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FEER: Malaysia's Postal Privatization Puzzles
By S. Jayasankaran
31/5/2001 9:29 pm Thu
Shroff - Malaysia's Postal Privatization Puzzles
By S. Jayasankaran
A pregnant silence has descended upon the privatization of
Malaysia's postal services. On May 24, Phileo Allied, a
financial-services company listed on the Kuala Lumpur stock
exchange, announced that it was buying Pos Malaysia, the
national postal-service company, from the Ministry of Finance
for 800 million ringgit ($210.5 million).
Phileo said it would pay the government 550 million ringgit
in cash and the balance through a five-year, 5% convertible
loan from the government. At the end of the period, Phileo
would either make a bullet repayment or the government
would convert its loan into equity, in which case it would
emerge as Phileo's single largest shareholder with a 32.9%
Straightforward enough? No, at least not in Malaysia. Pos
Malaysia is a profitable company -- it earned a net profit
of 53 million ringgit in 2000 -- and could have listed
under its own steam without resorting to a back-door entry.
More puzzlingly, bankers and financial executives familiar
with the company insist that Pos Malaysia's board had ruled
against a listing this year because of poor market
Given its ethnic context, the deal is also puzzling because
of its potential political repercussions. Race looms large
in Malaysia. So when an avowedly ethnic Chinese company
like Phileo Allied buys the national postal service with
its -- albeit decidedly diminished -- monopoly, its 740
branches and its vast property holdings all over the
country, it's bound to raise eyebrows.
Indeed, the background of the postal service clearly
indicates that it was always meant to serve Malay
interests. After Pos Malaysia was corporatized in the
mid-1990s, the government took up 60% of its equity while
the remainder was held by National Equity Corporation,
better known by its Malay acronym, PNB, a state-backed
agency entrusted with the economic empowerment of ethnic
And PNB is no ordinary concern. Owned by a foundation
chaired by Premier Mahathir Mohamad, PNB is the trustee of
four huge unit trusts explicitly designed to advance Malays
economically. The vast majority of their more than 7
million unit holders are Malays, who have reaped dividends
of at least 10% a year since 1981.
Thus, PNB's stake in Pos Malaysia implied that the eventual
listing of Pos Malaysia would serve ethnic Malay interests.
Indeed, Malaysia's privatization policy explicitly states
that it would be used to foster Malay corporate interests.
But, inexplicably, senior government officials say that PNB
sold its stake in Pos Malaysia back to the government in
The deal wasn't announced -- it didn't have to be, as
neither company is listed -- so few details have emerged.
PNB chief executive Hamad Kama Piah Che Othman didn't
respond to the REVIEW's faxed questions about the sale.
This could raise hackles in the United Malays National
Organization, or Umno -- the leading party in the ruling
National Front coalition -- as Phileo Allied is, on paper
at least, currently controlled by ethnic Chinese interests.
But so far the silence has been deafening.
Nobody's asking questions, nor is there concern in the
vernacular Malay media, normally quick to seize on issues
deemed detrimental to Malay interests. Utusan Malaysia, the
country's largest selling Malay newspaper, called the deal
"shocking" but didn't say why.
A senior Umno official told the REVIEW he was surprised at
the deal but "was amazed" at the indifference it inspired.
But another Umno insider says that "people are asking
questions about the deal's lack of transparency," and he
expects it to become a heated issue at the Umno general
assembly scheduled for June.
Even so, Phileo was attractive because of its 1.2 billion
ringgit cash hoard. Last year, it sold off its banking
business and ended up as a cash-rich shell. Meanwhile, the
government has a so-called golden share in Phileo which
allows it sweeping veto powers. In addition, it can take
over the company in five years anyway, given its equity
That's why some analysts think that, eventually, a Malay
businessman will control Phileo. "The government's got five
years to find him, "says a managing director of a listed
company, "because I cannot believe that the postal services
will be controlled by Chinese interests."
Interestingly, that Malay businessman could have been
Mokhzani Mahathir, the premier's son. Through two listed
companies, Mokhzani owned 28% of Avenue Assets which, in
turn, held close to 20% of Phileo Allied.
But in late April, Mokhzani sold both listed companies to
little-known businessman Lim Tong Yong at a loss to
"withdraw" from business. He said that his decision was to
shield his father from accusations of nepotism.
Shahrir Samad, a member of Umno's powerful Supreme Council,
is grateful for that. "If he was still at Phileo, the
opposition would have been whacking us for cronyism,
nepotism, you name it," he says.
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