Frankly Speaking

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Democracy brutalisedThe farce that took place when the Perak State Assembly was convened last Thursday has invited a fair number of adjectives, all of which aim to convey the sense of disbelief that unbridled lawlessness had been allowed to take place in the legislature itself. However one looks at it, the entire episode has greatly tarnished the reputation of the august House as the fountainhead of the law that is used to govern the state.

As a result of the shameless disregard for democratic procedure and the thuggish use of force, the proceedings at the opening of the assembly sitting do not have the legitimacy necessary for motions passed by the House to have moral weight. The entire process of convening a sitting of the House has therefore become, in effect, an exercise in futility.

The obvious remedy is for the House to be dissolved so that the people can give a fresh mandate to the leaders they want to represent them. Until that is done, both sides are likely to continue to undermine each other, with absolutely no benefit for the public.

The manner in which representatives of both Barisan Nasional and Pakatan Rakyat had been going at each other's throats leaves little doubt that the lawmakers in question have given a disgraceful account of themselves. They must now take a long hard look at themselves and learn to discharge their responsibilities as public officials with utmost attention to the rule of law. Undoubtedly, the damage to the sanctity of the legislative assembly will not be easily repaired, but must be rebuilt painstakingly. In time, perhaps, if the legislators can bring themselves to comply with conduct befitting their office, the manner in which democracy was brutalised at the assembly on May 7 could fade into the past.

As things stand, however, it would be no surprise if any elected representative who chose to demonstrate that might is right in the legislature is shown the exit when the ballots are counted next.Onus on IBs, going forwardThe move by the Securities Commission and Bursa Malaysia Securities to launch a new framework and guidelines for listings and equity fund-raising is to be lauded as it removes one of the hurdles preventing Kuala Lumpur from fulfilling its potential as a regional financial centre. The relaxation of the listing and fund-raising guidelines would no doubt help the local bourse play catch-up with its regional peers in Hong Kong and Singapore.

Under the new framework, local and foreign companies with 50% of their earnings sourced overseas will be allowed to list without meeting the 30% bumiputera quota in shareholding regardless of their industry. This opens the door to companies which do not meet the requirements in other exchanges to list on Bursa, raising fears that we may be attracting companies of poor quality.

With a stock market capitalisation of more than US$1.6 trillion (RM5.6 trillion), the Hong Kong Exchange is the preferred listing destination for companies in the region, followed by Singapore, with total market capitalisation of US$306 billion. While this does not necessarily mean we will end up with the scraps, the responsibility has shifted substantially to investment bankers to bring good companies to market, especially in the case of listing on the alternative market known as ACE Market. The IBs will need to strike a balance between profits and protecting market integrity.

Singapore’s experience with S-chips (Chinese firms listed in Singapore) offers a cautionary tale. It has been reported that a lack of trust in published accounts of these companies sent their prices plunging. The FTSE ST China Index, which tracks Singapore’s largest and most liquid S-chip stocks, is down 80% from its highest close in October 2007. The FTSE STI is down 42% over the same period.

For sure Bursa needs to enhance its position and taking a disclosure and market-based regulatory approach is a move in the right direction. Come August, under the new framework, all market parties will have their roles to play, including investors who now have to do their homework even more diligently before investing. Caveat emptor.  Dare we dream?By the end of this month, the Ministry of International Trade and Industry (MITI) could possibly introduce new policies pertaining to the issuance of open approved permits (APs) for bumiputera motor traders.

Despite the liberalisation of 27 subsectors in the services industry and the impending listing of the first foreign company on Bursa Malaysia, dare we hope that significant changes would be made to the AP policy that has been in place since 1970?

Highly unlikely, if the statements by Umno ministers and deputy ministers in MITI are any­thing to go by.

Tan Sri Muhyiddin Yassin, the former minister in charge of MITI, despite knowing that the recipients of open APs had blatantly abused the privileges, said the policy will continue to be in place until 2020. That is well beyond the 2010 deadline set under the National Automotive Policy (NAP) unveiled in 2006.

Muhyiddin, after taking the helm at MITI, ordered an audit of all companies receiving open APs. The results, which were released in December last year, showed that 8 out of 10 open AP recipients did not undertake the business themselves but were acting as a front for others operating it. Invoices and other documents were forged.

Despite such fraudulent activities, the open AP recipients are given until this month to comply with the requirements, such as having their own showroom.

Shouldn’t the results of the audit be used to strike off those on the list who did not comply with the conditions?

Last week, Datuk Mukhriz Mahathir, who had been vocal in calling for the abolition of the AP policy, appeared to be leaning towards its continuance. He was quoted by Bernama as saying that “it was a complex issue, involving many people and different interests”. He was also reported to have said that they have to weigh the different interests and present something acceptable to most parties.

As far as the layman is concerned, there is really nothing much to weigh in the matter. The benefits of the open APs are being enjoyed by a select group of people and they must be scrapped. Even genuine bumiputera motor traders often gripe as to why only certain people are entitled to the privilege.

Alternatively, the APs should be put out to tender in a closed affair among bumiputeras. The practice of confining them to a select few should be stopped altogether.

This article appeared in The Edge Malaysia, Issue 754, May 11-17, 2009