Monday, August 13, 2012

Fatal flaw in the RM180 million allocation to Indians

Fatal flaw in the RM180 million allocation to Indians

economy-ringgitRecently our Prime Minister had announced an allocation of RM180 million to uplift the economic standing of the Indian community. It was indeed a major announcement and a big step forward on the part of the government to help the Indian community. However in practice whether this allocation will help Indians in the long run is doubtful.

Malaysia is still plagued by discriminatory policies which favour the majority Bumiputra races. Announcing an allocation is rather easy but making the money usable for business or social purposes is another.

Take for example a real incident highlighted by Senator Dr. S. Ramakrishnan recently and I quote it here.

“One of my cousins wanted to import goats from Myanmar sometime in 2006. When he went to the Customs and Agriculture department for permits to import, he was told that he can only import under a Bumiputera name. My cousin then went looking for a trusted Bumiputra partner to import goat or at least lend his name for that purpose and he managed to find one. He imported goat and sold it in Malaysia. After the first import the Bumiputera partner went to Myanmar and started importing himself. My cousin lost a reliable source of supply and income.

“This is how many small time Indian businessmen incur losses and face difficulty in doing business in Malaysia. My cousin was so frustrated that he brought many friends to the Hindraf rally on 25th November 2007. He also has buses transporting workers. He has to get a Bumiputera to get a permit and pay a monthly fee to him for doing nothing. No other country in the world has this kind of cunning and malicious restrictions on its own citizens to do business.”

Article 153: Intent, spirit and unfair implementation

Many non Bumiputras face this problem. All this is done in the name of Article 153 of the Federal Constitution which provides for preferential treatment in favour of the Bumiputera. Let’s take a look at what Article 153 is all about.

It is implicit in Article 153(1) that “It shall be the responsibility of the Yang di-Pertuan Agong (YDPA) to safeguard the special position of the Malays and the natives of Sabah and Sarawak and the legitimate interest of other communities”. 

To set the record straight, the phrase ‘legitimate interest of other communities’ means that it does not allow simply any kind of preferential treatment in favour of the ‘Bumiputera’. It is not a ‘blank cheque’ but it merely confers limited powers on the government and Parliament, pursuant to Article 153, to derogate from the principle of equality and equal protection of the law.

The implementation of Article 153 has often been the bone of contention as many have argued that its implementation has been at expense of the other races in Malaysia. For example, although Article 153 provides for quotas only for the issuance permits and licenses to the Bumiputera, however, even government commercial contracts have been awarded solely to Bumiputera companies, which is clearly not sanctioned
under the Federal Constitution. Even government linked companies (GLCs) and statutory bodies assign their work solely to Bumiputera companies and some major banks assign their legal work only to Bumiputera legal firms.

GLCs and local authority procurement and infrastructure building contracts are mostly given to Bumiputera companies. For example, local authority contracts for infrastructure building are solely given to Class F (not to forget the other types licenses like Class A etc under the purview of the Finance Ministry) licensed contractors, which is a type of license only given to Bumiputra contractors although nothing in Article 153 of the Federal Constitution permits Parliament to restrict business and trade solely to Bumiputras for the purpose of reservation of quotas.

The issuance of vehicle AP’s solely to the Bumiputra is another example of a policy and system that is unconstitutional as it is against Article 153.

I now question how is the 180 million allocation useful to the Indian community in view of these restrictions?
Allow me to digress here: The majority of employees at the GLCs and some major banks are Malay Bumiputeras although the Federal Constitution only provides for reservation of quotas in the public service. Ethnic quotas are imposed on private companies by government agencies and licensing is used as a way to get private companies to observe Bumiputera quotas, a policy which is clearly against the Federal Constitution as Article 153 only provides for reservation of quotas in the public service.

Although Article 136 of the Federal Constitutionprovides for impartiality in the public sector, there have been complaints by the non-Bumiputeras in the various government departments that they have been deprived from getting promotions or have been sidelined in favour of Bumiputera candidates. This explains why the non-Bumiputeras shy away from seeking employment in the government sector and unfortunately it also explains the current brain drain that is currently plaguing our country.

These are several examples where the implementation of affirmative action policies has clearly gone beyond the limits of Article 153 of the Federal Constitution and has gone wrong. The problem that is quite apparent here is that although the Yang Dipertuan Agong, after acting on advice of the Cabinet, is bound to give binding directions to the relevant authorities to ensure the reservation of quotas in the public sector, scholarships and permits or licenses in favour of the Bumiputera, no one knows for certain what the percentage of the quotas are. Is it 50%, 70% or 95% in favour of the Bumiputera?

It is surprising to note that the Prime Minister had announced this RM180 million allocation without even looking at the realities on the ground. I believe that the weaknesses of the government’s policies must be repaired first before announcing any allocations to uplift any community. With the type of restrictions and limitations pervading the non Bumiputera communities under the guise of Article 153 of the Federal Constitution, it would not be difficult to realize that the allocation given to the Indian community for business purposes will be futile.

Deterioration in race relations: What is the cause?

It cannot be denied that the improper and arbitrary application of affirmative action policies as provided under Article 153 has contributed significantly to the deteriorating race relations in Malaysia. The deprivation of equal opportunities has caused racial tensions to run high in recent years. Therefore in order to improve race relations between the Bumiputera and the non-Bumiputera in Malaysia there should be legislative intervention.

The number of quotas and restrictions and qualifications in favour of the Bumiputera are not well defined or specified under the Federal Constitution. This loophole has led to the unfair, unbalanced and unreasonable implementation of Article 153. A race relations law must be introduced in Malaysia in order to remedy the imbalances and unfairness that has led to discrimination.

The intention and purpose of Article 153(1) when read as whole clearly provide for a balance between two competing interests, namely the protection of the special position of the Bumiputera and at the same time safeguarding the legitimate interest of other communities as well.

However ambiguity arises when one realizes that the scope and meaning of the words “legitimate interest of the other communities” are not defined in the Federal Constitution. Even the courts have not decided on this issue as the scope and ambit of provisions like Article 153 has not been litigated before in Malaysia, in the way it has been done in the USA and India. This lacuna in the Federal Constitution poses a problem to good race relations in Malaysia. This is where I believe that an effective and well drafted Race Relations Act is needed.

Reasons for Enacting Race Relations Law

A comprehensive race relations law will provide the balance that the original drafters of the Federal Constitution had intended when they inserted the words “legitimate interest of the other communities” into Article 153 of the Federal Constitution. A law on race relations would help prevent discrimination and promote equality in all spheres of life which affect Malaysians from all the different races.

There are two sides of the coin in support of this argument. On the one side, the Bumiputera are protected from discrimination and at the same time their special position under the Federal Constitution is also preserved. On the other, the non-Bumiputera are also protected against discrimination in the spirit of protecting the legitimate interest of other communities as provided under Article 153.

A race relations law will not affect the special position of the Bumiputera as widely believed by many i.e. a reasonable reservation of quotas can still be maintained in the areas specified under the Federal Constitution but if there are areas where a particular racial group is under represented in a particular trade or work area then the governing authority on race relations or the minister tasked to manage and regulate race relations under a race relations legislation will be empowered take remedial actions to solve the problem.

The Race Relations Act 1976 and the Race Relations Amendment Act 2000 (now replaced by the Equality Act 2010) in the UK, for example provides for such measures. A Race Relations Commission can be created under the Act to implement the provisions of the Act and ensure the enforcement of the Act.
In fact the Yang Di-Pertuan Agong under Article 153 is bound to act on the advice of the Cabinet or a Minister acting under the authority of the Cabinet. As such if the Cabinet or the Minister finds that there is indeed under representation of a particular racial group in a particular vocation or trade or sector and decides to take remedial actions, the Yang Di-Pertuan Agong is bound to act on that advice.

The current system clearly shows that the Bumiputeras are over represented in many areas of employment in the public sector, in the government and the local authorities, in government and local authority procurement and in the public universities, etc. This over representation has created a perception that the government is imposing exorbitant and unreasonable reservation of quotas in the areas mentioned in the Federal Constitution.

Surely, this is not what the Reid Commission had intended. In fact it is clear from the wordings of Article 153(1) that the drafters of the Federal Constitution did not envisage a system where reverse discrimination would be the order of the day.

The time has indeed arrived to see whether implementing quotas under affirmative action provisions are the way to go in light of the fact that globalisation has created a more competitive world where meritocracy is the order of the day, as compared to the time when the Federal Constitution was drafted in 1957 in particular Article 153. Affirmative action should not be cause for economic stagnation. In fact the Reid Commission had intended that the communal-based policies would be eventually eradicated from the country’s political and economic spheres.

Malaysia aspires to become a high income nation and to achieve this status we need to do away with raced-based policies that are currently plaguing our system. The only way to create a conducive and market friendly business environment and to get the private sector to be the catalyst for the creation of a high income nation is to ultimately eliminate race based policies in all sectors of business and society.

* Jeyaseelen Anthony is an Advocate and Solicitor (non-practicing) and was also a member of the Bar Council Law Reform Committee. He is a now a consultant fellow attached to the Faculty of Law, University Malaya. He is also a local councillor at Majlis Bandaraya Petaling Jaya.

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