By Parliamentary opposition Leader, DAP Secretary-General, MP for Tanjung and Assemblyman for Kampong Kolam, Lim Kit Siang, in penang on Sunday, 14.9.1986;
The Bank Negara’s $800 million “25:25:50” rescue plan for the 24 deposit-taking co-operatives is no great deal.
Bank Negara’s $800 million “25:25:50” rescue plan for the 24 deposit-taking co-operatives is no great deal, when the details of the plan are studied.
According to Bank Negara proposals, the 540,000 members and depositors would be allowed to withdraw 25% of their deposits when the co-operatives resume operations; while another 25 per cent of the deposit at 6 per cent interest could only be withdrawn in two years time. The balance of 50 per cent of deposits would be converted into equity of the co-operatives.
As the total deposits in the 24 affected co-operatives is $1.6 billion this will mean that on resumption of operations, depending on maturity dates of deposits, the co-operatives would at most have to pay out $400 million. The co-operatives would have to pay another $400 million, with six per cent interest, only in two years time. The balance of the $800 million of the total deposits of the 540,000 depositors would be converted into equity, and if the co-operatives are worthless, their 50% equity would also be not worth a cent.
Although the Bank Negara’s plan is bruited as a $800 million life-beat safety fund set up by the government, clearly, the ’25:25:50’ formula would obviate the necessity of the Government coming out with much money.
This is because when the co-operatives resume operation, it should be able to marshal the bulk of the $400 million for the first pay-out of 25 per cent of the deposits.
The second payout of $400 million in two years time could come from the use of the $1.2 billion deposits; while the conversion of 50 per cent of the balance of the deposits into equity would bean that there would be no more pay-outs.
It would be most unfair and unjust if the Bank Negara’s rescue plan involves the 540,000 members and depositors writing off 50 percent of their deposits.
Bank Negara must bear responsibility for the Co-operative Finance scandal
Up to now, Bank Negara officials have maintained that the co-operative finance scandal is not their baby, and that the Co-operative Department must bear responsibility.
Bank Negara cannot shrink its responsibility, especially as Bank Negara had been forewarned by DAP leaders of the time-bombs ticking away in the co-operative finance branches.
I want to dispel the impression however that Bank Negara came into the co-operative finance picture only in July when emergency regulations had to be invoked on July 23 to check the run on KOSATU by depositors, leading to the freeze on the assets and activities of KOSATU, which precipitated other runs on other co-operatives resulting in the August 8 Bank Negara freeze on 23 other co-operatives.
According to the Feb.1 1986 issue of the fortnightly, Malaysian Business, the director-General of the Co-operative Development Department, Haji Abdul Aziz bin Haji Abdul Wahab, announced that officials from Bank Negara had been seconded to the Co-operatives development department to monitor and supervise the credit operations of deposit-taking co-operatives.
Haji Abdul Wahab said the co-operatives are being monitored by a unit staffed by officials of the department and Bank Negara.
If Bank Negara had taken its supervision of the deposit-taking co-operatives seriously, it should not have allowed the situation to deteriorate for the next six months until 24 co-operatives had to been frozen.
For its part in allowing the $1.6 billion co-operative finance scandal to get out of hand, Bank Negara must come out with a rescue package which does not mean financial losses to the innocent depositors. In the Bank Negara’s present plan of ‘25:25:50’, depositors fear that it means writing off 5 per cent of their deposits.
How are the views of the co-operative members and depositors to be ascertained?
One problem about the Bank negara’s ’25:25:50’ proposal, which seems to involve write-off of 50 per cent of the deposits, is how the views of the 540,000 members and depositors of the 24 co-operatives are to be ascertained.
Deputy Prime minister, Ghaffar Baba, told me yesterday that the Bank Negara’s ‘25:25:50’ proposal would depend on getting 75 per cent support of the co-operative members concerned.
I do not think the government has the right to impose the ’25:25:50’ proposal on the members and depositors, for this would violate the Constitutional right to Property.
The DAP is seriously considering convening meetings throughout the country to ascertain the views of the affected co-operative members and depositors for there must be a forum available to the co-operative members and depositors to articulate their views and demand, which is absent today.