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Mall quotas won't work, say experts

KUALA LUMPUR: Experts believe that enforcing quotas for Bumiputera owned-businesses at strategic locations will not work to elevate the community.

Economist Dr Mohd Nazari Ismail said race-based quotas, such as the proposed quotas for the community in strategic locations like shopping malls owned by government-linked companies (GLC) as part of efforts to increase the community's participation in the economy, were likely to fail.

He said it would also result in more subsidies by the government and drive the already high fiscal expenditure further up.

"This kind of race-based quota in business will not work and may result in more subsidies by the government, leading to more government expenditure.

"Moreover, there is a danger of favouritism and cronyism too. It is best to leave it to market forces to decide.

"If a business is capable, then it can survive on its own, even if owned by Bumiputeras. We see that happening already. GLC-owned malls should be allowed to decide on who is located in their malls on the basis of business considerations instead of race," the Universiti Malaya professor told the New Straits Times.

He said the root of the issue lay in financial systems favouring big businesses instead of small ones.

"That has to be reformed. Society as a whole must start focusing on developing risk-taking equity investments and phase out the debt-based financial system, which favours big players regardless of race, and victimises the small players, also regardless of race," said Nazari.

The recommendation for a Bumiputera-owned business premises quota in strategic locations was made by the Bumiputera Prosperity Council during its meeting on Thursday.

The meeting, chaired by Prime Minister Datuk Seri Ismail Sabri Yaakob, had tabled the recommendation, which it said was in line with efforts to increase competitiveness and strengthen the Bumiputera economy.

Ismail Sabri had said the move was needed as Bumiputera traders were unable to afford business spaces at malls, including those owned by GLCs.

Economist Dr Yeah Kim Leng said the retail industry, which included shopping malls, were among the most dynamic and competitive businesses.

"While the targeted support is well-intended, the government should be aware of the numerous pitfalls, failures and wastages that have plagued similar initiatives in the past.

"Successful GLC-run malls will need to ensure that such a mandate does not adversely impact the overall performance of their malls, as well as their own financial sustainability.

"This will be especially vital in the event that there is no off-setting subsidies or financing from the government."

He said the reason why companies or entrepreneurs were successful was because they were critically-dependent on the competitiveness of their products and services, apart from unique value propositions to customers.

"There is no doubt that genuine companies or entrepreneurs could be successful with some form of a start-up assistance.

"However, the selection of recipients of government support are more often than not, politically-linked.

"That's why market selection mechanisms, such as private equity and venture capital funds that are run by professionals and experienced entrepreneurs, are more successful in nurturing start-up businesses.

"It is suggested that the selection criteria be open and transparent.

"Some form of bidding process could also be instituted to ensure fairness, openness and transparency," said Yeah.

There have been similar initiatives to help Bumiputera traders to occupy prime commercial spaces in the past.

In 2015, the government had set up Mara Digital in Jalan Tuanku Abdul Rahman, which came with a six-month waiver of rental and costs for Bumiputera traders.

The shopping complex exclusively for traders from the community also received support from buyers, with sales reaching RM18.4 million within the first year. However this declined over time.

Several years following the establishment of Mara Digital in Kuala Lumpur, the government attempted to build such malls in other states but had to close them down due to dwindling sales.

Mara Digital Mall Kuantan was closed in 2018 while Mara Digital Mall Johor ceased operations in 2019, both closing down within a span of three months.

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