What guarantees can Mahathir give that the Asset Management Corporation would not end up as a government bailout agency

Media  Statement
by Lim Kit Siang  

(Petaling Jaya, Wednesday):  The announcement by the Prime Minister, Datuk Seri Dr. Mahathir Mohamad in Tokyo that the Government may finance up to 60 per cent of the
capital needs of the Asset Management Corporation  (AMC), formed to take over troubled loans and assets in the banking sector, has resurfaced fears that the AMC would end up as a government bailout agency, resulting in another spate of of bail-outs like that of  UEM-Renong,  Sime Bank,  KUB,  Konsortium Perkapalan Bhd or MAS - which the government has refused to admit as bail-outs although everyone inside and outside the country regard them as bailouts.

Mahathir  said Malaysia looked East of Japan, i.e. the United States, to give the country’s banks a clean bill of health by buying over the non-performing loans (NPLs) and assets from banks at market price and revive and later sell them at higher prices.

What Mahathir meant was that  the AMC would be  modelled after the Resolution Trust Corporation (RTC) of the United States during the Savings and Loans Association (SLA) Scandal in the late 1980s.

But can Malaysia learn from the biggest crisis of savings and loans institutions in the history of the United States, where the RTC was set up by  an Act of the United States Congress.

The first question is whether the AMC would be set up by an Act of Parliament to ensure its accountability and transparency, and if not why not.

What is the legal basis for the establishment of the AMC and the appointment of Mohamed Azman Yahya as its chief executive?

The second question is whether the government understands the factors for the success of the RTC to deal with the SLA scandal in the United States?

A study of the handling of the RTC and the SLA scandal said that "the biggest lesson to be learnt" is the "proper, impartial management of the economy" and that the most important element for the success of the RTC was the absence of political intervention in the handling of the Savings and Loans Association crisis.

 Further, the body responsible for the  the RTC  and the SLA scandal was the Federal Reserve,  which had been acknowledged as "an able, utterly professional, blatantly a-political body" and "the most autonomous central bank in the world" which "is never afraid to face the two biggest powers in the world: the President of the USA and Public Opinion".

Can anyone say that the the Bank Negara, which is to be  in overall responsibility for the AMC, would be "an able, utterly professional, blatantly a-political body" and that the Bank Negara is fully independent and autonomous and that it would be not be acting on the  dictates either of the Economic Planning Unit of the Prime Minister’s Department, the National Economic Action Council or any form of executive  interference on whose and which company’s NPLs is to be  taken over?

This goes to the root of the question of confidence, and undoubtedly, if there is such confidence, the Malaysian economic crisis would not have continued to deteriorate, until Malaysia registered -1.8 per cent GDP growth in the first quarter of 1998 and faces the prospect of a recession for the first time in 13 years.

What guarantees can Mahathir give  that the AMC would not end up as a government bail-out agency and the latest manifestation of crony capitalism in Malaysia?


*Lim Kit Siang - Malaysian Parliamentary Opposition Leader, Democratic Action Party Secretary-General & Member of Parliament for Tanjong