The Asian Wall Street Journal
18th June 2001

Newspaper Takeover Sparks Political Backlash in Malaysia

By CRIS PRYSTAY

Staff Reporter of THE WALL STREET JOURNAL

KUALA LUMPUR, Malaysia -- A controversy surrounding the takeover of two influential Chinese-language newspapers has pitched three key politicians into a battle that could threaten the leadership of a party in Malaysia's ruling coalition.

Huaren Management Sdn. Bhd., the business arm of the Malaysian Chinese Association, or MCA, which is part of Prime Minister Mahathir Mohamad's governing coalition, bought a 72.3% stake in Nanyang Press Holdings Bhd. from a unit of Hong Leong Group on May 30. The deal sparked an outcry from ethnic-Chinese groups, who fear a loss of press freedom. Nanyang Press publishes Nanyang Siang Pau and China Press, two dailies with a combined circulation of 390,000.

The takeover has prompted a political backlash from a range of Chinese ethnic guilds and business groups, which have threatened to withdraw political support in the next election unless the deal is reversed. It has also pitted MCA president Ling Liong Sik, who engineered the deal, against his deputy president and leadership rival Lim Ah Lek, who contends the deal will erode the party's support.

The debate has become a proxy battle for the leadership of the MCA at a time when the Chinese vote is increasingly critical to the survival of Dr. Mahathir's ruling coalition. The Chinese electorate played a key role in returning that coalition to office in the 1999 elections, when a large block of Malay voters, disillusioned by the sacking, trial and conviction of former Deputy Prime Minister Anwar Ibrahim on corruption and s###my charges, defected to the opposition. But Dr. Mahathir alienated many Chinese last August when he likened a powerful Chinese lobby group to communists.

The MCA's takeover of Nanyang would increase government control over the relatively fractious Chinese press, which delivers more critical political coverage, and in recent months has given wide play to a range of educational and language issues that have deepened the Chinese community's discontent with Dr. Mahathir's government.

Nanyang's papers have devoted plenty of space to the succession battle between Datuk Ling and Datuk Lim, which political analysts believe added impetus both to the MCA president's drive to gain control of the media company and his popular deputy's resistance to the deal.

At a joint news conference Thursday, Datuk Ling and Datuk Lim said they remain united as party leaders despite their differences over the takeover, but both sides exchanged a series of salvos last week that belied the image of solidarity.

Datuk Ling, who is also transport minister, said on Wednesday that Huaren Holdings trustees who disagree with the Nanyang takeover should resign. The deal's main opponents, Datuk Lim and party vice president Chua Jiu Meng, who is also the health minister, are two of only four Huaren trustees.

Datuk Lim and Datuk Chua raised the ante Friday, claiming the deal violated a provision of the party's constitution requiring general assembly approval for any bank loan involving a mortgage or charge on party assets. To finance the takeover, Huaren pledged its entire stake in an English-language newspaper as collateral for a 230 million ringgit ($60.6 million) loan -- 100% of the purchase price. The shares pledged as collateral comprise about 90% of the party's total assets, Datuk Chua said. "It's against the constitution and unlawful," he said.

Datuk Ling later denied the deal violated the party's constitution.

Last month, 245 ethnic-Chinese nongovernmental organizations formed the National Assembly of Chinese Organizations Against the MCA Takeover of Nanyang Press. Over the past two weeks the group has held a series of boisterous meetings across the country to protest the deal.

Datuk Lim and Datuk Chua deny that their opposition to the deal is politically motivated. Datuk Ling, meanwhile, maintains that the takeover was purely a business deal -- a stand that Datuk Lim hotly contends. Leveraging Huaren's entire stake in the larger, more-profitable Star Publications to buy Nanyang Press Holdings makes little investment sense, he said.

Datuk Ling appeared to capitulate last week, offering to sell all or part of Huaren's Nanyang stake to any bidder offering a higher price than the 5.50 ringgit a share that Huaren paid. On Friday, he called a June 24 party meeting to allow members to vote on whether the MCA should keep its stake.

A consortium of Chinese business leaders led by tycoon Lim Guan Teik, the president of the Associated Chinese Chambers of Commerce and Industry, issued a brief statement Friday saying it would bid for the entire Nanyang stake held by Huaren.