by Parliamentary Opposition Leader, DAP Secretary-General, MP for Tanjung and Assemblyman for Kampong Kolam, Lim Kit Siang, in Petaling Jaya on Tuesday, 11.11.1986:
DAP Rejects Government Report on 24 Co-operatives proposing liquidation of KOSATU AND SAKAPP and take-over by banks and finance companies involving $600 million loss by the 588,000 depositors
DAP rejects the Government Report on the 24 Deposit-Taking Co-operatives tabled in Parliament yesterday, proposing the liquidation of KOSATU AND SAKAPP and take-over by banks and finance companies of other co-operatives involving the loss of $600 million by the 588,000 depositors.
The biggest victims of this Government plan will be the 52,000 KOSATU depositors who had deposited $156.1 million, who will get less than 30 cents on the dollar, and who may have to wait for five years to await the completion of the liquidation process and the 28,000 depositors of SAKARP which Bank Negara estimated to have net asset backing of 37 cents for every $1 of deposit.
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The 6,500 depositors of FORTISS (with estimated net asset backing of 39 cents), 166,000 depositors of KSM (41 cents), 29,000 depositors of Gunong Emas ( 44 cents), 19,000 depositors of MIFC (60 cents), the 3,800 depositors with ENE (63 cents), 10,000 depositors with SEPADU (68 cents), 50,000 depositors with KOSMOPOLITAN ( 75 cents) and 40,000 depositors with KOMUDA (79 cents) will also suffer great losses, even with take-overs by banks and finance companies.
In terms of size of net capital deficiency, the MCA’s Koperatif Serbaguna Malaysia Berhad (KSM) is the worst, which collected a total deposit of $563.8 million on 30th June 1986, but which is estimated to have net capital deficiency of $330 million on 8th August 1986.
Government White Paper Report a Calamity for the Malaysian Chinese and the Nation
The Government White Paper on the 24 Co-operatives represented an unprecedented calamity for the Chinese community in Malaysia and the Nation as a whole.
It showed that as a result of the dishonesty, fraud and mismanagement of directors and officials of the co-operatives, advertised as the ‘last defence line of Chinese small savings”, the overwhelming
majority of the 588,000 depositors would lose their entire life-savings.
The MCA, which pioneered the co-operative finance movement, has sucked away the largest chunk of this small Chinese people’s savings, as the entire deposits collected by KSM represented more than one-third of the entire $1.5 billion involved, and has suffered the greatest net capital deficiency of $339 million deficiency of $109 million and S $24.4 million, the two co-operatives
exceeding even KOSATU’s net capital ‘s net capital deficiency of the government want to liquidate!
The second reason why the Government White Paper is a calamity for the Malaysian Chinese is that it also exposes how leaders of the Malaysian Chinese community and society had abused their positions of trust to betray the interests of the Chinese masses. The hard-earned life-savings of the Chinese masses were mobilized not for the good of the community or the masses, but for individual leaders of the community and captains of commerce and industry – leading to the present collapse of the co-operative finance branches.
The third reason is the refusal of the government to bail out the 24 deposit-taking co-operatives and save the funds of the 588,000 depositors, leaving them to bear a $600 million loss.
MCA Ministers should resign over Cabinet’s refusal to bail out the co-operatives and save the 588,000 depositors instead of threatening to resign over Selangor MCA Resolution
In doing so, the Government is evading its moral, political and even legal responsibility to the people. The Government White Paper said that “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 principle did not prevent the Government from advancing $150 million to bail out Bank Rakyat in the late 1970s, the $2.5 billion of petrodollars from Petronas to bail out Bank Bumiputra and Bumiputra Malaysia Finance Bhd. in Hong Kong; nor the $660 million loss suffered by Malaysia because of the mysterious London tin-buying by MAMINCO in 1981 as admitted by Primary Industries Minister, Dr.Lim Keng Yaik in Parliament yesterday; nor the $2,000 million loss suffered by government companies admitted by the Deputy Finance Minister, Datuk Sabarrudin Cik, in Parliament last week.
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 shortfall of $600.8 million.
If the Government is prepared to come out with $600 million, the net asset value of all the 588,000 depositors would have been fully restored to $1 per $1 deposit.
What is $600 million for 588,000 depositors compared to $150 million for one co-operative Bank Rakyat ten years ago, or $2,5 billion for Bank Bumiputra and BMF; or $660 million for the $2 company, Maminco, for losses suffered from the 1981 mysterious London tin-buying; or $2,000 million loss by the government companies?
If the Government disregard these precedents, then it stand accused of bias and prejudice against the 588,000 depositors.
It is just not these precedents alone which require the Government to come out with $600 million to bail out the 588,000 depositors, however. The Government itself is responsible for the $1.5 billion deposits of the 588,000 depositors in the 24 co-operatives, for the Government had openly encouraged the people to deposit their savings in the co-operative finance branches.
The Malayan Thung Pao of 9th November 1985, for instance, carried a front-page lead story quoting the Co-operative Department public relations officer, Zaleha, as saying that members of the public who have any doubts about deposit-taking co-operatives should phone the Co-operative Department, Tel: 2989033 for clarification; The same report quoted the then Deputy Finance Minister, Datuk Dr. Tan Tiong Hong, as reiterating the Bank Negara’s earlier statement that only 28 out of about 2,400 co-operatives have the authority to take deposits. The report carried a list of the 28 approved deposit-taking co-operatives, which includes KOSATU, SAKAAP, KSM, Gunong Emas, MIFC, ENE, SEPADU, KOSMOPOLITAN, KOMUDA – all the co-operatives that are in deep trouble!
One depositor told me that as a result of such public assurance given by the Co-operative Department and the MCA leaders, he deposited $200,000 with KOSATU, and he has documents to prove that his deposits were made after the Malayan Thung Pao report of Nov. 9, 1985!
The Co-operative Finance Scandal is as much a scandal of the co-operative directors and officials, as well as ,a scandal of the Government, in particular the Co-operative Department, in encouraging the people to deposit with the 28 so-called authorised co-operatives without proper supervision and control.
The MCA Ministers should resign from the Cabinet for the government refusal to come out with a $600 million rescue plan to bail out the 588,000 depositors, instead of threatening to resign over the Selangor MCA Resolution for two reasons:
Firstly, the MCA leadership must bear direct responsibility for the co-operative calamity because of their encouragement of the Malaysian Chinese to put their trust in co-operatives; and
Secondly, because the government was avoiding it responsibility to look after the interests of the 588,000 depositors.
KSM deliberately misled the depositors and public when it advertised on August l that its $1 deposit is backed up with $1.17 of assets
On August 1, 1986, KSM carried out whole-page advertisements in the Chinese press guaranteeing that its deposits were “absolutely safe and absolutely protected.” The advertisement declared that “Every $1 deposit in KSM is backed by $1.17 of assets” and that “Every investment in KSM, whether big or small, had all received the approval of the Co-operative Department,”
The advertisement further declared that “the KSM’s assets are very strong, and as firm as ‘Taisang Mountain’ and that “Every cent of the KSM depositor is guaranteed, and need not lose any sleep over it.”
How come the promise of KSM Board on August, 1 that its every $1 deposit is backed by $1.17 asset
is suddenly reduced to 41 cents a week later on August 8? And how did the very strong’ assets of KSM, where depositors need not lose any sleep over it, suddenly become net capital deficiency of $330 million one week later? The White Paper also said that “Certain investments made by KSM has not had the approvals of the Registrar-General (of Co-operatives).
Call on Cabinet tomorrow to reconsider its White Paper proposals
The entire MCA leadership must bear full responsiblity for this KSM scandal as well as the entire Co-operative Finance Scandal, and redeem themselves by getting the Cabinet to reconsider its proposals as contained in the White Paper.
The Cabinet should assume its full responsibility and allocate approve a rescue plan of $600 million to bail out the 588,000 depositors.
I propose to meet the Finance Minister, Daim Zainuddin, to convey the DAP’s dismay and shook at the Government’s White Paper proposals,,
The DAP MPs also propose to summon a meeting of co-operative depositors in Kuala Lumpur on Friday night to find out their views on the Government’s White Paper proposals, The meeting will
be held at the Selangor Chinese Assembly Hall on Friday, Nov. 14, 1986 at 7.30 p.m.
Invitation to MCA and Gerakan Ministers and MPs to the Friday night dialogue with depositors to ascertain their views
I would extend an invitation to MCA and Gerakan Ministers and MPs to attend the Friday night dialogue with co-operative depositors to ascertain their views. I hope the MCA and Gerakan Ministers and MPs have not reached a stage where they dare not meet the public, and in particular the co-operative depositors.
If Maminco is honourable exercise, why Maminco flout the law without submitting annual returns to Registry of Company since its incorporation in 1981
Primary Industries Minister, Datuk Dr.Lim Keng Yaik, gave a most unsatisfactory explanation of the Maminco episode, the 1981 London tin-buying exercise which resulted it the loss of $660 million by Malaysia.
Dr.Lim said that he was revealing the Maminco operations “in the full conviction that the Maminco exercise was an honourable one even though it did not achieve its full objectives as originally planned.”
Dr.Lim has a very strange way of showing his ‘conviction’, for he repeatedly refused attempts by DAP MPs to seek clarification from his explanation, betraying no conviction whatsoever that what he was reading out to MPs was a justifiable exercise.
If Maminco is an honourable exercise, as Dr.Lim claimed, then why did Maminco, which was incorporated as a $2 company under the Companies Act, flout the law without submitting any annual returns to the Registry of Company since its incorporation in 1981. What are the terms of the
joint venture agreement it entered with the Swiss firm Marc Rich and Company to try to corner the international tin market.
Dr.Lim’s explanation on the Maminco exercise is not adequate and very unsatisfactory, and I call on the Primary Industries Minister to make public all the accounts of Maminco since its operation in 1981, and to submit the entire Maminco operations to investigation by the Parliamentary Accounts Committee.