The RM10.5 billion Renong bailout is the beginning of what Malaysians had feared - a government bail-out spree of politically well-connected companies

(Petaling Jaya, Saturday): The RM10.5 billion Renong bailout is the beginning of what Malaysians had feared - a government bail-out spree of politically well-connected companies.

This is the second rescue operation for Renong since the start of the financial crisis in July last year - the first time being the disastrous RM2.4 billion United Engineers (M) Bhd (UEM) bail-out of its parent company,  Renong by acquiring 32.6 per cent stake at a hefty premium to the market price to the detriment of UEM minority shares in November 1997 which precipitated a plunge of market confidence and  a stock market catastrophe wiping out some RM70 billion of capitalisation in three days.

As a result of the failure of the first bailout  operation for Renong by UEM, the government has now to be involved in the second bailout operation of Renong.

Renong, which has nine listed companies in its stable with interests spanning toll-road operations, construction and engineering, property development, telecommunications, financial services, oil and natural gas is estimated to have debts estimated at about RM20 billion - about eight per cent of all loans in the entire banking system.

I had asked in Parliament last December whether the RM2.34 billion UEM bailout of Renong was connected to the takeover of the Philippines National Steel Corporation (NSC) from Wing Tiek Holdings from a syndicated loan for US$800 million from four Malaysians banks, all of which had breached their single customer limits, and no answer has yet been forthcoming.

Before the government approves the RM10.5 billion bailout of Renong, Malaysian taxpayers are entitled to know why Renong had chalked up such colossal debts which now require a bailout by the public purse.

The complex RM10.5 billion bailout of Renong, United Engineers and four troubled infrastructure projects, namely Sistem Transit Aliran Ringan Sdn. Bhd. (Star), Projek Usahasama Transit Ringan Automatic Sdn. Bhd. (Putra), Keretapi Tanah Melayu Bhd. (KTMB) and Linkedua (Malaysia) Bhd., involve three parts.
 

• Repaying RM824 million of commercial debt at UEM’s subsidiary Linkedua, essentially involves the government waiving RM824 million of its support loan due from PLUS. The government will recover this amount from Linkedua. No payment date has been fixed.  In addition the remaining amounts due from PLUS to the government have been deferred, again with no specific date mentioned.
• The second part of the deal involves the issue of RM4.5 billion of bonds by the government will effectively mean giving money to non-profit making projects like STAR, PUTRA and KTMB.
• The third part involves the issue of RM6 billion bonds by the government to address the debts of Renong and UEM (which arose from its disastrous attempt to bail-out its parent company by buying up 32.6 per cent of its stake last November).

What must be very disturbing to the people is that the Renong bail-out could be the forerunner of similar bailout plans for  other  politically well-connected conglomerates and to allay such public anxieties, the government must be fully accountable and transparent about  the Renong bailout plan as well as other bail-out plans in the pipeline to allow for the fullest public scrutiny  to justify the involvement of the government in these rescue operations.

(10/10/98)