Was Bank Negara’s maximum exposure at the height of its forward foreign exchange speculation in the region of RM270 billion, which was three times the country’s GDP and more than five times the country’s foreign reserves two years ago?


Speech by Parliamentary Opposition Leader, DAP Secretary-General and MP for Tanjung, Lim Kit Siang, in Dewan Rakyat an Tuesday, May 3, 1994 an the 1993 and 1994 Supplementary Estimates

Was Bank Negara’s maximum exposure at the height of its forward foreign exchange speculation in the region of RM270 billion, which was three times the country’s GDP and more than five times the country’s foreign reserves two years ago?

Up to now, neither Parliament nor the country has got the full and true story as to what really happened to cause the colossal Bank Negara forex losses since 1992.

Malaysians must realise that if the Barisan Nasional Government is allowed to get away scot-free with the colossal Bank Negara forex losses without full accountability as to what really happened, then in future, there would be even bigger financial scandals!

I therefore call on the Finance Minister, Datuk Seri Anwar Ibrahim, to give answers to five aspects of the colossal Bank Negara forex lasses scandal.

Firstly, the real losses suffered by Bank Negara as a result of its speculation in the forward foreign exchange markets since 1992.

The Government had only admitted that Bank Negara had suffered RM5.7 billion forex lasses in 1993. It had not fully and publicly admitted any Bank Negara forex losses in 1992 – but only ‘paper losses’ of RM9.3 billion.

I have said in my urgent motion in Parliament on the Bank Negara forex losses two weeks ago that Bank Negara’s forex lasses since 1992 could have amounted to as high as RM30 billion, and the Finance Minister, Datuk Seri Anwar Ibrahim, had failed to give a full rebuttal to my figure.

Secondly, the truth of the statement by Anwar Ibrahim that he had directed Bank Negara to stop forward exchange trading when he discovered its forex losses 18 months ago, i.e. around October 1992.

If this was true, then there is no reason for the Bank Negara to suffer any forex losses in 1994 at all as forward forex commitments are usually for three-month or six-month contracts. Even if Bank Negara had beer so imprudent as to speculate with one-year deals, all such forward foreign exchange contracts should have been wound up by 1993 itself.

How come, then, could Bank Negara provide for a contingent liaiblity for RM1.4 billion lasses in 1994 arising from its forward foreign exchange commitments?

Was Anwar Ibrahim telling the truth that he had directed Bank Negara to stop forward foreign exchange trading around October, 1992 and if so, had Bank Negara disregarded the directive of the Finance Minister as to suffer continued losses from such forward forex speculation in 1994?

Parliament and the nation are entitled to know, if not the detailed figures, at least the global figures of the commit¬ments of Bank Negara in its forex speculation at the time Anwar Ibrahim ordered a stop in forward forex trading around October, 1992 – such as the total commitments of Bank Negara at that time on three-month forward forex deals, six-month forward forex deals, and one-year forward forex deals.

Thirdly, whether it is true that at the height of Bank Negara’s speculation in the forward foreign exchange market in 1992, Bank Negara’s maximum exposure was in the region of RM270 billion – three times the country’s GDP and more than five times the country’s foreign reserves at the time!

This is a completely unthinkable figure and if true, the Bank Negara must be deplored as being utterly irresponsible with the funds of Malaysian taxpayers!

I have not invented this figure of Bank Negara speculating at the international foreign currency markets with as much as RM270 billion at one time. This figure came from the latest issue of Malaysian Business – which is a publication close to the ‘establishment’.

This confirms what I said in Parliament last month, that Bank Negara forex traders were ‘very aggressive’ players, who operate in huge lots in the foreign exchange markets.

While the market norm is to deal with US$1 million, US$5 million or even US$10 million lots, Bank Negara operated in US$50 million lots, and on occasions, even as high as RM$500 million in one call!

Fourthly, the assurance given by Anwar Ibrahim to me in Parliament during question time on July 19, 1993 that Bank Negara had not suffered any ‘new or increased forex losses’ as he was “examining Bank Negara’s developments every week”. If this was the case – that as of July 1993 Bank Negara had not suffered ‘any new or increased forex losses’ – then how could Bank Negara lose RM5.7 billion by the end of December 1993?

Fifthly, for how long had Bank Negara indulged in forward foreign exchange speculation, the total profits it had made since it started forays into the forward forex specialations, and the real nature of the “unfortunate circumstances and errors of judgement” which caused such colossal losses to Bank Negara and the Malaysian taxpayers.

If the Finance Minister is not prepared to provide answers to these five questions on the colossal Bank Negara forex losses, then clearly, the Government and Bank Negara has something to hide.

In such circumstances, the new Chairman of the Parliamentary, Accounts Committee, Datuk Dr. Jamaludin Jarjis, who was appointed by Parliament last week, has his first immediate task cut out for him – to examine into Bank Negara’s colossal foreign exchange losses and to find answers to the five questions which I have just posed.

Although speculation is rife of early dissolution of Parliament, there should be at least another Parliamentary meet¬ing some time in July, and the PAC should, work over-time to present a report on its investigations into the colossal, Bank Negara forex losses to the next meeting of Dewan Rakyat.

If the PAC dare not investigate into the colossal Bank Negara forex losses, or is unable to present its report to the next meeting of Dewan Rakyat, then it will only confirm criticisms about the fundamental flaw of appointing an MP from the government to chair the PAC.

Parliament, the PAC and Malaysians cannot take lightly the RM30 billion Bank Negara forex losses, for they are not lasses suffered by Tan Sri Jaffar Hussein personally or Bank Negara, but RM30 billion losses suffered by the people.

RM30 billion is a colossal sum. If a person is to strike a RM2 million lottery every day, it would take him 41 years to reach RM30 billion!

If RM30 billion is divided among the 19 million Malaysians, including a new-born babe, every one will be entitled to RM1,578!

Or alternatively, it could mean a tax holiday for all Malaysians where no individual income tax need by paid by all Malaysians for eight years!

Or it could be used to build 1.2 million low-cost houses at RM25,000 per unit, which would resolve the long¬standing low-cost housing problem in the country, or build 45 universities, five North-South Highways and four Kuala Lumpur International Airports like the one being built in Sepang!

Khazanah Holdings Bhd. should be established by Act of Parliament and a Parliamentary Select Committee on Khazanah Holding should be set up to ensure satisfactory Parliamentary accountability

Last week, Deputy Prime Minister and .Finance Minister, Datuk Seri Anwar Ibrahim, announced that the Government would establish Khazanah Holdings Bhd. which would take over the management of the bulk of the Government’s equity investment currently being overseen by the MoF Inc.

Anwar said that Khazanah Holdings Bhd., the Government’s new investment holding company, would begin operations in early June.

MoF Inc. holds shares in 37 companies worth RM72.5 billion based on the current market value and RM7.59 billion at per value.

These include shares in listed companies like Tenaga Nasional Bhd., Telekom Malaysia Bhd, Edaran Otomobil Nasional Bhd, Heavy Industries Malaysia Bhd. and Perusahaan Otomobil Nasional Bhd (Proton) as well as in unlisted ones like national oil corporation Petronas and Perwaja Steel Industries Dn. Bhd.

It has been reported that initially, about RM40 billion of the investments will be taken over by Khazanah Holding.

According to Anwar, the functions of Khazanah include:

• Drawing up the medium and long-term corporate plans for the group’s participation in the private sector, especially in new priority areas;

• Drawing up strategies to enhance efficiency, productivity and profitability of the companies in its stable so that returns to the investments can be maximised; and

• Undertaking additional or new investments in mega projects which are “strategic” to the nation, either locally or abroad.

Khazanah will also be allowed to raise funds in the domestic and international markets by issuing shares, loan stocks or other types of financial instruments.

Anwar said that the Government decided to form Khazanah Holding in view of the increasing equity investments in MoF Inc as the privatisation and corporatisation of Government-owned enterprises gain momentum.

He said this called for “a more professional and systematic management” of the assets.
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The establishment of a clear line of Parliamentary accountability by Khazanah Holding is paramount as the country is still reeling from the colossal Bank Negara forex losses since 1992.

What are the safeguards to ensure that Khazanah Holding will be subject to satisfactory accountability and will not incur heavy and avoidable losses in the near future?

While it is right that there should be “more profes¬sional and systematic management” of the government equities, this by itself will not prevent colossal losses as happened in the Bank Negara case.

Until the colossal Bank Negara forex losses beginning in 1992, the former Bank Governor, Tan Sri Jaffar Hussein was fond of boasting in international conferences about Bank Negara having “one of the most sophisticated dealing rooms in our part of the world”!

Another area of grave public concern must be the possible misuse of the vast government equities in Khazanah to profit selected individuals or companies rather than the country or people. This is particularly serious in view of the preva¬lence of money politics in Malaysia, where companies connected to selected UMNO leaders enjoy government patronage, whether in terms of privatisation contracts or even funding.

There has also been proposals that Khazanah Holding should take over the management of the foreign exchange holdings of Bank Negara after the colossal Bank Negara forex losses.

Would this mean that one day, it would be Khazanah Holding rather than the Bank, Negara, which would be indulging in the speculation in the forward foreign exchange markets?

Although it is proposed that the Khazanah Holding will be required to submit its financial accounts to Parliament, this will not amount to much ‘accountability’ in view of the failure, of the Public Accounts Committee to be an effective Parliamentary watchdog to ensure government financial propriety and integrity.

For parliamentary accountability to be effectively exercised, Khazanah Holding should be established by an Act of Parliament and secondly, a Parliamentary Select Committee over Khazanah Holding should be formed to protect the public interest in all financial and investment decisions of the new government investment holding company.

Ministry of Finance should appoint MTUC representatives to oversee EPF investments as they affect the provident funds of workers

In this connection, I wish to call on the Finance Minister to appoint MTUC representatives to sit on the EPF Board.

This is because the EPF has RM74 billion investible funds which belong to the seven million EPF contributors, and the Government should not be so irresponsible as to refuse to appoint representatives of MTUC, as the most representative workers’ centre with over 500,000 membership, onto the EPF Board and even the EPF Investment Panel.

Since the 1991 amendments to the EPF Act, EPF is allowed to invest up to 50 per cent of its annual investible funds in non-Malaysian Government Securities (MGS) investments.

This involved a colossal sum. Without any MTUC representative on the EPF Board to represent the workers, the seven million EPF contributors are entitled to be concerned as to whether there would be any hanky-panky as happened in the EPF Makuwasa investments scandal in the mid-1980s, or at least, ‘errors in judgement’ which resulted in the colossal RM30 billion Bank Negara foreign exchange losses since 1992.

The seven million EPF contributors are entitled to be concerned. about the investments of their provident fund in the EPF, for this is meant for their retirement, and if there should be any colossal losses whether because of hanky-panky, imprudent investment decisions or ‘errors of judgement’, the repercussions would be unthinkable.

Recently, the EPF gave a RM1.825 billion loan to Independent Power Producer (IPP), Sikap Energy Ventures Sdn. Bhd. (SEV) for its Lumut power project under non-recourse financing facilities.

Under non-recourse financing, the lenders will have claim only on the assets of the project being financed and not the companies implementing it.

The political dimensions of the Sikap Power project is well-known, its connection to Malaysian Resources Corp. Bhd. and certain UMNO leaders. In fact, this has been described by a business publication as an example how “small and often inexperienced companies managed by comparatively little-known businessmen can be propelled into the corporate big leagues – often earning millions for lucky beneficiaries. Sikap Power’s existing shareholders, for example, stand to receive RM80 million for a company that’s never done significant business and is capitalized at one-eighth that amount, in exchange for control of Sikap Power’s only valuable asset: its private power licence”.

There must be true representatives from the workers sitting on the EPF to protect the workers’ provident fund to ascertain the prudence of such investment decisions involving huge sums of the EPF provident funds.

It is for this reason that the Government should accord recognition to the MTUC and appoint its nominees to the EPF Board as well as to all other statutory bodies and labour panels.

Call on Government to give a detailed report on the 25-year privatisation of government vehicles to SPANCO Sdn. Bhd. from 1994 to 2,018

I must express my great dissatisfaction at the inabil¬ity of the government to give satisfactory reply to my query last, week about the 25-year privatisation of government vehicles to SPANCO Sdn. Bhd. from 1994 to 2,018.

All that the Minister for Law, Datuk Syed Hamid Albar, said was that the RM5,000 rental a month which SPANCO is charging the government for Mercedes Benz 220 is cheaper than the rates charged by commercial companies. Hamid said that SPANCO would also be responsible for maintenance, insurance, road tax and others.

This is a very poor reply. Firstly, all commercial car rental companies are also responsible for maintenance, insur¬ance and road tax. Secondly, Hamid has misled the House when he said that the commercial car rental companies charge from RM17,000 to RM21,000 a month for Mercedes Benz 220 as compared to RM5,000 a month which SPANCO is charging the Government.

I have here the monthly tariff rate of AVIS, which charges RM5,980 a month for a Mercedes Benz 230E 2.3 (Auto).

I understand that the privatisation concession to SPANCO is being carried out in three stages:

• Peringkat pertama: Penyewaan semula kereta saloon yang dijual oleh Kerajaan kepada Syarikat SPANCO. Penyewaan semula pada 1 Jan 1994 bagi kereta yang berumuar seperti berikut:¬-

i. Kurang dari dua tahu bagi Kereta Rasmi;

ii. Kurang dari tiga tahun bagi Kereta Jabatan (Proton 1.5 dan 1.3).

• Peringkat Kedua: Penvewaan kereta baru yang¬dibeli oleh Syarikat SPANCO Sdn. Bhd. Syarikat SPANCO akan membeli kereta baru mulai 1 Jan 1994 bagi menggantikan kereta-kereta yang berumuar saperti berikut:

i. Melebihi dua tahun bagi Kereta Rasmi;

ii. Melebehi tiga tahun bagi Kereta Jabatan;

• Peringkat Ketiga: Selepas peringkat awal sele¬sai, Syarikat akan.mengganti kereta-kereta saloon yang disewa kepada kerajaan dengan kereta baru mengikut tahap berikut:

i. Setiap empat tahun bagi Kereta Rasmi;

ii. Setiap lima tahun bagi Kereta Jabatan.

The monthly rentals which the Finance Ministry has agreed with SPANCO are as follows:

Jenis Kereta Kadar Sewa
Mercedes Benz 220 RM5,095.73
Mercedes Benz 200 RM4,084.32
Volvo 940 RM2,800.00
Volvo 240 RM2,300.00
Wira Sedan 1.5 RM900.00
Proton 1.3 (Iswara) RM800.00

The Government should give a full and detailed report for awarding such a concession to SPANCO Sdn. Bhd., and in par¬ticular answer the following questions:

Firstly, was this privatisation concession for the government vehicles put up for public tender before being awarded to SPANCO, and if not why not. Syarikat SPANCO Sdn. Bhd. was registered on 31st January 1990 and its board of directors are: Dato’ Osman bin Zain (Chairman), Tan Hua Chuah, Abd. Rasip bin Haron, Hj. Husin bin Sulaiman, Hj. Md. Nordin bin Daud, Tan Han Chuan and Tan Chin Ching.

What are the qualifications and track record justifying the award of the concession to SPANCO?

There have been widespread complaints by government departments since the implementation of the concession about unsatisfactory service and poor workmanship of the SPANCO workshop, such as:

• Syarikat SPANCO tidak mempunyai alatganti kende¬raan secukupnya.

• Syarikat SPANCO kurang kakitangan pekerja mahir untuk membuat kerja-kerja senggaraan kenderaan.

• Syarikat SPANCO masih kekurangan kemampuan dan kebolehan jika dibandingakn dengan worsyop-worsyor yang lain.

Secondly, why was a 25 year concession given to SPANCO, which creates a monopoly for one company, when public interest in terms of costs, efficiency and service would be better served if the concession period is shorter so that other companies could tender for it, say every five to eight years!

Thirdly, high rentals charged by SPANCO. It has been estimated that SPANCO would be able to make a monthly profit of about RM480 a month from its rental rate for Iswara 1.3, and a monthly profit RM580 from its rental rate for Wira Sedan 1.5.

Or we take the Mercedes Benz E 220, which costs RM245,000. As SPANCO would be given the tax exemption for vehi¬cles it bought for government hire under the concession scheme, it would only cost it RM155,000. With rental of RM5,095.73 a month for four years, it would be able to net RM244,696. After four years, the second-hand value of Mercedes Benz E 220 has been estimated to be in the region of RM140,000 to RM150,000. This means that the four years of rental of RM244,696 would represent roughly the profits of SPANCO in renting out a Mercedez Benz. E 220 to the government.

As the Federal and State Governments uses thousands of Vehicles, and I will not be surprised if they exceed the 10,000 figure, the amount of government rentals for hiring cars from SPANCO would be in hundreds of millions of ringgit per year.

Let the Government present a full and detailed report to justify its 25-year privatisation concession of government vehicles to create SPANCO into a monopoly for a quarter of a century.

The new Datuk Bandar has not realised the magnitude of the DBKL financial mess

The Government has sent the Anti-Corruption Agency and special auditors to Sabah to search for skeletons under the previous Sabah State Government and its various agencies.

However, it continues to close its eyes to financial improprieties and embezzlement which had been happening in the very Federal capital, in the Dewan Bandaraya Kuala Lumpur.

I had spoken twice in previous sittings of these DBKL embezzlement and misappropriation of funds, but no action has been taken, and the new Datuk Bandar, Datuk Mazlan, does not seem to have realised or understood the magnitude and depth of the DBKL financial mess.

The sums outstanding for misappropriations or embezzlement by DBKL staff, who are still in DBKL employment – with some of whom rewarded with promotions – are as follows:

1. Ismail Jantan
Cawangan Taman Titiwangsa RM7,500

2. Suhaimi
Jalan Tasik Perdana RM4,000

3. Bakri binte Naleh
Bangsar Complex RM5,000

4. Hasmah
Sub-Office Taman Tun
Dr. Ismail RM38,000

5. Musa
Cashier Ibu Pejabat RM4,400

6. Azmi
Senior Accountant
Ibu Pejabat RM180,000

Azmi had originally owed RM290,000, and he had issued two post-dated cheques in November and December last year, one for RM100,000 and another for RM10,000 – both of which bounced.

All the six persons mentioned above are still working with small deductions from their salaries. There is no hope of recovering what they owed. These arrangements are made by the DBKL Treasurer, Jeffri Hairan – who is in full knowledge that criminal breach of trust had been committed in the above cases, but is playing a central role to ‘cover up’ the financial mess in the DBKL.

I understand Azmi, the Accountant, has stopped going to DBKL to work, has bought a new Citroen and has sat up a small business as consultant on Bandar Raya matters.

In the aftermath of the public uproar over the dinner for Datuk Elyas Omar, several people in DBKL were suspended. Investigations were carried out and according to the press, the service of same were to be terminated.

Those involved, and in particular the ‘Chief’, Encik Faizi, appealed for reinstatement, and this was promptly agreed to by Jeffri Hairan. It was officially stated at the time that there would be a demotion from his post of Chief Clerk to a time clerk, but instead, he has been rewarded as the highest of time¬scale with two increments for quality work (P.3 scale)!

Can the Finance Minister, explain the rationale for the DBKL rewarding staff for improprieties and misappropriations of funds?

Recently, there was publicity that the organisers of the dinner for Datuk Elyas Omar would not refund monies to their donors but would proceed with the dinner to be held next month.

This shows not only how blatantly rules and standards of official and financial proprieties are being flouted, but the contempt which, the ACA is being held, as ACA had investigated into the DBKL financial scandals without any result whatsoever.

Why has the Finance Ministry created a RM540 million monopoly for Titan by virtually banning the import of plastics resins – Polypropylene (PP) – from April 7

I have received complaints by plastics manufacturers that the Finance Ministry has created a RM540 million monopoly for Titan by virtually banning the import of plastics resins – Polypropylene (PP) – by over a thousand Malaysian plastics manu¬facturers from April 7.

The complaints came not only from local plastics manufacturers serving the local market, but also by Licensed Manufacturing Warehouses (LMW) and Free Trade Zone (FTZ) plastics manufacturers whose products are 100 per cent exported.

One LMW plant in Kulim Industrial Estate, which is 90 Per cent Japanese and 10 per cent Malaysian, had suspended its plans to expand its monthly production capacity from 400 metric tons to 1,400 metric tons, which will involve an increase of another 500 workers, because of the sudden gazetting by the Finance Ministry requiring APs before Polypropylene (PP) and Polyethylene (PE) resins – the raw materials for plastics manu¬facture – could be imported. The Finance Ministry further provid¬ed that before APs could only be issued, there must be a ‘No Objection Letter’ or NOL from the from local resin producers.

There are only two local resin producers. However, only Titan in Johore Bahru manufactures PE resins.

This virtually gives Titan a monopoly of the PE resins market, although its capacity for the local market is 140,000 metric tons (with 60,000 metric tons for the export market) when the total consumption needs of the plastics manufacturers Malaysia is in the region of 300,000 metric tons. I understand that the total value of this PE market comes to some RM540 million a year.

This puts all plastics manufacturers, including FTZ and LMW plants, at the mercy of Titan. MITI cannot issue NPs to plastics manufacturers to import their raw materials until there is approval from Titan – creating the extraordinary situation where the MITI is subservient to Titan!

The Finance Ministry has already imposed a 30 per cent tariff for PE and PP resins on 9th December 1993, and this should be adequate protection for Titan and another local resins producer, PPM, without creating a monopoly situation by imposing a virtual ban on import of PE and PP resins.

Apart from general complaints by the plastics manufacturers about the grade, quality and suitablity of the locally ¬produced PE and PP resins for their products and their markets, FTZ and LMW plants have the further complaint that this is a fundamental breach in their condition and understanding for investing in Malaysia, i.e. that they could freely import raw materials for their manufacture which are 100 per cent for ex¬port.

I would urge the Finance Ministry to give serious attention to the complaints of the plastic manufacturers, and in particular those of the FTZ and LMW, so as not to undermine general investor confidence in the country.