Speech (Part 2) by Parliamentary Opposition Leader, DAP Secretary¬-General and MP for Kota Melaka, Lim Kit Siang, at the Temerloh DAP Dinner-Ceramah held at Temerloh on Wednesday, June 18, 1986 at 8 p.m.
Daim Zainuddin was the big beneficiary while Multi-Purpose was the big loser in the 1984 swap between MPH’s UMBC shares for Daim Zainuddin’s Malaysia-French Bank shares in 1984
In 1984, when Multi-Purpose Holdings announced the swap of its 41% UMBC shares in exchange for the 51% Malaysia-French Bank shares, together with $125 million in cash, belonging to Daim Zainuddin’s companies, the then MPH managing director, Tan Koon Swan, said that this was a fair, equitable and beneficial deal to Multi-Purpose shareholders.
But the question kept being asked – who was the real beneficiary in the swap between Multi-Purpose’s UMBC and Daim Zainuddin’s Malaysia-French Bank shares.
As a result of the latest published figures from Multi-Purpose; Daim Zainuddin’s companies – DAAN Sdn. Bhd & DANI Sdn. Bhd; revelations in foreign publications like the Asian Wall Street Journal and the Far Eastern Economic Review, a computation could be made as to the respective gains or losses in the swap.
The DAP Multi-Purpose Holdings Accountability Committee made a study of these published figures, and discovered that Daim Zainuddin and his companies were the big beneficiaries of the swap while the Multi-Purpose Holdings was the big loser.
From this study, Multi-Purpose Holdings lost $16.6 million from the swap, or 6,1% loss from the swap; while Daim Zainuddin’s family companies made $95.35 million or 260% profit!
Multi-Purpose Holdings paid $228 million for the UMBC shares in 1981 and 1982, and adding the carrying costs of 1983 and 1984 (at say 10% interest of $228 million), the total cost of UMBC shares when sold to Daim Zainuddin’s family companies would be $273,6 million.
Multi-Purpose Holdings’ UMBC shares, costing $273.6 million, were sold however in exchange for 51% Malaysia-French Bank shares (valued at $132 million) together with $125 million in cash, which totalled $257 million. Multi-Purpose Holdings therefore lost $16.6 million in the deals or a loss of 6.1%.
According to company returns filed by Daim’s family companies, Daan Sdn. Bhd and Dani Sdn. Bhd., for December 31, 1984 after the UMBC/MF deal, these two companies made extraordinary Tax-Free profits of $95,35 million; when neither company had ever made more than $3 million post-tax in any previous year.
As the 51% Malaysia-French Bank shares of the two companies were valued at $132 million for the swap, and on the basis that the $95,35 million profits for the two companies were derived from the exchange, this means that the original costs (including carrying costs) of the Malaysia-French Rank shares were only $36.65 million, for the two Daim family companies – which is derived from $132 million minus $95,35 million.
This works out to a 260% profit for the two Daim companies from the exchange, when Multi-Purpose Holdings suffered a 6.1% loss.
Clearly the Chinese ‘economic wizard’, which is the appellation of Tan Koon Swan, was no match at all for the Malay corporate czar, which was Daim’s appellation before his appointment as Finance Minister. Daim is clearly s shrewder businessman, banker and financier than Tan Koon Swan!
MPH’s $191.9 million loss for 1985: How did a $5 million estimated loss for shipping investment last September ballooned to a whopping 150 million in nine months?
At long last, after a month-long controversy, Multi-Purpose Holdings finalised its 1985 accounts and announced on June 6 that its group after-tax loss would be in the magnitude of $191.994 million. Multi-Purpose Holdings, which was advertised by MCA leaders in 1981 as a ‘pioneering Chinese community economic-venture’ to achieve a breakthrough on the Malaysian economic scene, scored the distinction of registering the largest, loss recorded in the local corporate sector.
The main culprit for the MPH’s $192 million loss was the group’s Hong Kong-based shipping division, which accounted for some $150 million extraordinary loss.
Last September, the 1985 half-yearly interim report of MPH “deemed it prudent to make a provision of $5.613 million for dimunition in value of its investment in shipping.”
Nine months later, this $5 million provision for shipping loss has ballooned 3,000 times to a whopping $150 million. Clearly, the MPH Board of Directors had not been ‘prudent’ at all y as it claimed in its 1985 interim half-yearly report.
This must be one of the few rare cases where in a matter of nine months, an estimated $5 million loss could increase 3,000 times, and for this extraordinary feat, the MPH Board of Directors owe the MPH shareholders and the Chinese community the fullest explanation.
Tan Koon Swan, who was the MPH Managing Director for the whole of 1985, and the Board of Directors should explain why they thought the MPH would only lose $5 million from its shipping investment, when nine months later, the Board had to proclaim a loss of $150 million. It must be difficult to equal such incompetence and mismanagement in the local corporate scene. Or did Tan Koon Swan and the MPH Board deliberately deceived the MPH shareholders and MCA members, so as not to damage Tan Koon Swan’s chances in the MCA power-¬struggle with Neo Yee Pan? In view of the unprecednetly huge losses suffered by MPH, there should be a full inquiry into the management of MPH, and MPH shareholder should move a resolution in the coming MPH general meeting to set up such an inquiry, for clearly, an annual general meeting of MPH would not be able to give satisfactory answers to the shareholders’ queries on mismanagement and the colossal MPH losses.
Tan Koon Swan and the MPH Board of Directors should explain why they decided on the shipping investment in Hong Kong in the first place.
Multi-Purpose Holdings stepped into the Hong Kong shipping scene with some $100 million investment in 1933, acquiring the Hong Kong shipping line, PROMPTSHIP Holdings. The Multi-Purpose’s 1983 shipping investment decision in Hong Kong was said to have ‘raised a few eyebrows in shipping circles in Hong Kong’ because of Promptship’s poor financial shape, and its fleet of 34 ships had an average age of 14 years. In fact, Promptship Corporation was believed to be “on its last legs” when Multi-Purpose Holdings stepped in to be the new owner!