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KQ: UEM/Renong: Never Ending Cronyism By Kim Quek 27/12/2001 12:54 am Thu |
UEM/RENONG: NEVER ENDING CRONYISM
By: Kim Quek (14.12.2001) Some investors may be cheered by the unveiling of the much awaited
restructuring of the UEM/Renong Group as a landmark event that turns a new
leaf for the ailing Malaysian corporate world, long plagued by cronyism and
poor governance. Before any one is carried away by this euphoria, he is well advised to take
a closer look. In the same announcement of this restructuring, is a
disclosure that the RM 3.2 billion put option previously exercised on Halim
Saad had been cancelled by UEM a month ago. This effectively means that
Halim has been freed of this RM 3.2 billion liability to UEM, for which UEM
has provided a bad debt of RM 2.4 billion. Hence once again, the Government
has given Halim another massive bailout, for which UEM has to suffer a loss
so stupendous that its quantum equals two third of UEM's current market
value. As the Government now wholly owns UEM, this loss is now passed on to the
people of this Country. And this is translated numerically to mean that
every family in this Country has been robbed of RM 500, just because the
Government decides to do some one a favour.
This is only the latest in a long string of government bailouts handed out
to Halim and his Renong Group, a previous bailout of almost the same amount
was when Halim was pardoned a bad debt of RM 3.0 billion a year ago for his
disastrous investment in a Philippine venture.
Halim has long been recognized as a proxy for the financial interests of the
powers that be. He and his Renong Group have been the symbol of Malaysia's
cronyism under the Mahathir administration, being the first choice to
undertake numerous large-scale government projects, often awarded without
proper tenders. That Halim is exempted from honouring his RM 3.2 billion
put option was already seen as a foregone conclusion (and in fact recognized
as the Government's main agenda) when the Government announced its plan in
July to buy over UEM and delist it from the Stock Exchange.
The point to remember is that the Renong Group is still the biggest and most
influential conglomerate in this Country, and Halim and the hidden
beneficiaries he represents still constitute the biggest group of beneficial
shareholders in this corporate giant, though Halim is no more at the whelm
and though the Government is calling the shots through its acquisition of
UEM which has the controlling shares in Renong Berhard. So, whatever
decision the Government makes on behalf of UEM and the Renong Group,
particularly those directly touching Halim and his associates, must be above
board and transparent. In this respect, the Government has already failed
its first big test. It has let Halim off the hook for RM 3.2 billion
without public knowledge for one month (Halim's put option was terminated
on 16.11.01). Instead of absolving Halim, shouldn't UEM have taken steps
to freeze the assets of Halim and his nominees months ago? Why is the
Government still dilly-dallying on this issue with evasive answers? (such as
not knowing Halim's shareholdings in Renong).
The Government has been pumping billions after billions of pubic funds into
Halim and the Renong Group to keep them comfortable and afloat, the latest
being the RM 3.8 billion acquisition of UEM, the RM 3.2 billion pardon of
Halim's liability to UEM, and the RM 5.5 billion take over of LRT's (Light
Rail Transit) non-performing loans. It is almost a certainty that billions
more of public funds will continue to be siphoned to keep this Group
humming, now that the Government has taken over the management control and
has to face the awesome task of unwinding the staggering total debt load of
RM 30 billions. Overshadowing these deals that involve tens of billions of ringgit is the
fact that Halim as proxy for the powers that be is still the main
beneficiary of this endless and massive hemorrhage of the public coffers.
There is no way the Government can convince the public that the current
Renong restructuring represents a clean break from the past which was
characterized by favouritism, corruption and mismanagement, unless it comes
clean with the murky interests held by Halim as proxy for the political
power behind him. As it is, the conflict of interests of those in political power is so
pervasive that it is hardly possible to free the Government from the taint
of corruption, whenever it uses public funds to rescue any member of the
conglomerate. That the Malaysian Government has not as yet embarked on the course of
genuine corporate reforms is further evidenced from its recent bailout of
the LRT projects. After taking over the failed and debt-ridden companies by
injecting RM5.5 billions to assume the latter's non-performing loans, the
Government has performed the mind boggling feat of handing the projects back
to the original shareholders to operate, who had in the first place brought
these projects to financial ruins through massive mismanagement.
Thus, the Malaysian taxpayers have been made suckers 3 times over. First,
the proponents and shareholders of the projects reaped a financial bonanza
from the construction works using bank loans (acquired through government
help, of course) that are eventually repaid by the Government on their
behalf. Then they reaped a bonus by selling the projects to the Government
(UEM announced it will receive RM 600 million from this sale). And finally,
the projects are handed back to them on a silver platter for them to make
further profits in the future. No doubt, Malaysians can expect to be
further sucked to sustain the profit-making spree of these privileged few in
the years ahead, keeping in mind their miserable management record.
It is not sufficient that a government engineered restructuring plan looks
good on paper. It must be backed by a political leadership marked by its
high integrity and its respect for the principles of sound management.
Sadly, our political leadership has failed to convince us that it possesses
any of these. Kim Quek. |