http://malaysiakini.com/Column/
2001/08/2001081301.php3

Monday August 13

Is privatisation a success?

CHIAROSCURO

MGG Pillai

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 horizon?

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 says.

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 debts.

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.