Malaysia offers its Malays a piece of the capitalist action

The government here plans a nationwide advertising campaign that might well be labeled: "For Malay eyes only. Chinese, disregard." That's because only Malays (53 percent of the population) can buy advertised shares in Malaysia's newest experiment, the National Equity Corporation. The Chinese, who make up 35 percent of this nation's people, cannot.

It will indeed take quite an educational campaign to persuade largely rural Malays to buy the guaranteed 10-percent-return shares -- rather than to squirrel away their money under a mattress or buy a new cow.

But the government is counting on the new program as one way the largely agricultural Malays can be brought to own 30 percent of the country's corporate equity by 1990.

The new corporation is the latest element in the government plan that costs a commanding shadow over the entire Malaysian economy. It is the "bumiputra" (sons of the soil) policy of increasing the share of the economy owned by the Malays. Government legislation is designed to put some 30 percent of corporate equity in Malay hands by 1990 (it's now about 12.4 percent). Non-bumiputras, mainly entrepreneurial Chinese, could own 40 percent and foreign investors 30 percent.

The purpose of all this is to end Chinese and foreign domination of the economy and help transfer wealth to the dominant political group, the Malays.

To carry out this program, the government (acting "in trust" for Malays) has bought out Chinese and foreign companies and shares. The government now owns all or part of 674 companies, including an oil company and an airline. Enough shares in these companies are being transferred to the National Equity Corporation to form what one foreign analyst calls "something like a giant mutual fund."

The corporation, in turn, will issue guaranteed-return shares to Malays only. To prevent these shares from falling into Chinese hands, resale is prohibited, except back to the corporation.

All this has several purposes, according to analyst here:

1. To spend up Malay ownership, which has been lagging.

2. To win the government popularity at election time.

3. And to avoid the charge that the bumiputra policy has so far aided only big Malay capitalists, not "the little guy."

In January the National Equity Corporation took a big step forward when it was given the government's shares in 21 local blue-chip companies, including joint ventures with names like Goodyear and Nippon Electric. Another $500 million in stock is to be added in the next five years.

But before this could be done, any Islamic suspicion that dividends on shares are as objectionable as interest on loans had to be overcome. To clear this up, the government commissioned studies by numerous religious scholars, who finally gave the share-selling plan passing marks.

One analyst commented, "Anytime you apply a six-centuries-old rule to a situation today, it requires a lot of hairsplitting."

Still there is widespread doubt that Malays can reach 30 percent ownership by 1990 -- even with the National Equity Corporation.

As the deadline approaches the government will come under increasing political pressure to nationalize more enterprises and hold them "in trust" for the Malays. And this, some analysts say, could cause growing inefficiencies in the economy.

But so far the bumiputra program has not killed Malaysia's prosperity. The country's riches in oil, gas, tin, palm oil, rubber, and hardwoods have helped it survive the anxiety of foreign investors. Even so, particular areas have suffered. For example, with the 30-percent-foreign-ownership limitation, foreign capital for increasingly costly tin exploration has not been forthcoming.

One effect of the law setting up the National Equity Corporation is that the 30 percent limit of foreign capital is extended to enterprises not previously covered by the bumiputra policy.

These include plantations, timber, export-import businesses, insurance and public relations companies, printing, and publications. Particularly hard hit are Japanese-owned trading companies and British-owned plantations.

A cardinal premise of the new economic policy is that the increased Malay share of the economy will come not so much at the expense of the Chinese as from total growth of the "economic pie." In effect the redistribution has been more from foreign hands to Malay than from Chinese hands to Malay, one qualified analyst notes.

While that has been happening, this relatively unpopulated, resource-rich country (12.5 million people) has benefited from rising commodity prices on the world market.

"Wth the exception of palm oil, the country could rely on rising prices," an economist notes. Oil, gas, rubber, and hardwood prices all rose, as did tin prices until six months ago.

Increased oil prices were substantial enough for the government to urge its oil industry to decrease production, an analyst notes.