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MGG: Is Privatisation A Success?
By M.G.G. Pillai
14/8/2001 10:16 pm Tue
Monday August 13
Is privatisation a success?
11:00am, Mon: Yes, says the government. No, says the government.
As proof of the pudding is in the eating, both must be right!
On the one hand, it allows cronies of the establishment to prove
they cannot run what they know nothing about but can make much
money, run up huge bills for the government to bail them out, laugh
all the way to the bank. On the other, the government picks up the
pieces after the cronies had made mincemeat of the privatised
utilities, and reward them for failing.
The self-same government then tells you changes are on the way. It
would not say, indeed it cannot, that privatisation is failure. But make
no mistake: privatisation in Malaysia failed -and badly.
But in official gobbledygook, privatisation is an unmitigated success.
The finance ministry's parliamentary secretary, Hashim Ismail, told
Parliament last Tuesday the country saved RM123 billion from it, and
another RM24 million from selling equities and assets. And freed
government funds for 'social development programmes'.
Besides, only 'three or four' (in other words, he did not know!) of
the 457 privatisation projects failed. It is therefore unfair to say
privatisation is a failure. 'Most', he asserts, are successful.
Thieves in the night
Let us suspend our belief and accept, for argument, Hashim is right.
This is then success by any standard. A government that needs
success badly to shore up its tired image would not miss a chance to
tell Malaysians how successful privatisation is. So, why does it justify
it like thieves in the night? Amidst the largest bailout of failed
privatised undertakings? And with more high profile bailouts in the
Especially when Hashim also opines that without privatisation, the
1997 financial crisis would have been more serious. Its considered
move to privatise made it certain the government 'is not saddled
with more debts and forced to borrow externally?'
We are now told these companies have so much debt that no one
would, could, take them over, and more important, thousands would
be on the streets. But privatisation is justified, in the teeth of
political opposition, that governments should not be in business,
and all money-making ventures privatised.
However inefficient Telekom is, it brought in so much funds daily that
it obviated the government's need to borrow from the banks for its
current account expenditure. Telekom is a listed company and about
to sell RM1 billion in bonds to reduce its debt.
Nothing changed with privatisation. The civil servants became
employees of the privatised companies, usually at private sector
salaries and perks. And quickly saddled it with debts it could not
repay. The government let it. It did not step in when it acquired
debts as drunks bought drinks in a bar. It encouraged a corporate
profligacy unseen in Malaysian business history.
Success by failure
Hashim cannot evade this when he crows about what it brought.
Since he would not reveal what it cost, one must suspect what he
So, it is not the 'successful' 453 of 454 projects we should be
concerned about. It is the 'three or four' that threatens to bankrupt
us. The Renong-UEM boondoggle, the public transport fiasco, the
MAS conundrum, the IWK sewage scandal, the TimeDotCom vapour.
The list goes on. Just these alone would bankrupt us.
All or most of the privatisation is buttressed with huge loans, beyond
the capacity to pay, and the saving Hashim talks of is fiction. The
cronies of the establishment rushed to Labuan and elsewhere, usually
after the local banks would not extend them more credit, to rush into
debt beyond their capacity to pay. Many are so heavily indebted that
they cannot repay the loans in three generations.
The Renong-UEM group of companies, linked to UMNO, owes more
than RM30 billion, with another RM3.2 billion by its leading light,
Halim Saad, which the government also took over. This is about 20
per cent of the alleged savings Hashim informed parliament. We do
not yet know MAS's contingent liabilities, returned to government
control after Tajuddin Ramli, to whom it was privatised, ran it to
ground, and now owes RM10 billion. Tajuddin Ramli, on the other
hand, has nearly a billion ringgit to seek new investment ventures, as
he proudly informed the press.
The privatisation of public transport now costs the government
RM15 billion, the cost of buying it back after the private sector
messed it up. The Plus running of the national highways is so leaden
with debt that tolls must be raised ad infinitum and yet not meet its
More to come
There is more. The Bakun hydroelectric project cost the
government RM1 billion when it failed. It is revived on a smaller scale,
but it is run by the same group that could not build it in the first place.
If this is how 'three or four' companies run their privatised
businesses, how successful could the others be? Especially when run
by those with an unshakeable belief in making money at public
expense while piling up un-repayable debt.
Hashim did not say how much more money the government must
fork out to prove to the world privatisation is an unmitigated
success. He should. He should also list the 457 projects, and what
they are worth. And how much it cost the government in so far
un-repaid handouts of seed money for them to start work.
You must remember the privatisation was not done by the usual
checks and balances and proper tenders. They were handed over to
those who happened to be close to those in power. And they knew
how to run into debt by enriching themselves.
Hashim said his piece when the finance minister was asked a question
in Parliament. He would not have revealed his figures, which is, if
only it was true, a vindication of privatisation. But can we believe
what he says? On current practice, no.
For that, the prime minister or finance minister, or some one else
must repeat it, and give details, after cooking nasi lemak at a charity
function. Important statements come from there, not in parliament.
Which is why it is junior ministers, not ministers, who say these
words. So, if what Hashim said is true, it is a fair bet it would have
been mentioned in past important official statements from Khazanah;
the Budget speech, for instance.
We can forget Hashim's considered statement. It just adds to the
political pollution we have long come to expect. He did not then
disappoint us. In all respects.