Temasek Padu is UMNO’s new corporate vehicle

November 26, 2009

The Round Robin goes on in UMNO

According to The Straits Times, Singapore, UMNO is reorganising its corporate assets in a little-publicised exercise, which will see new players emerge as chief nominees of the political party’s growing business interests.

Senior UMNO officials and bankers involved in the reorganisation told The Straits Times that the party’s assets, which are now held through several investment holding companies, will be regrouped under a little-known private entity called Temasek Padu. The reorganisation process is part of a broader revamp of the party’s affairs by Prime Minister Datuk Seri Najib Razak since taking over the premiership and the party leadership in April this year.

UMNO officials and bankers said that the corporate reorganisation exercise is being spearheaded by the premier’s trusted ally, current Ambassador to the United States Datuk Jamaluddin Jarjis, and corporate lawyer Zulkifly Rafique, who is a founding partner of law firm Zul Rafique & Partners.

“Current nominees of the party’s assets have been asked to surrender and transfer the holdings to the new trustees of UMNO,” said one senior UMNO official familiar with the corporate revamp who spoke on condition of anonymity.

A senior executive at Zul Rafique & Partners said that Zulkifly was travelling overseas and could not be reached for comment. Jamaluddin also was not available for comment. Because a large chunk of UMNO’s corporate assets is in the form of equity holdings in companies that are not listed on the Malaysian stock exchange, the total value of the party’s assets is hard to determine.

Also, public declarations of changes in the shareholding of private companies are not required under local laws. Records lodged at the Registrar of Companies list Zulkifly and a fellow lawyer from his firm, Tunku Alizan Raja Muhammad Alias, as equal shareholders in Temasek Padu.

UMNO’s corporate holdings have long been a subject of keen interest among bankers and foreign investors because of the party’s dominant role in the government and its control over the national economy.

The party has been in business since the late 1960s. But the corporate expansion went into overdrive only after Tun Dr Mahathir Mohamad assumed the premiership and the UMNO presidency that comes with the post in 1981.The former premier appointed his trusted lieutenant, Tun Daim Zainuddin, as UMNO’s treasurer in 1984 and charged him with expanding the party’s business interests.

Daim, who was appointed finance minister shortly afterwards, lost little time awarding large state contracts, such as the project to build and operate a toll road stretching the length of Peninsular Malaysia, to corporate affiliates of the party under Malaysia’s privatisation programme.

The party’s vast corporate holdings were controlled through business nominees and were grouped under publicly listed Renong, which had interests in banking, stockbroking, toll roads, hotels, property development and oil and gas. But Renong’s corporate expansion was largely funded by debt, and when the regional crisis struck in mid-1997 the conglomerate ranked as the country’s largest corporate debtor with roughly RM20 billion in borrowings.

After repeated attempts to restructure the mountain of debt owed to local and foreign banks failed, the government was forced to take over Renong in mid-2001 and the group still remains under government control.

Before Dr Mahathir stepped down in November 2003, he handed over assets in the form of shares and cash mounting to just over RM1 billion to his successor Tun Abdullah Ahmad Badawi, according to UMNO officials. Abdullah appointed banker Abdul Azim Zabidi as the party’s treasurer who rationalised UMNO’s corporate holdings under several investment holding companies such as Realmild, Pesaka Consolidated and Temasek Padu.

The party’s main corporate nominee was businessman Latif Abdullah, who enjoyed close relations with Abdullah, who UMNO officials and bankers said will soon surrender his holdings in Realmild to the party’s new business nominees in Temasek Padu.

Najib dropped Azim as UMNO treasurer and appointed close ally Mohd Husni Hanadzlah, who is also the country’s second finance minister, to the powerful party position.

Under the corporate reorganisation plan initiated by Najib, Temasek Padu will take over Realmild’s holdings in medical services company Radicare and Labuan Shipyard & Engineering, a shipyard fabrication company.

Temasek Padu will also take over the equity interest held by Pesaka Consolidated in a power-generating company in Perlis, UMNO officials and bankers close to the plan said.

Documents lodged at the Registrar of Companies show that Temasek Padu, which was incorporated in 2005, has majority stakes in companies such as Subang Skypark, a company which operates the airport terminal on the outskirts of Kuala Lumpur, a property holding company called Pandan Village, engineering concern Mahkota Technologies and Canas Unggul, a private company that distributes computers and electronic products in Indonesia.