Raggie Jessy Rithaudeen
Former Council of Eminent Persons (CEP) elder Tun Daim Zainuddin said yesterday that the practice of government bailouts was necessary if done in the best interest of the people. Speaking during an interview with Astro Awani, presumably in place of Minister-of-Finance-currently-in-comma, Lim Guan Eng, Daim explained that sometimes, the government is forced to resort to bailouts particularly if it involves a sticky situation.
“For example, Tabung Haji. Without a bailout, it would have turned into a sensitive issue. We saw that after the bailout, now it has started making profits again,” he said, adding that Pakatan Harapan (PH) found that there were many government agencies which were riddled with financial problems, after it took over Putrajaya.
“It is not small. Each agency spent up to billions. So, if this is not corrected, the people get angry too. When it’s corrected, the Opposition party gets angry and the ratings agencies are also angry. They ask why a bailout?
Let me paint you a scenario here.
Let’s assume that the government owns a company, Diam Nasional Berhad (DNB), that engages in under-the-counter deals with a wide range of companies, including the one building the East Coast Rail Link (ECRL). One fine day, the key figure behind DNB, Diam Zunaiddin, approaches the Prime Minister of Malaysia, Tun Dr Mutakhir Mohamad, and suggests purchasing DNB using Diam’s Rayleg Holdings Sdn Bhd. Let’s assume that Diam committed Rayleg in trust to Mybank Berhad owing to some outstanding debts which Rayleg is struggling to pay. Of course, that would render Rayleg incapable of purchasing DNB unless Mybank can be assured a collateral of sorts that would allow the bank to consider financing the purchase.
Now, for some ‘unknown’ reason, Mutakhir agrees to the takeover. He then gets another government owned entity, ABC, to quietly approve and commit a bunch of projects to Rayleg, complete with paperwork, terms of associations, terms of payment and all. Diam then parks these commitments and approvals with Mybank in return for substantial borrowings which he then uses to purchase DNB. Publically, though, the government invites bids for the projects knowing that ABC has already committed them to Rayleg. Of course, these bids are but part of a bogus exercise that Mybank helps the Government of Malaysia (GoM) conceal. Several days later, the government announces that Rayleg won the bid and invites Diam to a grand signing ceremony.
Days then turn into weeks, and weeks, months. One fine day, DNB announces the Initial Public Offering (IPO) of some securities which Mybank helps the company evaluate, price and underwrite. Needless to say, Mybank overrates each security unit on the pretext that DNB secured government-guaranteed projects. This undoubtedly gets people all hyped up about DNB’s potential and renders the price Mybank sets for the security units tenable. Following the IPO, Diam would have all the capital he needs for Rayleg to reduce its debt load and to fill both his and Mutakhir’s money vaults with loads of cash.
Then, suddenly, news of a downturn hits the stands. It soon becomes public knowledge that DNB failed to deliver on some project commitments to ABC due to this being the stumbling block and that being the setback. Before long, DNB is declared a troubled entity that cannot service its obligations to Mybank. ‘Seeing’ no alternative, Mutakhir decides to bail the company out by telling people that not only was DNB performing “national service,” it was badly affected by the rise in global steel prices. He then goes on to say, that because the projects awarded to DNB were government-guaranteed, it is the duty of the GoM to rescue the company in the greater interest of the people. Right after he’s done with all the bullshxt, he approves the ‘renationalisation’ of DNB at a price far exceeding the market rate.
And the end result?
Well, Diam gets to wash his hands off DNB, laugh his way to the bank and ends up returning moderate-priced government projects to the government at twice their value. Not only did the privatisation-cum-bailout scheme allow Mutakhir and Diam to rake in billions, they even manage to stuff the vaults of their cronies with truckloads of “free cash” by secretly handing out pink forms during the IPO. Then, on the pretext of seeking a new entity to run the ‘abandoned’ projects, Muthakhir goes ahead and announces yet another round of tenders, this time, secretly agreeing to award them at twice the value to Tan Sri Vince Mc Mohan Tan, his crony. And all along you thought a bailout was, as Daim put it, an exercise “in the greater interest of the people.”