Asia Times Online
25 January 2006
Southeast Asia
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.