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Bailout of Renong meant to protect Umno assets: Jomo
By Susan Loone

29/7/2001 10:47 pm Sun

[Umno baru(a) akan pupus jika wangnya sudah tiada lagi. Krisis ekonomi menyebabkan Umno semakin menjadi ligat mencuri. Itu termasuk mencuri dari 'kawan lamo' sendiri...... dengan dana milik rakyat sebagai alat. - Editor]

Saturday July 28

Bailout of Renong meant to protect Umno assets: Jomo

Susan Loone

7:26pm, Sat: The government's bailout of Renong was a bid to salvage Umno's ailing assets and not to save the conglomerate's employees from the prospect of unemployment as suggested by the prime minister, said an economics professor today.

Universiti Malaya's Prof KS Jomo said productive employees in enterprises, industries and services will continue to keep their jobs even when there is a change in ownership.

"Take, for example, the North-South highway. Even if United Engineers Malaya (UEM) is bankrupt, the highway will not disappear and people will be needed to manage it," he said.

"The threat of job losses is an excuse to convince people to allow the use of public funds to rescue the group which is under indirect Umno control," claimed Jomo.

Last Monday, Prime Minister Dr Mahathir Mohamad told Parliament that the multi-billion-ringgit takeover exercise was to relieve the conglomerate's corporate debts in order to protect the interests of its employees.

"It is not the towkay (boss) who will suffer when such companies fail, it is the employees that will be victimised," the premier said.

The government recently announced the takeover of UEM, which controls Renong, in a bid amounting to almost RM4 billion.

The Renong group has interests in banks, toll roads, oil and gas fields and real estate. It is Malaysia's most debt-burdened conglomerate and has over RM13 billion in outstanding debt.

The takeover is being financed by the government's investment arm, Khazanah Nasional Bhd.

UEM has a 32.6 percent stake in Renong, which in turn has a 37.1 percent stake in UEM. If the takeover bid is successful, UEM will be taken off the Kuala Lumpur Stock Exchange (KLSE).

'Not an ordinary group of companies'

According to Jomo, the 11 companies in the Renong group listed on the KLSE were not "an ordinary group of companies".

"These companies have been acknowledged as Umno assets for whom chief executive officer Halim Saad and others are virtual trustees. They were answerable to former finance minister Daim (Zainuddin), who was Umno treasurer for well over a decade and a half from 1984 until early this year," he said.

Halim was a protege of Daim Zainuddin (photo), who resigned without explanation as finance minister and Umno treasurer on June 1. He was believed to have engineered a series of costly and unpopular state bailouts of well-connected private firms.

Jomo said that while public funds were being used once again to rescue Umno assets, this time however it is on terms unfavourable for Halim.

"In the past, Halim was rescued with Umno's assets. Now, he is being left out on the limb," he said.

"But the question Malaysians are asking is, 'should Umno's conglomerate be salvaged using public funds ?' There have already been at least five major earlier bailouts for the Renong group since November 1997 costing the government, public and taxpayers well over RM10 billion," he added.

Policies endorsed by Mahathir

Jomo said many of those who applaud the government's move to bail out Renong do not seem to know the background to the bailout and its implications.

"The reason why Renong has such a large amount of corporate debt is because of steps taken and approved by the government leadership all this while," he said.

"The company's RM25-30 billion debt when the crisis began in 1997 did not fall from the sky. It was due to business style and practices, perhaps advised by Daim, but also endorsed, if not applauded by Mahathir in those days," he added.

Renong had amassed RM26 billion ringgit in debt when the financial crisis hit Asia in 1997. The conglomerate's debt accounted for roughly 5 percent of total loans in the Malaysian banking system at the time.

However, both Renong and UEM have since restructured a combined RM8.4 billion in debt through the issuance of seven-year bonds in early 1999.

Jomo said when debts could not be paid and clogged up the banking system, steps were taken to save the companies under Halim's control.

"Halim's interests were seen as coinciding with the interests of the Renong group and Umno, but in many ways, many of the efforts were to ensure Halim's continued control, and this was seen to coincide with Umno's best interests in the Daim days," he said.

Umno's trustee

However, Jomo added that "with Daim gone, those around Mahathir who resent Daim, finally have their chance to separate out these interests, particularly Umno's from Halim's and, they presume, Daim's".

"Some claim Umno has no more assets, but everyone knows - and Halim has acknowledged time and again - that he was an Umno trustee. But it now seems that Halim no longer commands Mahathir's confidence with Daim gone," he said.

Jomo said many who were not happy with Daim's influence welcomed the Renong bailout, and some imagine it means that market forces will take over without government interference.

Some analysts have also welcomed the government's move because they felt Renong's unresolved problems were dampening the share market performance.

This, he said, couldn't be further from reality. He said the recent episode clearly indicates that it is the government, not the market, that ultimately decides.