More business support, loans and set-asides will be directed at ethnic Malays, with the launch this week by Malaysian Prime Minister Najib Razak (pictured above) of the second Bumiputera Economic Transformation Roadmap.
The five-year roadmap aims to more than double the average income of ethnic Malays (or bumiputeras as they are commonly known) who make up over two thirds of the population. The plan has among its five pillars the aim of strengthening entrepreneurship.
Released by Teraju, Malaysia’s state agency set up in 2011 to assist bumiputeras, the new roadmap plans to prioritise SME-friendly policies through among other things procurement policies which favour the unbundling of large turnkey contracts.
'Biased procurement criteria'
“At best, the smaller but capable bumiputera firms – especially in professional services (engineering, quantity surveyor), have to bid to become subcontractors, which put them at the mercy of the procurement practices of the turnkey contractor,” says the roadmap.
In addition it says procurement criteria are often biased towards more established companies, adding that greater consideration therefore needs to be paid to companies that demonstrate a strong line up of experienced bumiputera professionals.
Under the first roadmap, which ran from 2011 to 2016, 10.6 billion ringgits ($2.4bn) - or 50% of the total value of selected turnkey projects - were set aside for 372 bumiputera firms.
The set-aside requires turnkey contractors to carve out part of a project to be put out to tender to bumiputera firms.
In addition a number of other bumiputera companies were assisted, these include:
Too many micro firms
Bumiputera companies make up 38% or 247,000 of registered Malaysian SMEs.
However the roadmap notes that the bumiputera entrepreneurs still tend to run mainly micro-enterprises (making up 88% of SMEs), concentrated in highly competitive sectors like retail, restaurant and consumer services which cater to the domestic markets.
To help develop bumiputera firms Teraju has started a sector-by-sector baselining exercise to adopt a value chain driven approach in bumiputera entrepreneurship development.
“There shall also be greater emphasis on encouraging mid-career professionals who have extensive sector experience to venture into businesses aligned to their area of expertise,” the roadmap says.
It says to encourage innovation intensive business activities, the government will also promote small-firm friendly policies.
“The role of tertiary institutions in influencing entrepreneurship should be emphasised by encouraging these institutions to inculcate an entrepreneurial mindset and skills among bumiputera at an early stage,” it added.
The plan also hopes to get entrepreneur development organisations to play a bigger role in encouraging bumiputera companies to scale up.
In addition Teraju will further develop Terajuxchange, a central database of bumiputera entrepreneurs to assist the government in making a comprehensive impact assessment of the support provided, while avoiding overlap in financial assistance.
Razak said this week that the support for Malays would not be at the expense of Chinese and Indian Malaysians. Yet it comes at a time when the prime minister is struggling with a corruption allegations and growing opposition to his rule.
A bigger problem is that few adults start up new firms in Malaysia (see this earlier post). Getting this right will be harder than simply dolling out more ethnically-aligned support.
Timm is a South African who writes on small business. Follow Small Business Insight on Twitter at @Smallbinsight.
Stephen Timm is a