30% equity for tuition centres detrimental to students, ministry and national policy

I have reviewed the education ministry’s guideline for tuition centres, particularly Section 6.3.2 which stipulates a minimum 30% Bumiputera equity and 100% Malaysian citizen ownership for tuition centres registered as Sdn Bhd and enterprises.

During my time as deputy education minister, the regulatory philosophy for private education centres was clear: we regulated for teaching quality, teacher qualifications, premise safety and affordability for parents. Licensing wasn’t a tool for equity restructuring but to raise the standards of human capital development.

I support the agenda to increase Bumiputera participation in the economy, including in private education. This is an important national objective under Article 153 of the Federal Constitution.

However, based on experience, the most effective way to achieve this in education is through enabling measures, making it easier for Bumiputera educators to open new centres with access to training, financing and premises.

This would be a more prudent way to increase Bumiputera participation in the tuition industry rather than just forcing some decades-old institutions to give up their equity without substantial reason except government intervention.

My concern is practical:

If enforced retrospectively upon licence renewal from 2027, many small operators – Chinese, Indian and Malay families who built these centres from their own savings – will be forced into nominal partnerships. This will encourage Ali Baba practices, raise compliance costs and do nothing to improve learning outcomes. If this happens, even the long-term goal of Bumiputera equity growth would fail in the long run.

I would rather the entrepreneur development and cooperatives ministry, SME Bank and various other government agencies create a Bumiputera tuition centre ecosystem to aid building bona fide tuition centres, especially in rural areas that need them.

I respectfully urge the education ministry to:

1. Clarify immediately whether this condition applies only to new applications, or also to existing centres upon renewal;

2. Impose a moratorium and convene genuine stakeholder engagement, including with Bumiputera educator groups, existing operators and parents’ associations – listening to the ground is pivotal in making a policy change that will be accepted and embraced by all stakeholders.

These avoid repeating your “Ali Baba”/cost-to-parents/positive-incentives argument:

a. Legal principle of legitimate expectation: thousands of centres were licensed for years under different rules. Retroactive equity restructuring violates the principle of legitimate expectation and proportionality in administrative law, opening the education ministry to judicial review.

b. It pushes the sector underground: Malaysia already has a large unregistered home-tuition and online-tuition market. Adding an equity condition for Sdn Bhd will push operators to deregister, operate without a licence or shift fully online where the education ministry has zero oversight on safety and teacher quality – the opposite of what regulation should achieve. The last thing anyone wants is a shadow economy for education, of all things, which may compromise educational standards and even impinge on legitimate government earnings, i.e tax.

c. Contradiction with national policy direction: in 2009 and again in recent services liberalisation, Malaysia removed the 30% condition to attract talent and investment. Reintroducing it for education, a sector we want to make globally competitive, sends a confusing signal, especially when we are trying to retain teachers and STEM talent. Any policy should have continuation and be geared towards increasing the standard of education in the long run rather than short-term economic aims that might not be sustainable.

d. Impact is on Bumiputera students, too: over 40% of students in many urban tuition centres are Bumiputera students. If centres close or raise fees due to restructuring costs, Bumiputera students lose access first. A policy should address the holistic impacts on all stakeholders before implementation and not offer knee-jerk reactions after. Clarity is key.

e. Franchise and branch rule compounds the damage: under the guideline, branches must mirror the parents’ equity structure. A successful Bumiputera operator who wants to franchise, or a non-Bumiputera operator with one Bumiputera partner, will have to replicate the same partnership at every branch, making expansion unviable.

f. The education ministry’s core capacity issue: the ministry’s private education division is already stretched inspecting premises, verifying teacher qualifications and curbing unlicensed centres. Auditing shareholding, shareholder agreements and beneficial ownership is outside the ministry’s expertise and will delay all licence renewals, not just Sdn Bhd.

The last thing the nation wants is for our children’s educational needs, irrelevant of race, to be disrupted. This is a cost too high for any nation to bear.

g. Better international models exist: instead of licensing-linked equity, we can use procurement-linked incentives; for example, the ministry’s own programmes like extra classes, remedial support for Tamil schools, or digital education grants could prioritise centres with meaningful Bumiputera teacher employment and Bumiputera student scholarships.

That measures real education equity, not paper shareholding.

P Kamalanathan is a former deputy education minister.

The views expressed are those of the writer and do not necessarily reflect those of FMT.

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