DAP calls for a Parliamentary Oversight Panel on Valuecap to ensure that the RM10 billion public funds of the new asset management company is not used to bail out politically-linked or crony companies
by Lim Kit Siang
(Penang, Saturday): The Prime Minister Datuk Seri Dr Mahathir Mohamad yesterday defended the role of Valuecap Sdn Bhd, saying that the newly set-up asset management company is not bailing out anybody and is run by people who abide by the law and follow market rules.
He said that as Valuecap was funded by government agencies,
equally owned by Khazanah Nasional Bhd., Permodalan Nasional Bhd and
Kumpulan Wang Amanah Pencen (KWAP), the new RM10 billion asset management
company had the right to invest the way other people were investing and has
the right to buy shares that were underpriced.
The assurances that the RM10 billion Valuecap will not be used to bail out politically-linked or crony companies and the stance that the government had never in the past used public funds for such bail-out operations is as believable as the oft-repeated government assurance that the Internal Security Act (ISA) had never been abused to detain political opponents or to suppress political dissent. Such assurances would be credible if I had not been detained twice under the ISA.
Malaysians can still remember the most recent bail-out operation using public funds when in March 2001, the Pensions Trust Fund (KWAP) became the "Bail-out Fund" for the politically-connected Time dotCom, by acquiring the lion's share of 48 per cent of the Time dotCom IPO issue of 571.7 million shares or 63.9% of the unsubscribed IPO portion of 428.83 million shares.
The Time dotCom IPO was an utter flop, with applications for only 142.86 million shares, or 25% of the total 571.7 million shares made available for public subscription and KWAP was the principal "bailor" of the Time dotcom IPO issue, taking up 273.86 million shares of the unsubscribed portion of the Time dotCom IPO at the cost of M903.74 million paying the IPO price of RM3.30.
From the very first day of its public debut in the stock market on March 12, 2001, Time dotCom took a plunge, closing at RM2.43 on the first day and ending at RM2.04 per share for its first week of trading, with KWAP incurring losses running into some RM350 million in the first week in utter disregard of its statutory charter as the custodian for the pensions and gratuities for the 850,000 civil servants.
Nor Mohamad is very proud of the "strong positive momentum" which Valuecap had injected into the Kuala Lumpur Stock Exchange (KLSE), increasing its market capitalization by RM30 billion and raising the benchmark Composite Index (KLCI) by 44.77 points to 670.53 at the close of tradng yesterday since the entry of Valuecap into the KLSE after 3 pm the previous Friday on 10th January 2003. (Utusan Malaysia)
Neither Mahathir nor Nor Mohamad had however addressed the grave ethical, accountability and good governance issues raised by the use of public funds to prop up the stock market as well as whether such an operation is sustainable in the mid-term and long-term.
Time dotCom poses many of these questions. Before Valuecap's entry, Time dotCom was worth RM1.39 per share. After the Valuecap foray in the past week, Time dotCom edged up to close at RM1.55 per share yesterday.
Going by Nor Mohamad's statement about Valuecap's objective to buy shares that have fundamental values but were underpriced, will Valuecap be buying Time dotCom shares until its share price is raised by over 100 per cent to RM3.30 per share - its IPO price last March, which was only believed by the government advisers but not shared by the entire market which avoided the IPO like a plague.
At the present price of RM1.55 per share, KWAP stands to lose
RM479.55 million for bailing out Time dotcom by taking up 273.86 million
shares at RM3.30 per share two years go. Is one of KWAP's objective for
participating in the Valuecap operation to recoup its mega losses for
bailing out Time dotCom two years ago?
What is clear however is the urgent need for an oversight mechanism over Valuecap, if not before but definintely soon after its market operations For this reason, DAP calls for the immediate establishment of a Parliamentary Oversight Panel on Valuecap or another public body to ensure that the RM10 billion public funds of the new asset management company is not used to bail out politically-linked or crony companies and that the new government asset management company adheres to the principles of accountability, transparency and good governance.
* Lim Kit Siang, DAP National Chairman