Malaysian Maverick: Mahathir Mohamad in Turbulent Times Read online

  Indeed, Dr. Mahathir bore responsibility for the money culture well beyond that of a leader who failed to treat a virulent cancer repeatedly diagnosed in the UMNO body. He actively contributed to the problem by increasingly centralizing power in the hands of the party president from the early 1980s.[116] By tightening his grip he ensured rivals would coalesce into stronger factions in an effort to get a share of the contracts, privatization opportunities and special bumiputra allocations of publicly-listed stocks.

  When the Asian economic crisis struck in late 1997, the government lost no time in bailing out Renong and other political favourites. Renong by then was the country's largest conglomerate with debts of more than RM25 billion, about 5 per cent of the total loans in the banking system.[117] State support was widely assumed to be an attempt to rescue major Renong shareholders, specifically Halim Saad — and by extension UMNO — at the expense of minorities.

  The government also bailed out UMNO over the Putra World Trade Centre, persuading state-owned banks to forgive Khidmat Bersatu at least RM140 million in accumulated interest.[118] According to a confidential accountants' report commissioned by UMNO in late 1985 after the UMNO complex was completed, it cost almost RM360 million and was financed primarily by loans of RM199.5 million from Bank Bumiputra and RM64.9 million from Malayan Banking Bhd. As of March 1986, Khidmat Bersatu had paid just RM51,570 in interest, and the report — obtained, again, by the author in the course of his research — made it clear the company would pay no more.[119] Malaysian taxpayers had subsidized the construction of UMNO's landmark headquarters, which became a cash cow for the party.

  After Anwar was sacked in late 1998, Dr. Mahathir and Daim consolidated their power and sidelined Anwar-aligned companies and businessmen, who quickly faded away. Similarly, the sensational Mahathir-Daim split in June 2001, through devoid of any public explanation or recrimination, spelled the end for Halim and other Daim protégés. Halim was summoned within two weeks by a Mahathir aide and told the government intended to take control of Renong, which would be broken up and eventually sold to new investors.[120]

  Where that left UMNO's finances was anybody's and everybody's guess. It was easy to believe but impossible to prove that vast sums had been skimmed off UMNO investments on Daim's watch. As the Democratic Action Party's Lim Kit Siang said, "Once he became financial czar, you could never tell where UMNO companies ended and Daim companies began."[121] For 17 years, only Daim knew how much was in the UMNO Political Fund, since, as Dr. Mahathir said, "Yes, he informs me, but...I don't look at the books".[122] In the absence of any public accounting, word circulated inside the party that billions of dollars were missing. Dr. Mahathir gently demurred after his own retirement. "I don't think so," he said. "UMNO never had billions of dollars."[123] Daim also begged to differ, at least as far as he personally was concerned. In a comment directed at UMNO and its leaders, he said, "They don't owe me any money and I don't owe them anything."[124]

  Notes

  Interview with Lim Kit Siang, 31 May 2007.

  Interview with Daim Zainuddin, 18 October 2007.

  Interview with Mahathir Mohamad, 14 August 2007.

  Edmund Terence Gomez, "Introduction: Political Business in East Asia", in Edmund Terence Gomez, ed., Political Business in East Asia (London: Routledge, 2002), p. 6.

  Ibid., p. 6.

  Pasuk Phongpaichit, "Thailand under Thaksin: Another Malaysia?", Working Paper No. 109, September 2004, Asia Research Centre, Murdoch University, p.7.

  Tunku Abdul Rahman, Viewpoints (Kuala Lumpur: Heinemann Educational Books (Asia) Ltd., 1978), p. 53.

  Stephen Duthie, "Mahathir Rivals Ask Court to Halt New UMNO Drive", Asian Wall Street Journal, 4 April 1988.

  Interview with Tengku Razaleigh Hamzah, 29 May 2007.

  Ibid.

  Ibid.

  Interview with Tengku Razaleigh Hamzah, 17 January 2008.

  Interview with Tengku Razaleigh Hamzah, 21 March 2007.

  Interview with Abdullah Ahmad, 1 August 2008. UMNO's direct majority stake in Utusan Melayu was disclosed when the company was publicly listed in 1994. Edmund Terence Gomez and Jomo K.S., Malaysia's Political Economy: Politics, Patronage and Profits (Cambridge: Cambridge University Press, 1999 edition), p. 96.

  Interviews with Tengku Razaleigh Hamzah, 17 January, 11 August, 2008.

  Yoolim Lee, "Malaysia's Banking Magnate", Bloomberg Markets, January 2008, p. 100.

  Edmund Terence Gomez, Politics in Business: UMNO's Corporate Investments, (Petaling Jaya: Fortune Enterprise, 1990), p. 58.

  Ibid., p. 58.

  Interview with Daim Zainuddin, 18 October 2007.

  Edmund Terence Gomez, "Political Business in Malaysia", in Political Business in East Asia, p. 10l.

  Peter Searle, The Riddle of Malaysian Capitalism: Rent-seekers or Real Capitalists? (Sydney: Asian Studies Association of Australia with Allen & Unwin and University of Hawai'i Press, 1999), p. 46.

  Cheong Mei Sui and Adibah Amin, Daim: The Man Behind the Enigma (Petaling Jaya: Pelanduk Publications (M) Sdn. Bhd., 1995), p. 15.

  Ibid., p. 15.

  Raphael Pura, "Malaysia's Daim Charts Path to Power", Asian Wall Street Journal, 24 August 1984.

  Ibid.

  Raphael Pura, "Indosuez Unit Control Shifts to Malaysians", Asian Wall Street Journal, 15 October 1982.

  Interview with Mahathir Mohamad, 20 March 2007.

  Ibid.

  Interview with Daim Zainuddin, 18 October 2007.

  Edmund Terence Gomez, Politics in Business: UMNO's Corporate Investments, p. 58.

  "Khidmat Bersatu Sdn. Bhd.: Accountants' Report for the Period from 1st June 1981 to 31st March 1986", Hanafiah Raslan & Mohamad, Kuala Lumpur.

  Interview with Daim Zainuddin, 18 October 2007.

  Interview with Tengku Razaleigh Hamzah, 17 January 2008.

  "UMNO Political Fund: Accounts, 31st December 1983", Anuarul, Azizan & Company.

  Interview with Mahathir Mohamad, 14 August 2007; interview with Daim Zainuddin, 18 October 2007.

  Raphael Pura, "Fleet Group of Malaysia Has New Chief", Asian Wall Street Journal, 9 August 1982.

  Interview with Daim Zainuddin, 18 October 2007.

  Peter Searle, The Riddle of Malaysian Capitalism, p. 106.

  Doug Tsuruoka, "Fleet's Stormy Voyage", Far Eastern Economic Review, 5 July 1990, p. 52.

  Interview with Daim Zainuddin, 18 October 2007.

  Doug Tsuruoka, "Fleet's Stormy Voyage", p. 52.

  Peter Searle, The Riddle of Malaysian Capitalism, p. 106.

  Nick Seaward, "Malaysia's Controversial Finance Minister Proves an Able Economic Manager: The Daim Stewardship", Far Eastern Economic Review, 1 September 1988, p. 52.

  Edmund Terence Gomez, Politics in Business: UMNO's Corporate Investments, p. 43.

  Ibid., p. 43.

  Interview with Daim Zainuddin, 18 October 2007.

  Edmund Terence Gomez, Politics in Business: UMNO's Corporate Investments, pp. 40-41; Cheong Mei Sui and Adibah Amin, Daim, pp. 58-59.

  Edmund Terence Gomez, Politics in Business: UMNO's Corporate Investments, p. 38.

  Peter Searle, The Riddle of Malaysian Capitalism, p. 104.

  Hardev Kaur, "Daim: Person Behind the Name", New Straits Times, 21 July 1984, cited in Peter Searle, The Riddle of Malaysian Capitalism, p. 104.

  Edmund Terence Gomez, Politics in Business: UMNO's Corporate Investments, p. 60.

  Ibid., p. 61.

  Ibid., p. 61.

  Peter Searle, The Riddle of Malaysian Capitalism, p. 106.

  Ibid., p. 106.

  Interviews with Tengku Razaleigh Hamzah, 29 May 2007, 17 January 2008.

  Interview with Tengku Razaleigh Hamzah, 29 May 2007.

  Stephen Duthie, "Court Allows Auction of Land Held by UMNO", Asian Wall Street Journal, 11 January 1989; Stephen Duthie, "Consultant, Ministry Differ on UMNO Property Value", Asian Wall Street Journal, 22 February 1989; Stephen Duthie, "Effort to Auction Property Owned By UMNO Stalls", Asian Wall Street J
ournal, 17 April 1989.

  Raphael Pura and Stephen Duthie, "Malaysian Court Allows Highway Award: Government Can Give Rich Project to Firm Owned by Ruling Party", Asian Wall Street Journal, 18 January 1988.

  Ibid.

  Edmund Terence Gomez, Politics in Business: UMNO's Corporate Investments, p. 129, citing the Star, 29 August 1987.

  Stephen Duthie, "Lim Files Police Report Accusing Malaysian Cabinet of Corruption", Asian Wall Street Journal, 7 October 1987.

  Stephen Duthie, "Malaysia Signs Disputed Highway Pact", Asian Wall Street Journal, 21 March 1988.

  Cheong Mei Sui and Adibah Amin, Daim, p. 125.

  Interview with Daim Zainuddin, 18 October 2007.

  Stephen Duthie, "UMNO Regains Party Assets, Adds Holdings", Asian Wall Street Journal, 26 July 1989.

  Stephen Duthie, "United Engineers Expands at Rapid Pace", Asian Wall Street Journal, 14 February 1990.

  Ibid.

  Peter Searle, The Riddle of Malaysian Capitalism, p. 110.

  Ibid., p. 110.

  Interview with Tengku Razaleigh Hamzah, 17 January 2008.

  Stephen Duthie, "Mahathir's Party to Consolidate Business Assets: Transactions to Create Huge Holding Firm, Bolster Political Base", Asian Wall Street Journal, 2 May 1990.

  Stephen Duthie, "UMNO's Asset Transaction to Yield Large Windfall", Asian Wall Street Journal, 3 May 1990.

  Peter Searle, The Riddle of Malaysian Capitalism, p. 124.

  Ibid., p. 12l.

  Ibid., p. 126.

  Ibid., pp. 123-124.

  Ibid., p. 124.

  Stephen Duthie, "UMNO Flagship Seeks Huge Restructuring", Asian Wall Street Journal, 4 February 1991.

  Doug Tsuruoka, "Fleet Group to Benefit from Renong's Reorganization: The UMNO Shuffle", Far Eastern Economic Review, 17 May 1990, p. 70.

  Doug Tsuruoka, "UMNO's Money Machine", Far Eastern Economic Review, 5 July 1990, p. 48.

  Cheong Mei Sui and Adibah Amin, Daim, p. 130.

  Doug Tsuruoka, "UMNO's Money Machine", p. 50.

  Edmund Terence Gomez, "Political Business in Malaysia", in Political Business in East Asia, p. 97.

  Ibid., p. 97.

  Cheong Mei Sui and Adibah Amin, Daim, p. 125.

  Stephen Duthie, "Mahathir Party to Sell Tower, Slashing Debt", Asian Wall Street Journal, 25 March 1994.

  Stephen Duthie, "Ruling Lets Mahathir Party Regain Assets", Asian Wall Street Journal, 16 August 1994.

  Edmund Terence Gomez, "Political Business in Malaysia", in Political Business in East Asia, p. 97.

  Ibid., pp. 97-98.

  Interview with former Renong executive, 19 October 2007.

  Zafer Achi, et al., "Conglomerates in Emerging Markets: Tigers or Dinosaurs?", Strategy & Business, Booz-Allen & Hamilton, Second Quarter, 1998. Reprint No. 98206.

  Edmund Terence Gomez, Political Business: Corporate Involvement of Malaysian Political Parties (Townsville: James Cook University of North Queensland, 1994), p. 29l.

  Raphael Pura, "Ties That Bind: Renong's Asset, Its History, Reveals Its Liability Side", Asian Wall Street Journal, 19 January 1996.

  Raphael Pura, "Chairman's Family Feud Rattles Renong", Asian Wall Street Journal, 19 March 1996.

  Raphael Pura, "A Malaysian Morality Tale for the 1990s: Control of Renong Could Be Up for Grabs in Spellbinding Divorce Battle", Asian Wall Street Journal, 30 July 1996.

  Stephen Duthie, "Anwar's Ascent Creates New Clique of Businessmen", Asian Wall Street Journal, 13 March 1991.

  Edmund Terence Gomez, "Political Business in Malaysia", in Political Business in East Asia, p. 98.

  Ibid., p. 98.

  Ibid., p. 98.

  Shamsul A. Baharuddin, "Political Change and Economic Development at the Grassroots in Contemporary Rural Malaysia", in Manning Nash, ed., Economic Performance in Malaysia: The Insiders View (New York: Professors World Peace Academy, 1988), pp. 87-90.

  Ibid., p. 90.

  Edmund Terence Gomez, Political Business, p. 159.

  Ibid., p. 160.

  Harold Crouch, "Money Politics in Malaysia", in Mahathir's Economic Policies (Kuala Lumpur: INSAN, 1989), p. 87.

  Edmund Terence Gomez, Political Business, p. 59.

  Suhaini Aznam, "No Ruffled Feathers", Far Eastern Economic Review, 10 October 1985, p. 16.

  Lee Kuan Yew, From Third World to First: The Singapore Story 1965-2000 (Singapore: Times Media Pte. Ltd., 2000), p. 191.

  Zainuddin Maidin, The Other Side of Mahathir (Kuala Lumpur: Utusan Publications & Distributors Sdn. Bhd., 1994), p. 167.

  Ibid., p. 167.

  Ibid., p. 173.

  R.S. Milne and Diane K. Mauzy, Malaysian Politics Under Mahathir (London: Routledge, 1999), p. 26, citing New Straits Times, 3 May 1995.

  Lee Kuan Yew, From Third World to First, p. 191.

  Asia 2002 Yearbook, Far Eastern Economic Review Ltd., p. 153.

  Mahathir Mohamad, "The UMNO Saga", in Reflections on Asia (Subang Jaya: Pelanduk Publications (M) Sdn. Bhd., 2002), pp. 120-121.

  Edmund Terence Gomez, Political Business, p. 155.

  Leslie Lopez, "Steelmaker's Demise Roils Malaysian Banks, Taxpayers", Asian Wall Street Journal, 19 September 2000.

  Interview with Daim Zainuddin, 18 October 2007.

  "Khidmat Bersatu Sdn. Bhd.: Accountants' Report for the Period from 1st June 1981 to 31st March 1986", Hanafiah Raslan & Mohamad, Kuala Lumpur.

  Leslie Lopez, "At Malaysia's Renong, Change is About Perceptions", Asian Wall Street Journal, 26 July 2001.

  Interview with Lim Kit Siang, 31 May 2007.

  Interview with Mahathir Mohamad, 14 August 2007.

  Interview with Mahathir Mohamad, 20 March 2007.

  Michael Vatikiotis, "Daim's Expanding Empire", Far Eastern Economic Review, 25 March 2004, p. 42.

  * * *

  (6)

  Scandal, What Scandal?

  Dr. Mahathir's administration took office in 1981 with the slogan bersih, cekap, amanah — clean, efficient, trustworthy. Almost immediately, however, it became embroiled in financial scandals that exploded with startling regularity, some of them truly spectacular. A few were of an order of magnitude that would have bankrupted most developing nations. But tropical Malaysia was generously endowed with natural resources, notably offshore hydrocarbon deposits, and commanded by a leader committed to rapid development. The expanding economy absorbed the shock of much of the dissipated wealth and, where necessary, the gaps left by the missing billions were plugged with the proceeds of oil and gas exports.

  Almost all the scandals involved the government directly, or senior officials and businessmen closely connected to UMNO. In some cases, impropriety — whether illegal or merely ill-advised — was officially authorized or condoned for an allegedly higher purpose. Public funds were stolen in various ways, or simply poured into a big black hole in the name of ventures that bordered on the reckless, improbable, or criminal. The extent of the losses — and in some cases the way the money disappeared — was never fully documented. Dr. Mahathir's administration generally did not hold Malaysians accountable for the financial disasters, and often laid the blame on others. By the early 1990s, cynics remarked that it had been a good decade for bad behaviour, or a bad decade for good behaviour.[1]

  Although he initiated, promoted or at least approved some of the undertakings that turned into outright scams, Dr. Mahathir was remarkably blasé about the massive wastage and far from embarrassed that another government slogan was "leadership by example". His eyes fixed on the bigger picture, his vision of a modern Malaysia, Dr. Mahathir was more concerned to minimize publicity about mistakes and misdeeds than to punish those responsible for egregious offences. Two visiting academics, who interviewed him in the late 1990s, were taken aback to find him shrugging off the bad experiences and uninterested in studying what happened in order to avoid a repeat. Noting that Dr. Mahathir on special occasions could be persuaded to sing his favourite song, My Way, they suggested that an appropriate encore would be the anthem of the late
French chanteuse, Edith Piaf, le ne regrette rien, I have no regrets.[2]

  Dr. Mahathir's ultimate protection was his government's large majority in Parliament and its control of the press and investigating agencies. With a revolt by backbench members of the ruling coalition almost unthinkable, it invariably fell to the small opposition Democratic Action Party and its harried leader, Lim Kit Siang, to try and expose malfeasance. His was a thankless task as the perpetrators or beneficiaries were often "Umno-putras", as Lim dubbed the UMNO elite and cronies. While he could usually count on support from a few non-governmental organizations, their clout was limited by their inability to get their message across in the mainstream media, or interest the police in investigating allegations of corruption and other wrongdoing.

  Political scientists R.S. Milne and Diane K. Mauzy, commenting that Malaysia's financial scandals "reached almost endemic proportions" in the mid-1980s, concluded they might have been generated as a result of a "get-rich-quick mentality" that was encouraged by the policy of promoting bumiputras in business. And that, they suggested, may have "led to the pursuit of wealth, untempered by ethics, or even fear of the law".[3] Their observations largely are borne out in the following case studies.

  The tin caper

  David Zaidner, a fast-talking Egyptian metal trader who travelled on a Swiss passport, packed his bags with a clever idea and headed for Jakarta in 1980. Representing the large commodity broker, Swiss-based Marc Rich & Company, Zaidner wanted to handle sales of tin for Indonesia, the world's second-biggest producer. More than that, he had some unorthodox notions to offer about how the international price of tin could be raised.