PM’s supporters don’t understand 1MDB’s shady deals said Tun Dr Mahathir yesterday. First of all let us see what 1MDB has to say:
Media statement 1Malaysia Development Berhad
Issued on 30 June 2015
For immediate publication
1MDB Response to Tun Dr. Mahathir Mohamad
1MDB refers to a blog posting by Tun Dr. Mahathir Mohamad dated 29 June 2015.
“Despite clarifications from 1MDB, despite both KPMG and Deloitte standing behind their audits at recent PAC hearings, and despite the ongoing enquiries into this matter by the lawful authorities, Tun Mahathir continues to repeat the same questions and falsely claim that 1MDB funds are “lost” or “unaccounted for”, without providing any shred of evidence. 1MDB has now issued a response to Tun Mahathir, which follows two statements issued on 16 June 2015, answering these very same questions that have been repeated yet again by Tun Mahathir.
Such allegations and misleading statements by Tun Mahathir and certain opposition politicians, significantly impacts the ability of 1MDB, a 100% government owned company, to conduct its ongoing business and causes damage to the wider economy.
Furthermore, such allegations negatively impact the implementation of the 1MDB rationalisation plan announced on 29 May 2015, which is intended to reduce the company’s debt levels and ensure that maximum value is generated for our 100% ultimate shareholder, the Government of Malaysia.
1MDB is the subject of ongoing enquiries by the Public Accounts Committee (PAC) – a bi-partisan committee of Parliament. The PAC is a lawful authority to verify whether RM42 billion has ‘disappeared’ from 1MDB, as they have access to all information. 1MDB trusts that the honourable members of the PAC will specifically look into this allegation and provide their judgement to conclusively resolve this matter.
1MDB remains committed to implementing the rationalisation plan, and reaffirms our previously stated position that if any wrongdoing is found, then action must be taken by the lawful authorities, per due process and the laws of our country.”
Now, that was from 1MDB. Let us now talk about the shady deals as uncovered by Aliran: The Truth About Privatisation when Mahathir was the PM:
The cult and culture of privatisation continues in Bolehland. It is being pushed, promoted and peddled by the present government, one which won the general elections on a platform of change, but with little to show except the PM’s `towering’ promises.
The country’s assets are placed in the hands of the hand-picked children, `cousins’, cronies and courtiers of the political elite. Only a year in existence, and they are out to sell the last bits of the country s silver for a song.
The promises of privatisation are played up to the full as profitable public utilities are turned into private monopolies and as the purported purpose and the process of privatisation ironically pave the way for less accountability and transparency.
Privatisation s costly price is covered, converted and coated with official cocksure and naive confidence. It will, quite evidently and eventually, be paid by the people and their children. Blessed are the young, they shall inherit the country s debts!
Contrary to what is often portrayed, the pages of history on privatisation in Bolehlandspeak little of benefits to the people but far more of debts by conglomerates and costly and controversial bailouts by the government.
Often the objective of reduced fiscal burden on the government has backfired, with the government having to pay higher costs with public funds to bail out failed privatisations. We see this in the results of the mindless privatisation of the Mahathir years.
Indeed, the records show that the previous government would enter into a privatised project with a brave face and often come out of it with an about-face and a PM refusing to lose face in spite of the fact that the promised windfall had turned into a pitfall.
Equally outrageous is that workers savings, meant for old-age security, have often been used to bail out selected groups of crony capitalists. Malaysia does not have to borrow from IMF because it has the EPF (Employees Provident Fund). Towards the end of September 1997, following serious decline in the ringgit and share values and large losses suffered by several corporate figures, Mahathir announced the formation of a RM60 billion fund, sourced mainly from EPF.
Initially, the public was made to understand that only unprofitable enterprises would be privatised. But, it did not take very long before very profitable state-owned enterprises like Telekom Malaysia, Tenaga Nasional and Pos Malaysia were offered at the altar of privatisation.
Privatisation has resulted in the public having to pay more and without a commensurate improvement in essential services provided. whether it be for electricity supply, water, telecommunications, health services, postal services, highway travel, etc.
The former government was right when it declared that privatisation creates a win-win situation. The government wins and surely the private companies win. Even if they lose, the government is always there to ensure that they will win by bailing them out. The public will always lose. With such privatisation-made-easy at no risk , it is not surprising that many crony companies are begging to be awarded privatised ventures.
With the former government raving about privatisation and rushing to privatise everything possible (and the present government following suit), we are left with the inevitable question what then is the role of the government, especially when it comes to its social agenda?
What about its crucial obligation and duty to provide to the lower-income group and the poor basic and essential services such as electricity, water and sanitation, healthcare, and telecommunications that would enable public participation and advancement in society.
By increasingly putting public service into the hands of private ownership the Government is abdicating its role and responsibility for privatisation is a movement away from a caring society (central to Vision 2020) to a high social risk society , and an unjust society at that.
Further, instead of funding the maintenance of social safety nets and social development, the former government provided `safety nets’ for elite crony companies, which had failed in privatised projects.
Pertinent are the (summarised) observations of M. Nadarajah, a sociologist who works on issues of sustainable development:
The culture of privatisation has spread from the economy to the social sectors.
Economic security of businesses has become more crucial than the social security of workers.
The policies of privatisation tend to reduce the government s role in wealth redistribution.
The government has increasingly reduced its provision of social protection and shifted its responsibility to the individual and the family.
There is a tendency towards the privatisation rather than the socialisation of social protection.
A culture of privatisation upsets priorities and introduces a careless, high-risk society.
Privatisation displaces real need with market demand .
Indiscriminate privatisation and marketisation of health care services, for example expose the family to high levels of social risks.
Malaysian privatisation has reached a major crossroads. Will the present Government learn from the mistakes of the past or will it embark on an irrational spree to privatise whatever possible, beginning with an imminent privatised healthcare system and a national health insurance scheme?
Lest we forget, below are some examples of instances of the wheels of the privatisation express having come off and the people having to pay the price for the privatised failures. It s about time that the tell-me-the-truth PM faces the truth about privatisation.
IWK: Pure pong
The citizens of Bolehland can still remember what a stink the former government raised with its RM200 million bailout of Indah Water Konsortium (IWK), the financially hobbled concessionaire managing the national sewerage system. But that was not all that the country lost. According to DAP national chairman, Lim Kit Siang, the soft loans granted by the government to IWK amounted to about RM1.4 billion and they were clearly irrecoverable losses .
KPB: Sunken ship
Who can forget Mahathir’s rescue of Konsortium Perkapalan Bhd (KPB) (then owned by his son Mirzan), which was submerged in debts of about RM1.7 billion, using funds from Petroleum Nasional Bhd (Petronas)? The Petronas-controlled national shipping carrier Malaysian International Shipping Corporation Berhad (MISC) was used to acquire KPB s shipping assets with cash said to be as much as RM1 billion.
Proton: Sad saga
The previous government fuelled controversy by using Petronas funds yet again to buy 27 percent of the national car maker Perusahaan Otomobil Nasional Bhd, or Proton, for about RM1 billion, thereby making it the controlling shareholder. (It has since disposed of its controlling stake). The stake was held by the DRB-Hicom Group Bhd, which was deeply in debt. The deal was announced after Proton reported a net loss of RM19 million in the nine months to 31 December 1999.
MAS: Ailing airlines
The government bought back a controlling stake in the Malaysia Airlines System Bhd. (MAS) at the same price for which it sold it in 1994. But the carrier, which had a light debt load then, was grounded by its RM9.5 billion debt and was headed for a fourth straight year of losses. Bankruptcy was imminent.
The national carrier was first sold to then chairman, Tajudin Ramli, a prot g of then Finance Minister Daim Zainuddin without an open bidding process. In the bailout, the government used the rakyat s money to pay RM8 a share when the shares of the ailing airline were trading at only RM3.6. It was believed that the government paid close to RM1 billion more than the market value for the stake held by the airline s former chairman who had no experience in the airline business before he took over the company and was widely blamed for running the airlines into the ground.
Time dotcom: Damned dot
The manner in which the government rescued Time dotCom, a subsidiary of Time Engineering (then saddled with a RM5 billion debt), itself a publicly-listed company of the UMNO-linked Renong Group, added yet another ugly dot to its integrity.
In a land where anything is possible, Bolehlanders watched in disbelief when:
- Kumpulan Wang Amanah Pencen (KWAP) or the Pensions Trust Fund (which came under the office of then Finance Minister Daim Zainuddin) coughed up RM904 million to buy 273.9 million unwanted Time dotCom shares, incurring an instant loss of RM280 million.
- Employees Provident Fund (EPF) spent RM269.28 million on 81.6 million (unsubscribed public portion of the initial public offering (IPO)) of Time dotCom Bhd shares at RM3.30 when the share was hovering between RM1.96 to RM2.10 and even less – eventually suffering a loss of over RM100 million belonging to the rakyat.
- Danaharta (the agency tasked with removing bad loans from the banking system) and Khazanah (the Government s investment arm) got involved in the bailout, when it was clearly not their mission to be a vehicle to bail out failed IPOs of companies. (Khazanah acquired 30 per cent of Time dotCom for some RM2.1 billion.)
LRT: ride over rails
The rakyat was again taken for a ride on the privatisation express when in another privatisation reversal the government raised RM6 billion (in what was known as Malaysia s biggest-ever rescue via bond issue) to bail out Kuala Lumpur s light-rail transit operators Projek Usahasama Transit Ringan Automatik Sdn Bhd (PUTRA) which belongs to Renong Bhd (former UMNO s investment arm), and which defaulted on its RM2 billion loan in 1999, and Sistem Transit Aliran Ringan Sdn Bhd (STAR).
The Government through the EPF again, gave STAR more than RM600 million in loans even when the company was operating at a loss – resulting in the Fund s equity stake of RM135 million being subsequently written off and it s share of the loss amounting to RM96 million in 1999. Both companies were allowed to continue to operate and manage the LRT systems despite their mismanagement and incompetence. Taxpayers had to foot the mega-bills.
PLUS: Cash cow
In 1988, the Malaysian government awarded the North-South Expressway (NSE) concession to United Engineers Malaysia Berhad (UEM), a company owned by UMNO trustee company Hatibudi Sdn Bhd. This award was heavily tainted with corruption allegations, as apart from conflict of interest, UEM was the least qualified among the four tenders submitted. UEM then formed PLUS to undertake the NSE concession.
Despite this being a privatised project requiring the conces-sionaire to provide his financing, the government provided a soft loan of RM 1.6 billion, which was half of the tender price of RM 3.2 billion. (The construction costs were later reported to be double this amount, for reasons best known to PLUS itself.) Other over-generous terms given to UEM included annual increments of toll rates, guaranteed traffic volumes and various indemnities, the full details of which remain secret till this day.
When the Asian financial crisis struck in 1997/8, PLUS took the role of cash cow to bankroll the UEM Group, which became largely insolvent, mired in debts that ran into tens of billions of ringgit.
The endless streams of toll collections from the NSE made PLUS the rose among the thorns in the UEM Group, as far as credit standing was concerned. PLUS naturally became the chief borrower of the group, incurring huge long term debts, in order to keep the UEM conglomerates afloat during the financial crisis. This explains the unusually high gearing of PLUS despite its own highway operation being highly lucrative. It also explains the favouritism practised by the BN government towards PLUS. Looking from this perspective, the people are now being made to carry the burden of the financial follies committed by the UEM Group.
Coming on the heels of the highly unreasonable toll hike of 10 per cent recently, Works Minister Samy Vellu announced in Parliament on 24 March 2005 that the Cabinet had approved a package deal with PLUS to widen certain sections of the NSE. Under the deal, PLUS would undertake to widen two stretches of roads from four lanes to six lanes (Seremban-Ayer Keroh, Rawang-Tanjung Malim, totalling 119 km), to relocate a toll complex (at Jelapang), and to abolish the collection of Senai toll. In return the government would write off a loan (to PLUS) of RM 962 million, hand over the existing Seremban-Port Dickson Expressway valued at RM 50 million to PLUS for toll collection, and extend the NSE toll collection period by eight years to 50 years. These completely one-sided concession terms favouring the concessionaire at the expense of the public must have made the contract between the government and PLUS one of the most unbalanced contracts. (Source: Kim Quek, Malaysia Today)
PSC/Navy project: Future fiasco
Recent reports have it that Pak Lah is trying to unwind the country s biggest privatized contract, a problem-plagued RM24.3 billion deal (signed in 1998) for navy patrol vessels awarded to PSC Industries Bhd. (PSCI), a Malaysian company controlled by Amin Shah Omar Shah. The deal, which also gave PSC control of the government s main naval shipyard and the exclusive rights to service the Malaysian Navy s entire fleet, was intended to be the springboard for Malaysia to create its own marine-engineering industry. The government, which already has advanced more than RM2.5 billion to PSCI, is increasingly skeptical that Amin Shah can deliver the patrol vessels. The first two ships built by PSC have failed to pass pre-delivery trials. PSC itself is in deep financial trouble.
In June this year, Amin Shah was re-elected director of PSCI at the annual shareholder meeting, during whichseveral representatives of several shareholder companies such as Boustead Holdings Bhd.were barred from the meeting. Boustead, the single biggest shareholder of PSCI with 32.7 per cent has served notice to get Amin Shah out of the PSCI board.
The recent recommendation by Public Accounts Committee (PAC) chairman Datuk Shahrir Samad that the Government should use any means possible to rescue and corporatise the PSC Naval Dockyard, the ailing subsidiary of PSCI, makes Amin Shah s insistence that the contract is still in tact , very suspect.
PSCI has threatened to take legal action against Shahrir for his allegation of the possibility of criminal breach of trust among senior officials of the company, which could have taken the company s operations to such depths of failure.
Other bailouts which bewildered the citizens of Bolehland included the following:
- The perceived bailout of Renong/UEM with the EPF s acquisition of UEM equity and UEM s subsequent securing of a RM800 million loan from government and well-connected banks such as Malayan Banking, Bank Bumiputra, Bank of Commerce and RHB to implement a controversial purchase of Renong equity from the company s executive chairman, Halim Saad.
- the bailout of Renong s National Steel Company (NSC) in the Philippines through the Hongkong-based company Hottick, which secured loans, apparently without collateral, from government-owned Malayan Banking and Bank Bumiputra, as well as RHB Bank and Bank of Commerce. Hottick s loans totalling RM3.09 billion were eventually taken over by Danaharta.
- the bailout of Ting Pek Khiing s Ekran Berhad, which received RM950 million compensation from the government over the Bakun Dam project.
- the Park May-Intrakota bus bailout, the Monorail bailout, etc.
Privatisation is no panacea
In the light of the depressing saga described above, the decision by Abdullah s government to (further) privatise basic services runs contrary to assurances made before the last general elections and can only be seen as defying all logic, wisdom and common sense.
The string of de-privatised projects proves that continued privatisation only provides more rope for this country to hang itself economically. The country cannot afford to have more bailouts.
Privatisation in Bolehland has brought more failure than fortune, more bailouts than benefits. The only thing that the public gains is the burden of private debts. The only clear reality is that, the government continues to lack transparency and accountability as was the practice under the previous government.
All that glitters is not gold including privatisation! Will Abdullah listen to these truths?
And I quote:
The truth about privatisation
It has led to more bailouts than benefits in Bolehland.
All the above was then-Pemuda UMNO Chief Zahid Hamidi’s war cry. From early 1998, Zahid went around shouting “Cronyism! Nepotism!” When I asked Zahid’s then press secretary, Hanafiah Man, if his boss was referring to Mahathir, Hanafiah sheepishly replied saying it was meant for the UMNO general audience. We know now who Zahid was referring to. Anwar also started his campaign against Mahathir using the same war cry, although we know Anwar was doing so for his own benefit.
However, interesting to note that 1MDB has admitted that it is being investigated by several agencies, and that any wrongdoings will not be covered. In the name of transparency, shouldn’t Mahathir allow for investigations into the billions of Ringgits that had went into a Black Hole during his tenure as the PM be investigated as well? After all, what you sow then is what people of today reap.
And what is this about raising the Altantuya story again? I thought this is over and done with and the the supreme court of the land had decided that Najib had nothing to do with her murder. Whatever that is said now is nothing short of in contempt of court. Mahathir goes on blabbing about how the case might have been rigged. Is Mahathir suggesting that the judiciary is controlled by the government? Shall we get Mahathir to hazard a guess as to who is responsible to cause the judiciary to lose its independence? Maybe, in the name of transparency, Mahathir should be tried for the abuse of position and power when he was the PM. Never mind the fact that Salleh Abas himself went out of line by complaining to the then Agong about the Agong’s personal life, and then copied the same letter to all Sultans and Raja. I am sure Mahathir saw the opportunity that was far too juicy to be missed to get rid of Salleh Abas whom had wanted a far more independent judiciary. I am pretty sure there are many judges who would like to preside over the above-mentioned cases.
I grew up admiring Mahathir and respect him for all the things he had done for this country during his time. This is no longer his time, and certainly isn’t the time for the pot to be calling the kettle black.