Speech by Parliamentary Opposition Leader, DAP Secretary-General, MP for Tanjong and Assemblymen for Kampong Kolam, (Penang) at the DAP Klang ceramah on the $ 1.5 billion Co-operative Finance scandal held in Klang on Tuesday, August 12, 1986 at 9 p.m.
Three reasons why the Malaysian Government must give full financial backing to the 23 deposit-taking co-operative to ensure no depositors suffers any monetary loss
I had said in Parliament that the $ 2.5 billion Bumiputra Malaysia Finance Scandal was a sordid tale of fraud, deception, irresponsibility and negligence. But the Government has learnt nothing from the BMF scandal, probably because important political leaders were themselves involved. As a result, we have today the $ 1.5 billion Co-operative Finance Scandal, which is even more serious than the BMF scandal as they directly affect a few million people who will suffer immediate hardship if the co-operative finance sector collapsed.
There is no doubt that the Barisan Nasional Government had failed to take prompt and early action to protect the interest of the 540,000 co-operative members and their money because of fear that Barisan Nasional candidates, in particular from MCA and Gerakan, would face massive rejection in the general elections. As a result, Bank Negara took action only after the August 3 general elections!
The DAP had made two calls on the $ 1.5 million Co-operative Finance Scandal: Firstly, that there should be a Royal Commission of Inquiry into the scandal taking over the Bank Negara investigations through 17 accounting firms; secondly, that the Government guarantees the deposits of the co-operative finance depositors in all the 23 deposit-taking co-operatives currently under Bank Negara investigation.
There are at least three cogent reasons why the Barisan Nasional Government must give full financial backing to the 23 deposit-taking co-operatives, not to protect the directors who have committed fraud, breach of trust or other abuse of authority, but the innocent 540,000 members and the few million dependants.
Firstly, if the Bank Negara and the Finance Ministry had heeded the warnings of DAP leaders and MPs since last year that the government should protect the interests of the depositors in the co-operative finance branches, in particular my warning in the March meeting of Parliament this year that a financial crisis greater than the BMF scandal could explode if the government failed in its duty in the co-operative finance sector, the $ 1.5 billion Co-operative Finance Scandal would not have reached this magnitude.
Since it had allowed the political interests of MCA and Gerakan to delay taking action to protect the interests of the depositors, it is now under a great moral and political duty to bail out the depositors for any losses they might suffer as a result of such government omission and negligence.
Secondly, if the government could use Petronas money to bail out Bank Bumiputra and BMF in the $ 2.5 billion BMF scandal, which has no direct victims among the people, the Barisan Nasional has a greater responsibility to bail out the depositors in the $ 1.5 billion Co-operative Finance scandal especially as a few million Malaysians will be directly hit by it.
Thirdly, the Co-operative Finance scandal is the direct result of the New Economic Policy of the Barisan Nasional. The overwhelming majority of the depositors affected by the $ 1.5 billion Co-operative Finance scandal are Malaysian Chinese, and small-timers, the housewives, hawkers, workers, and small businessmen. They are attracted by the high interest rate to put their life savings in the co-operative finance branches, rather than in finance companies or banks.
The co-operative finance sector became the chief source for the mobilization of small-time Chinese savings and capital, because the Barisan Nasional, under its New Economic Policy, had refused to allow non-Malays to open up banks or finance companies, even by way of co-operative ownership.
For the reason, the Barisan Nasional and its component parties like UMNO, MCA and Gerakan, must be held responsible for creating the policy and condition whereby co-operative finance companies mushroomed, jeopardizing the $ 1.5 billion life-time saving of small-time Malaysian Chinese.
Because of all these three reasons, if the Barisan Nasional refuses to bail out the 23 deposit-taking co-operatives, while it had no hesitation to use Petronas money to bail out Bank Bumiputra and BMF although it was an illegal act which it had to legalise retrospectively when challenged by the DAP, then the Barisan Nasional Government would be guilty of the grossest discrimination and injustice to the co-operative depositors.
I want to reiterate that I am not passing judgement on all the 23 co-operatives and their directors, although there is no doubt that there are co-operative which had been guilty of fraud, breach of trust and abuse of authority to trigger off the present Co-operative Finance crisis.
The full report of the investigations into the 23 deposit-taking co-operatives should be made public
Co-operatives which had not committed fraud, breach of trust or abuse of authority should be cleared immediately, while directors who are guilty of fraud, breach of trust and abuse of authority should be severely punished regardless of their political influence.
It is for this reason that I call for the full report of the investigations into the 23 deposit-taking co-operatives by Bank Negara to be made public.
The DAP has no political axe to grind against any co-operative, but we are taking a firm stand to uphold the rights and interests of the depositors. For this reason, the DAP is prepared to meet with any co-operative who could convince us that they are above-board and should not be under a cloud of suspicion, and if we are so convinced, we are prepared to speak up on their behalf. I say this because KOMUDA has said that it would send a delegation to meet me to let me know the whole situation about its functioning, and I am still waiting for this KOMUDA delegation to call on me.
On Thursday, August 14, 1986, the new Cabinet will be having its first meeting. I call on the MCA and Gerakan Ministers not to fail the few million people who are affected by the Co-operative Finance Scandal by getting the Cabinet to decide and announce full backing for the co-operatives so that no depositors would suffer any financial loss.
If the MCA and Gerakan Ministers could not get the Cabinet to agree to this decision, then they should individually and collectively explain to the Malaysian people the reasons why.