Speech by Parliamentary Opposition Leader, DAP Secretary-General, MP For Tanjung and Assemblyman for Kampong Kolam, Lim Kit Siang, in the Dewan Rakyat on Monday, Nov. 24, 1986 on the motion to cut the salary of Minister of Finance, Daim Zainuddin, by $10 during the Finance Ministry estimates of the 1987 Budget debate.
DAP calls for an Independent Commission of Inquiry to investigate how the negligence and irresponsibility of the Government had been the single biggest cause of the $1.5 billion Co-operative Finance Calamity.
Two weeks ago, the government presented the White Paper on the 24 deposit-taking co-operatives and the $1.5 billion Co-operative
Calamity of 588,000 depositors, in which it said:
“…the Government is of the view that the public should not be responsible for the large losses arising from the bad management of the co-operatives. The government should not as a matter of principle underwrite each and every loss in institutions, be they companies, co-operatives or even statutory bodies. This action would encourage irresponsible management at the expense of the public.”
In one swift stroke, the Government, and in particular the Minister of Finance, Daim Zainuddin, is shirking the government’s moral, political and legal responsibility to the 588,000 depositors, who are mostly the ordinary rakyat, the housewives, hawkers, workers and petty businessmen, who have put their entire life-savings and even their coffin-money in the co-operatives.
The principle enunciated in the White Paper did not prevent the Government from allocating $150 million to bail out Bank Rakyat, another co-operative facing liquidation because of the fraud, criminal breach of trust and mismanagement of UMNO and UMNO Youth leaders; or $2.5 billion to bail out Bank Bumiputra with petrodollars from Petronas because of the biggest banking and financial fraud in Malaysian history; or absorbing $660 million loss because of the mysterious London tin-buying operation of the $2 company Mamimco in London in 1962; or the $2000 million loss suffered by government companies admitted by the Deputy Finance Minister, Datuk Sabarrudin Cik, in Parliament recently.
Up to now, the Minister of Finance, who has takenover the responsibility for the 24 co-operatives from the Ministry of National and Rural Development, has not been able to advance one good reason why the government should discriminate against the 21 troubled co-operatives and not bail out the 588,000 depositors, when it could bail out Bank Rakyat previously.
Is politics the reason for this discrimination, that UMNO leaders and memberswere involved in the Bank Rakyat scandal, and had therefore to be bailed out while UMNO leaders and members are not involved in the present Co-operative Finance Calamity, and the government could therefore ‘wash its hands’ and leave them to their fate?
Actually, it is the MCA and Gerakan Ministers and leaders who should protest loudest against such injustice and discrimination, where UMNO Ministers could depend on them for support to use government funds to bail out Bank Rakyat and Bank Bumiputra, while UMNO Ministers refuse to reciprocate by extending similar government bail-out support to the 21 troubled co-operatives with KSM in the biggest mess being insolvent to the tune of $330 million for its 166,000 depositors.
Is the Minister of Finance aware that in refusing to extend to the 21 troubled co-operatives the same bail-out support it gave to Bank Rakyat, it opens up the Government to the charge of gross discrimination, both on grounds of UMNO politics and race? There is no doubt in anybody’s mind that the Government would have come out with a $600 million rescue plan for the 588,000 depositors if UMNO leaders and members had been involved.
On this ground alone, the Minister of Finance as the Minister in charge of the fate of the 24 deposit-taking co-operatives, should be censured and have $10 cut from his salary.
But this is not the only reason. The Co-operative Finance Scandals is not only a scandal of the corrupt co-operative directors and officials, it is also a scandal of the Government, in particular the Co-operative Development Department the Ministry of Finance and Bank Negara, whose negligence and irresponsibility had contributed in a major manner to the $1.5 billion Co-operative Scandal.
The Government, by its statements, had encouraged the people to put their savings as deposits in the co-operatives, and had failed the depositors by failing to exercise proper supervision and control over the management of the co-operative.
The Malayan Thung Pao of 9th November 1985, for instance, carried a front-page lead story quoting the Bank Negara and the Co-operative Development Department as saying that there are only 28 co-operatives which are authorized to take deposits. The report also quoted the then Deputy Finance Minister, Dr. Tan Tiong Hong, in the same vein, preceding a list of the 28 ‘authorised’ deposit-taking co-operatives, which include all the troubled co-operatives like KOSATU, SAKAAP, KSM FORTISS, GUNONG EMAS, MIFC, SEPADU, KOSMOPOLITAN, KOMUDA, etc. The Malayan Thung Pao is particularly persuasive in this matter, because everybody knows that it is owned by MCA and is therefore an official mouthpiece of MCA Ministers.
Such assurances by the Bank Negara, Deputy Finance Minister and the Co-operative Development Department had induced depositors to leave their deposits in the co-operatives, or persuaded new depositors to put their life-savings in the co-operatives. How can a responsible government now wash its hands of its responsibility for inducing the public to put their savings in the co-operative?
Daim Zainuddin was already the Minister of Finance when his deputy, Datuk Dr. Tan Tiong Hong, ‘misled’ the co-operative depositors in the Malayan Thung Pao report of 9th November 1985 advising the depositors to be ‘calm’ and not to listen to rumours about instability of the deposit-taking co-operatives. Can the government now leave the 588,000 depositors in the lurch, for trusting the Deputy Finance Minister and the Government?
Bank Negara publicly maintained the stance that it came into the co-operative picture only on July 23, 1986, when it froze the assets of KOSATU and its key management under the Essential (Protection of Depositors) Regulations 1986, and that until then, it knew absolutely nothing about the mess in the co-operative finance branches.
This was not the case. In early January, I personally spoke to Bank Negara Governor, Datuk Jaffar Hussien and senior Bank Negara officials about the potential scandal in the co-operative finance branches, when I met them over the Setia Timur Credit & Leasing scandal, and they expressed their concern over the matter.
In late January, 1986, the Malaysia Business quoted the Co-operative Development Department Director-General, Haji Abdul Aziz bin Haji Abdul Wahab, as saying that officials from Bank Negara had been seconded to the Department to monitor and supervise the credit operations of deposit-taking co-operatives.
How can Bank Negara now pretend that it knew nothing of this problem until July 23, 1967? In any event, the 588,000 depositors are not interested in the various government departments playing the game of ‘passing the buck’, for they are all part of the government which must bear full responsibility of the negligence and irresponsible for any department.
A third reason why the Government must not shirk its responsibility for the bailing out of the 588,000 depositors is that it had not acted on the numerous information and complaints about irregularities and illegalities in the deposit-taking co-operatives, for the past five years, which would have enabled it to stamp out malpractices in the co-operative finance system and prevented the $1.5 billion Co-operative Calamity from taking place.
Five years ago, the Government had sufficient information to act against KOSATU Chairman, Tee Ann Chuan, but the government did nothing. On looking back, it is clear that there was a conspiracy involving various government enforcement agencies and the corrupt and crooked co-operative directors, especially those committing fraud, criminal breach of trust and abuse of power on a grand scale, to permit such co-operative malpractices to continue until the whole system collapsed in August this year.
The DAP calls for the establishment of an Independent Commission of Inquiry to investigate into how the negligence and irresponsibility of the various government enforcement agencies had in fact been the biggest single cause of the $1.5 billion Co-operative Calamity. I am convinced that a full-scale inquiry would expose a seamy conspiracy involving government officials and co-operative directors to defraud the hard-earned savings of the 588,000 depositors, in the past five years. Let the inquiry expose the list of government officials who were on the payroll of the corrupt co-operative directors to close their eyes to the massive fraud and larceny in the co-operatives for the past five years.
According to the White Paper, the total deposit liabilities of the 24 co-operatives stood at $1,491 million as at August 8, 1986. The net assets available for distribution is $889.7 million, which means there is a total capital deficiency or short-fall of $600.8 million.
DAP calls for a Bank Rakyat rescue plan for the 588,000 depositors
If the Government is prepared to come out with $600 million rescue plan, the net asset value of the 588,000 depositors would have been fully restored to $1’s worth per $1 per deposit. What is $600 million for 588,000 depositors compared to $150 million for one co-operative, Bank Rakyat, ten years ago? What the DAP and the 588,000 depositors ask is that the government should provide a similar Bank Rakyat rescue plan for the 588,000 depositors – which is not an unfair and unreasonable demand.
The Government must change its decision, as embodied in the White Paper, that it could not guarantee the deposits of the co-operatives.
The White Paper provides scant hope for the overwhelming majority of the 588,000 depositors. It proposed liquidation of KOSATU and SAKAAP, and that banks and finance companies would be invited to assume the deposit liabilities and the attendant assets of the other DTCs, with KSM being put in a special category by itself.
The White Paper said “the depositors will be able to receive the amount of their deposits in proportion to the net asset backing of their respective DTC, after due evaluation by the bank or finance company, and subject to the agreement of the members of each DTC.”
Press reports have already reported about hitches in the government take-over proposal by banks and finance companies, and the longer the whole matter is dragged out, the less money the depositors will get in the end. I call on the Finance Minister to give a clear statement about the state of the 24 co-operatives at this moment, as two weeks had passed since the White Paper.
In this connection, I ask for an explanation why the White Paper omitted many details in the Bank Negara’s investigations into the 24 co-operatives, including some big names involved in misappropriation of funds. I understand that reference to at lease one influential politician was omitted in the White Paper.
Three Other Reasons to Censure Daim Zainuddin
The Government’s handling of the $1.5 billion Co-operative Finance Calamity is not the only reason why the Daim Zainuddin should be censured. Time does not permit me to give the other reasons in detail, and I will confine myself to three other grounds in outline:
1.Conflict-of-interest in the three UMBC deals, including refusal to disclose the price Pernas is paying for the UMBC shares of Daim’s family companies
Firsty, the conflict-of-interest questions in the three UMBC deals involving Daim Zainuddin’s family companies, including the refusal by the Minister to disclose the price Pernas paid for the UMBC shares in the latest sale by Daim’s family companies.
On the first day of Parliamentary on 8th OCT. 1986, in a written reply to my oral question, the Deputy Minister of Finance said there was no need to set up a Royal Commission of Inquiry to investigate the UMBC deals by Daim Zainuddin because there was no conflict of interest. He even made the astounding claim that the UMBC shares were owned by ‘Encik Daim’s family companies where he did not have any interest.’
Here we have a case where the accused has become the judge as well, for not only is Daim in the dock for his “conflict-of-interest’ in the UMBC deals, the entire Finance Ministry and Cabinet are also in the dock for aiding and abetting Daim Zainuddin in committing such conflict of interest.
The latest UMBC Saga III, where the entire block of UMBC shares to Daim’s family companies are sold to Pernas at an undisclosed price, requiring Pernas to take a yen-loan to finance the purchase, with the public kept in the dark about the details and justification of such a transaction, is another financial scandal.
2. The refusal by the Ministry of Finance to give a full accounting on the 1981 London mysterious tin-buying episode through the$2 company, MAMINCO.
The Malaysian public have the right to know the real circumstances and background for the establishment of Maminco and the attempt to corner the international tin market in 1981, whether it was really a Cabinet decision, especially as there are many questions surrounding this operation affecting the credibility, integrity and motives of government leaders.
Former Prime Minister, Tun Hussien Onn, has said that he was not aware of any Cabinet decision in 1980 committing the Government to enter the tin market on the London Metal Exchange. Dr. Mahathir, in his presidential address at September’s UMNO General Assembly, had said that the Cabinet had approved the setting up of the $2 company, Maminco in 1980, and when asked about Tun Hussien Onn’s statement, had said: “It is up to you to believe which one.” From Dr. Mahathir cryptic remark, the public only draw one conclusion: Either believe Dr. Mahathir or believe Tun Hussien Onn.
This is not the way a serious, responsible and accountable government operates, and the Minister of Finance, who is in real charge of Maminco, (which appeared under the Ministry of Finance in the 1985 and 1986 Telephone Directory) should be censured for this further evasion of public responsibility and accountability for the MAMINCO operation which cost Malaysia a loss of at least $660 million.
3. Thirdly, the failure of the Minister of Finance to give a full and satisfactory explanation about the MAKUWASA operations, making use of EPF funds for speculative trading in shares.
The Ministry of Finance has clearly made a fool of the Minister of Primary Industries, Dr. Lim Keng Yaik, informing him that there are two Makuwasa companies, when there are in fact five companies with that acronym of EPF. What the workers and people know about the MAKUWASA story is probably only the tip of an iceberg and for again denying public right to know about the full details of Makuwasa affair, the Minister of Finance must be censured for conducting Ministry of Financeaffairs in utter disregard of the high standards of public probity, accountability and responsibility.
A government which really believes in the principle of public accountability and integrity of government leaders would have conducted independent Commission of Inquiries into the three separate issues of the UMBC deals, the Maminco affair, and the Makuwasa companies, to assure the Malaysian public that the Government has nothing to hide from the people.