(Petaling Jaya, Tuesday): The Cabinet at its meeting tomorrow should address and resolve the problem of the government sending out mixed and confusing signals which will have the effect of undermining rather than restoring confidence, which should be the nation’s first and primary task so that the country can effect a turnaround of the economy as soon as possible.
It is a sad commentary that nine months into what the National Economic Action Council (NEAC) Executive Director and Government Economic Adviser, Tun Daim Zainuddin, has admitted as the "worst economic crisis since the Second World War", the government has not yet won the war of confidence-restoration and the intangible and most important question of confidence is being alternately enhanced and battered by mixed and confusing government signals.
There have been many instances of such mixed and confusing signals issuing from the government of late.
For instance, the Deputy Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim said on Saturday that he has given the greenlight to Bank Negara to investigate Sime Bank Berhad’s losses of RM1.8 billion to serve as a warning to other banks to rectify problems, mismanagement or weaknesses.
Yesterday, however, the Prime Minister, Datuk Seri Dr. Mahathir Mohamad said borrowers should not be blamed for the losses suffered by banks, as they are at the mercy of the currency crisis to settle loans. He said the problem would not have surfaced if the country had not been hit by the currency problem.
Mahahtir was being consistent as his first public comment on the Bank Negara revelation that Sime Bank and Bank Bumiputra would need capital injection of RM1.2 billion and RM750 million respectively was to blame their problems on the devaluation of the ringgit and their share value, stating: "They were very sound institutions before but when you knock off their financial strength, then naturally they will suffer".
If the Prime Minister has already decided that the causes of the losses of Sime Bank and Bank Bumiputra were external, and nothing to do with banking mismanagement or imprudent banking practices, then what is the purpose of Bank Negara investigations into the Sime Bank losses.
Secondly, the government should know that it is sending out an undesirable message when Bank Negara is investigating into Sime Bank losses but not the losses of Bank Bumiputra, Abrar Finance and Cempaka Finance, especially as this would be the third bail-out for Bank Bumiputra in 12 years totalling some RM4.232 billion if the government had to pump in RM750 million as announced by Bank Negara.
Thirdly, the government must address widespread concerns that it had reneged on its assurances that there would be no bail-outs or corporate restructurings, by giving satisfactory answers to at least five bail-outs.These concerns are not allayed despite the statement by Anwar last Tuesday that "the Government would allow big private companies, including banks, to close down if they were no longer viable" because of the divergence between words and actions.
Two questions about the Sime Bank bail-out calling out for answer are:
1. Will EPF funds be used to finance RHB’s purchase of Sime Bank, and if so how much, and is this in the best interests of the nine million EPF contributors?
2. Why is KUB, which owns only 30 per cent of Sime Bank, getting RM670 million from RHB, while Sime Darby gets only RM100 million for 60.35 per cent of Sime Bank through the issue of new shares, i.e. KUB getting more than six times what Sime Darby would be getting, although it holds less than half of Sime Darby’s shares in Sime Bank. Is the Sime Bank exercise basically a bail-out of KUB, a listed investment-holding company, whose shareholders are largely UMNO members? Is this fair to the Sime Darby shareholders?
The Petronas bail-out of the debt-ridden companies of Mirzan Mahathir and the listed company Konsortium Perkapalan Bhd in buying all of Mirzan’s shipping operations and liquefied-natural gas transportation interests in a complex deal involving Malaysian International Shipping Corp. (MISC) for an undisclosed sum raises many questions. It is most significant that following the announcement of the bail-out, when MISC shares were requoted on the Kuala Lumpur Stock Exchange on March 12, MISC dropped 15 sen to RM5.20 on that day while Konsortium Perkapalan Bhd. rose 24 sen to RM3.86 in a weak market - indicating who is the real beneficiary in the entire operation.
Good corporate governance, with fair, consistent and transparent regulatory regimes, are important in restoring confidence.
The Kuala Lumpur Stock Exchange decision last Friday to suspend trading in the shares Sin Kean Boon Group Bhd. (SKB) under Clause 1.15A of the Second Board Listing Requirements "to maintain an orderly and fair market" is questionable in enhancing confidence.
Firstly, this provision appears to be a recent addition and many stockbroking houses were not even aware of it until last Friday when it was invoked for the first time by the KLSE. There is concern that the provision could lend itself easily to abuse of power as there seems to be no limit to its scope and no guidelines as to its use. This is something which could be disastrous to confidence-restoration.
It has been reported that the suspension by the KLSE follows an alleged "scam" by an official of a stockbroking house involving 2,000 lots of SKB, and that KLSE has been asked by the stockbroking house concerned to nullify the transaction.
Should the KLSE be involved in a matter which should strictly be between the stockbroking house and its official, raising questions as to whether the KLSE could be manipulated by member firms to bail out certain stockbroking houses for their own interests in disregard of the public interest.
The Cabinet should be sensitive to recent developments in the banking, finance and corporate sectors which have been detrimental to the important task of confidence-restoration. Undoubtedly, one bold measure which the Cabinet can take tomorrow which would be an enormous confidence-booster is for it to establish a Royal Commission of Inquiry to inquire not only into the losses in Sime Bank, Bank Bumiputra, Abrar Finance and Cempaka Finance, but also Bank Negara as well as the general state of banking and financial sector in Malaysia.
DAP calls for the establishment of such a Royal Commission of Inquiry as it is not only Sime Bank, Bank Bumiputra, Abrar Finance and Cempaka Finance which should be investigated for their losses, the time has also come for the regulator of the banking sector itself to be investigated as to the quality of its regulation of banks in Malaysia.
(17/3/98)