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Malaysia's fox takes charge of the
henhouse
By Anil Netto
PENANG, Malaysia - Malaysians have been having
trouble imagining the hard-driving former premier,
Mahathir Mohamad, spending his retirement tending to his
garden and playing with his grandchildren after 22 years
in power. So when Mahathir, who stepped down at the end
of October, was appointed adviser to Petronas, the
national oil company, it set tongues wagging.
The deal had been in the offing for quite some
time, according to Petronas chairman Azizan Zainul
Abidin, who said, presumably with a straight face, that
Mahathir was appointed because he had previously
contributed many ideas to improving Petronas'
operations.
During Mahathir's years in power,
the wholly owned oil company was often used as a
national piggy bank to bail out a flock of politically
connected banks and other firms, the national airline
Malaysia Airlines (MAS), the limping national car
company Proton, and a variety of controversial projects
of various and dubious utility.
Critics point
out that anyone who can influence or "advise" on the way
Petronas funds are used would be in a powerful position
- especially when the adviser is the former boss of the
new premier, Abdullah Badawi, himself relatively
inexperienced in finance. In addition to the
premiership, Abdullah assumed the Finance Ministry
portfolio from Mahathir as well.
Set up in 1974,
Petronas, or Petroliam Nasional Bhd, with total oil and
gas reserves of 24 billion barrels of oil equivalent, 80
percent of it domestic, is extremely powerful. It has a
presence in more than 30 countries, including some with
dubious human-rights records such as Sudan and Myanmar.
It is cash-rich with good assets, low debt, and a strong
balance sheet.
But critics say it has not been
fully transparent about how its money is spent. Its
managers are answerable to the premier and its financial
results are not included in the national budget.
"Petronas has neither been fully transparent nor
accountable with how it spends its money, especially in
aiding and abetting Tun Mahathir to indulge in
unproductive construction of megaprojects, to bail out
ailing crony companies and corporate figures, and to
involve [itself\ in excessive and wasteful spending on
celebrations and conferences," said opposition
politician Syed Husin Ali.
Since the early
1980s, Petronas has never been far from controversy or
criticism, especially in its involvement in high profile
bailouts of the debt-ridden and political connected Bank
Bumiputra, now merged into Bumiputra Commerce. For a
long spell, Bank Bumiputra was kept afloat with huge
injections of Petronas funds.
One of the biggest
outcries came in 1998, when cash-rich Petronas announced
what analysts felt amounted to a bailout of Mahathir's
son Mirzan. Back then, Mirzan's main public listed
company, shipping concern Konsortium Perkapalan Bhd
(KPB), was floundering, with debts estimated at about
RM1.7 billion. Its share price had fallen to RM3.78 by
February 1998, a fraction of its pre-financial crisis
level of RM17 plus.
The Petronas-controlled
national shipping carrier Malaysian International
Shipping Corp Bhd (MISC) stepped in to bail out KPB for
cash, mainly by acquiring debt-laden KPB's shipping
assets.
Under Mahathir's tenure, Petronas also
financed the then tallest buildings in the world, the
Petronas Twin Towers, much to the consternation of
critics who felt the money could have been better used.
It was completed in 1998, just in time for the 1998
financial meltdown, at a cost of some RM1.8 billion.
Petronas is also heavily involved in the
multibillion-ringgit development of the new - and
extravagant - administrative capital, Putrajaya, with
its artificial lakes and bridges and imposing monuments.
It is one of the shareholders of Putrajaya Holdings Sdn
Bhd, the main developer for Putrajaya. Apart from the
concessions for government complexes/buildings and the
residential and commercial development projects in
Putrajaya, Putrajaya Holdings is also responsible for
"the development of infrastructure, and landmark
projects such as the Dataran Putra (Putra Square), Putra
Mosque, Putra Bridge, the Putrajaya Lake and the
Wetlands".
Another controversy hung over
Petronas, soon after the opposition Parti Islam
SeMalaysia (PAS) captured the east-coast state of
Terengganu in 1999. The Mahathir administration decided
that it would no longer pay oil royalties to the state
government based on offshore extraction. Instead, the
money would be classified as "goodwill money" to be
distributed directly by the federal government to the
people in that state - a move which sparked an uproar
from the state government as the royalties were
Terengganu's main source of income.
For all its
oil wealth, Terengganu ranks among the poorest states in
Malaysia, and that is perhaps one of the contributing
reasons for its fall to opposition hands in 1999.
According to the World Bank, half all of all of
Malaysia's poor households are concentrated in
Terengganu, Kelantan and Sabah, where the poverty rates
are 33 percent, 27 percent, and 18.5 percent
respectively.
In March 2000, Petronas again hit
the headlines when it sealed a deal to buy 27.2 percent
of national car maker Perusahaan Otomobil Nasional Bhd,
or Proton, for about RM1 billion (US$264 million),
making it the controlling shareholder. The stake was
held by the DRB-Hicom Group Bhd, which was deeply in
debt. The deal was announced after Proton, one of
Mahathir's pet projects, reported a net loss of RM19
million in the nine months to December 31, 1999.
Petronas was also used to secure the title
sponsorship rights for the Malaysian Formula 1 Grand
Prix and to sponsor the Sauber Petronas racing team.
These were projects that Mahathir cherished as an
attempt to market Malaysia around the world - while
critics dubbed them wasteful.
Thus, it is hardly
surprising that many Malaysians raised their eyebrows at
Mahathir's appointment as Petronas adviser so soon after
his retirement. It leaves the former premier with an
influential say in Petronas' management and skeptics
wondering who will have the final say in the way it uses
the considerable funds at its disposal.
(Copyright 2003 Asia Times Online Co, Ltd. All
rights reserved. Please contact content@atimes.com for
information on our sales and syndication policies.)
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