A Doctor in The House: A Memoir of Tun Dr Mahathir Mohamad (110 page)

The total cost of the airport was about RM9 billion. This compares well with the USD20 billion (RM72 billion) for Hong Kong’s international airport, which opened a few days before KLIA and which took longer to resolve its teething problems. The investment by the Government was amply justified. I do not know how much we have earned from KLIA, but we now handle almost 23 million passengers annually and a great deal of cargo. I cannot imagine how things would have stood if we were still using Subang as our international airport. By the time we moved operations to KLIA, the Subang airport was handling some 14 million passengers a year. Despite having two terminals added to the complex, it was literally bursting at the seams.

KLIA is one of the best examples of Malaysia’s project management and construction ability. After the airport was completed I told Jamilus—who was made a Tan Sri the night the Yang di-Pertuan Agong officially launched KLIA—to form a company to bid for other airport construction contracts elsewhere in Malaysia and abroad. That company now has the capacity to design and construct fully modern, well-equipped airports anywhere.

KLIA’s first phase—with the main terminal building and one satellite building—was designed to handle 25 million passengers a year. The low-cost airline AirAsia
[2]
 wanted to operate out of Subang, but that would have meant KLIA would lose out on aircraft movements and the number of passengers. The Government insisted that they stay in KLIA, but they did not want to use facilities such as the aerobridge, which would have increased their operation costs. They wanted a place where they could keep their costs low with minimum expenditure, so a low-cost terminal has now been built.
[3]
 KLIA’s main terminal building and satellite building lost several million passengers a year as a result. However, the low-cost airline has brought more than 10 million passengers a year.
 

Overall, KLIA has turned out to be the airport I had hoped it would be. Its infrastructure truly became world-class in April 2002 with the launch of the Express Rail Link (ERL), a RM2.4 billion medium-speed train service that connects it to the Kuala Lumpur Sentral transportation hub in the city. Passengers can check in at KL Sentral’s City Air Terminal. With an ERL service, which runs at a top speed of 160km/hour, every 15 minutes, they can travel the 50km between KL and KLIA in just 28 minutes. Our ERL is very similar to the rail system that connects Heathrow Airport to Paddington Station in central London, but we were able to build our system to cover about double the distance, at a much lower cost. It usually costs about RM157 million/km to build such a train service—we did it for RM35 million/km. This reduction allows us to give world-class service at a third of world prices, and the ERL provides the cheapest fare-per-kilometre in the world for rapid rail transit. Since we had no knowledge or experience in this field, there was a lot of foreign input in constructing the ERL. The project was undertaken by Siemens of Germany and Express Rail Link Sdn Bhd, a stakeholder of which is YTL Bhd, one of the best-known construction companies in Malaysia. Together, they were able to complete the project ahead of schedule and within the budget. With the ERL, KLIA is now on par with other modern airports in the world, and it also remains competitive as a regional air transport hub.

Around the same time, we built our Formula One racing circuit, which was adjacent to KLIA. I had reasons for wanting Formula One racing in Malaysia—there was the tremendous exposure to be gained from television coverage of the championship, as well as the opportunity for Malaysian engineers to acquire racing car engine technology.

I remember telling the Press in 1996 that we had a definite agenda. We wanted Malaysia to become better known and this was one way of publicising the country. The exposure would be huge and the audience enormous, with over 6.1 million viewers from 201 countries. Based on my calculations, this translated into 26,400 hours of coverage with an average “live” viewing of 367 million people per race, backed by a trackside attendance of over 2.4 million people. In Japan, the charge for a three-minute advertisement on TV is RM1 million. We did not pay a single sen for the three days Sepang was on TV worldwide.

We endorsed the World Formula One Championship twice, well before the F1 came to Malaysia. PETRONAS also entered into a five-year contract with the Red Bull-Sauber team which, among others, allowed the team to carry the words “Malaysia and PETRONAS” on the sides, front and back of the cars.

In our bid to host a World Formula One motor racing championship event, we had to compete with China, South Korea and Indonesia, but my hopes were raised in 1994 when I received a letter from Bernie Ecclestone. As Vice President of the International Automobile Federation (FIA) and head of the Formula One Constructors Association—the latter holds the rights to the F1—I was aware that Ecclestone was the man who could make or break a country’s bid to host a leg of the F1. In his letter, he said: “To be included in the Formula One Grand Prix, countries must be in a position to support a world-class event. I have confidence that your country can do this.”

I left the job of constructing the racing circuit to Malaysia Airports Berhad, in the capable hands of Tan Sri Basir Ismail, its Executive Chairman. We made sure that once it was completed, the RM300 million racing track would not affect the activities at KLIA. Up to 32 different races could be held at the track a year. It was no use building a circuit with just the Formula One in mind, since it would only take place for three days annually. The circuit had to be for other events as well, such as the Formula Asia race and the weekly amateur races held at the Shah Alam racing circuit. Finally, after a record 14-month construction, the Sepang International Circuit was officially opened in early 1999.

While the Commonwealth Games displayed our organising capabilities, the Kuala Lumpur Airport at Sepang and the Express Rail Link took us several steps forward towards our target of becoming a developed country by 2020. Along that national journey, 1998 was a challenging year but in the end it proved to be a year of great Games and remarkable gains for us. Full of uncertainties at the time, in retrospect it stands out as a year of notable achievement.

ENDNOTES

[
1
] Located in the fifth precinct of the new administrative centre, construction of the Putrajaya International Conference Centre began in 2000 and was completed in 2003.
 

[
2
] AirAsia is Malaysia’s first low-cost airline. Established by DRB-HICOM in 1993, it began operating in 1996. It was then acquired by Tune Air, a private company, in 2001.
 

[
3
] The Low Cost Carrier Terminal or LCCT is located about 10km from KLIA and opened in March 2006.
 

The currency controls we imposed helped to staunch the bleeding caused by the financial crisis, but in the immediate aftermath, we still found ourselves facing the problem of having several high-profile companies teetering on the edge of bankruptcy. Among the big companies which faced the threat of collapse were recently-privatised corporations such as Malaysia Airlines, companies that managed the Light Rail Transit systems, the wastewater treatment company Indah Water Konsortium, and Renong, a conglomerate that had initially been set up to manage UMNO’s assets.

We did not like companies to fail because they then became our problem in several ways. The Government collects no taxes from failed companies. Often it must also pick up the pieces, work out an alternative way for the delivery of essential services, deal with the human fallout of company failure, and, if the company is a recently-privatised one, suffer political consequences as well. When a company becomes bankrupt it tends to drag others down. Workers lose their jobs and subcontractors also incur losses. Loans may turn bad and the banks too are affected. When one company is bankrupted, it is difficult to appreciate the effect on the community and overall economy. If a large number of companies are bankrupted, the devastating results are soon felt by everyone and by the nation. If that can be avoided or if corrections can be made, there is no reason why even one functioning or remediable company should be allowed to go under.

A revived company can contribute towards the well-being of the owners and employees and will pay taxes to the Government. The idea that inefficient or struggling companies must immediately be closed down is the extreme rather than the reasonable version of capitalist thinking.

Among the measures we took to mitigate the impact of the crisis was the creation of three agencies to deal with banking and corporate liquidity. Pengurusan Danaharta Nasional Berhad (Danaharta) was set up in June 1998 to resolve the issue of non-performing loans. Danamodal Nasional Berhad (Danamodal) was created in August that year to recapitalise our banking system, while the Corporate Debt Restructuring Committee (CDRC) focused on making sure that viable businesses continued to be financed. All three agencies successfully met their targets and recovered billions of ringgit in loans and debt restructuring.

Among the companies we had to salvage was Malaysia Airlines, which had been privatised and taken over by Tan Sri Tajuddin Ramli. He had borrowed RM1.8 billion to pay for his controlling shares but the financial crisis left the company severely in debt and haemorrhaging money. Since he had taken over the company, Malaysia Airlines had incurred debts of RM9.4 billion by the end of the year 2000.

The company had been doing well when it was sold to Tajuddin in 1994, and his acquisition of Malaysia Airlines had been seen as a coup. At that time Tajuddin was the owner of Celcom, a cellular telephone company that was doing very well. He had attempted to buy his 29 per cent stake in Malaysia Airlines through an exchange of shares between the company and Celcom, and had that happened, he would not have had to spend a sen. In the end, however, he had to borrow a lot of money to buy the shares. Had I known this, I would have put a stop to the acquisition.

By the end of 2000, when it was clear that Tajuddin could not service his debts, the Government decided to pay him RM1.79 billion for his controlling stake and re-acquire the company. Claiming that he had bought Malaysia Airlines out of national duty, Tajuddin demanded that he receive the price per share that he had paid when he bought them. But I knew that he had bought into the company because he felt it was a good investment—newspaper reports at the time had quoted him as saying that he was not the kind of person to invest RM1.8 billion unless he could get a good return. Our purchase of his stake received a lot of criticism because we paid him RM8 a share, at a time when the market value was RM3.62 per share. Tun Daim Zainuddin, who was the Minister of Finance at the time, negotiated the buyback. I was unhappy with the price but Tun Daim claimed it was the best he could do to salvage the national carrier.

The financial crisis also struck a heavy blow to Projek Usahasama Transit Ringan Automatik Sdn Bhd (Putra) and Sistem Transit Aliran Ringan Sdn Bhd (Star), companies which respectively managed the Putra and Star lines of the Light Rail Transit (LRT) system. At the time, the LRT was not being patronised by Malaysians as frequently as it needed to be as it takes time for any infrastructure facility to be accepted and used. Malaysians are a pampered lot and expect to be transported by vehicle to the very door of their workplaces or their homes. There was, admittedly, also a contradiction in public policy as we encouraged Malaysians to buy the national car. Incidentally, the number of cars per capita in Malaysia is the highest in Southeast Asia.

Not wanting the LRT to go under, the Government stepped in and paid about RM9 billion to take it over. Again, we were accused of bailing out politically-connected businessmen but the buyout has since proven to be a good investment. Today, everyone realises how important the light rail system is to Kuala Lumpur. Without it, the roads would be jammed with passenger cars and buses. The LRT lines now carry full loads of passengers and during peak hours it is standing-room only. Now, with oil prices rising and falling dramatically, the time for the full acceptance and development of public transport has arrived.

Another Malay businessman we had to help was Tan Sri Halim Saad, the Chairman of Renong Bhd who, like Tajuddin, was another one of Tun Daim’s protégés. He had originally been brought in to kick-start the North-South Expressway project in 1987, which had slowed down and gone over budget. Although Renong had been associated with UMNO at one time, it had become a fully-private enterprise by the 1990s and was involved in a number of public projects. It built the National Sports Complex for the Commonwealth Games, for example, and its subsidiary UEM completed the North-South Expressway, which generated a great deal of income for the company and tax revenue for the Government.

Even before the financial crisis, however, Renong was already over-extended. When Datuk Seri Anwar Ibrahim was the Deputy Prime Minister and Finance Minister, Halim had gone to see him about a restructuring plan that involved about RM10 billion in government-backed bonds. Anwar had agreed to it in principle, although he later denied this and said he had rejected the idea. I found out about it only after Anwar had been removed and Halim came to tell me about the plan. When the financial crisis hit, Renong lost about 80 per cent of its value on the share market and its debts accounted for about five per cent of all debt in the entire banking system. CDRC got UEM to issue about RM8.5 billion in bonds and some of the money that was raised was used to pay off Renong’s debts.

Through a series of very complicated manoeuvres, Halim attempted to maintain his position in Renong. He persuaded UEM to buy Renong shares at a very high price and promised he would buy them back later. But when the time came, he asked for a postponement as he did not have enough money and was trying to borrow more. In the end, we had to step in. I asked Khazanah Nasional Berhad to take over UEM because if Renong defaulted on its debts, it would have probably dragged several banks down with it. We simply could not allow that to happen.