This article first appeared in The Edge Malaysia Weekly on September 27, 2021 - October 3, 2021

Last week, an association of freight forwarders urged the government to clarify its position on a 51% bumiputera equity requirement for logistics companies, slated to take effect by the end of the year.

The Federation of Malaysian Freight Forwarders (FMFF), possibly looking to buy time, has proposed that the 51% bumiputera ownership requirement be deferred to the end of next year, instead of in three months.

To recap, former prime minister Datuk Seri Najib Razak had announced the revision of bumiputera equity requirements for freight forwarders in 2018, with a review to be undertaken at the end of last year.

Adding to the confusion, the Ministry of Finance, in January this year, said that all Customs brokerage licence holders must comply with bumiputera equity requirements, but did not set any fixed figure of 51%, or even any timelines.

The lack of a final decision on the equity requirement as the deadline draws nearer is unfair to freight companies, which must renew their Customs brokerage licences by year end.

In a nutshell, freight forwarding licences registered before 1976 did not have a bumiputera equity requirement, while for those registered between 1976 and 1990, a 30% quota was imposed. As for licences registered after 1990, there is a 51% bumiputera shareholding requirement.

In contrast, no bumiputera equity is required for licences held by integrated international logistics services providers.

Many issues come to mind. First, how are freight forwarding companies going to meet the 51% bumiputera equity requirement in such a short span of time, with proper due diligence being a necessity to raise borrowings for a stake sale. Second, with the disposal of 51% equity interest by the existing shareholder(s), he or she will be required to give up control of the company, which may not be palatable to many existing operators. So, what do the existing operators do? Shut down?

Third, why should the government determine who owns the freight forwarding businesses locally, and where will the line be drawn? Today it is the freight forwarders, what will it be tomorrow?

In the current climate of economic turmoil, where does this 51% bumiputera equity fit in? Which part of Keluarga Malaysia do such restrictive policies fall under?

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