(Penang, Sunday): On Tuesday, Malaysia achieved another "first" and "Malaysia Boleh" when sixteen Malaysian skydivers landed by parachute on North Pole together with a Proton Wira. Another "first" and "Malaysia Boleh" is that Malaysia is still capable of such feats when faced with the worst economic crisis in the nation�s history and is in danger of being reduced from a first-rate nation near developed nation status into a third-class nation grappling with problems just to provide basic human needs of the people like clean air, piped water, affordable housing and health care and even adequate foodstuffs to the drought-stricken people in Sabah. On Thursday, someone in New York sent this email to Malaysia:
"Thought you'd like to know that readers of The New York Times this morning were treated to the following headline over a short Associated Press wire service story: �Malaysians Drop Off Car at North Pole.� It was explained that a 16-member skydiving team �accompanied� the descending Proton Wira sedan and stayed with the vehicle for two hours. The report did not explain in what manner the skydivers returned home. Nor was it explained whether the car was sent to the North Pole because of excess production, poor sales, or solidarity with polar bears. Already there are rumors in New York that car thieves are racing across the Yukon by dogsled, believing that whoever arrives first gets to drive home. Hopefully, the Proton Wira is equipped with snow tires."
I have started with reference to the North Pole expedition because of its tangential relevance to the topic I have been given, "If they are not bailouts, what are they?". If there are those who think producing another "First" and "Malaysia Boleh" in the North Pole expedition could serve as a bail-out for the much-battered international image of Malaysia, they cannot be more mistaken.
The topic that I have been given, "If they are not bailouts, what are they?" is in fact quite a dangerous one in present-day Malaysia, which has approximated to the world of double-speak in George Orwell�s "1984".
Last year, the government decreed that there was no economic crisis in Malaysia, and the term was banned in polite and civilised circles over the radio, television and the local printed media.
Next on the ban list wss the word "haze" with the Information Minister, Datuk Mohamad Rahmat threatening to revoke licences of broadcasting stations which report about the haze in Malaysia.
In this new lexicon of "sensitive" terminology in present-day Malaysia, the latest addition is "bail-out". Bailouts? Where got bail-out? Right from the Prime Minister, Datuk Seri Dr. Mahathir Mohamad downwards, all government leaders will deny until they are blue in the face that there are bail-outs.
I do not know whether those who keep talking about the economic crisis, haze and bailouts would one day be invited to be guests of His Majesty�s Government for violating the new sensitivities of the powers-that-be, but these are the consequences and risks we must take in the stride for the good of the people and country.
At least our insistence of calling a spade a spade, and an economic crisis an economic crisis, instead of talking only about "economic problems", have been vindicated when the executive director of the National Economic Action Council and Economic Adviser to Government, Tun Daim Zainuddin, admitted in an interview with Far Eastern Economic Review two months ago that Malaysia is faced with the worst economic crisis since the second world war.
And it is also Daim Zainuddin who recently declared that it is government policy to intervene to save financially-troubled companies like United Engineers Malaysia (UEM) Bhd and Renong Bhd. although he denied that this is a bail-out.
Daim's comments were contained in an article entitled ''The Bottomline'' which was published in a book titled ''Hidden Agenda'', published by one of the most sycophantic public relations outfits for the Barisan Nasional, LimKokwing Integrated Sdn Bhd.
''In the case of UEM and Renong, if the worst happens, the government will not abdicate its responsibility to ensure that vital, viable assets and operations in companies are saved, even with public funds,'' said Daim. ''At the same time, the government will not stand in the way of any shareholders or lender, or for that matter any other stakeholder, exercising their own initiative and imagination, within the confines of a regulatory framework, to restructure their way to survival.
''This is not a bail-out,'' he added. He said he was concerned with the question of bail outs lest it became an issue of semantics.
It is in fact the Barisan Nasional leaders who are indulging in semantics, denying that the government is involved in bailouts of troubled companies and individuals while doing precisely that, at public expense, either involving public funds or jeopardising the interests of minority shareholders.
The UEM-Renong saga is a classic case of a bailout at the expense of the interests of minority shareholders. In the first three days after the initial November 17, 1997 announcement of UEM�s reverse take-over of Renong, stock market capitalisation fell by RM70 billion, or 20 per cent. It has been estimated that subsequent slides as the authorities dithered over the following eight weeks suggest that between a fifth to a third of the stock market decaplitalisation since July 1997 could be attributed to this episode and its implications.
If the RM2.34 billion UEM bail-out to save the UMNO holding company, Renong and its deeply-indebted Chairman, Tan Sri Halim Saad, in violation of stock market rules, including the mandatory general offer required after exceeding the 33 per cent ownership trigger point, is not a bail-out, then what is it? An act of public charity?
There have been other bail-outs, with more to come, as indicated by Daim. The other bail-outs include the bail-out of Tan Sri Ting Pek King and Ekran as a result of government deferment of the Bakun dam project, and Parliament was just informed that the government would probably compensate Ekran Bhd to the tune of RM200 million - at a time when Ekran has still to explain the diversion and misuse of part of the RM1.5 billion raised in the rights issue in May last year for purposes other than as approved last year by its shareholders and the Securities Commission (SC).
There is then the next batch of the five bail-outs of Sime Bank, KUB, Bank Bumiputra, Konsortium Perkapalan Bhd (KPB) and MAS which could be described as the "new danger points" in undermining the still-fragile investor confidence, and one important reason why despite the third 1998 budget by the Deputy Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim in Parliament on March 25, 1998, the Kuala Lumpur Stock Exchange Composite Index had fallen by over 100 points and the ringgit generally weakening its position.
At least, as a result of public and persistent protests, the proposal to commit RM1.5 billion of EPF funds in the rescue of Sime Bank and KUB had been rescinded although some RM30 million of EPF funds would still be involved in the recapitalisation of Sime Bank.
This, however, has not fully addressed the distress of the nine million Employees Provident Fund (EPF) contributors with regard to the lack of responsibility, accountability and transparency of the EPF in its investment of the RM130 billion EPF funds and its role in bail-outs of troubled companies and individuals.
What is the position with other bailouts using EPF money - such as the proposed EPF acquisition of a 20% stake in Projek Lebuhraya Utara-Selatan Bhd. (PLUS) reportedly for RM1.5 billion - which is seen as financing UEM�s RM2.34 billion acquisition of Renong, which was initially financed with borrowings.
The nine million EPF contributors are entitled to full, proper and satisfactory answers to the questions about the use of RM1.5 billion to buy 20% stake in PLUS before any policy decision is taken by the EPF Board.
Why should EPF be involved in the bail-out of UEM or any troubled company as a result of the economic crisis? Between Sept. 30 and October 1 last year, just before the outrageous RM2.34 billion Renong acquisition, EPF bought 65.91 million shares in UEM.
It has been calculated that at RM10.50 apiece, EPF would have forked out a total of RM645.53 million for these UEM shares. At the end of trading at the Kuala Lumpur Stock Exchange yesterday, UEM counter ended at RM3.36 per share. This would mean that EPF would have lost over RM460 million from this acquisition.
In acquiring the 65.91 million UEM shares, was EPF involved in an exercise to bail out and prop up UEM, so that it could in turn bail out and prop up Renong?
In this connection, it is public knowledge that banks have drawn up their own list of "unacceptable stocks" and I have here one such bank list, with a list of 92 "unacceptable main board stocks" and a list of 71"unacceptable second board stocks".
What concerns me is that EPF owns quite a number of such stocks.
The government seems to have backtracked from the firm commitment given by Anwar in his second 1998 budget in December 1997 that there would be "no bail-outs" and "no corporate restructuring" at public expense, whether that of public funds or the interests of minority shareholders.
The Prime Minister, Datuk Seri Dr. Mahathir Mohamad has justified such bail-outs on the ground that the companies are facing difficulties not because of any fault of their own but because of foreign exchange volatility, causing the collapse of the KLSE, and which are factors completely beyond their control.
Mahathir seems to have forgotten what he said before the ASEAN Leaders� Summit in mid- December last year, when he spoke of the need to amputate "gangrenous" parts of the sick economy. That was in fact the one and only time he spoke of the need for Asian nations "to allow unviable businesses to die, and companies will have to retire unnecessary workers as a surgeon would amputate an infected limb".
Let me say that if the government is set on bailouts of troubled companies and individuals, then let it establish an independent National Bailout Commission for all troubled companies, big or small, to apply for bailouts based on a transparent set of criteria rather than based on cronyism or political favouritism.
Such a National Bailout Commission should examine the antecedents of every applicant company, as to whether the applicant has healthy and solid fundamentals or is an empty, bloated company based on political connections or cronyism.
Companies, however a big flier they might be before the crisis, should be refused bailouts if they are not healthy companies. Many mega-companies, including those reputedly to be performing "national duties" have never been healthy companies.
One such company for instance was given 3,000 acres because it was performing a "national duty", although its factory and supporting industry required less than 100 acres, and land was given below-market price of 30 cents per sq ft or RM13,068 per acre. It was revalued at RM20 per sq ft or RM871,200 per acre, giving a potential profit of RM2.6 billion overnight. Although the company was given the first release of 1,000 acres, the revaluation created a collateral of RM2.6 billion to enable it to secure a RM600 million loan from various banks.
I understand that the RM600 million loan has been used up. Would such a company deserve any bailout?
If there is an independent National Bailout Commission which must justify its decisions and convince Malaysians that it make its decisions in accordance with a publicly-declared set of critera without fear or favour, and not subject to political directives from the government, I do not think that all the companies which are receiving bailouts like UEM-Renong, Ekran, Sime Bank, KUB, Bank Bumiputra, Konsortium Perkapalan and MAS would have qualified to receive bailouts at all.
(26/4/98)