THE 51pc Bumi Equity policy (“51pc Bumi Equity”) in freight forwarding companies has attracted much interest and comments.
On 28.09.2021, the Federal Minister of Finance (MoF), Tengku Datuk Seri Zafrul Abdul Aziz extended, for the second time, the exemption period for freight forwarders to meet the 51pc Bumi Equity until December 2022.
On 29.10.2021, the Daily Express reported an offer to reboot Malaysia on 28.11.2021 by a group of 55 prominent Malaysians and to seek the Yang di-Pertuan Agong’s (“YDPA”) consent for the formation of a deliberative platform under the Conference of Rulers (“COF”) to formulate reforms towards a better Malaysia.
According to the MoF website, this was to allow the Bumiputera Agenda Steering Unit (Teraju) to study and review the participation of the Bumiputera community in the logistics industry in greater detail along with various quarters because “…30 years after the New Economic Policy’s introduction, the Bumiputera shareholding stood at only 17.2 per cent (in 2019).”
In 2015, the Federation of Malaysian Freight Forwarders had requested for an exemption on the 51pc Bumi Equity policy, and MoF in 2016 gave a waiver from the need to comply until Dec 31, 2020, for local companies with the International Integrated Logistics Services (IILS) status.
At the same time, the exemption was also given to majority foreign-owned Customs agents with IILS status and companies listed on Bursa Malaysia.
It is apparent that the costs of goods have increased during the Covid-19 pandemic since most goods are already transhipped through Port Klang. Two questions then arise.
Firstly, whether this policy is constitutional? Secondly, how should Sabah respond to this policy under the Federal Constitution (“FC”) and Malaysia Agreement 1963 (“MA63”)? Issue 1: Constitutionality of 51pc Bumi Equity
The Federal Government under the Ninth Schedule, List I - Federal List of FC in item 10 is responsible for “…10. Communications and transport, including …(e) Carriage of passengers and goods by land, water and air…”. So, the Federal Government has the authority to issue the 51pc Bumi Equity policy.
The constitutionality of the 51pc Bumi Equity arises because Article 153 FC allows the YDPA to have the final decision on permits and licences involving the Malays, natives of Sabah and Sarawak and other communities.
The FC is the Supreme law of Malaysia as stated in Article 4(1) FC that:
“This Constitution is the supreme law of the Federation and any law passed after Merdeka Day which is inconsistent with this Constitution shall, to the extent of the inconsistency, be void.”
For the purpose of this article, I will assume that the 51pc Bumi Equity is constitutional simply because of the “presumption in favour of constitutionality” (refer Jeffrey Tan FCJ in Public Prosecutor v Gan Boon Aun [2017] 3 MLJ 12) and the “Rule of law requires the judiciary to be subservient to the constitution and condone policy of the government, provided it does not breach the constitutional framework or the doctrine of accountability, transparency and good governance.” (refer Datuk Dr Hamid Sultan JCA in Public Prosecutor v Aluma Mark Chinonso (Negerian) and another appeal [2020] MLJU 694)
However, without going into details, there may be some constitutional issues surrounding Article 153 FC because the words “and natives of any of the Borneo States” were inserted after “Malays” by Act A30, paragraph 6(a), in force from 10-03-1971.
The words “the States of Sabah and Sarawak” were substituted for “the Borneo States” by Act A354, section 43, in force from 27-08-1976. In particular, the above amendments were not part of the MA63.
Further, the role of the YDPA under Article 32 FC and the role of the COF under Article 38 FC in protecting natives of Sabah and other communities is subject to Article 40 (1) FC which requires that the YDPA “...shall act in accordance with the advice of the Cabinet or of a Minister acting under the general authority of the Cabinet, except as otherwise provided by this Constitution....”.
It is uncertain as to the circumstances under which the YDPA may depart from the advice of the Cabinet or Minister as regards permits and licences for natives of Sabah.
Article 153 occupies a very special position in the FC as no amendment is allowed without the consent of the COF. There are no decided cases on the exercise of powers of the YDPA under Article 153 FC and so the extent and manner of such protection is untested.
In this respect, the 51pc Bumi Equity policy must be read together with the provisions of Article 153 FC on the constitutional responsibilities of the YDPA as follows:
i) In Article 153 (1) “…to safeguard the special position of the Malays and natives
of any of the States of Sabah and Sarawak and the legitimate interests of other communities…”.
ii) In Article 153 (6) “…ensure the reservation of such proportion of such permits or licences for Malays and natives of any of the States of Sabah and Sarawak as the Yang di-Pertuan Agong may deem reasonably; and the authority shall duly comply with the directions.”
iii) In Article 153 (7) “…Nothing in this Article shall operate to deprive…… to authorize a refusal to renew …. any permit or licence when the renewal or grant might reasonably be expected in the ordinary course of events.”
iv) In Article 153 (8) “…Notwithstanding anything in this Constitution, where by any federal law any permit or licence is required for the operation of any trade or business….but no such law shall for the purpose of ensuring such a reservation—
a) deprive or authorize the deprivation of any person of any right, privilege, permit or licence accrued to or enjoyed or held by him; or
b) authorize a refusal to renew to any person any such permit or licence ……; or
c) where no permit or licence was previously required for the operation of the trade or business, authorize a refusal to grant a permit or licence to any person…”
v) In Article 153 (9) “…Nothing in this Article shall empower Parliament to restrict business or trade solely for the purpose of reservations for Malays and natives of any of the States of Sabah and Sarawak.”
In summary, the YDPA has the following constitutional responsibilities as regards the
51pc Bumi Equity policy in Sabah:
a) To the natives of Sabah who are in a different category from the Malays as regards their rights to a specific quota.
The term “native” of Sabah is defined in Article 161A FC to mean “…(6)(b) in relation to Sabah, a person who is a citizen, is the child or grandchild of a person of a race indigenous to Sabah, and was born (whether on or after Malaysia Day or not) either in Sabah or to a father domiciled in Sabah at the time of the birth.”
However, the phrase “race indigenous to Sabah” is not defined in the FC.
The current proposed amendment to the FC on natives of Sarawak has for unknown reasons somehow left out Sabah natives.
b) To the other communities who can continue their legitimate rights to the permit or licence and to the renewal of the same.
However, there is no express quota for other communities.
c) To give directions to the relevant authorities in accordance with YDPA decisions.
Therefore, there is avenue for the natives of Sabah and other communities to make petition to the YDPA to address the 51pc Bumi Equity policy.
However, the procedure for making such petition is not well documented.
Issue 2: How should Sabah respond to this policy?
Why the sudden interest to regulate the freight forwarding industry? Apart from the request from Teraju, no specific reason was given by the MoF for the 51pc Bumi Equity policy. In particular, there appears to be no separate input from Sabah on this policy.
The sketch map above shows the growing importance of the Lombok-Makassar Straits (“LMS”) as an alternative to the Straits of Malacca (“SOM”) through which there are daily shipments of nearly 12.8 million barrels of oil (according to 2011 figures).
By comparison, the LMS has daily shipments of about 0.4 million barrels of oil (according to 2011 figures). In this respect, the SOM is nearly 32 times more busy than the LMS.
However, the LMS is deeper and wider than the SOM which is very busy and has almost reached its maximum capacity.
Therefore, the potential for growth of shipping traffic in the LMS, especially of larger vessels, is certaintly better than that in the SOM.
In this respect, the Sabah ports as compared to Port Klang are in a good position to take advantage of proximity to the LMS.
The POIC oil jetty at Lahad Datu with its 20m deep pier can cater for 100,000 DWT oil carriers.
The container port and dry bulk jetties are less than 20m deep and can cater for smaller vessels.
Then, there is the Sepanggar Container jetty which is further from the LMS but has a 12m deep pier for 45,000 DWT ships.
Therefore, the Sabah ports including the Sabah Freight Forwarders are in a good position to take advantage of any uptick in vessel traffic using the LMS.
Further, the proposed move by the Indonesian Government to shift the capital to Palangkaraya in Kalimantan cannot be discounted in any future projection of the shipping industry and freight forwarding industry in Sabah.
In this respect, the nearest sea port to Palangkaraya is Banjarmasin which now has a 26 feet deep pier.
No doubt the Indonesians may enlarge the sea port in the future as construction begins for the Palangkaraya capital.
There is at present no direct land route from Tawau to Palangkaraya.
Therefore, the sea route from Sepanggar and Lahad datu to Palangkaraya will remain very important for sometime to come as regards transportation of goods and material.
The above reasons may or may not have been factored in the 51pc Bumi Equity policy by the Federal Government.
However, the interest of Sabah freight forwarders and Sabahan consumers for lower freight and transportation cost are necessary considerations in any implementation of that 51pc Bumi Equity policy in Sabah.
In this regard, the recent debate on 02.11.2021 between Datuk Wee Ka Siong, the Minister of Transport and Mr Lim Guan Eng, former Minister of Finance on revoking on 12.11.2020 the Minister of Transport exemption granted on 28.03.2019 under Section 65U of the Merchant Shipping Ordinance 1952 [Ord. 70/1952] for repair of submarine cable by non-Malaysian ships under subsection 65KA(1) is sufficient reason for Sabah to be alert as to the introduction of any shipping policy affecting Sabah.
Any exemption given by executive order can be just as easily be taken away. Therefore, Sabah and Sabah freight forwarders may have 3 alternatives to consider:
(a) to represent to the MoF to exempt the 51pc Bumi Equity policy in Sabah.
(b) to request the State Government to exclude Sabah from the policy since
Teraju does not represent the natives of Sabah. This is to avoid natives of
Sabah being left in the same category as Malays in the policy.
(c) to petition the YDPA to fix separate quotas for permits and licences for natives of Sabah and other communities in Sabah.
Which is the best option for Sabah? It will be paragraph (b) above because if such power is given to the State Government, then it will not be so easily taken away.
New policies and new business strategies will continue to be introduced but its effect on the Sabah business industry will only be known many years thereafter.
Therefore, it is very important that Sabah must respond correctly to this 51pc Bumi Equity policy either by limiting it to Peninsular Malaysia or to seek a separate quota for Sabah natives and other communities which are separate and distinct from the quota for Bumis in West Malaysia.
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