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Economist: Wrongs and Renong
By Economist

28/7/2001 6:09 am Sat

[Mahathir memang licik membuat mereka yang tidak tahu selok belok perangainya terpegun dan terpedaya dengan tindak-tanduknya kerana dia sanggup menangis dan berpura untuk kekal berkuasa. Malah dia sanggup 'bercerai' dengan 'kawan lamo'nya Daim atau 'berkahwin' dengan Anwar untuk mencuri kekuatan Anwar.

Oleh kerana kekuatan Anwar terletak kepada imej Islamnya pengaiban luarbiasa dirancang untuk menghakis kekuatannya. Dan untuk Daim pula gergasi koporat Renong dan UEM menjadi sasaran kerana di situlah berjuta-juta harta dan kekuatan milik Daim tersimpan. Tetapi Daim tidak pula dikenakan tindakkan undang-undang kerana Daim dijangka akan berdiam kerana dia bukan seorang pejuang. Daim adalah seorang pemain yang akan mencari jalan lain yang tidak kelihatan atau secara diam-diam kerana itulah cara tradisi dia menjadi jutawan.

Kita berpendapat masalah kroni tidak akan padam sebaliknya ia akan bergerak secara diam atau menyorok dan menjalar di bawah tanah (going underground) selepas ini. Umno amat memerlukan wang untuk menang tetapi dananya sudah kecelaruan. Dari manakah sumber itu akan datang jika tidak dari kroni juga. Sebab itulah projek mega seperti Bakun disambung semula kerana di situlah peluang untuk membalun secara diam. Tanpa wang Umno akan padam. Inilah antara sumber kekuatan Umno - sebab itulah Daim dibiarkan.
- Editor

The Economist: Jul 26, 2001

Wrongs and Renong

A good week for corporate governance, a bad week for crony capitalists

AN ACCOUNTANT of extravagant tastes, mediocre business acumen and impeccable political connections, Halim Saad has long symbolised the corporate culture of Malaysia. He benefited greatly from the "new economic policy", a form of affirmative action that favoured the country's ethnic Malay businessmen. In the 1980s, he was picked to run Renong, a group of companies closely linked to the ruling political party. He has been winning government contracts to build motorways, telecoms networks and other bits of Malaysia's infrastructure ever since. For financing, Mr Halim has always relied on other people's money, making the Renong group the country's largest debtor.

Since the Asian financial crisis of 1997, Mr Halim has embodied all the reasons why international investors continue to shun Malaysia. He has refused to restructure his empire to repay his creditors. Instead, he has repeatedly appeared determined to fleece his minority shareholders in order to maintain control. In late 1997, for instance, shareholders in United Engineers Malaysia (UEM), a listed company that is part of the Renong group, were horrified to learn that UEM had bought a 33% stake in Renong at non-market valuations (Renong in turn owns 37% of UEM). To placate irate investors, Mr Halim promised to buy the shares back with his own money three years later, but he now seems unlikely to be able to do so in full.

All this explains why investors were so cheered when, on July 23rd, the government said that it intended to take over UEM - thereby, in effect, seizing control of Renong - in order to restructure the group in earnest. The offer price is low enough, according to analysts, to suggest that this is not a rescue. To drive the point home, the government added that Mr Halim "will have no role to play in the restructuring of the group"-in short, that he will be fired.

It is still possible to be cynical. Mr Halim is the most prominent of several notorious protégés of Daim Zainuddin, who recently resigned as Malaysia's finance minister after a clash with Mahathir Mohamad, the prime minister. Many Malaysians see the ouster of Mr Halim as part of a purge of "Daim's boys".

Yet it is likely that the takeover of UEM also signals a genuine policy shift. Of late, Mr Mahathir seems to have grown tired of Malaysia's pariah status in world capital markets. Last week, he explicitly blamed Renong for dragging down the Malaysian stockmarket. Next month, a new code of corporate governance will take effect, requiring boards to have more independent directors, proper audit and remuneration committees and so forth. Plenty more Malaysian conglomerates are in dire need of restructuring, including the Lion Group and Johor. If they start to clean up too, that will show that the days of crony capitalism in Malaysia really are numbered*.

[*We believe such activity will remain will just vanish from the surface but will reappear underground. - Editor]