A Doctor in The House: A Memoir of Tun Dr Mahathir Mohamad (83 page)

He also began to cut back the Government’s expenditure, revising or slashing allowances for Ministers and senior civil servants. He even wanted to end the pension scheme but this I resisted. He also accelerated the privatisation of Malaysia Airlines, Tenaga National, the North-South Expressway, the Telecoms Department, MISC, HICOM, Port Klang Container Terminal and many others. Even Malayan Railway was offered to private entrepreneurs for RM1.

This offer was once quoted by Datuk Seri Kalimullah Hassan, a former editor-in-chief of the 
New Straits Times,
 as a justification for Proton’s sale of its shares in Italian motorcycle company MV Agusta for one euro. But it is not the same. The buyer of Malayan Railway would not be able sell the assets because he still had to operate the railway service. He would have to settle the debts of Malayan Railway which was quite big, let alone make any profit. It was a public offer but there were no takers. In the case of Agusta, where no public offer was made, the sale may have relieved Proton of having to carry Agusta’s debts but it certainly would not recover the cost of buying the company. Had Agusta been retained it could have been turned around, if the management had known what needed to be done. As we now know, the buyer of Agusta was able to sell off Agusta together with its debts for USD109 million.

Meanwhile, although Tun Daim spearheaded the privatisation of many public agencies, the Government wanted to have the last say should anything extraordinary happen. For this reason it retained a Golden Share, giving it the right to literally stop the sale of the company without Government approval. The listing of the shares of these privatised companies increased the market capitalisation of the Kuala Lumpur Stock Exchange (KLSE). At that time, the KLSE and the Singapore Stock Exchange operated as one, but share trading at the Singapore Exchange was greater because of its efficiency. This cost Malaysian stockbrokers money and limited their operations and prospects.

Tun Daim decided that the stock exchange should be split and I had no objection. I did not see why they should not become independent when our currencies were going separate ways and parity was impossible. The split resulted in a huge increase in the volume traded on the KLSE. Since many of the counters previously traded in Singapore were Malaysian, the Singapore Exchange faced possible decline. In response Singapore introduced the Central Limit Order Book (CLOB), an over-the-counter trading facility for dealing specifically in Malaysian shares. We eventually had to take action against CLOB when it undermined Malaysian share prices during the 1997-1998 financial crisis.

Tun Daim habitually came to see me with a list of the problems he had to tackle, together with his proposed solutions. I would listen to him and ask a few questions before giving my approval. Once I agreed, he would go, leaving me sure he would be able to resolve the problems. He never outlined a difficulty without offering a suggestion as to how it might be overcome. He was generally successful but he could be unfeeling about removing people and bringing in his nominees as part of his solution. Soon people began to talk about those they considered his proxies. He did not seem to care about what was being said and just went ahead with whatever harsh measures he had decided were necessary.

Tun Daim’s austerity programme, however, started to slowly yield results. Government borrowings were reduced and some debts were even pre-paid. The economy began to pick up. In 1985 the growth was minus 1.6, but in 1986 it was back to plus 1.2; in 1987 1.4; in 1988 8.9; in 1989 9.2; in 1990 9.7, and 1991 8.7. Foreign debt—which had been high between 1980 and 1984, peaking at +70.3 in 1981—was much reduced. In 1985 it contracted by 14.2 per cent and by 18.9 per cent in 1986. It experienced growth between 1987 and 1990, as new development was funded by fresh borrowing, but declined again by 5.5 per cent in 1991.

Tun Daim also made many parties happy when he resolved problems at the United Malayan Banking Corporation. UMNO Youth under Datuk Suhaimi Kamaruddin had objected to this bank being sold to Multi-Purpose Holdings (MPHB), the investment arm of the MCA. With 51 per cent of the shares, MCA would control the bank even though Pernas owned 30 per cent of the shares. Tun Daim negotiated with Chang Ming Thien, the founder of the bank, and it was agreed that Pernas should increase its shares to 40.68 per cent, while MPHB would limit its share ownership to 40.65 per cent. The rest of the shares would be placed with a company approved by the Government. With this settlement, UMNO Youth was mollified.

Throughout all these events and despite his obvious success in rehabilitating the nation’s economy, Tun Daim came under a lot of criticism. His disposal of his personal and his family’s assets came under attack. When he was made Chairman of Fleet Group, the company purchased Faber Merlin, in which Tun Daim was supposed to have shares. Prior to this, Faber had bought Tun Daim’s Buluk Malwi property, but that was in 1977, long before he became Chairman of Fleet and certainly before he became Minister of Finance. That did not stop people from accusing him of making a big profit from selling his property to Faber Merlin, which had been acquired by Fleet Group when he was the Chairman.

Tun Daim was also blamed for the Maminco losses on the London Metal Exchange and BMF problems, which unfolded before he became Minister of Finance. The links he had with Malay businessmen, who became prominent during his time as UMNO’s Treasurer, were also cited against him. Tan Sri Wan Azmi Wan Hamzah, Tan Sri Halim Saad, Datuk Samsudin Abu Hassan, and Tan Sri Tajuddin Ramli
[1]
 were all close to him. The accusation was that they were his proxies, holding shares in all the big privatisation projects for him.
 

Recently Tajuddin accused me and Tun Daim of forcing him to buy shares and a controlling interest in MAS. I have checked newspaper reports of the time. Far from feeling coerced, it is obvious that Tajudddin was elated over his purchase. He wanted to swap his Malaysian Helicopter shares (a company with two aircraft) for MAS shares (a company with well over 60 aircraft). The Government rejected his plan and asked that he pay in cash instead, which forced him to borrow RM1.8 billion. He was therefore not coerced by the Government to buy the shares, but was forced by his own modest collateral to borrow heavily.

Although I was Prime Minister at that time, I never got involved directly in the actual sale. I do remember wondering how Tajuddin would be able to buy the airline and when I asked Tun Daim, he explained that Tajuddin’s telecommunications company Celcom (Malaysia) Berhad was doing well. As for allegations that Tun Daim later forced Tajuddin to save the Government with the bailout of Malaysia Airlines, the idea is ridiculous. Tun Daim was at that time no longer the Minister of Finance. And while the Government did lose money in currency trading, that loss was not about to bring it down. The Government’s capacity to recover was far greater than that of any public or private corporation.

I found myself having to defend Tun Daim every now and again but he himself seemed unfazed. Once the 
Far Eastern Economic Review
 reported that he had been paid USD5 million to switch the supplier of engines for Malaysia Airlines’ planes. He did not even bother to respond to the allegation.

People constantly talked about him having financial interests in the companies run by his cronies. This was especially so once privatisation was under way. Those who got the big privatisation projects were his protégés, often people who had worked under him in the Urban Development Authority. Yet, undeterred, he went ahead with the privatisation projects and many of his protégés were the beneficiaries. For my part, I wanted to use privatisation as a way for Malays to leapfrog into big business. I was in no position to evaluate the applicants as I did not know them. Their qualifications told me little about them. So I had to leave the choices to Tun Daim, his expert knowledge and his keen judgment, both of business prospects and of people.

Perhaps he did choose people who were close to him, and so ended up being accused of using them as his proxies. Could he choose, and recommend to the Government, people he neither knew nor trusted? I assumed he appointed them because he knew them and believed them capable of taking on big jobs. After all, I had chosen him as my Minister of Finance because I knew him.

I have myself often been unfairly accused of impropriety, so whenever someone was accused of wrongdoing I always demanded proof. Until I was satisfied that there were valid grounds, I refused to take any action. Tun Daim wanted to resign from the Government in October 1990, but I prevailed upon him to stay. Eventually however, the number of accusations became so overwhelming that I could no longer discount them.

I never found proof of any wrongdoing but I had to act to stop myself from being accused of staging a cover-up. My problem was made worse because Tun Daim simply refused to defend himself. Perhaps sensing my embarrassment, he eventually offered to resign as Minister of Finance in 1991 after presenting the Budget in December of 1990. I reluctantly agreed. But I kept my options open and made it clear that I would call him if I needed his advice or participation in any way.

Naïvely perhaps, he had thought that Datuk Seri Anwar Ibrahim, who replaced him as Minister of Finance, would seek his advice. But Anwar never did. The recovery and rapid growth of the economy which Tun Daim had engineered continued after he retired. Malaysia’s GDP was growing at above eight per cent from 1988 and it seemed that this growth would go on forever.

But in 1997 the currency traders struck and the economy collapsed. Malaysia suddenly became very poor as the ringgit lost 50 per cent of its value. Imports became very expensive but our exports did not earn much to compensate. Foreign buyers of Malaysian products insisted on benefiting from the lower production costs due to our devalued currency.

Fortunately, Malaysia did not have heavy foreign borrowings, so it was not under pressure to seek the help of the IMF. Yet Malaysia’s problems were compounded by the fact, described elsewhere, that Anwar allowed himself to be influenced by the IMF and the World Bank. He decided to adopt the IMF formula for overcoming the financial crisis, cutting back on government expenditure to achieve a budget surplus, raising interest rates, and increasing non-performing loans by shortening the default period from six months to three months.

The National Economic Action Council (NEAC) set up in 1998—with members from Opposition parties, trade unions, the private sector and academics—proved too large and unwieldy to devise and oversee a response to our dire situation. With the currency depreciating every day and the economy imploding, I decided to work with a smaller team to monitor the situation on a daily basis. Tun Daim was among the people I appointed to this team. Anwar, as Deputy Prime Minister and Minister of Finance, sat on it as well. Later, when Anwar was indicted, Tun Abdullah Ahmad Badawi, as the new Deputy Prime Minister, became a member.

Tun Daim attended the daily morning meetings and his contribution was invaluable. I tested the idea of currency controls on him and asked for his support, and although he was not very vocal, he did not object, which was good enough. Once Anwar left the Government I had to act as Minister of Finance but I found the task burdensome. I just could not scrutinise all the papers as thoroughly as I should have, so I decided to ask Tun Daim to rejoin the Government. To give him some formal standing, he was made Special Functions Minister. One of his duties was to sit on the new economic and currency watch committee, which actually had no legal status. I just wanted a brains trust I could depend on. Some of its members were Ministers, some were not. Special Functions was a very vague title, but Tun Daim’s purpose was mainly to give advice.

He oversaw the implementation of the currency controls and dealt with the shareholders of the trustee companies used by CLOB. The shareholders were not allowed to dispose of their shares. With the stabilisation of the currency, fixed at RM3.80 to the US dollar, our economy recovered faster than those countries which had submitted to IMF control. The KLSE main index crept up from 262, its lowest during the currency crisis, to well over 800 in one year. With that, market capitalisation increased considerably and both the companies and the banks were less threatened by the high percentage of non-performing loans.

Despite his help, the old criticisms that had plagued Tun Daim in the past soon returned. He was repeatedly accused of lining his pockets and taking kickbacks from contracts. No clear evidence was ever produced, but once again the whispering grew louder and more spiteful. People came to see me to complain about him, and when I demanded evidence, they could produce none. Yet I could not easily defend him. Exculpatory evidence was no more easily found than the incriminating variety. I could produce no solid grounds for his defence. I never spoke to him about this because I knew what his answer would be.

Tun Daim, as usual, ignored all the talk about him. He must have heard the rumours but he chose not to reply. When the talk got to be too much and I could not bear it anymore, I arranged for him to resign. In the end what worried me were not only the rumours of cronyism but also tales of his supposed disloyalty. He was supportive during the financial crisis, at least in front of me. But Datuk Abdul Ghani Othman, the 
Menteri Besar
 of Johor, told me Daim called a number of the other 
Menteri Besar,
 telling them not to support my idea of currency controls. Since nobody else came with similar complaints I just discounted the story. But when it had all become too much, I didn’t accuse him of anything but sent word through a mutual friend that I wanted him to resign.

Tun Daim immediately wrote the letter and came to see me. He never mentioned what our friend had told him and only said that he wanted to resign. He had always said that he would step down any time I wanted him to do so and, true to his word, when I asked him he never questioned it. This was the second time he was stepping down. I did not like dropping people because it caused such upheaval and I did not like having to face emotional explosions. I tried to cushion their impact by working indirectly, through intermediaries. But it did not always work.