Daim should order a freeze in the MAS deal and  commission a public inquiry as to whether   the RM1.8 billion public rescue of MAS   violated government’s own rules on  transparency and ‘hair-cuts’ for Tajudin

(Petaling Jaya, Friday): Finance Minister, Tun Daim Zainuddin, has again denied that  the government’s proposed purchase of 29% stake in Malaysian Airlines (MAS) from Naluri Bhd was a bail-out claiming that it was  essential to bring about speedy solution to the airline’s current problems.

The Finance Minister’s sudden sense of urgency to resolve MAS’ problems when they have dragged out  for more than three years  is nothing but a tactic to deflect widespread  public criticisms inside and outside the country of the RM1.8 billion buy-out bail-out  of Tan Sri Tajudin Ramli’s 29.09 per cent stake in MAS through Naluri, at the exorbitant price of  RM8 per  share or a premium of RM4.32 or 117 per cent over the closing market price of the MAS share at RM3.68 each  when the deal was signed.

Tajudin had told a foreign news agency that he was lucky in getting a  good price of RM8 a share, which will enable him to settle Naluri’s entire debt of RM1 billion but Malaysians are now saddled with MAS’  RM9.4 billion debts after the buy-out bail-out costing RM1.8 billion.
 
The government has violated its own rules for assisting industries and companies as laid down by the National Economic Recovery Plan (NERP) formulated  by the National Economic Action Council and adopted by the Cabinet in the RM1.8 billion MAS buy-out bail-out.

Chapter 4 of the NERP’s Agenda for Action on "Establish Rules for Assisting Industries and Companies" laid down ten rules which, among other things, made a distinction between assistance to troubled companies that involve only privately owned companies and assistance that involve the government.

On assistance to  be granted by government to troubled companies, this will be guided by  three criteria , namely, national interest, strategic interest, and equity considerations under the New Economic Policy and the National Development Policy.

The NERP said:
 

"Industries and business activities that provide benefits to a wide cross-section of the population and help raise their living standard can be considered to be in the ‘national interest’. Banks, education and some infrastructure facilities are example of industries of national interest. ‘Strategic industries and businesses’ would include those that make an important contribution to the growth of a specific sector or/and provide important  support for other industries and businesses. The  automotive, aerospace and shipping industries are example of strategic industries."

Two of the NERP rules for "assisting industries and companies" are:
 

"3. As a matter of principle, there will be no bailout of individual investors or lenders using public funds, except in respect of  industries and corporations in key, strategic sectors of national interest. In some cases, there may be a basis for government or central bank intervention in supporting banks  or companies facing difficulties. There might also be similar experiences and measures adopted in other countries that  Malaysia can learn from. For any such action, the transparency of action plans is of paramount importance so as not to have adverse impact on the credibility of the  authorities and, therefore, public and investor confidence. Any corporate transactions of this nature should be accompanied by immediate disclosure of the financial  details of the deal.

"4.In the event of a rescue involving public funds, private investor and lenders must take their appropriate ‘hair-cuts’. Except for the most extreme extenuating circumstances,  promoters, controllers and management of rescued entities must be seen to be relieved of their control and involvement. The proof of viability should also be established before commitment of rescue funds."

Daim should explain why in the RM1.8 billion buy-out bail-out of Tajudin’s MAS shares, there was not only total lack of transparency and accountability undermining government credibility and public confidence, Tajudin is spared from taking his "hair-cuts".

Instead, Tajudin has been given a bonanza at taxpayers’ expense to reward for his mismanagement of MAS by  being given  117% premium for the MAS shares over the  market price, transforming it into a personal rescue for Tajudin instead of a public rescue for MAS.

The national and international outrage at the MAS deal is that it is not Tajudin who had to take his "appropriate hair cuts", but the taxpayers who have to suffer "hair cuts" for the benefit of Tajudin!

Daim said yesterday that the Ministry of Finance, Inc. had not completed the purchase of Tajudin’s stake in MAS, having only paid 10% of the purchase price of RM1.79 billion subject to obtaining the necessary regulatory approvals first.

The most important approval  the government must secure in a democratic society which upholds the principle of  responsibility, accountability and transparency  is public approval.

For this reason, DAP calls on Daim to  order a freeze in the MAS deal and  commission a public inquiry as to whether  the RM1.8 billion public rescue of MAS   violated government’s own rules on  transparency and ‘hair-cuts’ for Tajudin,  as well as making recommendations whether the government should go through with the purchase of  Tajudin’s stake in MAS - spelling out  the "hair cuts" for Tajudin  -  and how to turn MAS into a leading and successful international airline.
 

(19/1/2001)