A Doctor in The House: A Memoir of Tun Dr Mahathir Mohamad (73 page)

Following the passage of the Bill in Parliament, there followed a period of strained relations between the Rulers and the Government. Semangat 46, the party led by Tengku Razaleigh Hamzah, condemned the Bill and Razaleigh spoke against it in public.

Of the Rulers, the Sultan of Kelantan was the most vehemently opposed to the amendments. At one stage, the Cabinet decided to withdraw unofficial privileges for the Rulers. Tunku Abdul Rahman urged the Government to meet and discuss the matter with the Rulers so as to reach an amicable settlement. The Tunku must have remembered his attempt to stop the Rulers from being involved in business.

Anwar spoke at many public gatherings criticising the Sultan of Kelantan for trying to help his uncle Tengku Razaleigh and Semangat 46. He urged the Sultan to find some other way to help his uncle.

Eventually, there were signs that the Rulers would agree to the amendments. The Sultan of Pahang, who was scheduled to chair the meetings of the 159th and 160th Conference of Rulers on 11 February, said he believed the problem would be settled at the meetings. It seemed that the Rulers wanted a say in the composition of the special court which would hear cases against the Rulers. The Government felt that it could concede on this matter.

The usual practice was for the Prime Minister to accompany the Agong on the second day of the Conference of Rulers. On 12 February, Tun Ghafar accompanied the King. All the Rulers were present except the Sultan of Kelantan, who asked the Sultan of Kedah to represent him.

The meeting unanimously agreed to the amendments after being assured that certain changes would be made to the text of the Bill. This was to be done during the committee stage of Parliament’s sitting. A joint statement was made by the Keeper of the Rulers’ Seal and the Attorney-General to the effect that the Conference of Rulers had agreed to the amendments.

On 25 February the Sultan of Kelantan contested the validity of the Conference of Rulers’ decision. His Royal Highness wrote to the Attorney-General on 3 March that he would challenge the decision in court.

On 8 March, a special meeting of the Dewan Rakyat was held to debate amendments to the Bill which had been passed by Parliament during the 18 to 20 January sittings, which had not received the assent of the Yang di-Pertuan Agong. At this sitting, Semangat 46 members were absent. PAS members did not vote. But DAP and PBS as well as four independents voted in support of the amended Bill.

This was the first time that members of the Opposition voted with the Government. It was a measure of the general feeling of members of Parliament and the people on the need for confining the immunity of the Rulers to their official duties only. Of the 173 members present, 167 voted for the amendment.

The amended Bill was sent to the Agong, Sultan Azlan Shah, on 16 March and signed by him on 22 March. The Bill was sent to the Speaker of the Dewan Rakyat, Tun Mohamed Zahir Ismail, who informed me that it would be gazetted as soon as possible.

I felt much relief and so did all the leaders of the Barisan Nasional component parties. Anwar said that “one lesson to be learnt from the episode is that the issue was not entirely confined to the abolition of the Malay Rulers’ legal immunity in their personal capacity. It concerns the understanding and maturity of all quarters involved with regard to the real meaning of freedom and the rule of law.”

Then Opposition Leader Lim Kit Siang welcomed the King’s assent to the Bill and hoped “this particular chapter of the Rulers’ issue” would be closed. The DAP National Deputy Chairman, Karpal Singh, also described the royal assent as the closing of another chapter. “The issue is now closed and is effectively now law,” he said, adding that the Government should forward the Bill to the Government Printers as soon as possible for gazetting as an Act. He said, “The law must be fairly applied to all Rulers, irrespective of whether the present Government leaders have good relations with them or not.”

Since the amendment to limit the immunity of the Rulers became law in 1993, there has been only one case for the special court to hear and deliver a judgment. This case did not involve any bodily harm to anyone. It was a civil suit. One can claim that the law has been quite effective. Now there is a suggestion that the law be annulled, that the Rulers be given back their total immunity. Among those who voiced this opinion are the very people who as leaders in the Government and the Opposition spoke strongly and voted in favour of the amendments.

Laws often look ineffective in preventing some crimes, but the moment the laws are annulled, one may see a sharp increase in the incidence of that crime.

Whatever the case, the amendments were necessary at the time and for the reasons I have mentioned, and the Government then was also formulating many new policies to enhance social justice for all Malaysians.

The disproportionately small share of our national wealth that the Bumiputera held was a matter that concerned me throughout my political career. As I mentioned earlier, a study conducted by the Prime Minister’s Department in 1970 on the distribution of wealth based on share ownership found that Malays and other Bumiputera, who made up some 60 per cent of the population, owned less than two per cent of shares in public listed companies. The Chinese, who made up slightly less than 30 per cent of the population, owned 30 per cent of the shares. Sixty per cent was owned by foreigners, mainly Europeans, who had founded large public limited companies controlling rubber plantations, tin mines and trading houses from colonial times. The remaining shares were owned by Malaysian Indians and other Malaysian nationals.

Based on these and other findings, the Government under Tun Abdul Razak Hussein had formulated the New Economic Policy (NEP), whose objectives were both to remove the identification of race with economic roles and functions and to eradicate poverty irrespective of race. The second of these two aims is hardly noticed and most Malaysians, not to speak of our overseas critics, seem to think that the official “leg up” was exclusively for the Bumiputera via the economic function. But all the poor had to be helped. To save the country from experiencing the dire consequences of widespread poverty, the situation of the Malays had to be dealt with earlier and more thoroughly as they made up the majority of the poor. It would not look good if poverty among non-Malays was eradicated first, leaving only the Malays among the poor in the country, as was bound to happen if the same amount of attention was given to the non-Malays as to the Malays. But poverty eradication among the non-Malays was certainly not neglected.

The first of those two NEP objectives entailed engineering the redistribution of wealth among the races so that it would be more equitable. Malays and other indigenous people, it was decided, should hold 30 per cent of the corporate wealth, the Chinese and Indians 40 per cent (up from the previous 30 per cent) and foreigners reduced to 30 per cent. The NEP was not about the expropriation of existing wealth and its transfer from old to new owners, but about the creation and allocation of new wealth. If the economy could grow significantly, much of the fruit of that new growth could be allocated to the indigenous peoples. This entails discrimination in the allocation of new opportunities to the have-nots as against the haves. But how else can we balance the end results if the haves must get an equal or even greater share of the new opportunities?

In practical terms, this would mean allocating more opportunities, licences, permits and contracts to the Bumiputera and fewer to the non-Bumiputera. We were aware that the sense of deprivation would still be felt by the non-Bumiputera, but by comparison, it would be far less than that caused by expropriation. Their existing wealth would not be taken from them; but their entitlement to new wealth and economic opportunities would be less than for Bumiputera. They would have to accept that while the property that they already had was a legally-protected entitlement, they could not expect to have unrestricted access to wealth opportunities in the future as they did before if we were to reduce the disparities instead of exacerbating the inequities.

Distributing company shares to the Bumiputera seemed simple enough. The shares to be distributed would come from Initial Public Offers or, when a company was expanding or restructuring, when new shares would be issued. Thirty per cent of these new shares would be allocated to the Bumiputera so that their shares in the corporate sector would increase over time. Simple arithmetic would show that if the balance of the shares went to the non-Bumiputera, the 70 per cent that they get would actually increase the disparity. Strictly speaking, if the Bumiputera share of the corporate sector were to be increased to 30 per cent from two per cent, their share should be bigger than the allocation to the non-Bumiputera. But at no time were they allocated more than 30 per cent. From the beginning it was realised that the Bumiputera had no capacity to take up even the 30 per cent due to them. They lacked capital. There had to be other ways of enriching the Bumiputera.

That, at least, was how we envisioned the plan would work. But almost as soon as the Bumiputera were allocated the shares, they sold them, mainly to the Chinese who were prepared to pay more than the issue price. Since during good times almost all IPO shares appreciated in value upon being issued and would continue to appreciate for some time, demand for the shares was high and Chinese speculators were always ready to buy them. For their part, the Bumiputera were happy simply to make easy money from the initial capital gains. Since many Bumiputera borrowed money from the banks to acquire their shares, they were eager to pay off their loans. This they did by disposing of their shares while making a little profit from the sale. Sometimes the Chinese who wanted certain offered shares would pay, in effect, a commission or fee to the Bumiputera who would front for them. Upon allocation, they would take the shares over from their nominal owners and pay those Bumiputera their fee for providing that service.

Obviously this sale of shares for upfront profits frustrated efforts to increase Bumiputera ownership of corporate wealth. In fact this practice increased the disparities in wealth ownership between the Bumiputera and the non-Bumiputera. If this continued to happen, the NEP would prove to be a spectacular failure. Politically, this would be disastrous as the envy of the Malays over the ever-increasing wealth of the non-Malays would create tension and might destabilise the nation.

But it was not only company shares which were being sold upfront upon allocation. The Bumiputera were also selling contracts, licences and permits immediately after they were allocated.

Actually they had no choice. They had no capital, management skills or understanding of the businesses that came their way for them to raise capital and carry out their own business. When they tried, their inexperience resulted in their businesses failing. They would then default on their bank loan repayments. They actually ended up poorer than before they started. A small number of them succeeded somehow. A decision had to be made whether to give more opportunities to these successful Malays or to keep on giving to the others in the name of fairness. In the end it was decided to continue giving opportunities to the successful ones without neglecting those who had failed and were likely to continue failing.

Mulling over this dilemma, I recalled a method of investment that I came across when I was Minister of Education in the 1970s and had to oversee the affairs of the Tunku Abdul Rahman Foundation. A charitable trust, it was administered voluntarily by a Chinese businessman, who invested the money in shares on the Kuala Lumpur Stock Exchange. In those days business was good, so he made decent returns from dividends on his investments. He would periodically sell the shares he held for capital gains and then reinvest the proceeds in other promising shares. The fund grew under his management. It seemed to me that a similar trust should be set up by the Government and the Initial Public Offer of company shares should be allocated to it rather than to impecunious individuals.

The Bumiputera could then invest in this trust fund which would be allocated the 30 per cent shares meant for Bumiputera. This trust would not sell off the shares for immediate capital gains. Instead, it would earn dividends which could be passed on to the Bumiputera investors. The fund could judiciously buy and sell shares to benefit from the movements of share prices.

Investing in stock markets requires skill and experience. A unit trust manager would be better able to determine what shares to buy, when to buy and when to sell. By investing through unit trusts, investors would not be directly exposed to the ups and downs of the share market.

Share ownership was new to most Malays. They did not value it as much as the ownership of landed property or gold ornaments. It took a long time before they considered ownership of shares as an appropriate and strategic way of holding wealth. Share prices, however, may fluctuate violently while gold and property values change less dramatically. Cash was also a way of storing wealth, but inflation could erode its value. Malays used to save money in cash because it was something tangible. Ready money was something they could understand, but not how the purchasing power of their savings was reduced over time by inflation.

Many Malays also looked askance at fixed deposits because they saw bank interest as 
riba,
[1]
 which is 
haram
 or forbidden to Muslims. The Muslim objection to interest is that it involves no uncertainty, so all Islamically-acceptable borrowing must take the outward form of a business venture in which there is shared risk. But the stock market was, for them, simply too risky. Not understanding its volatility, they were loath to invest in shares. They lacked the necessary knowledge and confidence to entrust their wealth to its uncertainties.
 

In 1960, on a holiday to Hong Kong with Hasmah, I read about unit trusts in the 
Hong Kong Standard
. To reduce the risk of private investment in companies, unit trusts were set up and were managed by professionals. Managing large sums of money, they minimised risk by spreading their investments wisely and judiciously among different business sectors and among different companies operating in the same sector. With their knowledge of the market and their access to expert market intelligence, professional fund managers were believed to be less likely to make bad investments. When they saw that a company was likely to fail, they quickly sold the shares; when they received information of impending developments that would enhance a company’s performance, they bought shares. To me that sounded like a good way to invest, so in the early 1960s, I put a small amount of my own money in one of the Hong Kong unit trusts. Sure enough, the unit price appreciated. Not having any long-term strategy, I sold off my shares and made a small profit. I was behaving like the Malay that I am.