Big challenge to find bumi businessmen willing to take up 51% equity, say freight forwarders’ associations

  • Nation
  • Friday, 24 Sep 2021

KLANG: Logistics and freight forwarding companies holding Customs Department brokerage licences to conduct their business are worried that they may have to close down.

This is because these companies are required to have 51% bumiputra shareholders before they can renew their Customs brokerage licence at the end of every year.

Airfreight Forwarders Association of Malaysia chairman Walter Culas said it will be a mammoth task to find bumiputra businessmen who were willing to take-up 51% equity in freight forwarding companies.

“It takes a lot of money to invest in freight forwarding companies and businessmen do not have that kind of money under the current circumstances.

“Most logistics companies have a foreign base and branches globally.

“Take for instance companies like DHL, would there be anyone with money to buy 51% equity in that company here?’’ asked Culas.

Culas also said the requirement will breach the agreement local freight forwarders currently had with foreign principals as it will affect their (the foreign principals) shares in the companies.

He added most multi-nationals do not allow a 51% bumiputra ownership in their corporate guidelines.

Recently, industry players had written to the government asking them to clarify the percentage of bumiputra representation needed for companies to renew their Customs brokerage licences.

They said it would be difficult to meet the 51% mark given that there were only a few months left for the licences to be renewed.

Subsequently, the Finance Ministry postponed the deadline to December 2022.

Culas said industry players did not ask for an extension but wanted the total removal of the 51% bumiputra equity requirement in freight forwarding companies with Customs brokerage licence.

He said the shipping industry is required to have only 30% bumiputra representation and hence the freight forwarding industry must also be accorded this.

“And shipping agents are also allowed to have 100% foreign shareholders and not required to have 51% bumiputra equity,’’ added Culas.

Federation of Malaysian Freight Forwarders president Alvin Chua also reckoned it was going to be a big challenge to get such a big quantum of bumiputra businessmen buying into the freight forwarding business.

He added that in the event freight forwarding companies with brokerage licences cannot obtain bumiputra shareholders owning 51% of the companies, the businesses would have to close down.

He also opined that selling a big chunk of their businesses for the brokerage licences would also mean the original owners of the companies would lose control of their businesses.

“But currently, 80% of the freight forwarding companies with Customs Department brokerage licences are already bumiputra companies.

“So it’s the remaining 20% that will be affected by this requirement in a short span of time,’’ he added.

Meanwhile, Selangor Freight Forwarders and Logistics Association president Datuk Tony Chia explained that only freight forwarding companies that are Customs brokerage agents, as opposed to all freight forwarding companies, are required to have 51% bumiputra equity.

“Freight forwarding companies that don’t have the Customs brokerage licences are not required to have the 51% bumiputra share equity,’’ he said.

He said currently many companies in the freight forwarding industry have grown to provide international integrated logistics services and hence hold Customs brokerage licences.

He said now with globalisation, there is transformation and the business norms have changed with big foreign companies also seeking a brokerage licence here.

According to Chia, the Customs Department had frozen the issuance of brokerage licences in 2015 after the Finance Ministry said there were far too many Customs brokerage agents in the industry.

“So after the five years in 2021, they are reviewing the renewal of existing licences and that’s all that there is to it,’’ said Chia.

He added there was a need to relook at the status quo of the industry’s past agreements with the government.

Chia said companies with a Customs brokerage licences that existed before 1976 did not require any bumiputra participation and companies that came into being from 1976 to 1990 needed 30% of bumiputra equity.

“Then from 1990 and beyond, the bumiputra equity requirement was 51% and all the industry players have agreed to these terms,’’ he added.

Chia said the matter has been blown out of proportion and was not what it was made out to be.

He believed a settlement will be achieved amicably soon.

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