16-31 January 01
HARAKAH Column
Privatisation:
Now You See, Now You Don't!
M.G.G.
Pillai
The Prime Minister is still sold on privatising government
assets to cronies, courtiers and siblings. The few that collapsed, he
infers, are "inconsequential". These things happen in the normal
run of business. But he was less than ingenious in his recent interview to
Bernama, his annual tour de horizon that in recent years raises more questions
than answers. He did not privatise these assets after due diligence.
It was handed out to favoured business men, with often a large sweetener to boot.
And all we guaranteed to fail, as indeed it has.
With it is the failure of
the New Economic Policy, not for its inherent shortcomings but for its
ill-thought-out political agenda. MAS is in deep straits because of what he
now insists is the social contract. It is important, he now says, that
Malays be spoonfed. No effort is made to have them stand on their own feet.
But there was no mention of this social contract when they were privatised.
In
fact, what brought this country to its present levels is how policies are
implemented. Civil servants defang desirable policies such that success only
postpones the heavy cost to a date in the future and makes sure that no
institution of government can pull its own weight. Frighteningly, it would now
take decades before we can begin to rebuild them. In the meanwhile, we
degenerate as a nation.
The government must now bail-out the continually
indebted privatised entities because it must continue to employ Malays to keep the
social contract, such as it is, alive. What has the government done in the
past 30 years to break away from this pernicious cycle? Precious little.
The
six billionaires this created are all in debt, consequently giving all bumiputra
entrepreneurs a bad name: they are all, in the public eye, failures. They
are not. Those outside the government loop survive, often well, without government
help or assistance. They are themselves angry at this bailout of cronies.
The
Chinese business men press-ganged are handpicked not for their ability but for
their lack of it. So, Tan Sri Ting Pek Khiing, a former tractor driver, and
his Ekran empire keeps going with projects which prove their incompetence:
after making a mess of the Bakun hydroelectrice project, he is given another
chance to build it; besides, he also gets an important subcontract for the
submarine
base at Sepang Bay in Sabah. The former car salesman and insurance agent,
Tan Sri Vincent Tan, cannot rise from his inability to run companies and
businesses without fresh infusions of government projects.
Let us look at
the "few" failures: MISC, Westport, MAS, Renong, UEM, IWK.
The failed star is the Tan Sri Halim Saad stable, with more than RM30 billion in
debt. These seven companies owe a quarter of what KLSE stocks now are worth:
about RM80 billion or US$20 billion. Let us take a
few other examples.
The two LRT companies, Star and Putra, are in debt to RM6 billion.
The two
bus companies, ParkMay and Intrakota, RM2.7 billion. MRCB RM1.4 billion, its
associate companies NSTP RM1.9 billion, TV3 RM700 million. The list goes on.
When you add the cronies' and courtiers' corporate debt, it could quintuple.
In other words, the total debt now of KLSE
companies equal what KLSE stocks
were worth -- US$400 billion -- before the 1997 decline. The GDP, then, of
US$100 biilion was a quarter of what KLSE stocks were worth. The GDP remains the
same but the KLSE stocks are worth less.
What went wrong? All these
assets were privatised for no reason than for its stakeholders to make lots of
money. The North-South Highway and all privatised highways were built not by
competitive tender but in such a way that the privatised company would be loaded
with debt it cannot repay. Then this heavily indebted company is listed on
the stock exchange, with the promoters making a second killing. Even with tolls
increased regularly, the companies cannot repay its loans.
The government
finds creative reasons to say why the management could not do better. But
the companies had no incentive to do better. The government takes over the
debts and then returns it to the management that caused the debts in the first
place. If the government is serious about
turning a profit, it should
bring in a different management chosen for their competence and not political
reliability.
Look at just one company, MAS. Tan Sri Tajuddin Ramli's
29.9 per cent stake in MAS was acquired not for cash as he now claims but by
manipulating MAS and Malaysian Helicopter Services share prices. MHS price
was pushed nearly four times and MAS pushed down a third so that two
MAS shares
equalled one MHS share. MHS changed its name to Naluri.
He then went
raided MAS. The planes were transferred to a Labuan registered company
called MAS Capital, which then leased the planes back to MAS. The catering
and maintence departments were privatised to companies in his stable. One TR
subsidiary insures the 100 or so MAS planes for about RM2 billion each, so a
pilot tells me.
Now, with RM9 billion in debt, MAS's TR stake is sold to
the government at what he paid for it -- RM8 a share, but without planes and
services. In other words, the government has bought a virtual airline in
acquiring the TR stake. Tan Sri Tajuddin himself is in debt to about RM1 billion.
So, he
needs to be rescued, come what may. But why is he being paid RM8
in cash when it would be far cheaper to return the Naluri shares back to him?
Or buy the controlling stake on the open market, either buying up MAS or Naluri
shares?
Indeed, with the government's golden share which equals 51 per cent
of the share capital, why did it have to buy the MAS shares when it could have
controlled it behind the scenes to rescue MAS. Further, why did not the
government use the golden share to prevent Tan Sri Tajuddin from
stripping MAS
of its assets?
Every crony is mollycoddled so that he does not ever face
the market place. They should be left to their own devices. So
thoroughly indebted they are that future generations would continue to pay for the
mistakes now long after they are forgotten. The RM18 billion the Plus
Highway owes is scandalous, especially since the management is returned to the
same group that brought this debt about. Meanwhile, Renong goes about crowing that
its RM30 billion debt is about to disappear into the government safety net.
The
Prime Minister insists the cronies, courtiers and siblings did badly because the
KLSE went weak. But they failed because they looked upon the companies they
acquired as a monkey sees flowers. None had any intention to hold on to them
and create a business. Their only aim was to make
as much money in the
shortest time possible. But they believed this is best done by being indebted as
quickly as
possible.
The government believed that paper profits they
made in a burgeoning stock market was proof of success. And they flaunted
their wealth. Their fleet of planes, by and large, have been repossessed.
Each of these instant tycoons fell over each other to buy the latest model of
motor cars and acquired wives, mistresses, baubles as if there was no tomorrow.
In this make-believe world they did not see reality.
What frightens is that
the Prime Minister and his cabinet cares not a whit what this does to future
generations.
Or if Malaysia would survive this heavy debt. They announce projects and plans
worth tens of billions. They is no money. But they brazen it through with
more privatisation and more projects, lulling the people into believing that
somehow by the skin of its teetch the country would survive. Were it that
simple!
M.G.G. Pillai
pillai@mgg.pc.my
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