Speech by Parliamentary Opposition Leader, DAP Secretary-General and MP for Tanjung, Lim Kit Siang, on the Central Bank of Malaysia Ordinance amendment bill in the Dewan Rakyat on Wednesday, June 26, 1991
DAP calls for inquiry as to whether three banking groups are falling into the ownership and control of the Daim Zainuddin through various nominee companies
The Central Bank of Malaysia Ordinance amendment bill before the House seeks to provide for the appointment of two more Deputy Governors for Bank Negara to make a total of three Bank Negara Deputy Governors.
There appears to be a need for these additional appointments in view of the expanded functions conferred on the Central Bank under various amendments to the Ordinance and other legislations and also the passing of new laws.
However, what is most important in the appointment of more Deputy Governors for Bank Negara is whether Bank Negara officials can independently and impartially, without fear or favour, carry out their duties entrusted to them by Parliament to serve the interests of the people and country, and not to be subservient to the Government of the day to lend laws to serve the personal interests of individual political leaders in Government.
In the past, Bank Negara officials, including the Bank Negara Governor, had been reprimanded and even forced to resign because they adhered strictly to the laws and refused to comply with irregular and illegal political pressures from the highest levels in government.
The Bank Negara has the statutory responsibility to ensure the highest integrity in the Malaysian banking and financial system. However, the Bank Negara has failed to prevent the occurrence of numerous banking scandals in the country, like the $2.5 billion Bumiputra Malaysia Finance scandal, the second Bank Bumiputra scandal in 1990 where another $1 billion had to be pumped into the bank save it from a second bankruptcy, and numerous failures of banks and finance companies which had to be taken over by Bank Negara.
However, the biggest Bank Negara scandal in Malaysian history is the UMBC shares ownership scandal involving the former Finance Minister, Daim Zainuddin and his family companies, involving open violation of banking laws, illegality and conflict of interest.
Up to now, there had been no public inquiry into this UMBC shares ownership scandal involving the then Finance Minister himself.
Now we have a new Finance Minister, and I take this opportunity to congratulate Anwar Ibrahim on his elevation to this new post which seems to have brought him so much closer to the coveted No. one post in the country.
Anwar Ibrahim should not fail his first test and should institute a public inquiry into the UMBC shares ownership scandal
I hope that Malaysians will not be disappointed that Anwar Ibrahim’s idealism espoused in his ABIM days in his uncompromising battle against all forms of corruption, abuses of power, conflicts of interest, unethical practices and illegalities would now be put into practice now that he is in charge of the corporate, financial and banking integrity in the country.
For a start, I call on the new Finance Minister to order a full public inquiry into the UMBC shares ownership scandal, particularly into three aspects, namely:
i. Where Daim Zainuddin illegally acquired 40.7 per cent of UMBC in 1984, as Daim Zainuddin was already Finance Minister;
ii. Where in 1985, he again illegally increased his 40.7 per cent stake in UMBC to 50.4 per cent majority ownership of UMBC, evading the new law he had introduced to limit equity ownership in banks and finance companies to 10 per cent for individual shareholders, including family-owned companies, and to 20 per cent for corporations; and
iii. When he came under intense public and political attack for his illegal ownership of UMBC shares, abusing his powers and forced Pernas to buy over his UMBC stake with a profit of over $100 million.
If Anwar Ibrahim dare not institute a public inquiry to get into the bottom of the UMBC shares ownership scandal, then he would have failed his first test to clean up the illegalities, malpractices, abuses of power and corruption that he has inherited when he took over the Finance Ministry.
If even a famous crusader against corruption, malpractices, abuses of power, conflict of interest, unethical practices and open violation of banking laws like Anwar Ibrahim should fail in his first test to clean up the corporate, financial and corporate world, how can the people expect the appointment of any number of Deputy Governments to be of any use to ensure the integrity so needed in the Malaysian banking and financial world?
Bank Negara sometimes operate in very peculiar and mysterious ways. For instance, why did the Bank Negara buy over the Bank Bumiputra from Petronas? Is bank-buying the job of Bank Negara?
Did Bank Negara pay Petronas billions of ringgit for Bank Bumiputra to enable Pertronas to have controlling stake in the Kuala Lumpur City Centre project
When Petronas sold its Bank Bumiputra shares to Bank Negara for an undisclosed sum but which must be in the multi-billion ringgit figure, the Petronas Chairman, Tan Sri Bashir Ismail said this divestment was to enable Petronas to concentrate henceforth in petroleum-related activities only.
However, last week, we read that Petronas is to take a controlling stake of 51 per cent in the highly controversial multi-billion ringgit Kuala Lumpur City Centre which is to take shape on the former Selangor Turf Club.
The approved masterplan for the Kuala Lumpur City Centre comprises five office blocks, a new City Hall building with an amphitheatre, five hotels, retail areas, a water plaza and a tropical park.
According to T. Ananda Krishnan, the Chairman of Seri Kuda Sdn. Bhd., the developer of the project, the first phase development from end-1992 to early 1996 will cost $2 billion, which will include an 80-storey office block, a twin 60-storey office towers and a 500-room convention hotel.
The question I want to ask is whether Bank Negara had bought Bank Bumiputra from Petronas to allow Petronas to pay for its controlling interest in the Kuala Lumpur City Centre project, when this project has nothing whatsoever to do with any petroleum-related activity.
Is this a responsible way for the Bank Negara to operate?
And who will be the main beneficiaries from such highly irregular and improper transactions? Petronas or T. Ananda Krishnan and whoever he fronts for?
The banking laws have very specific provisions to ensure integrity and strict legality in banking and financial institutions, but these laws are meaningless unless we have Bank Negara officials who are prepared to put their jobs on the line to uphold the law, regardless of political pressures and influence.
This is particularly important at a time when 20 years after the New Economic Policy, greed and graft have become very rampant in the higher levels of society and government, and very sophisticated techniques are used to evade the requirements of the law.
The most prevalent form of evasion of the law is through the technique of nominee companies, whose real identity is unknown.
Daim Zainuddin is the king of banks and czar of nominee companies in Malaysia
I understand that Daim Zainuddin owns a substantial chunk of Development and Commercial Bank through nominee companies. I also understand that Daim Zainuddin is the biggest shareholder of Rashid Hussein Bhd., owning about 60 per cent before it offered a small portion of its shares to the public.
Plans are afoot to merge D & C Bank with UMBC with Rashid Hussein taking over the new banking conglomerate. When this eventuates, Daim Zainuddin would gain controlling interest whether directly or through nominee companies.
A second bank merger afoot involves the Bank of Commerce and the United Asian Bank. The Bank of Commerce is owned by Renong, which is generally believed to be owned and controlled by nominee companies of Daim Zainuddin, as UMNO has legally lost its proprietary rights as the Public Trustee has sold the shares of all UMNO companies, whether it be Fleet Group or others.
When this second bank merger eventuates, Daim Zainuddin would again own and control the dominant stake through nominee companies.
There is also talk of a third banking merger between Southern Bank and Ban Hin Lee Bank. It is believed that nominee companies of Daim Zainuddin have bought some 40 per cent of the shares of Southern Bank. When all these banking mergers take place, Daim Zainuddin may emerge as the King of Banks in Malaysia.
I call on the Finance Minister to institute an inquiry as to whether three banking groups are falling into the ownership and control of Daim Zainuddin through various nominee companies.
Is the Bank Negara in a position to require nominee companies which own bank shares to disclose their real identities? If not, the banking law restricting bank share ownership to 10 per cent for individuals and 20 per cent for corporations can be easily rendered meaningless by nominee companies.
I have no doubt that in Malaysia the czar of nominee companies is none other than the former Finance Minister, Daim Zainuddin.
To avoid evasion of banking laws, nominee companies should not be allowed to own shares of banks and financial institutions, unless they disclose the identity of the real owners.
I hope Anwar Ibrahim will take a serious attitude to such open flouting of banking laws, which need even more urgent attention than the appointment of two more Bank Negara Deputy Governors.