Speech by Parliament Opposition Leader, DAP Secretary-General and MP for Kota Melaka, Lim Kit Siang in Dewan Rakyat on the 1985 budget on October 24, 1984
I congratulate the new Finance Minister, Daim Zainuddin, for delivering his maiden Budget last Friday – and if I am not mistaken, it was also his maiden speech in Parliament.
Daim Zainuddin’s budget has another distinction in that it provoked a public protest and demonstration in Johore Bahru on Sunday for its being a “rich man budget”, at a period of deteriorating economy and worsening poverty arising from escalating prices of essential foodstuff and scarcity of low-cost housing.
I will sum up Daim Zainuddin’s maiden 1985 Budget as being over-generous to the rich while forgetful of the poor.
The 1985 Budget philosophy could be seen from the disparity in treatment where low income earners were only given one per cent reduction in their income tax rates, while those with chargeable income above $10,000 got reductions ranging from 5 to 20 per cent; the raising of the death duty exemption from $600,000 to $2 million, and the reduction of the duty from the previous 12 to 60 per cent (depending on the property value) to only two rates: 5 per cent (for value of estate between $2 million and $4 million) and 10 per cent (for value above $4 million).
The inequity of the new tax reductions, which will cost the Treasury $327 million, could be seen from the differences in tax savings from the rate revision, where the low-income earners will benefit in the region of tens of dollars while the high-income earners benefit in the region of $30,000 to $40,000.
Thus a salaried employee with a wife and child, and earning $1,200 a month would save in tax $32, an employee earning $1,700 monthly would save $51 while a professional or businessman with a monthly income of $20,000 (which will bring him into the chargeable income of $232,200) would save $38,500.
The restructuring of the income tax rates should be to make it more equitable, rather than to result in a more inequitable, and regressive system where the rich and wealthy are given a bonanza when everyone is being exhorted to tighten their belts to see through the troubled economic times the country is in. In fact, the 1 per cent reduction of income tax rates for the low-income earners appear to be an afterthought, after the Finance Minister has decided to slash 15 per cent of the income tax rates for the rich, so as to make the decision palatable.
The income tax revision, as well as the death duty charges, would aggravate the disparity in the distribution of income and wealth between the rich and the poor, and makes a mockery of the New Economic Policy objective of wanting to eliminate poverty and create a more equitable Malaysia.
It is still to be seen whether the Finance Minister’s hope that the income tax reductions would increase incentive, productivity, individual savings and investment, for clearly for the lower income groups, the meager tax savings would be used to meet the exigencies of life aggravated by recession and inflation; while for the rich, other factors are probably more dominant in deciding whether to save and invest in Malaysia, which I will come to later.
What I find most disturbing about the 1985 budget is that the new Finance Minister seems to be more receptive and responsible to the representation of the rich while the plight and sufferings of the poor have difficulty in getting his attention.
ECONOMIC DEMOCRACY
The Finance Minister, Daim Zainuddin, in his budget speech said:
“We are convinced that political democracy is incomplete, if the majority of our citizens do not enjoy economic democracy, that is, the ability to overcome poverty. We believe that none o us wants to live in poverty. In fact, every individual has a dream and the aspiration to acquire enough money so as to live and to practise his religion, work and fulfil his responsibilities towards his family. This is also the dream and aspiration of the Government.”
If the Finance Minister and the Barisan Nasional Government really believes in economic democracy, how could they explain to the poor and the low-income Malaysians, who represent 80 per cent of all races of our citizenry, that in the 1985 Budget the government could only afford $2,190 million for poverty eradication programmes when one off-shoot of Bank Bumiputra, Bumiputra Malaysia Finance, could with impunity up to now, throw away more than this sum of money in Hong Kong?
DAYABUMI
Again, how could they square their profession of ‘economic democracy’ for all Malaysian when for ten days now, over 300 Kampong Bercham squatters who had been evicted by the use of some 200 rounds of tear gas by the FRU, had been crowded into the small Kampong Bercham community hall outside Ipoh, in unsanitary and unhealthy conditions, without privacy or facilities for the students to study or prepare for their examination, with many squatters falling victim to various forms of illnesses – and the government authorities doing nothing to relocate and resettle them after tearing down their squatter houses which had provided their only home for 10-15 years and showing no concern whatsoever for their welfare or health!
The Finance Minister declares that the government would continue to accord high priority for public low-cost housing projects throughout the country, and announced an allocation of $278 million for 1985. I thought at first I had heard wrongly, for this is a paltry sum, which shows the low priority of the government on the human right of every Malaysian to have a roof over his head, for the total annual sum of $278 million for low-cost housing for the whole of 1985 us very much less than the cost of building the prestigious white elephant, Dayabumi – the UDA headquarters.
The Government has got its sense of priorities all wrong, and its policies is more wealth-oriented than people-oriented. It would be a tragedy in Malaysia if we reach a position in government and public life where ‘Money Talks’ and the poor could only suffer in silence, have tear gas fired at them because they are poor and homeless, and their problems and grievances ignored and suppressed. This probably explains why in a budget where the Finance Minister is acting as a Santa Claus for the rich, the low-income have not been spared, for motor-cyclists have to pay higher motor-cycle road tax to help finance some of the goodies being given out to the rich.
Even the increase of vehicle registration and transfer fees could only add to the hardships of the low-income, for vehicle ownership is now no more a luxury but a necessity in the struggle for a livelihood.
For instance, under the budget, transfer fees for vehicles is increased from $40 to $100 from individual to individual; from $40 to $300 from individual to company; and from $40 to $100 from company to individual; and endorsement in the registration book of ownership claim, which was previously free of charge, would now cost $50.
This would mean that a person who buys a second-hand car, through a finance company, would have to pay the following additional expenses under the 1985 budget:
| Transfer of registration to finance company from original owner: | $300 |
| Transfer of registration from finance company to hire purchaser: | $100 |
| Endorsement of finance company’s ownership claim: | $50 |
| Total | 450 |
Before the budget, this will cost the purchaser of second-hand car only $80 being $40 fee for the double-transfer each. He will now have to pay $450, for the finance company would definitely pass the extra expenses on to him.
Only the low-income will buy second-hand cars, and borrow from the finance company by way of hire purchase, for the rich will buy a fleet of brand-new imported cars of the most expensive make without having to make use of hire purchase companies. I hope this could be rectified immediately to reduce the budget’s bias against the poor and low-income, for this budget proposal penalises the low income for having low incomes and being unable to buy brand new cars or without hire purchase through finance companies.
The basic problems of the Malaysian economy today are the twin budget and balance of payments deficits, the public debts, control and accountability of the government and government agency expenditures in particular of the Off-Budget Agencies, poverty and the inequal distribution of income and wealth.
Although the 1985 budget touched on these problems, it did not really grapple with the root causes or provide the solution to them.
BALANCE OF PAYMENTS
The current account turned from a surplus of $2 billion in 1979 to deficits of $620 million in 1980, $5.6 billion in 1981, $8.1 billion in 1982, $7.1 billion in 1983, an expected $5.2 billion for this year, and an estimated $4.9 billion for 1985.
This means that for the six years from 1980 to 1985, Malaysia will run up $31.5 billion in current account deficits. The main cause is the rapid rise in the invisible trade deficit, i.e. payments for investment income to abroad, freight and insurance, travel and education, foreign consultants and royalties, which rose from $2.1 billion in 1976 to $4.9 billion in 1979, $5.8 billion in 1980, $5.3 billion in 1981, $6.3 billion in 1982, $8.5 billion in 1983, an expected $9.9 billion for 1984, and an estimated $10.8 billion for 1985.
As a result, although we expect to have a merchandise trade surplus of $4.7 billion for 1984 and $5.9 billion in 1985, the current account deficit is expected to be $5.2 billion and $4.9 billion respectively.
Total Federal Government revenue for 1983 was $18.6 billion while operating expenditure was $18.4 billion and development expenditure $9.4 billion, giving an overall budget deficit of $9.4 billion. For this year, this budget deficit is expected to be $8.4 billion while for 1985 it is estimated to be $6.3 billion.
PUBLIC DEBT
The total outstanding debt of the Federal Government is expected to increase by 17% from $49,508 million in 1983 to $57,746 million at the end of 1984. This is mainly due to an increase in the outstanding external debt from $16,933 million in 1983 to $21,159 million in 1984.
The total debt service payments for 1984 is expected to be $4,805 million was spent in paying back old loans, which is equivalent to 58 per cent of the 1984 new loans. This means that out of the total $8,238 million new loans borrowed in 1984, $4,805 million was spent in paying back old loans which is equivalent to 58 per cent of the 1984 new loans. This mean that 58 cents out of every ringgit in new loans in 1984 merely went back to pay back our old loans, as compare to 42 cents for every ringgit for 1983.
At this rate of public indebtedness, we will soon be in the same situation as Mexico and Argentina, where we will use 100 per cent of our new loans to repay old loans!
In 1985, the debt service payments would rise to $5,486 million which would represent 26 per cent of the 1985 operation expenditure of $21,537 million.
When the government introduced the Fourth Malaysia Plan in 1981, it announced that during the Plan period from 1981 to 1985, Malaysia would borrow externally $4,000 million as compared with #3,907 million during the Third Malaysia Plan, but during the four years of the Fourth Plan, we have already borrowed $16.4 billion, more than four times the Plan target
This external debt figure has not taken into account the total national indebtedness, as it has been estimated that last year the total external debt, both public and private sectors, was $30.9 billion up from $24 billion in 1982 and $15.4 billion in 1981.
The Barisan Nasional Government must bear the full blame for the huge public debt of $58 billion with external debts as high as 37 per cent, for when it decided to plunge on its reckless course of external borrowings in 1981 (with its eyes on the 1982 general elections), it is fact decided to mortgage Malaysia’s future for its short-term political party interests.
Its style of government must also take the responsibility, for the government’s contempt for public debate and fullest consultation before embarking on major policy initiatives, as shown in the other case of the National car Project which was announced with the minimum of public discussion or even cabinet knowledge.
VICIROUS CIRCLE
I call on the new Finance Minister to have an open and frank style of government to take the public into his confidence on matters of common national concern. The Finance Minister, should, for instance, let the country know what is the government’s plans with regard to domestic and external borrowings for 1985, which should not be regarded as a top secret, so as to enable intelligent public discussion of economic and financial strategies for the future.
The government has not yet broken the vicious circle whereby the twin current account and budget deficits resulted in a bigger external debt, which in turn in the form of debt service payments, has become the single biggest item on the services deficit in the current account deficit.
The Government must call a halt to the reckless increase in the public debt; slash costly prestigious projects; reduce reliance on foreign contractors in construction and turnkey projects or foreign consultants; bring home the $1,000 million spent abroad annually by Malaysian parents for the higher education of their children by establishing adequate universities, colleges and polytechnics in Malaysia, or allow the establishment of private universities; the end of misuse of public funds by the government and government agencies and the raising of their efficiency and productivity the creation of a national climate where Malaysians would save and invest in Malaysia instead of the flight of domestic capital which has been estimated to total $13 billion between 1976 – 1983 and check corruption in public life.
In his budget speech, Daim Zainuddin described the Off-Budget Agencies as a ‘new phenomenon’ whose expenditure is expected to peak to $7.2 billion or 46 per cent of total public expenditure in 1984. For 1985, the expenditure of the OBAs will be reduced by $1.5 billion to $5.7 billion. The Finance Minister said that the methods of control and financial management should not differ between the expenditure by the Government and the OBAs, since both have the same effect on the balance of payments and the overall financial position of the country.
OBA’S FREE WHEELING WAYS
From the recent publicity given to the need to bring the OBAs under government control, it would appear that there has been no system of government control over them. I do not agree. Although the projects and activities carried out by these agencies lie outside the normal budgetary process, they do not lie outside the control and monitoring of the Government. If I am not mistaken, there is always at least an official representative of the Federal or State Government on the governing board of everyone of the OBAs, and if the OBAs run riot to the extent of negating the government’s efforts in containing its development expenditures, it is not because of the absence of government control but the breakdown of government control.
The problem of the OBA’s free-wheeling ways are more deep-seated, for it stems from the unwillingness of the government to respect the principle of public accountability for the stewardship of public funds, whether directly by the government and its departments, or indirectly through government companies or other OBAs.
The government cannot claim that it had no means of control previously over the OBAs, for then, why did the Federal government loan $20 billion and guaranteed a further $7 billion to the OBAs, with $800 million in default?
The Government had been guilty of gross irresponsibility in allowing the OBAs to operate like a law unto themselves, without proper control or monitoring over their activities. But the question has still to be answered whether the Government is prepared to accept the principle of accountability for all OBAs, because in the final analysis, they are acting as trustee of the Malaysian public in their charge of public funds vested in them.
It is most odd if all that the Finance Minister would concede is that the OBAs are answerable and accountable to the Government, but not to Parliament and the rakyat, when the Government is itself answerable to Parliament and the rakyat.
The DAP calls for the establishment of a Parliamentary Off-Budget Agencies Accounts Committee, as a sister committee of the Public Accounts committee, to scrutinise and to make the OBAs accountable to Parliament.
If the Government is not prepared to have Parliamentary scrutiny over OBAs, then its recent pronouncements about the need to bring OBAs under control wears thin, for who is to exercise a check on the government’s control over the OBAs, if not Parliament itself?
The BMF scandal is an excellent example as to how, even with various governmental checks exercised by regulatory agencies like Bank Negara, The Ministry of Finance, and the Prime Minister’s Department, things can go very wrong for the simple reason of the failure of the governmental regulatory agencies.
The Finance Minister in his budget speech said that the ‘unpleasant episode’ of BMF ‘is now past’ and that the immediate task was to further strengthen Bank Bumiputra and to generate greater confidence among the public and overseas towards the bank.
The BMF scandal is to heinous, and involved too vast a sum of public funds, to be swept under the carpet. The $2.5 billion bad loans of BMF comes to about 10 per cent of the 1985 budget, and could have been used to double allocation of funds for the eradication of poverty projects next year, to relive the poverty of the farmers, the fishermen, the workers, the homeless, the jobless and the needy and deprived.
I am indeed shocked by the Finance Minister’s remarks on the BMF, for his speech could be misread as an indication that the Government wants to ‘cover up’ the entire BMF scandal and protect the culprits from public prosecution and conviction. This would naturally raise the question as to why the Government wants to hush up the entire BMF scandal.
If the BMF scandal is hushed up, then it would be a signal to all public officers that the 2M government does not take public integrity, dedication and trustworthiness seriously, and that infractions and violations of the national interest as happened in the BMF scandal would be condoned and even hushed up. Nothing would have done more to destroy public confidence in the integrity and trustworthiness of the entire government itself.
Nobody disagrees with the Finance Minister that Bank Bumiputra should be strengthened and greater confidence among the public and overseas generated. The problem with Bank Bumiputra now is not its financial stability, for with the full backing of the Malaysian Government and its takeover by Petronas, there would be no doubt in anyone’s mind about its financial strength.
Bank Bumiputra’s problem will be whether it could regain public and international confidence about its integrity and the trustworthiness of its officers whether at the parent company or its subsidiary companies. Thus could only be done if Bank Bumiputra is made to admit its mistakes, which is by now public and world knowledge, and the officers guilty of the BMF’s $2.5 billion losses, punished and made example of.
The Ahmad Nordin Committee of Inquiry into the BMF scandal is reported to be completing its second report, which would mention names of persons, including prominent politicians, against whom action should be taken for the BMF scandal.
I call on the Finance Minister to keep his word on his return from the World Bank and International Monetary Fund meetings in early October that the BMF inquiry committee interim report would be made public after his budget presentation on October 19
I also call on him to make a clear-cut clarification that his budget remark on the BMF scandal is not meant to publicly close the chapter on the BMF scandal, for this is impossible, for far from being a ‘past’ matter, it is still very present and alive in the minds of all thinking Malaysians until there is a full accounting and the culprits concerned are brought to book.
PETRONAS’S RESCUE
I wish here to deal with Petronas’s use of its oil money to rescue and take over Bank Bumiputra and buy up BMF $2.5 billion bad debts.
The Bank Bumiputra-Petronas deal set a most dangerous and unhealthy precedent whereby the Government could avoid public and Parliamentary scrutiny and accountability for breach of trust, mismanagement and gross negligence in Off-Budget Agencies by hiding and absorbing their colossal losses by arranging for them to be bought up by Petronas or other Oba similarly aflush with public funds.
The Bank Bumiputra-Petronas deal is therefore a great blow to the efforts by Malaysians who want to bring OBAs under greater control and accountability, for it provides a vehicle for the OBAs to be even more unaccountable and irresponsible.
The Petronas take-over of Bank Bumiputra runs counter to all Daim Zainuddin’s profession of wanting to bring the OBAs under greater control and supervision.
The new Finance Minister had the reputation of a Corporate King before his appointment to the Cabinet, dazzling Malaysians with his corporate take-overs and his wizardry in corporate battles. But he cannot regard government finances as a mere corporate chessboard, and apply in toto the strategy and principles and tactics which would be revenant in the corporate world.
BANK RAKYAT SCANDAL
Thus, a corporate empire facing the problem with one company burdened with a huge debt running into billions of dollars could bail it out by arranging for other companies in the same group with large liquid assets to take it over, with the corporate group showing healthy financial balance, without having to explain or account to anyone for the mismanagement or breach of trust or other acts of negligence that might have been committed.
This is not applicable in the management of a country’s finances, for the principle of public and Parliamentary accountability must be strictly observed.
As the Government of Malaysia had repeatedly given public assurance that the Government would stand by Bank Bumiputra, it is the Government that must bail out Bank Bumiputra by way of an application to Parliament for the allocation of an advance to Bank Bumiputra – in this case, some $2.5 billion.
This was done in the case of Bank Rakyat, which as a result of breach of trust, mismanagement and negligence, led to huge losses, and had to be bailed out by Parliament. The Bank Rakyat scandal was debated in Parliament, and a White Paper presented, before Parliament approved $150 million as an advance to bail out the co-operative bank.
In the Bank Bumiputra-Petronas case, however although public funds in the form of Petronas’ oil money would be used to bail out Bank Bumiputra, the government would have avoided accountability to Parliament and the public.
The Petronas Chairman, Raja Tan Sri Mohar bin Raja Badiozaman, had said that Petronas had enough profits to inject into Bank Bumiputra as part of the Government’s rescue package to restructure the Bank, and that it was a ‘good buy’.
If Petronas had a ‘good buy’ in the Bank Bumiputra deal, then the PNB must have had a ‘bad sell’ in disposing of its 86% shareholding in Bank Bumiputra, and the PNB Chairman, Tan Sri Ismail Ali, owes the PNB shareholders an explanation.
However, I do not think Tan Sri Ismail Ali need to lose any sleep over the sale of PNB’s majority stake in Bank Bumiputra to Petronas; for it was PNB which had a ‘good sell’ and Petronas which had a ‘bad buy’, as according to one calculation, the $2 per share paid by Petronas is well in excess of its net book value which is only 25 cents per share. I understand the PNB would be making a record low dividend of 9 to 11%, and I have no doubt that if PNB had not disposed of the bank Bumiputra majority shares it would not be able to declare any dividend for this year at all!
The argument that Petronas would now get a banking licence does not hold water, for if the Government is that keen that Petronas should run a bank, it could simply issue it with a banking licence!
This brings me to another aspect of the Petronas-Bank Bumiputra deal, namely its legality or otherwise.
I contend that Petronas has acted ultra vires of its statutory objectives in using $2.5 billion of oil money to bail out Bank Bumiputra and BMF.
Although Petronas is incorporated under the Companies Act with its own Memorandum and Articles of Association, it is established by a special Act of Parliament, the Petroleum Development Act, 1974, and the parent or controlling statute for Petronas is the Petroleum Development Act and not the Companies Act.
ULTRA VIRES
The objects of Petronas must therefore be limited to the terms and the policy of the constituent Act, namely the Petroleum Development Act 1974, which stated in the preamble of the Act as follows:
“An act to provide for exploration and exploitation of petroleum whether on-shore or off-shore by a Corporation in which shall be vested the entire ownership in and the exclusive rights, powers, liberties and privileges in respect of the said petroleum, and to control the carrying on of downstream activities and development related to petroleum and its products.”
As the buying over of an ailing bank and the bailing out of a finance company cannot remotely be defined as activities having any connection with upstream or downstream or petroleum-related activities, Petronas has violated its statutory objectives, and acted ultra vires.
Petronas may have its Memorandum and Articles of Association purporting to give its powers to buy banks and bail out finance companies, but such Memorandum and Articles of Association would be null and void and of no legal effect as they conflict with the statutory objectives of Petronas as laid down by the Petroleum Development Act. Otherwise, Petronas could also go into the entertainment field, buy and sell detergents and set up fast-food chains or supermarkets, and a whole host of activities unrelated to petroleum whatsoever!
When he was in the United States, early this month the Prime Minister, Datuk Seri Dr. Mahathir Mohamed, told Malaysian students that he believed that the Government had acted correctly in the Petronas-Bank Bumiputra deal, and that the Government was prepared to be challenged in court over the legality of the takeover of the bank by Petronas.
Referring to my earlier announcement of the DAP’s intention to take Petronas to court for acting ultra vires of its statutory objects, Dr. Mahathir said:
“We are willing to let him challenge us. If we are found to be wrong, we will take corrective measures.”
We find this most irresponsible manner of governing the nation. In the first place, the question of the government’s willingness to be used in court does not arise, for the government has no choice in the matter.
Secondly, his statement that if the government is found to be wrong, it would take corrective measures, could only mean the summoning of an emergency meeting of Parliament to pass retrospective validation laws to make what had been illegal legal as in the Essential Security Cases Regulations 1975 which was pronounced by the Privy Council in the Teh Cheng Poh case as unconstitutional and null and void.
Since the Prime Minister has conceded that there is a possibility that the Petronas-Bank Bumiputra deal might be unlawful, then the government and in particular the Attorney-General, is duty-bound to refer the whole matter to Court for a definitive ruling so as not to allow legal rights and liabilities that might accrue after the Petronas-Bank Bumiputra deal to be left in doubt as to their legality.
COURT DECLARATION
The Petronas-Bank Bumiputra case cannot be treated in the same way as Teh Cheng Poh’s case with regard to the Essential Security Case Regulations, for in the former, a whole maze of commercial, financial and property rights and liabilities would be affected.
I want to ask the Attorney-General whether he proposes to refer the whole Petronas-Bank Bumiputra deal to the Courts for a definitive ruling on his own initiative, or whether he is prepared to be joined as a party to seek the court’s ruling on the legality of the Petronas takeover of Bank Bumiputra?
The DAP Central Executive Committee, at its meeting on October 7, decided in the public interest that the Petronas take-over of Bank Bumiputra must be taken to the courts for its legality to be challenged, for if we are right in our contention that Petronas cannot legally act outside its ambit of statutory objects laid down by the Petronas Development Act 1974, although it is incorporated under the Companies Act, then at least 50 per cent of its 33 Articles of objects and powers would be illegal and unlawful.
The DAP had intended to go to the Courts for a declaration on 9 matters, namely:
- A declaration that the objects and powers of Petronas must either by expressly conferred or derived by reasonable implication from the Petroleum Development Act, 1974
- A declaration that each and every object set out in the Memorandum and Articles of Association of Petronas other than objects which are or are incidental or conducive to the attainment of the objectives of the Petroleum Development Act, 1974 are ultra vires Petronas and void in particular Articles 3, 7, 9, 12, 14 and 16
- A declaration that the acquisition of shares in Bank Bumiputra Malaysia Bhd by Petronas is ultra vires, Petronas being not within the objectives and purposes of the Petroleum Development Act, 1974
- A declaration that the purchase or acquisition of $2,225 billion problem loans of Bank Bumiputra Malaysia Bhd by Petronas is ultra vires, Petronas being not within the objects and purposes of the Petroleum Development Act 1974
- A declaration that the Prime Minister of Malaysia cannot, purporting to act under the provisions of Section 3(2) of the PDA issue a direction to Petronas to purchase or acquire the shares in Bank Bumiputra Malaysia Bhd and that such direction is not binding on Petronas;
- A declaration that a resolution of the Government of Malaysia, the sole shareholder of Petronas, in approving the purchase by Petronas of shares in Bank Bumiputra Malaysia Bhd is ultra vires Petronas being not within the objects and purposes of Petroleum Development Act, 1974;
- A declaration that Petronas is not empowered to provide financial assistance to restructure Bank Bumiputra Malaysia Bhd or engage in any form of salvage operations relating to Bank Bumiputra Malaysia Bhd;
- A declaration that
- The purchase of 90 per cent of the share capital of Bank Bumiputra Malaysia Bhd for the price of $933 million from Permodalan Nasional Bhd
- The injection of $300 million into Bank Bumiputra Malaysia Bhd;
- The purchase of $2,2225 billion problem loan of Bank Bumiputra Malaysia Bhd for $1.255 billion, are not in the interest of Petronas
- A declaration that Raja Tan Sri Mohar Raja Badiozaman, in his capacity as Chairman of Petronas has not acted in the interest of Petronas in approving the entire transaction or acquisition of the shares in Bank Bumiputra Malaysia Bhd by Petronas and has thereby failed to discharge his duties as an officer of Petronas to act bona fide in the interest of Petronas
We now understand that the Bar Council, in the pursuance of its statutory objectives and duties under the Legal Profession Act 1976 to ‘uphold the cause of justice’ and to advice the government on the laws of the land is interested in taking a test case to determine the legality of the Petronas-Bank Bumiputra deal.
In view of the Bar Council’s interest in the matter we in the DAP are prepared to let the Bar Council take up this test case on the legality of the Petronas’s takeover of Bank Bumiputra and BMF’s bad loans, and it is for this reason that we have not taken further action on the matter so far. We will await the Bar Council’s decision on whether it wants to proceed with the action or not.
Petronas is the largest and most unaccountable OBA in the country. I had asked my secretary at the Parliamentary Opposition Leader’s Office, Sdr. Madhavan Nair, to write to Petronas for copied of all its annual reports for purpose of the 1985 Budget debate, but Petronas did not even have the courtesy to reply.
Petronas officials seem to forget that they are not the person owners of Petronas, and are mere trustees of the people and as such must be prepared to account to Parliament as representatives of the people.
A local press recently reported how there was a game of ‘hide and seek’ when its reporters went to the Registry of Companies for the Petronas’ 1983 accounts before the records were produced. Why this secrecy and mystery?
DIRECTOR’S EMOLUMENTS
According to the report, Petronas and its subsidiaries were worth $9.5 billion on March 31, 1983. Its reserves were $9 billion which in some way could rival the country’s reserves in gold and foreign exchange which at the end of December 1983 were only $8.8 billion.
Its expenditure for the 1983 financial year was $390 million with the 15 directors’ emoluments totalling $1.4 million, which works out to an average of $8,422 a month. This does not include loans to directors for housing and motor vehicles which came to a further $1.2 million.
After the Pertamina scandal in Indonesia, Petronas has been described as the most top-heavy national oil corporation which does not produce a drop of oil.
The secrecy and mystery of Petronas, accountable to no one buy the Prime Minister, is most unhealthy and unsatisfactory, especially as it commands vast reserves which could make it into a parallel government
There must be an end to the secrecy of operations of Petronas if we want to make all OBAs more open and accountable for their actions, and Petronas must open up to explain and justify its policy, operational and management practices, in both petroleum and fiscal aspects.
We do not want to have a situation where in the public sector, austerity and belt-tightening is demanded of all departments and government servants, except Petronas, where because of the unlimited oil monies, become an oasis of plenty, overstaffed, highly-paid and with the minimum of work.
The oil reserves of Malaysia is not meant to be a bonanza for the fortunate few appointed to the Board of Petronas, and the time has come for the Petronas to, for a start, justify its annual expenditure of $400 million and the annual director’s expenses of some $3 million!
Secondly, Petronas should voluntarily submit its accounts to the Auditor-General for audit to show that it is prepared to accept the principle of accountability to Parliament and the people, with the Auditor-General submitting his report to Parliament.
In 1980, the Government formulated and implemented its National Oil Depletion Policy to conserve the petroleum and petroleum-related resources for future generations. But from the petroleum production figures, which shot up from an average of 371,108 barrels per day during the first six months of 1983 to 457,700 barrels per day in the first six months of 1984, it is clear that the National depletion Policy appears more to deplete rather than to conserve our petroleum resources.
There is now talk that to bail out Malaysia’s twin deficit problems in our budget and balance of payments, oil output should be increased to 600,000 barrels per day, even though world oil prices are plummeting.
Two days ago, the Deputy Finance Minister, Datuk Sabaruddin Chik, said Malaysia would not cut back its oil production rate even if oil price in the international market falls, showing the desperation of Malaysia in depending on the petroleum resources for economic rescue, abandoning the conservation objectives of the National Oil Depletion Policy.
The government must reconsider its entire oil production policy for we seem to be bent on sacrificing the long-term interests of future generations to tide over our present economic woes.
‘FEAR OF GOD’
When public accountability breaks down, whether in the BMF scandal case or Petronas for example, there will be across-the-board fall in public integrity, leading to corruption and graft in Malaysia becoming most blatant and rampant today than at any time in the 1980s.
The 2M Government’s promise of a ‘clean, efficient and trustworthy’ government has become a poor joke to the people of Malaysia, for the Prime Minister’s promise to put ‘the fear of God’ into the corrupt had clearly failed to evoke any fear whatsoever. Today, corruption, abuse of power and breach of trust has become the order of the day.
I call on the 2M government to have a second lease of commitment to fight corruption, abuse of power and breach of trust, which if unchecked, would like cancer, destroy the very fabric of our society in the way many nations in the past had gone to ruins.
Political leaders, whether at Federal or State levels, must set a high standard of political morality. The clear case of the breach of Article 6(5) of the Sabah State Constitution by the Sabah Chief Minister, Datuk Harris Salleh, prohibiting the Sabah Chief Minister from ‘actively engaging in any commercial enterprise’ is a good case in point
In response to Datuk Harris Salleh’s challenge, I had on September 3 publicly at the Chinese Assembly Hall in Kuala Lumpur accused him of breaching Article 6(5) of the Sabah State Constitution and named three companies where he had been director during his tenure as Sabah Chief Minister, namely DUA BERSAUDARA SDN. BHD., EMPAT BERSAUDARI SDN. BHD. AND SEJATI SDN. BHD.
On September 24, at the Chinese Assembly Hall, I had named a fourth company where Datuk Harris Salleh had been a director during his tenure as Sabah Chief Minister, i.e. SADAS Sdn. Bhd.
There is also a fifth company which calls for explanation and investigation by the Anti-Corruption Agency. I am referring to MINYAK BERJAYA SDN. BHD., which was incorporated on 7th August 1974 in Kota Kinabalu with Datuk Harris Salleh as one of the two original subscribers.
According to the annual returns lodged with the Registry of Companies on 16th August 1980, Datuk Harris Salleh is the largest single shareholder with 600,000 shares of the total 3 million shares at $1 each. Sabah Land Development Board held 500,000 shares.
After this return, the entire company of MINYAK BERJAYA SDN. BHD. was sold to SAPLANTCO SDN BHD., which is wholly owned by Sabah Land Development Board, for an undisclosed consideration.
We have therefore here a case of a company where Datuk Harris Salleh owns 600,000 shares out of the total 3 million shares being sold to a wholly-owned subsidiary of a government agency, the Sabah Land Development Board, which is finally responsible to the Sabah Chief Minister.
The Anti-Corruption Agency should investigate into this case to ascertain whether there is any conflict of interest.
In any other country where political leaders have a greater sense of political morality, Datuk Harris Salleh would have resigned as Chief Minister when these breaches of the Sabah Constitution are made public. But in this case, the Sabah Chief Minister is hoping that the Prime Minister would bail him out.
Corruption in Sabah under the Berjaya government has become so rampant that way back in 1978, the people in Sabah had aptly described it as ‘Big Small All Eat’. It was because in 1978 when I visited Sabah I called on Datuk Harris Salleh to honour the founding Berjaya pledge of Tun Fuad, Datuk Peter Mojuntin and Datuk Chong Thian Vun to have a clean, honest and incorrupt government that I was subsequently banned from entry into Sabah.
Datuk Harris Salleh cannot deny that Berjaya leaders, going up all the way to the Berjaya Supreme Council which is the policy-making body, had been corrupt, as he himself admitted in October 1983 that of the 1,600 Bumiputras who borrowed $105 million from the Bumiputra Participation Unit and the Rural Development Corporation’s credit scheme, 70 Berjaya politicians, including Berjaya Supreme Council members, wrongly obtained $68 million of the loans.
Even more damaging had been a TIME magazine report dated April 27, 1981, which reported:
“Another problem plaguing Harris’ economic development programmed is corruption. Sabah’ Land Development Board, which is responsible for the ambitious resettlement program, is notoriously corrupt: contract kickbacks are routinely demanded. Throughout Sabah politics, money talks. The result of last month’s state elections, which Harris’ Berjaya (Successful) Party won handily, was not unaffected by voter’s receiving the government’s annual gift of $67 (US) just before the vote as well as the distribution of money and favors to village headmen for delivering votes. Harris has granted key Berjaya supporters valuable timber licenses and has himself become enormously wealthy since taking office, with interests in oil, real estate, plantations and timber. The Chief Minister argues that ‘patronage’ is involved not ‘corruption’. ‘He gets his piece of the action but he doesn’t cheat’, says a Kota Kinabalu businessman. ‘He insists on high standards and makes his millions honestly’.”
Apparently, the Anti-Corruption Agency does not read TIME magazine.
I challenged Datuk Harris Salleh to disclose all the companies where he had remained as a director at any time during his tenure as Sabah Chief Minister and to declare his assets and that of his family and close kins before he become Chief Minister and at present, and to allow a public scrutiny and examination of his personal assets and incomes.
The Anti-corruption Agency must be more effective in Sabah to stamp out the ‘Big Small All Eat’ corruption, or Sabah would stand as the very symbol of the utter failure and ineffectiveness of the ACA to combat corruption for which it was established.
RACIAL POLARISATION
The Finance Minister had slashed the income tax rates of the wealthy in an exercise in Reagonomics to spur productivity, investment and individual savings although the supply-side theory has contributed to the biggest budget deficit in US history.
Various studies have shown that the savings rate in Malaysia greatly exceeds its investment rate and that between 1976-1983, there was a flight abroad of domestic capital totalling $13 billion.
The problem therefore is not so much capital shortfall as whether domestic capital could be encouraged and induced to invest locally.
Apart from problems of economic uncertainty arising from the international situation, a major cause of the domestic flight of capital is the problem of racial polarisation in the country.
Only last week, I was told of a Malaysian Chinese industrialist who in the late sixties and early seventies was a very strong proponent of the need to help the Malays catch up economically, but who in the late seventies and eighties had become so disenchanted by NEP policies and measures that he had transferred most of his capital overseas to invest abroad.
Extremists and chauvinists can accuse such a person as being disloyal to Malaysia and ‘good riddance’, but it could only mean we are not prepared to grapple with the problems created by racial polarisation in the economy, national unity and our national future, and want to see it escalate further.
The demand for the extension of the NEP goals and targets after 1990, the accelerated process of Islamisation in all sectors of national life trying not to be too far removed from the ultimate demand for an Islamic State, the shocking insensitive of Federal and state Government authorities to the political, religious, cultural, economic, educational and national aspirations of all races, religions, cultures, aggravating racial polarisation and threatening the country with religious polarisation, are factors which affect productivity, investment and savings in Malaysia.
BUKIT CHINA ISSUE
The Bukit China issue in Malacca is a good illustration. For four to five centuries, Bukit China has become the community trust property of the Chinese for religious purpose, and there are 12,500 graves on the ancient cemetery hill.
Bukit China therefore symbolise the cultural roots of the Malaysian Chinese in Malaysia, their contribution to the building of Malaysia today, their religious freedom, political status and citizenship rights. In fact, Bukit China should be regarded as part of the national heritage by all Malaysians, regardless of race.
In utter disregard of the historic, cultural, religious, political sensitivities of the Chinese in Malacca and Malaysia, and even without consultation and consent from the trustee of Bukit China, the Cheng Hoong Teng Temple committee, the Malacca Chief Minister unilaterally announced the Malacca State Government’s decision to level and develop Bukit China, announcing two development plans and even gazetting the government’s intention to acquire Bukit china for road purposes.
I know that since Merdeka in 1957, many UMNO and MCA leaders had been dreaming their ‘Bukit China’ dream, for anyone who could participate in the development of Bukit China, which is in the heart of Malacca town, would be virtually given the franchise to mint money and become a multi-millionaire overnight.
But the cost of any forcible State Government development of Bukit China, especially as the Chinese community had both in Malaysia and Malacca made clear their opposition, would cost the nation very dearly in terms of the damage to inter-racial, inter-religious, inter-cultural relations and national unity as a whole.
This is because if the Chinese community finds that what had been their community trust property for centuries, and used for a religious purpose, could be forcibly taken away from them, then the non-Malay community in Malaysia will not feel safe with regard to any of their rights.
As a result, racial polarisation would take a turn for the worse, confidence in the long-term investment in Malaysia destroyed, and Malaysia enter a period where citizens would be set against citizens, instead of all uniting to make Malaysia a great nation.
For sake of the long-term interest of Malaysia, to prevent the worsening of racial polarisation and the grave damage to both national and international confidence in Malaysia’s investment climate, I call on the Federal Government to stop the Malacca Chief Minister, Datuk Abdul Rahim Thamby Cik, from forcibly levelling and developing Bukit China, and to fully respect the Cheng Hoon Teng Temple Committee, as the trustee, in their views as to the future of Bukit China.
The high-pressure, amounting to extortionist tactics, of the Malacca State Government to compel the Cheng Hoon Teng Temple committee to capitulate to the government’s Bukit China plan must be withdrawn immediately, including the $2 million demand for quit rent and arrears and late payment fines, when all these years it had been exempt; and the two so-called development plans for Bukit China; and the gazette notification of government intention to acquire Bukit china for road purpose.
If the Federal Government does not pay attention to issues like the Bukit China question which could undo all its attempts to build up national harmony and unity and confidence in long-term national investment, then State governments will become the political ‘OBAs’ which negate the Federal government’s economic measures.
With a corporate king as Finance Minister, there is an urgent need to remind the government that in its actions, it must be people-oriented and not wealth or money-oriented.
PAPAN NUCLEAR DUMP
The government’s solution of the protest by the people of Papan to the sitting of the radioactive waste dump in Papan will be a test-case as to whether the government places greater priority to the welfare, health and well-being of the 20,000 villagers in Papan and surrounding areas, or to the profit considerations of a Japanese-Malaysians joint venture, the Asian Rare Earth Sdn. Bhd., to carry out activities in Malaysia which is prohibited in Japan because of its threat to health and lives.
A British physicist and safety analyst, Dr. William Cannel, and an American nuclear expert, Dr. Edward Radford, had inspected the proposed dump and found the trenches badly constructed.
I call on the Federal and State Governments to respect the legitimate fears and wishes of the 20,000 villagers in Papan and surroundings areas in their opposition to the siting of the radioactive waste dump in Papan – especially as the government had heeded the objections of the people of Parit where the dump was originally to be sited.
Before I end, I want to refer to a final item. During the debate on the motion for the establishment of a Royal commission of Inquiry into the BMF last Thursday, the MCA MP for Padang Serai, Tan Kok Hooi, insinuated whether I had been ‘bought’ as I had not yet revealed the irregular $30 million loans of a local finance company.
I have seen the Bank Negara Governor, Tan Sri Aziz Taha, on this matter as I am concerned that there should be no local BMFs which would undermine public confidence in financial institutions in the country because of unethical and unlawful misuse of public funds deposited with finance companies.
I had since then read in the press that the Neo Yee Pan MCA faction had claimed that they had information about this local finance company, and would soon be making public revelations.
I do not propose to be caught in the MCA power struggle, or to be used by either side. I have decided therefore to let the MCA neo Yee Pan faction to have the opportunity to make the revelations about the irregular loans of this local finance company, unless it is afraid to do so because they have skeletons in their cupboard too.