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BW: Malaysia's Not-So-Masterful Bank Plan
By Michael Shari
29/3/2001 2:23 am Thu
[Kroni Umno amat memerlukan banyak wang kerana sakan berhutang dan
kerugian di samping untuk membiayai projek mega yang bakal dingapkan.
Penggabungan bank adalah langkah awal untuk memastikan kroni mudah
mendapat wang hanya dengan satu panggilan telifon dari pihak atasan
kerana semua penghuni banknya terdiri dari orang pilihan.
Sejak akhir tahun lepas kroni mula diselamatkan. Ada banyak lagi yang
berada di dalam barisan kerana diambang kemuflisan. Ia dilakukan sekarang
kerana Anwar sudah dipenjarakan dan adalah merbahaya jika ditangguhkan
sehingga menghampiri pilihanraya umum akan datang. Dengan Daim sebagai
menteri kewangan, semua bank akan tertekan dan bakal menjadi hamba suruhan.
Sesiapa yang degil akan tertelan dan itu bisa diatur dengan cuma beberapa
peraturan bernama 'pembaharuan'.
Malaysia's Not-So-Masterful Bank Plan
Instead of fixing the failings of a much-needed consolidation
program, the new strategy continues to avoid the obvious
In the weeks leading up to the announcement of its "master plan" for
fixing the country's financial system, there was hope that Bank
Negara, Malaysia's central bank, would finally take the painful
steps necessary to clean up a $26 billion pile of nonperforming
loans and get banks over their fear of lending. No go. Instead, in a
direct violation of World Trade Organization rules, the Mar. 1 plan
prevents foreign banks that don't already have branches in
Malaysia from entering the market until 2007.
In a further disappointment, the plan failed to address concerns that
a two-year-old government program to consolidate all of
Malaysia's troubled 54 domestic banks and other financial
institutions into 10 viable "anchor banks" had run aground. The
irony is that a couple of years ago, Bank Negara had justified the
consolidation program on grounds that Malaysia needed to build
strong banks to compete globally when its financial-services market
opens up in 2003 under WTO rules.
BRINK OF EXTINCTION.
Trouble is, Malaysia can't afford to wait until 2007 or even 2003 to
build strong banks anymore. Consolidation -- forced or voluntary
-- is badly needed to bring the banking system back from the brink
of extinction, where it has been teetering since the Asian crisis of
Loan growth was sluggish at 5% last year, and nonperforming debt
remains high at 24% of loans in the banking system. But
consolidation has been held back by a strong desire from within the
ruling United Malays National Organization, or UMNO, to make sure
that trusted members of the party control all 10 anchor banks.
Then there are all the obstacles that dog bank mergers in any
country, such as clashes of corporate culture and disputes over
pricing. Standard & Poor's (a unit of The McGraw-Hill Companies,
owner of BusinessWeek) concluded -- tactfully -- in a Mar. 5
report that by failing to address such issues, the master plan "could
produce a period of some instability."
QUESTIONS OF SURVIVAL.
Confounding financial analysts, the consolidation plan has been
progressing in fits and starts. In late February, shortly after the lead
banks in the 10 proposed consortia had signed all the court
documents required for their respective mergers, two banks and a
finance company peeled themselves away from a proposed merger
with Eon Bank, which specializes in car loans, and dropped out of
Now, desperately, Bank Negara is trying to merge the three errant
institutions -- Utama Banking Group, AMMB Holdings, and MBF
Finance -- into an 11th anchor bank. The question now is how
Eon Bank will survive, given recently raised minimum-capital
requirements. "Eon Bank won't be able to make it alone," says a
banking analyst at a foreign brokerage in Kuala Lumpur.
Many of the bank mergers are plagued by political snags. Bank
Utama, for example, is partly owned by the government of the
remote Malaysian state of Sarawak, which is scheduled to hold a
local election this year. The problem is that if the merger had gone
through, Bank Utama would have come under the control of a bank
based in Western Malaysia, not in Sarawak.
The banks that run into the worst trouble are seen to have had ties
to former Finance Minister Anwar Ibrahim, who was
excommunicated from UMNO in late 1998 for complaining about
cronyism and is now serving a prison sentence for s###my. Take
RHB Bank. In February, founder Rashid Hussein attempted to regain
control of RHB by purchasing a stake from the government's
bank-recapitalization agency, Danamodal Nasional. Even though
Rashid offered a 38% premium on the stake, which Danamodal
acquired in exchange for a $263 million recapitalization move, the
Finance Ministry turned him down.
Analysts say Danamodal and two other government agencies now
own a total of 45% of RHB, and the government intends to merge it
with the largest of the planned anchor banks, which is led by
Maybank and already represents 20% of assets in the banking
system. In recent interviews with Malaysian newspapers, Bank
Negara Governor Zeti Akhtar Aziz declined to comment on the
government's strategy for RHB.
Rare breakthroughs in the merger process seem to coincide with
well-connected individuals getting treated right. Consider Phileo
Allied, a bank once linked to Anwar. In January, Maybank's
long-delayed acquisition of Phileo Allied went through after
Maybank agreed to pay cash to Avenue Assets, a company
controlled by Mokhzani Mahathir, son of Prime Minister Mohamad
Mahathir, to acquire an 18.4% stake in Philieo Allied. The deal
saved the Maybank merger, but it also caught the attention of
financial analysts in Kuala Lumpur, who note that all other mergers
involved in the consolidation program were settled with share
swaps, not cash.
From the beginning, foreign bankers, financial analysts, and
diplomats have questioned the legitimacy of the program. In 1999,
the central bank proposed forming six anchor banks. These in turn
would have been led by major commercial banks known to be run
by associates of Finance Minister Daim Zainuddin, who also
happens to be UMNO Treasurer. After all the banks missed
deadlines to merge, the central bank proposed increasing the
number of anchor banks to 10. Daim fought that amendment
because it gave the banks more freedom to find partners -- and
thus limited UMNO's control over the financial system by leaving
party cronies at the mercy of market principles, say diplomats in
Even if the consolidation program does work in the end, it remains
doubtful that it will fix the financial system. For starters, the biggest
corporate debtors -- such as infrastructure developer Renong,
which has defaulted on more than $7 billion in debt and is linked to
Daim -- have been left out of the restructuring process. And even
if Malaysia were operating under the best of circumstances, the
country is "hopelessly overbanked," as one foreign banker puts it,
with most branches of domestic commercial banks operating at a
loss in small Malaysian towns. All in all, this "master plan" is a
Shari covers Malaysia for BusinessWeek from Singapore
Link Reference : Malaysia's Not-So-Masterful Bank Plan