Malaysia's web of politics and
business By Anil Netto
PENANG, Malaysia - When Mahathir Mohamad
stepped down as prime minister in 2003, one
analyst predicted the period of veneration of his
role and legacy in transforming Malaysia would
soon give way to a process of "de-Mahathirizing"
Malaysia.
Sure enough, his legacy is being
re-evaluated as the warts begin to show. The flip
side of his rule is not a pretty picture: bailouts,
financial scandals,
questionable deals and unviable projects, some of
which are only now coming to light.
One
day, it is state-controlled car maker Proton,
which has been losing local market share, its
strategic alliance with Volkswagen scrapped before
it could even take off.
Another day, it is
Malaysia Airlines, saddled with huge losses
despite previously being bailed out by the
government. Then there's the bad-loans scandal in
Bank Islam that forced a management change.
Also, the multibillion-ringgit Bakun Dam
project in Sarawak state has been much delayed and
is now expected to generate electricity only in
late 2009. Even then, without the planned
submarine cables to channel electricity to the
more industrialized peninsula, the economic
justification for the dam will have disappeared.
On Monday came news that the
multimillion-ringgit Entertainment Village
project, Malaysia's answer to Hollywood and
located within the Multimedia Super Corridor
(MSC), has been abandoned. Officials say it won't
affect the MSC's ambitions to promote software and
other multimedia development, but it is obvious
that the corridor, another Mahathir brainchild, is
no longer ahead in the regional stakes.
Last week, a senior judge's remarks on the
dispute surrounding the takeover of a toll
concession firm in 1990 brought back memories of
the close business-political nexus of the Mahathir
years. Court of Appeal Judge Gopal Sri Ram ruled
that two businessmen, Anuar Othman and Halim Saad,
in the early 1990s had siphoned off RM32 million
(US$8.5 million) from a highway toll concession
firm, Metramac Corp Sdn Bhd (formerly Syarikat
Teratai KG Sdn Bhd or STKG).
STKG's
earning potential was abruptly halted by a public
demonstration against toll collection at the
Cheras Highway in September 1990. The government
stepped in and suspended toll collection, a move
that spelled disaster for the company.
STKG put forward a claim for RM764.2
million in compensation. But "its appeal to
then-minister of finance Tun Daim Zainuddin fell
on deaf ears. He simply told the defendant's then
existing shareholders that the federal government
was not in a position to pay the defendant any
compensation," observed Sri Ram.
But
curiously in November 1990, a politically linked
listed company, UEM Bhd, offered to buy STKG's
shares for RM97 million - though in reality the
shares were to be acquired by a UEM-nominated
firm, Metro Juara Sdn Bhd, owned by Anuar and
Halim. The takeover was completed in January 1990.
Why pay RM97 million for the shares of a
company in dire straits? asked the judge. "The
answer is simple enough. Anuar Othman and Dato
Halim Saad had something which the plaintiff did
not. And that was the patronage of the
then-minister of finance, Tun Daim Zainuddin.
"All the independent evidence on record
points to this being in reality a crude case of
economic duress presenting itself in a more subtle
form."
After the takeover, "as if by the
rub of a magic lamp, the federal government and
DBKL [Kuala Lumpur City Hall], who hitherto
claimed to be impoverished, suddenly found
themselves flush with funds". The judge said the
compensation figures were staggering. "In one way
or another the defendant was to receive a total
sum of RM756 million." This amount, the judge
said, included RM312 million for work already
done, RM405 million to enable Metramac to meet the
cost of financing work to be done under a new
agreement and RM32.5 million as "payment for share
premium" not "previously taken into account".
Halim, who was not a party in the case,
responded angrily in the media. "My company was
ordered by the government to take over Metramac as
the issue of the toll collection at Cheras had
become so political and tense. There was in fact a
near-riot."
He said his firm, Metro Juara,
was asked to buy Metramac shares at market value
plus a "premium" of RM32.5 million. "My personal
opinion then was that the RM32.5 million was not
payable to the previous shareholders. But the
government asked us to pay that amount and we
could only manage a silent protest," he said.
"This was the same RM32.5 million that the
ministry decided to reimburse me and Dato' Anuar
Othman in Metro Juara through Metramac as stated
in the letter of 13th February 1992."
He
pointed out that Tun Daim Zainuddin resigned as
finance minister in March 1991, and the new
agreements were signed in February and March 1992
when Anwar Ibrahim was finance minister.
Daim, who is abroad, issued a brief
statement through his lawyers, describing the
judge's findings as "erroneous". He is expected to
issue a detailed response in the next few days.
Anwar, for his part, said the matter was a
done deal by the time he took over as finance
minister and urged the attorney general to launch
an immediate investigation.
Many were
encouraged that the judiciary felt bold enough to
speak out against such prominent personalities,
though largely linked to the previous
administration. While civil-society groups lauded
the judge's remarks, Mahathir has been largely
silent. Anuar and Halim were proteges of
Mahathir's long-serving economic czar, Daim
Zainuddin, and were closely linked to companies
related to the ruling United Malays National
Organization (UMNO).
In a 1992 study of
corporate stock ownership, it was revealed that
Halim and his wife Noraini collectively owned
almost RM2.4 billion worth of corporate stock.
Anuar Othman, for his part, had publicly announced
that he was acting as UMNO's business proxy,
according to a book authored by economists Edmund
Terence Gomez and K S Jomo.
In another
case this week, Court of Appeal judges slammed the
Insolvency Department of Malaysia for delays in
bankruptcy cases.
So is Malaysia's
judiciary waking up from its slumber? The
judiciary itself was a victim of Mahathir's
authoritarian rule from 1981 to 2003. In 1988,
Mahathir clamped down on the judiciary ahead of a
crucial case involving the ruling party. The lord
president and five top judges were suspended. In a
psychological blow, the Supreme Court was renamed
the Federal Court, while the lord president's
position was labeled "chief justice".
Far-reaching constitutional amendments,
passed in 1988 at a time when a string of vocal
opposition parliamentarians were under detention
without trial, curbed the powers of the judiciary.
Sharia courts were raised to the level of civil
courts and given powers to decide on cases
touching on Islam. It was hard then to foresee how
much this would strain inter-religious ties and
the social compact among Malaysians.
Many
now feel that civil judges, interpreting the
amendments cautiously, have surrendered too much
ground to the sharia courts, leaving non-Muslims
without a remedy in certain types of cases, such
as those involving religious conversion and child
custody cases. What's more, Mahathir's
pronouncement in 2001 that Malaysia was already an
Islamic country/state threw the very nature of the
Malaysian nation state into doubt.
These
developments have cast a shadow on Mahathir's
legacy and Prime Minister Abdullah Badawi could
well profit from it by isolating the old guard and
the Mahathir loyalists within his administration.
Not that Abdullah has no controversies of his own
to deal with - especially over the role played by
his fast-rising and ambitious son-in-law, Khairy
Jamaluddin.
"There's been a bit of a
ground shift,'' said one Kuala Lumpur-based
political commentator. "This is the year of the
disclosure of the shenanigans under Mahathir."
The ruling UMNO will be in for a very big
factional fight next year, when party polls are
due to be held, he predicted.
"Abdullah
Badawi has a bit more subtlety than you and I give
him credit for," he said. "He will move to cut the
ground under the feet of the corrupt." But he
warned that the forces against reform remain
formidable and entrenched. The Metramac judgment
was issued on January 12, but government agencies
appear in no hurry to probe deeper, despite a
clamor from civil society groups and opposition
politicians.
So have things really
changed? It won't be easy to untangle the
intricate web of politics and business in
Malaysia, so intertwined are the two in this
country. Whether Abdullah has the political will
or stomach to match his rhetoric with substantive
reforms remains to be seen.
Anil
Netto is a freelance writer based in Penang,
Malaysia.
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