(Petaling Jaya, Friday): The swift and categorical reaction of the Prime Minister, Datuk Seri Dr. Mahathir Mohamad to The Asian Wall Street Journal report yesterday about the MAS restructuring exercise raises the fundamental question whether it was right and proper for Mahathir to defend and endorse the MAS restructuring exercise even before the Finance Minister, Datuk Seri Anwar Ibrahim, had evaluated and decided on the proposal.
Yesterday, during the debate on the Supplementary Supply and Development Estimates in Parliament, I said that the The AWSJ front-page report under the heading "Malaysian Airline System Faces a Big Restructuring" had again raised doubts about the government�s commitment of "No bail-outs, no corporate restructuring" during the economic crisis.
The AWSJ reported:
"In a plan likely to vigorously reignite the controversy over shareholder rights in Malaysia, the controlling shareholder of Malaysian Airline System Bhd. is proposing a restructuring.
"In the complex plan, Tan Sri Tajuddin Ramli essentially is proposing to borrow against the carrier�s aircraft to raise funds that would be used to settle personal debts, according to senior government officials and financial executives close to the plan."
The AWSJ reported that under the plan, Tan Sri Tajuddin, who is MAS� executive chairman and controlling shareholder, proposes to sell MAS�s aircraft to a new company, to be called MAS Capital, which he would ultimately control. MAS Capital would then lease the aircraft back to MAS. The new company would be incorporated in the financial centre of Labuan to take advantage of tax incentives.
The market reaction has been very negative regarding it as another bail-out like the UEM-Renong bail-out, where the interests of minority shareholders would be sacrificed and this is another reason for the continued drop in the KLSE Composite Index today.
Yesterday, investors sold down MAS shares in a vote of no confidence and MAS stock tumbled as much as 9.4 per cent on the news before closing down 20 sen at RM2.98. Today, MAS shares continue to plummet.
Mahathir made a very categorical statement that the government will not stop MAS from carrying out the the restructuring exercise. He said: "There is nothing wrong with that".
He refuted allegations that the MAS restructuring exercise was a personal bailout for MAS executive chairman, Tan Sri Tajudin Ramli, who would shuffle the carrier's assets in a bid to reduce his personal borrowings.
Two questions that arise from Mahathir�s swift and categorical defence and endorsement of the MAS restructuring exercise are:
Firstly, is it right and proper for the Prime Minister to commit the government�s support for the MAS restructuring exercise when the Finance Minister had not evaluated and made a decision on it.
Because of the historic antecedents of MAS, the Finance Ministry controls a "golden share" in MAS, which bestows on the Finance Minister the veto power over major decisions at the airline.
In this particular case, has has the MAS restructuring exercise become a fait accompli and Anwar had lost the powers as the Finance Minister to evaluate and decide whether to approve the MAS restructuring exercise as the Prime Minister has already publicly defended and endorsed the proposal?
Secondly, from Mahathir�s comments, it is clear that he has prior knowledge about the the reshuffling of the MAS assets to reduce Tajudin�s personal debts. Had Mahathir given his blessings for the MAS restructuring exercise even before it was formally sent to the Finance Minister for approval? I want to reiterate what I said in Parliament yesterday. In the national interest, Anwar should honour the government�s repeated undertaking that there would be "No Bail-Out, No Corporate Restructuring" during the economic crisis,as what the country needs is a national bail-out and not bail-out for troubled companies or individuals whether at public expense or the minority shareholders� expense.
If the next few months are going to see a series of bail-outs like the UEM-Renong, Sime Bank, Bank Bumiputra, Konsortium Perkapalan Bhd and now MAS bailouts, confidence is not going to return to Malaysia soon - and the economic recovery which Anwar said in Washington two days ago as having started is going to take a very long time indeed.
(17/4/98)