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KQ: Illusions From UEM Takeover
By Kim Quek
25/7/2001 7:50 am Wed
[Kes Renong-UEM yang hangat kini lebih bersifat ingin menunjuk
sahaja itupun masih gagal untuk memberitahu segala-galanya kerana
ia akan terpalit kepada kerajaan juga. Renong kaya dengan projek
kerana kerajaan memberi projek penswastaan kepadanya tanpa kaedah
yang sepatutnya kerana ada sesuatu di dalam Renong milik Umno.
Sepatutnya kepincangan dan kemanjaan Renong yang menjadi fokus
bukannya mengambil-alih sahaja. Langkah kerajaan itu hanya
menyelamatkan penyangak yang telah lama bermain bawah meja. Kes
ini tidak ubah seperti kes BBMB yang ditelan agar semua hutang
terpadam tanpa diketahui sesiapa. Tiada sesiapa pun didenda walaupun
wang telah lesap dengan begitu banyaknya kerana penyangak juga yang
memegang segala rekod celanya.
The Government has been orchestrating a market hype that its current move to
re-structure UEM-Renong is the ultimate remedy to the malaise that has
plagued the Kuala Lumpur Stock Exchange.
By building up Halim Saad as the bogeyman, and by capitalizing on his Renong
Group's notoriety as symbol of Malaysia's cronyism, Mahathir hopes to
convince investors that all will be well, once Halim is put away and
UEM-Renong is reined in under his control. The message is out that the days
of dubious government favouritism towards selected tycoons are over, and
transparent governance is in, and investors should feel at ease to invest.
But the truth is Halim is but a proxy for the powers that be and therefore
not a key to the solution, and cronyism will not go away unless there is a
fundamental change in government policy in managing the assets and resources
of this Country.
For a start, the present practice of awarding billions of ringgit of
government contracts and privatized projects without proper tenders must be
replaced by transparent tenders with clear-cut parameters; and the
Anti-Corruption Agency must be transformed from a mere arm of the Prime
Minister to a truly independent body, packed with adequate legislative
muscles and answerable only to Parliament.
Without introducing the above changes, the present exercise of Halim bashing
and UEM-Renong restructuring can only be viewed as a PR effort to drum up
support for the stock market.
In fact, it is worse than that. It is a camouflage to the real intent,
which is to bail out Halim again, this time, to save him from having to dump
billions of ringgit down the drain (all the time not forgetting his role as
proxy to the powers that be). Halim is obligated under a put option
committed in early 1998 to buy 32% of Renong from UEM at the agreed amount
of 3,200 million ringgit cash. This commitment is a financial disaster for
Halim, because the market value of 32% of Renong is now only 600 million
ringgit at the last closing price of RM 0.80 per share, thus requiring Halim
to loose the whopping amount of 2,600 million ringgit.
In comes government investment arm Khazana Nasional which offers to take
over UEM on condition that acceptance to its offer is not less than 90%.
This is to facilitate UEM's delisting, allowing it to disappear from the
radar screen of the public. And UEM will then be at better ease to exempt
Halim from honouring his put option, saving him billions of cash and losses.
To the vital question of whether UEM will eventually ask Halim to pay up his
due under the put option if the take over is successful, Sheriff Kassim,
Managing Director of Khazana was evasive in his answer, merely saying that
the issue will be dealt with later, while Khazana was concentrating on the
immediate task of taking over and de-listing. On the same issue, Mahathir
appears to be more forthright. He was quoted by the press to have raised
the question of 'whether Halim could be made liable for the put option
which is considered a debt.' Mahathir further said: 'If we take over, I
think we take over the debts as well. We can't take over the assets and
not take over the debts'. (Straits Times 24th July). Mahathir has
therefore implied that there is no need for Halim to meet his obligation to
Mahathir's statement is of course incorrect, for he has confused Halim's
personal liability to UEM as UEM's own liability. Halim's liability to
UEM will not disappear automatically upon Khazana's take over of UEM,
though UEM may decide to rescind its earlier decision to accept the put
option given by Halim, thereby freeing Halim of this liability.
Mahathir's error aside, his muddled headed answer nevertheless has
inadvertently allowed an insight into the truth behind this take over -
freeing Halim from billions of ringgit of liabilities and losses.
If the intention is not to bail out Halim as the authorities would want us
to believe, then why must Khazana insist on de-listing UEM? The official
justification of gaining a freer hand to carry out the re-structuring is
unacceptable, as compliance with stock exchange rules and regulations may
only lengthen the re-structuring time somewhat but cannot obstruct it. On
the hand, advantages galore if the take over is limited to securing only a
controlling interest while keeping UEM's listed status. Apart from saving
billions of ringgit of cash for the people's coffers (present cost is RM
3.8 billions), the entire restructuring process can be turned into a
confidence-building showpiece through transparent dealings and maximum
public participation. Through this process, the market can even be
rejuvenated in a limited sense. It is therefore obvious that the latter
option is the automatic choice, if the intention is to instill and regain
public confidence in the stock market, and not to bail out Halim.
The stock market is to a large extent a reflection of the political and
economic health of a country. The problem with Malaysia is its
deteriorating political leadership. Due to the leadership's failure to
recognize and address the structural weaknesses that have in the first place
caused the recent financial and economic crisis that has ravaged this
region, Malaysia has not recovered from it. In fact, Malaysia has suffered
rapid deteriorations in all fronts in the past few years, causing its
ranking in various international indices to slip very badly, whether it is
in the administration of justice, human rights, economic competitiveness or
To the misfortune of Malaysia, Prime Minister Mahathir seems to have only
one answer to dissenting voices to his rule, and that is: increased
repression by using laws from the formidable arsenal of repressive
legislations that he has built up in his 2 decades of rule, as shown
recently by the trigger happy manner in which these repressive laws are
increasingly abused to punish and imprison his opponents. Compounding the
worsening political scenario locally, is the PM's recalcitrance in
attacking foreigners as anything from rogue traders to colonizers, and more
lately, extending these attacks to embrace market liberalization and
globalisation. These developments have of course further eroded investors'
confidence in this Country, both foreign and local, direct and portfolio
Looking from this perspective, the present exercise to take over UEM can
only be viewed as another massive bail out of cronies, and its supposed
confidence boosting effect is but a mirage.