Renong case an admission of Mahathir's failed experiment
By Brendan Pereira


When Tan Sri Halim Saad realised that his business empire was crumbling, he made a beeline for Putrajaya in search of a lifeline.

The 47-year-old corporate figure had reason to be hopeful during the 30-minute drive from Kuala Lumpur to the administrative capital, home of the Prime Minister's office.

The Mahathir administration had been a patron, protector and, on several occasions, a white knight to the conglomerate that the New Zealand-trained accountant headed for more than a decade.

He joined the queue of people waiting to see Prime Minister Datuk Seri Dr Mahathir Mohamad. When the opportunity arose, he strode up to the Malaysian leader to make his case.

But Dr Mahathir cut him short and noted that the matter with United Engineers Malaysia (UEM) was not up for discussion.

End of the matter.

It was a stunning rebuff to a man who, more than anyone else, has come to symbolise the bumiputera entrepreneur - that hand-picked individual who was to be nurtured on government largesse to become a captain of industry.

The rebuff was even more significant because the man who delivered it was the architect of that plan to create the super class of Malay entrepreneurs.

In some ways, it was an admission that the experiment had failed.

But more so, it was an acknowledgment that the misfortunes of some of Malaysia's big corporate players had become too much of a liability for Dr Mahathir to shoulder, in a country that appears less tolerant of poor business practices.

He could carry them no longer.

Earlier this year, Malaysia Airlines boss Tan Sri Tajuddin Ramli had his number called up.

In this climate of change, several big-name figures are engaged in the newest game in town - looking over the shoulder.

TAKING CONTROL OF RENONG

IN THE days that followed Tan Sri Halim's last-ditch attempt at salvation, the government announced a plan to make a general offer for UEM, the first in a series of moves that will remove the construction giant from trading on the Kuala Lumpur Stock Exchange
(KLSE).

By taking control of the construction company, the Mahathir administration was also wresting control of the Renong group away from Tan Sri Halim.

UEM owns a 32.6-per-cent stake in Renong, far more than the businessman's 16.5-per-cent stake.

Government officials say that while many people were caught off-guard by the takeover bid, the Malaysian Cabinet had decided - a week after former finance minister Tun Daim Zainuddin's resignation on June 1 - that 'something had to be done' about the Renong problem.

The conglomerate operates banks and toll roads, owns large swathes of real estate, but is also groaning under a RM13-billion (S$6.2-billion) debt. The delay in solving its corporate-debt problem was weighing down heavily not only on the stock market but also the banking system.

Every time Finance Ministry officials, the Prime Minister's advisers or government politicians met foreign fund managers, it seemed the perception was that Malaysia's corporate-debt restructuring was moving too slowly and that the Mahathir administration was not prepared to allow some favoured corporate sons to go to the wall.

The Malaysian leader knew he had little choice but to order a clean-up.

The KLSE needs infusion of foreign funds as much as a person with clogged arteries needs bypass surgery.

Government officials also told The Straits Times that there was another reason why the government has moved to break up the debt-laden UEM/Renong group of companies.

They feared that if a plan by Tan Sri Halim to restructure the group's debts had been accepted by regulators, it would have hurt Dr Mahathir and his government severely. Under the plan, the businessman would take UEM private, with three banks agreeing to provide funds.

But government officials feared that the deal would have spooked the market and provided more ammunition for opposition political parties that have made corporate governance and bailouts part of their platform.

Fresh in the minds of government leaders was the hugely unpopular decision of the Employees Provident Fund to invest RM269 million in the initial public offering (IPO) of TimedotCom, a subsidiary of Time Engineering, a company controlled by Renong.

It carried the air of a rescue because the IPO was 75-per-cent undersubscribed and generally viewed by fund managers and market analysts as a poor investment.

The administration had a monster job of controlling the damage from this exercise, with the union movement threatening to call a nationwide strike.

Later, it transpired that Dr Mahathir was in the dark over the Finance Ministry's decision to approve use of the pension funds to buy TimedotCom shares.

Government officials say that if Tan Sri Halim had been allowed to take UEM private using funds from three banks, the arrows would have been aimed at the government once again.

Said a government official: 'The perception in the public domain would have been that the banks were pressured to help.'

The Straits Times understands that all the banks were informed that they should evaluate the decision to back the UEM restructuring plan solely on business risks and no other considerations.

So what does the takeover of UEM mean for the rest of corporate Malaysia?

Does it signify that the old way of doing business in Malaysia is over - that the nexus between politics and business will not be as close as in the past?

No, definitely not.

MORE CAUTIOUS APPROACH

MORE capable Malay entrepreneurs will still get a helping hand from the administration. That is a cornerstone of the New Economic Policy, an affirmative-action programme aimed at uplifting the economic status of the Malays.

What is likely to happen from now on is that the opportunities are likely to be given to a larger group of qualified Malays. Within Umno, there have been calls to ensure that large businesses remain government-owned but are run by a team of Malay professionals, whose rewards are tied closely to the performance of the company.

Also, what is likely to happen from now on is a more cautious approach approving privatisation projects. The political cost of making unpopular decisions is becoming too expensive.

A government official told The Straits Times that a prominent corporate figure recently had a business plan rejected by senior advisers to the Prime Minister.

The businessman then did what most well-connected corporate players do when they do not get their way - he sought the intervention of the Prime Minister.

Wrong move. For now, his privatisation project is dead in the water.