Wednesday, November 15, 2006

Bumi equity – more questions than answers after Awang Adek and Effendi gave their replies

One must be very confused when reading Deputy Finance Minister Datuk Dr. Awang Adek’s reply last Tuesday as compared with statement made by the Minister in the Prime Minister Department, YB Senator Datuk Effendi Norwawi, after doing a close checking on the mathematics.

During his reply to a oral question from MP for Gua Musang, YB Tengku Razaleigh Hamzah, Datuk Dr. Awang Adek revealed that Bumiputeras own 36.6 percent of equity ownership at Bursa Saham valued at RM78.4 billion as at Dec 31 last year, as compared to 46.9 percent or RM100.4 billion for non- Bumiputeras and 16.45 percent or RM35.2 billion for foreigners.

Bumiputeras own 45% equity in nominee companies – Awang Adek did not say it in hansard

Datuk Effendi Norwawi challenged Datuk Dr Awang Adek’s reply by clarifying that Awang Adek wrongly apportioned 45 percent of equity ownership held by nominee companies to Bumiputeras when it should be 8.3 percent.

One should not be seemed as defending Awang Adek’s figure when one argues about the validity of Effendi’s claim against Awang Adek’s that Awang Adek has wrongly apportioned 45 percent of equity ownership held nominee companies to Bumiputeras which leads Awang Adek to conclude that Bumiputeras own 36.6 percent equity.


A double check with the hansard on 7th November 2006 discloses that Awang Adek has never mentioned about this, that the figure of 36.6 percent equity ownership is based on 45 percent apportion of the equity in nominee companies owned to Bumiputeras.

Until there is a clear clarification from Awang Adek to specifically deal with this issue, i.e. of whether his figure of 36.6 percent equity ownership is based on 45 percent apportion of equity in nominee companies to Bumiputeras, Effendi’s statement can be legitimately doubted and cannot be taken as truth since there is no substantial fact to back-up in his clarifications.

8.3 percent Bumiputera equity in nominee companies not accurate when 180 out of 359 nominee companies are excluded

Effendi also further illustrated that instead of taking the figure as 45 percent, Bumiputeras actually control 8.3 percent equity in nominee companies based on a survey on 359 nominee companies to ascertain the status of ownership and beneficiaries of shares registered under nominees, which was conducted in March 2005 by EPU with the cooperation of SSM (Companies Commission of Malaysia).

A total of 179 companies (which equities represent 74.3 percent, or RM103.7 billion of the total equity held by nominee companies) are said to have responded to this survey. It is from this survey that the figure of 8.3 percent Bumiputeras ownership in such companies is derived.

This means that there are another 180 nominee companies (in which their equities represent the rest of the 25.7 percent of the equity, or RM35.9 billion of the total equity held by nominee companies) did not respond to this survey.

By assuming that 100 percent of the share of these 180 nominee companies are owned by Bumiputeras, it would mean an additional of RM35.9 billion of equity on top of the RM8.6 billion (equivalent to 8.3 percent of the share owned by Bumiputeras, value: RM8.6 billion out of RM103.7 billion – 179 nominee companies from a total of 359 nominee companies) equity owned by Bumiputeras as informed by Effendi.

Therefore, total equity owned by Bumiputeras in all the 359 nominee companies can be as high as RM 44.5 billion (RM35.9 billion + RM 8.6 billion = RM 44.5 billion) which is 31.9 percent of a total of RM 139.6 billion (RM 44.5 billion + RM 103.7 billion), the total equity value owned by nominee companies in Bursa Malaysia.

It could be unreasonable to assume that 100 percent equities of the rest of the 180 nominee companies are solely owned by Bumiputeras. It is also equally ridiculous to exclude the other 180 nominee companies which had not responded to the EPU-SSM survey when we come to evaluate the real percentage of equity owned by Bumiputeras in nominee companies listed in Bursa Malaysia. Therefore, in releasing his clarifications on nominee companies, we just cannot afford to ignore the rest of the 180 companies.

Since there is no further information on these 180 nominee companies, Effendi’s remark that Bumiputeras only controlled 8.3 percent of equity in nominee companies stands no ground. According to Effendi, it is this figure (Bumiputeras only controlled 8.3 percent of equity in nominee companies) that derives the conclusion that Bumiputeras only control 21.8 percent of equity in 914 listed companies in Bursa Malaysia. This percentage is reduced to 18.9 percent after extrapolation done against 609,595 active companies registered with the Companies Commission, which is also another question that why extrapolation is used instead of direct computation of the real figures.

Effendi: 609,595 registered companies; Awang Adek: 717,935 registered companies – Who is correct??

There is also a huge difference between 609,595 companies used by Effendi Norwawi and 717,935 companies used by Awang Adek. Effendi chooses to use 609,595 active companies for the extrapolation whereas Awang Adek could have included another 108,340 inactive companies for his computation. It is interesting to further pursue what type of extrapolation technique they used in order to come out with the same figure – 18.9 percent Bumiputera equity ownership – when there is such a huge difference in the total number of registered companies used by both of them.

What I wish to establish here is that all the numbers that both of them provide must be able to speak for themselves. With so many flaws and doubts after detailed examination of the figures provided by both high level officers of the administration, there is an urgent need of the government, in particular the Prime Minister himself to clarify everything once and for all.
One must be very confused when reading Deputy Finance Minister Datuk Dr. Awang Adek’s reply last Tuesday as compared with statement made by the Minister in the Prime Minister Department, YB Senator Datuk Effendi Norwawi, after doing a close checking on the mathematics.

During his reply to a oral question from MP for Gua Musang, YB Tengku Razaleigh Hamzah, Datuk Dr. Awang Adek revealed that Bumiputeras own 36.6 percent of equity ownership at Bursa Saham valued at RM78.4 billion as at Dec 31 last year, as compared to 46.9 percent or RM100.4 billion for non- Bumiputeras and 16.45 percent or RM35.2 billion for foreigners.

Bumiputeras own 45% equity in nominee companies – Awang Adek did not say it in hansard

Datuk Effendi Norwawi challenged Datuk Dr Awang Adek’s reply by clarifying that Awang Adek wrongly apportioned 45 percent of equity ownership held by nominee companies to Bumiputeras when it should be 8.3 percent.

One should not be seemed as defending Awang Adek’s figure when one argues about the validity of Effendi’s claim against Awang Adek’s that Awang Adek has wrongly apportioned 45 percent of equity ownership held nominee companies to Bumiputeras which leads Awang Adek to conclude that Bumiputeras own 36.6 percent equity .

A double check with the hansard on 7th November 2006 discloses that Awang Adek has never mentioned about this, that the figure of 36.6 percent equity ownership is based on 45 percent apportion of the equity in nominee companies owned to Bumiputeras.

Until there is a clear clarification from Awang Adek to specifically deal with this issue, i.e. of whether his figure of 36.6 percent equity ownership is based on 45 percent apportion of equity in nominee companies to Bumiputeras, Effendi’s statement can be legitimately doubted and cannot be taken as truth since there is no substantial fact to back-up in his clarifications.

8.3 percent Bumiputera equity in nominee companies not accurate when 180 out of 359 nominee companies are excluded

Effendi also further illustrated that instead of taking the figure as 45 percent, Bumiputeras actually control 8.3 percent equity in nominee companies based on a survey on 359 nominee companies to ascertain the status of ownership and beneficiaries of shares registered under nominees, which was conducted in March 2005 by EPU with the cooperation of SSM (Companies Commission of Malaysia).

A total of 179 companies (which equities represent 74.3 percent, or RM103.7 billion of the total equity held by nominee companies) are said to have responded to this survey. It is from this survey that the figure of 8.3 percent Bumiputeras ownership in such companies is derived.

This means that there are another 180 nominee companies (in which their equities represent the rest of the 25.7 percent of the equity, or RM35.9 billion of the total equity held by nominee companies) did not respond to this survey.

By assuming that 100 percent of the share of these 180 nominee companies are owned by Bumiputeras, it would mean an additional of RM35.9 billion of equity on top of the RM8.6 billion (equivalent to 8.3 percent of the share owned by Bumiputeras, value: RM8.6 billion out of RM103.7 billion – 179 nominee companies from a total of 359 nominee companies) equity owned by Bumiputeras as informed by Effendi.

Therefore, total equity owned by Bumiputeras in all the 359 nominee companies can be as high as RM 44.5 billion (RM35.9 billion + RM 8.6 billion = RM 44.5 billion) which is 31.9 percent of a total of RM 139.6 billion (RM 44.5 billion + RM 103.7 billion), the total equity value owned by nominee companies in Bursa Malaysia.

It could be unreasonable to assume that 100 percent equities of the rest of the 180 nominee companies are solely owned by Bumiputeras. It is also equally ridiculous to exclude the other 180 nominee companies which had not responded to the EPU-SSM survey when we come to evaluate the real percentage of equity owned by Bumiputeras in nominee companies listed in Bursa Malaysia. Therefore, in releasing his clarifications on nominee companies, we just cannot afford to ignore the rest of the 180 companies.

Since there is no further information on these 180 nominee companies, Effendi’s remark that Bumiputeras only controlled 8.3 percent of equity in nominee companies stands no ground. According to Effendi, it is this figure (Bumiputeras only controlled 8.3 percent of equity in nominee companies) that derives the conclusion that Bumiputeras only control 21.8 percent of equity in 914 listed companies in Bursa Malaysia. This percentage is reduced to 18.9 percent after extrapolation done against 609,595 active companies registered with the Companies Commission, which is also another question that why extrapolation is used instead of direct computation of the real figures.

Effendi: 609,595 registered companies; Awang Adek: 717,935 registered companies – Who is correct??

There is also a huge difference between 609,595 companies used by Effendi Norwawi and 717,935 companies used by Awang Adek. Effendi chooses to use 609,595 active companies for the extrapolation whereas Awang Adek could have included another 108,340 inactive companies for his computation. It is interesting to further pursue what type of extrapolation technique they used in order to come out with the same figure – 18.9 percent Bumiputera equity ownership – when there is such a huge difference in the total number of registered companies used by both of them.

What I wish to establish here is that all the numbers that both of them provide must be able to speak for themselves. With so many flaws and doubts after detailed examination of the figures provided by both high level officers of the administration, there is an urgent need of the government, in particular the Prime Minister himself to clarify everything once and for all.
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