Malaysian Maverick: Mahathir Mohamad in Turbulent Times Read online

  Among the cases mentioned by Anwar was the award of contracts valued at RM957 million to the Man Shoon Group and companies affiliated with businessmen Kok Mew Shoon and Ng Kim Lin. Price Waterhouse could not find documentation for RM103 million of the contracts. Unstated was that Kok, who controlled Man Shoon, was a long-time associate of Eric Chia. Legwork by reporters at the Registrar of Companies office unearthed the fact that the Man Shoon companies had done little business before they began to land the Perwaja contracts. For example, revenue at Man Shoon Enterprise Sdn. Bhd. jumped to RM234 million in 1994 from less than RM2 million in 1991. Another affiliate, Sinar Sdn. Bhd., did not do any business at all in 1991 and had paid-up capital of RM3. But by 1995, the company had annual revenue of more than RM80 million.[123]

  With the government destined to be the big loser if Perwaja defaulted, Anwar said the immediate goal was to rescue the company. After considering offers from four companies, the government opted for a joint venture with a private investor, surprisingly selecting a small steel and property group, Maju Holdings Sdn. Bhd., ahead of much stronger candidates to lead the salvage effort. Maju's own steel business had been unprofitable, and it was hard to see how the privately held group would be able to raise the finance necessary to resuscitate Perwaja.[124] Maju, controlled by businessman Abu Sahid Mohamed, known best for driving a shocking pink Volvo stretch limousine, was given 51 per cent of the venture, Equal Concept Sdn. Bhd., and the government retained the rest. Perwaja's steel assets were transferred to Equal Concept free of debt, which was assumed by the government. In echoes of Eric Chia's boosterism, Abu Sahid told reporters the company would show "significant changes" within three years and be profitable within six years.[125]

  Four years later, however, Equal Concept-managed Perwaja was mired deeper than ever in a financial swamp. The company had amassed another RM800 million in accumulated losses and was continuing to bleed red ink. Perwaja's net liabilities climbed to more than RM9.1 billion at the end of 1998 from RM6.94 billion three years earlier, while state-guaranteed borrowings rose to RM5.1 billion from RM3.19 billion. The Asian economic crisis had knocked 34 per cent off the value of the ringgit, making imported iron ore and scrap iron much more expensive and depressing demand for steel. Maju, as expected, lacked the financial means to spearhead any turnaround in Perwaja's fortunes.[126] A reporter who visited the site along the coast of northeastern Trengganu in 1999 found the sprawling complex almost deserted, its rusting chimneys smokeless in the blazing sun. To save money, the plant was working only one daily shift, overnight, but was still losing about RM35 million a month on its operations alone.[127]

  Reviewing Perwaja, Dr. Mahathir described it as a "good project", but said he "couldn't help it if the management did not know how to run it".[128] He was relaxed about the losses, which he said totaled "maybe RMl billion or RM2 billion", not "RM15 billion or anything like that...It's not something we couldn't overcome".[129]

  In fact, based on incomplete public information, RM15 billion was a conservative estimate of Perwaja's losses. Similarly, Bank Bumiputra dropped at least RM10 billion. Bank Negara's foreign exchange forays drained perhaps RM23 billion from Malaysia's reserves. The cost of trying to push up the price of tin seemed paltry by comparison, maybe RMl billion. The total, RM50 billion or so, could have easily doubled if a professional accounting had been made, factoring in all the invisibles, from unrecorded write-offs to blatant embezzlement and opportunity costs.

  Notes

  V. Kanapathy, "The Mahathir Era: A Brief Overview", in The Mahathir Era: Contributions to National Economic Development (Petaling Jaya: International Investment Consultants, undated), p. 21.

  R.S. Milne and Diane K. Mauzy, Malaysian Politics Under Mahathir (London: Routledge, 1999), p. 162.

  Ibid., p. 68.

  Raphael Pura, "Malaysia Plan to Control Tin Led to Disaster", Asian Wall Street Journal, 22 September 1986. Extensive details of Malaysia's secret plan are drawn from this article.

  Dr. Mahathir made his attitude to tin producers crystal clear: "On the one hand, they operate stockpiles, which is a monopolistic activity. On the other, they recently resented the rise in the price of tin, accusing Malaysia of manipulating the market. If placing tin on to the market is not manipulating prices, I don't know what is. I can't understand this double standard in which one can take action to depress the price but nobody can do anything to raise the price. This is something that I just cannot understand." "Interview/Mahathir Mohamad: Problems and Power", Far Eastern Economic Review, 30 October-5 November 1981, p. 31, http://www.feer.com/articles/archive/1981/8111_05/P037.html (accessed 25 January 2006).

  Interview with Mahathir Mohamad, 31 March 2008.

  Raphael Pura, "Tin Council Approves Price Increase, But Rise Still Short of Producer Goal", Asian Wall Street Journal, 19 October 1981.

  Raphael Pura, "Malaysia Protests U.S. Move on Tin Sales", Asian Wall Street Journal, 24 December 1981.

  Raphael Pura, "Malaysia Plan to Control Tin Led to Disaster".

  Raphael Pura, "Malaysia Tin Mines Facing Hard Times as Glut Persists", Asian Wall Street Journal, 5 August 1982.

  Neil Behrman and John Berthelsen, "Sudden Halt to Tin Trading Poses a Threat", Asian Wall Street Journal, 25 October 1985.

  John Berthelsen, "Ipoh Hit Hard by Malaysia's Tin Slump", Asian Wall Street Journal, 3 February 1986.

  Interview with Mahathir Mohamad, 31 March 2008.

  Raphael Pura, "Mystery State Firm Puzzles Malaysians", Asian Wall Street Journal, 10 July 1986.

  Raphael Pura, "Malaysia Plan to Control Tin Led to Disaster".

  Ibid.

  Nick Seaward, "Malaysia Tin Ramp Cost M$660.5 million", Far Eastern Economic Review, 20 November 1986, p. 12, http://www.feer.com/articles/archive/1986/8611_20/P014.html (accessed 26 June 2006).

  Vaudine England, "The Credibility Gap: Malaysia Faces Distrust as It Tries to Rally the ATPC", Far Eastern Economic Review, 13 November 1986, p. 115, http://www.feer.com/articles/archive/1986/8611_13/P074.html (accessed 25 January 2006).

  Raphael Pura, "Tin Producers Hit Exports by Singapore", Asian Wall Street Journal, 16 January 1984.

  Raphael Pura and Matt Miller, "Bank Bumiputra's Ills Begin to Shake Malaysia", Asian Wall Street Journal, 17 March 1983.

  Interview with Mahathir Mohamad, 31 March 2008.

  Raphael Pura, "Bank Bumiputra Change was Expected", Asian Wall Street Journal, 22 March 1982.

  Raphael Pura, "Bank Bumiputra Faces Bad Debts from Heavy Lending in Hong Kong", Asian Wall Street Journal, 10 November 1982.

  Raphael Pura and Matt Miller, "Bank Bumiputra's Ills Begin to Shake Malaysia".

  Matt Miller and Raphael Pura, "Check Raises Questions on Bank Bumiputra Ties to Eda", Asian Wall Street Journal, 18 March 1983.

  Raphael Pura, "Razaleigh Says Probe Continues into Bad Loans", Asian Wall Street Journal, 17 March 1983.

  Raphael Pura, "Bank Bumiputra's Lending in Colony Chided by Aide", Asian Wall Street Journal, 4 April 1983.

  Raphael Pura and Matt Miller, "For Bank Bumiputra, Some Troubling Questions Remain", Asian Wall Street Journal, 1 July 1983.

  Raphael Pura, "Bank Bumiputra Unit's Hong Kong Loans Soar", Asian Wall Street Journal, 28 June 1983.

  Raphael Pura and Matt Miller, "For Bank Bumiputra, Some Troubling Questions Remain".

  Ibid.

  Raphael Pura, "Mahathir Says Loans to Colony a 'Mistake'", Asian Wall Street Journal, 10 July 1983.

  Raphael Pura, "Malaysia Due to Debate Loan Scandal Today", Asian Wall Street Journal, 11 March 1986. Dr. Mahathir's comments were contained in a letter appended to a white paper released by the government with the 1,075-page final report by a three-man committee of inquiry into BMF's Hong Kong lending.

  Ibid.

  Stephen Duthie, "Bank Bumiputra Suit May Rely on '86 Probe", Asian Wall Street Journal, 27 February 1992.

  Stephen Duthie, "Bank Bumiputra is Target of Suit Filed in the U.S.", Asian Wall Street Journal, 26 February 1992. The sui
t was originally filed by Hong Kong-based Sinclair Nominees Ltd., which was later replaced by Capri Trading Corporation. Stephen Duthie, "Bank Bumiputra Faces Questions in Suit Involving Carrian Group", Asian Wall Street Journal, 29 April 1992.

  Stephen Duthie, "Bank Bumiputra Suit May Rely on '86 Probe".

  Stephen Duthie, "U.S. Federal Court Dismisses Suit Against Bank Bumiputra Malaysia", Asian Wall Street Journal, 24 February 1993.

  Stephen Duthie, "Bank Bumiputra is Target of Suit Filed in the U.S.".

  Stephen Duthie, "Bank Bumiputra Suit May Rely on '86 Probe".

  Raphael Pura, "Malaysia Continues Investigation into Carrian Loans", Asian Wall Street Journal, 14 December 1984.

  Raphael Pura, "Malaysian Banker's Murder Escalates Scrutiny on Loans", Asian Wall Street Journal, 25 July 1983.

  Raphael Pura, "Prime Minister's Press Conference Sheds Light on Bumiputra Finance", Asian Wall Street Journal, 12 January 1984.

  Later renamed the InterContinental Hong Kong.

  Raphael Pura and Matt Miller, "Prosecutor Links Malaysian's Death to Carrian", Asian Wall Street Journal, 17 April 1984.

  Matt Miller, Robert Magnuson and Raphael Pura, "Undisclosed Loans to Carrian Discovered", Asian Wall Street Journal, 16 September 1983.

  K. Das, "A Gathering Storm: Kuala Lumpur is Embroiled in Mounting Debate Following the Revelation of Bank Bumiputra's Loans Debacle in Hong Kong", Far Eastern Economic Review, 3 November 1983, p. 90, http://www.feer.com/articles/archive/1983/8311_03/P054.html (accessed 25 January 2006).

  Raphael Pura, "Bumiputra Finance Officials Resign Over Loans", Asian Wall Street Journal, 3 November 1983.

  Raphael Pura, "Bank's Writs Reawaken Carrian Questions", Asian Wall Street Journal, 4 January 1984.

  Raphael Pura, "Malaysia Begins Official Inquiry of Carrian Loans", Asian Wall Street Journal, 12 January 1984.

  Raphael Pura, "Malaysia Steps Up Carrian-Loan Probe", Asian Wall Street Journal, 14 December 1984.

  Ibid.

  Raphael Pura and Matt Miller, "Mahathir Tilts to Theories Faulting Motives of Colony", Asian Wall Street Journal, 30 May 1984.

  Raphael Pura, "Bumiputra Bank Panel Finishes Report", Asian Wall Street Journal, 9 December 1985.

  John Berthelsen, "Malaysian Prime Minister Hits Bank Bumiputra Panel", Asian Wall Street Journal, 20 January 1986.

  Raphael Pura, "Bank Bumiputra's Inquirer Wins Praise", Asian Wall Street Journal, 13 March 1985.

  Raphael Pura, "Bank Bumiputra Reports Large Loss for Last Year", Asian Wall Street Journal, 21 September 1984.

  Ibid.

  Raphael Pura, "Malaysian Bank Rescue Will Be Costly", Asian Wall Street Journal, 17 September 1984.

  Ibid.

  John Berthelsen, "Malaysian Vote Sanctions Bank Rescue", Asian Wall Street Journal, 15 April 1985.

  John Berthelsen, "Mahathir Draws Fire on Bumiputra Plan", Asian Wall Street Journal, 22 September 1986.

  Raphael Pura, "Malaysia Steps Up Carrian-Loan Probe".

  John Berthelsen, "Malaysia's Biggest Bank Explains Losses", Asian Wall Street Journal, 24 June 1985.

  Stephen Duthie, "Bank Bumiputra Seeks New Rescue Plan", Asian Wall Street Journal, 9 October 1989.

  Stephen Duthie, "Petronas to Help Bank Bumiputra Again", Asian Wall Street Journal, 16 October 1989.

  Stephen Duthie, "Bank Bumiputra's Troubles Blamed on Property Loans", Asian Wall Street Journal, 18 October 1989.

  A confidential review commissioned by UMNO showed that the party actually borrowed RM199.5 million from Bank Bumiputra and RM64.9 million from Malayan Banking for the project. "Khidmat Bersatu Sdn. Bhd.: Accountants' Report for the Period from 1st June 1981 to 31st March 1986", Hanafiah Raslan & Mohamad, Kuala Lumpur.

  Stephen Duthie, "Bank Bumiputra Seeks New Rescue Plan".

  Interview with Daim Zainuddin, 18 October 2007. Daim said UMNO "subsequently" repaid the loan, but "There was a haircut on interest."

  Stephen Duthie, "Bank Bumiputra Seeks New Rescue Plan".

  Stephen Duthie, "Bank Bumiputra is Sold to Government", Asian Wall Street Journal, 17 January 1991.

  Leslie Lopez, "Fattened Up by Big Profits, Malaysian Bank Fields Offers", Asian Wall Street Journal, 8 November 1996.

  Leslie Lopez, "Bank Bumiputra May Need Bailout as Problems Mount", Asian Wall Street Journal, 2 July 1998.

  Leslie Lopez, "Government to Take Over Bank Bumiputra Bad Loans", Asian Wall Street Journal, 9 February 1999.

  Ibid.

  Alan Friedman, "Soros Calls Mahathir a 'Menace' to Malaysia", International Herald Tribune, 22 September 1997, http://www.iht.com/articles/1997/09/22/soros.t.php?page=l (accessed 24 March 2009).

  Mahathir Mohamad, Reflections on Asia (Subang Jaya: Pelanduk Publications (M) Sdn. Bhd., 2002), p. 87.

  Cynthia Owens, Stephen Duthie and David Wessel, "Malaysia is Said to Slow Activity in Currencies", Asian Wall Street Journal, 5 December 1989.

  Interview with Daim Zainuddin, 18 October 2007.

  Cynthia Owens, Stephen Duthie and David Wessel, "Malaysia is Said to Slow Activity in Currencies".

  Ibid.

  Ibid.

  Nick Seaward, "Malaysia's Controversial Finance Minister Proves an Able Economic Manager: The Daim Stewardship", Far Eastern Economic Review, 1 September 1988, p. 52, http://www.feer.com/articles/archive/1988/8809_01/P062.html (accessed 25 January 2006).

  Cynthia Owens, Stephen Duthie and David Wessel, "Malaysia is Said to Slow Activity in Currencies".

  Interview with Mahathir Mohamad, 31 March 2008. Elsewhere, Dr. Mahathir said Bank Negara's currency trading room that he visited was in London: Pauline Ng, "Mahathir Denies Involvement in MAS Deal", Business Times (Singapore), 26 July 2006.

  Stephen Duthie, "Bank Negara Chief Finds Gratitude Doesn't Last", Asian Wall Street Journal, 4 April 1994.

  Mahathir Mohamad, Reflections on Asia, p. 140.

  Doug Tsuruoka, "Malaysia: Testing Times", Far Eastern Economic Review, 17 October 1991, p. 78, http://www.feer.com/articles/archive/1991/9110_17/P056.html (accessed 23 January 2006).

  Stephen Duthie, "Bank Negara Chief Finds Gratitude Doesn't Last".

  John Berthelsen, "Malaysia Hits Hongkong Bank for Speculation", Asian Wall Street Journal, 21 August 1986.

  Stephen Duthie, "Huge Charge at Bank Negara Startles Analysts", Asian Wall Street Journal, 2 April 1993.

  Ibid.

  Ibid.

  Ibid.

  Stephen Duthie, "Bank Negara Aims New Rules at Speculators", Asian Wall Street Journal, 24 January 1994.

  Stephen Duthie, "Bank Negara is Criticized in Parliament", Asian Wall Street Journal, 28 April 1993.

  Ibid.

  Stephen Duthie, "Can Bank Negara Keep a Good Currency Down?", Asian Wall Street Journal, 18 January 1994.

  Edmund Terence Gomez and Jomo K.S., Malaysia's Political Economy: Politics, Patronage and Profits (Cambridge: Cambridge University Press, 1999 edition), pp. 94-95.

  Doug Tsuruoka, "Change in the Air: Bank Negara Moves to Sell Malaysian Airlines Stake", Far Eastern Economic Review, 23 December 1993, p. 52, http://www.feer.com/articles/archive/1993/9312_23/P053.html (accessed 23 January 2006).

  In response to Tajudin's suit, Dr. Mahathir told reporters he agreed to the privatization after Daim approached him and said Tajudin wanted to buy the airline. Dr. Mahathir said he did not know who set the price for the shares. "I only decide on principles," he said. Pauline Ng, "Mahathir Denies Involvement in MAS Deal".

  Stephen Duthie, "Bank Negara Posts Another Huge Loss", Asian Wall Street Journal, 1 April 1984.

  Ibid.

  Stephen Duthie, "Malaysia's Lim Seeks Central-Bank Probe", Asian Wall Street Journal, 13 April 1994.

  "Tengku Razaleigh Responds to Dr Mahathir's Allegations Against Him", Aliran Monthly, 1994: 11, p. 36.

  Email correspondence with Bank Negara, 22 August 2008.

  Stephen Duthie, "Bank Negara Posts Another Huge Loss".

  Stephen Duthie, "Bank Negara Chief Finds Gratitude Doesn't L
ast".

  Interview with Daim Zainuddin, 18 October 2007.

  Arfa'eza A. Aziz, "Forex Losses: Anwar Names Those Responsible", 19 July 2006, http://www.malaysiakini.com/news/54097 (accessed 30 August 2008). Jaffar Hussein passed away in 1998.

  Raphael Pura, "Malaysian Steelmaker Spouts Red Ink and Recriminations", Asian Wall Street Journal, 9 February 1996.

  Interview with Mahathir Mohamad, 31 March 2008.

  Eric Chia passed away in 2008.

  Raphael Pura, "Malaysian Steelmaker Spouts Red Ink and Recriminations".

  Raphael Pura, "Malaysia Discloses Hefty Loss at Perwaja", Asian Wall Street Journal, 19 October 1995.

  Raphael Pura, "Malaysian Steelmaker Spouts Red Ink and Recriminations".

  Leslie Lopez, "Malaysia Says It Will Bail Out Ailing Perwaja", Asian Wall Street Journal, 13 March 1996.

  Leslie Lopez and Raphael Pura, "Steel Fiasco May Rattle Malaysian Government", Asian Wall Street Journal, 16 February 1996.

  Ibid.

  Ibid.

  Leslie Lopez and Raphael Pura, "Malaysia Says Perwaja Faces Financial Crisis", Asian Wall Street Journal, 22 May 1996.

  Leslie Lopez and Raphael Pura, "Steel Fiasco May Rattle Malaysian Government".

  Leslie Lopez and Raphael Pura, "Malaysia Picks Firms for Rescue of Steelmaker", Asian Wall Street Journal, 19 June 1996.

  Raphael Pura and Leslie Lopez, "Maju is Confident That It Can Turn Perwaja Around", Asian Wall Street Journal, 26 June 1996.

  Leslie Lopez, "Malaysia's Perwaja Sees Losses Mount", Asian Wall Street Journal, 12 June 2000.

  Ibid.

  Steven Gan, "Interviewing Dr M", 23 May 2006, http://www.malaysiakini.com/editorials/514647 (accessed 30 August 2008).

  Interview with Mahathir Mohamad, 31 March 2008.

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  Big, Bigger, Bust