Malaysia: Crony Capitalism alive and well with Najib


September 20, 2015

Malaysia: Crony Capitalism alive and well with Najib

by Asiasentinel Correspondent

http://www.asiasentinel.com/econ-business/new-crony-scandal-malaysia-pm-najib/

In the middle of two gigantic scandals involving hundreds of millions of US dollars, the Malaysian government may be courting another mess, according to critics in Kuala Lumpur.

In mid-September, in an affair that is being widely talked and written about in Malaysia, the government-owned Prasarana Malaysia Bhd. (Infrastructure Malaysia Bhd) awarded a RM11.5 billion contract to extend the capital area’s light rail system from the city center to the port city of Klang on a so-called project-delivery-partner basis to the government-linked Malaysian Resources Corp Bhd, an engineering firm, and George Kent (M) Bhd — despite the fact that it was the third-highest bidder and was in fact nearly RM1.62 billion higher than the UEM consortium, owned  by the state investment fund Khazanah and a full RM2 billion higher than the lowest bidder, whose name hasn’t been revealed.

Salim F Din and Imran Salim

The new major shareholder and Group Managing Director of Malaysian Resources is (Tan Sri) Mohamad Salim Fateh Din (above). His son, Mohd Imran, is Executive Director. Salim is a close friend of Prime Minister Najib Razak’s, Rosmah Mansor.  Malaysian Resources has never done a rail project. Its expertise is in construction, not rail.

George Kent (M) Bhd. is headed by Tan Kay Hock, 67, who has bragged that he has been a golfing buddy of Najib’s for 25 years. His wife is said to be close to Rosmah and reportedly accompanies her overseas on shopping trips. In addition to George Kent, he is also chairman and CEO of his umbrella company Johan Holdings Bhd.

Tan Kay Hock

George Kent won a similar contract to construct the RM1.1 billion Ampang light rail extension project in 2012 despite the fact that for the previous 76 years, the company was known as a minor-grade manufacturer and supplier of water meters with an annual income of RM 30 million. Tan denied at that point that George Kent won the contract because of his links to the Prime Minister. The project’s completion was delayed by a year although George Kent officials said it wasn’t their fault.

Malaysia is notorious for this kind of crony capitalism. In 2014, before he was jailed on what many consider spurious sexual abuse charges, opposition leader Anwar Ibrahim calculated that more than 80 percent of the country’s richest businessmen – both Malay and Chinese – owe what Anwar called “a significant portion of their wealth and success to who they know, instead of what they know.” In 2014, The Economist ranked Malaysia third in its world rankings behind Russia and Hong Kong for the extent to which businessmen linked to government handouts owed their fortunes. 

Anwar blamed former PM Mahathir Mohamad for the rise of crony capitalism, with some justification. Much of it came as the former prime minister sought to create an entrepreneurial class of Malay businessmen.  At least 23 of Malaysia’s biggest companies were connected to UMNO, run by chief executives who made fortunes in a system designed to siphon away vast amounts of money in government contracts. However, many top Chinese businessmen also owe their fortunes to the process including Vincent Tan, who became one of the country’s richest men on the back of a contract awarded by Mahathir for sports gaming. Others include  the families of Lim Goh Tong, Yeoh Tiong Lay, Syed Mokhtar Al-Bukhary and Ananda Krishnan, who mostly built their fortunes through Mahathir’s actions.

 “George Kent has never built anything like this,” said a longtime local businessman in Kuala Lumpur. “UEM is the biggest infrastructure concern in Malaysia. It is government-owned. Its bid was far lower than George Kent’s. This makes no sense.”

A government-linked company that was considered a vehicle to raise money for the United Malays National Organization through infrastructure contracts, UEM was one of a stable of companies that fell on hard times after the 1997-1998 Asian Financial Crisis including Malaysian Airline System, the national flag carrier and light rail transit operators Projek UsahasamaTransit Ringan Automatik Sdn Bhd (PUTRA) and Sistem Transit Aliran Ringan Sdn Bhd. All were taken over by an asset-management company to clean up nonperforming debt and brought under the wing of Khazanah.

Whatever its precarious finances, UEM group has an undeniable record of construction success. It has built infrastructure projects including expressways, bridges, buildings, urban transits, water infrastructure, airports, hospitals, township and property development. It also has asset and facility management services.

The system George Kent will be called upon to build is extensive. The 36-km. line will include 25 stations along the route. The line, if completed as expected, is expected to serve 2 million people in the Klang Valley, transporting as many as 70,000 passengers per day.

Despite the price discrepancy of nearly 20 percent over the lowest bidder, the project owner, Prasarana Malaysia, told the Malaysian Insider the project is within the price range it established. Executive director Imran Salim of Malaysian Resources told the website the company had also offered a package options to carry out the project.

“We provide estimates, and then we gave them options. For instance if the government wanted it ready six months ahead of schedule, we will give them an option with additional machinery and manpower at a certain pricing. We gave many options (to choose from),” Salim told The Malaysian Insider in an exclusive interview.

 

15 thoughts on “Malaysia: Crony Capitalism alive and well with Najib

  1. I know Tan Sri Salim Fateh Din and his son, Imran Salim well. Tan Sri Salim is an astute entrepreneur who got to where he is now through sheer hard work and risk taking. –Din Merican

  2. Forget the cronyism and the racism. The fact is Najib is in power from sheer corruption and brute force. UMNO is incapable of removing him, completely paralyzed. Najib is a relatively benign dictator, should a real zealot, that Najib now surrounds himself with, rise to power, the consequences would be horrifying..

    UMNO is a CLEAR AND PRESENT DANGER TO THIS NATION – an ENEMY OF THE STATE NO LESS..

  3. Sorry Dato, Fateh did not have work “hard” to overcome the RM2 billion hurdle.

    As for Tan, the “water meter reader” has got bags of experience.
    George Kent (GK) delayed the current LRT Project by only 12 months (think of what the Liquidated & Ascertained Damges (LAD) for 12 months is).

    So don’t anyone say any thing about George Kent, he spends the LAD money saved wisely shopping!!

  4. 1. “Losers and friends of the losers will call it crony capitalism.” alie

    So we all presume you a “Winner”? Is that “Good”? Congratulations. Post service gratuity huh..?

    2. “Globally all entrepreneurs got to where they are today on the same principle.” TL Man

    Some maybe, definitely not all.
    So Bill Gates, Carlos Slim, Warren Buffet, Amancio Ortega, Larry Ellison (Top 5 Billionaires) are on principle Cronies? Crooks sometimes, but cronies? I doubt it.
    Only in Second and Third World Authoritarian countries can we have such wonderful ‘Entrepreneurs’ of Who-They-Know (sometimes in the Biblical sense too), and not What-They-Know, exist. Don’t tembak simply can or not?.Cuz ‘we the peeple’ are already getting painfully screwed – without additional burden of simpleton generalizations.

  5. In my experience the difference between third world cronyism and first world cronyism is that in third world cronyism , so called entrepreneurs start of as cronies while in first world cronyism these businesspeople become cronies.

    Innovation, creativity , hard work and luck, most often plays a part in the initial success of entrepreneurs in most functional democracies. The cronyism and manipulation of political power comes later.

    There are of course exceptions especially in states (in America) where there is systemic dysfunction and political leaders cultivate cronies to further political hegemony but generally with all the scrutiny that goes on, it is far more difficult to practise the overt cronyism found here, for example.

    Then of course there is the fact that generally cronies can actually do the job they get and the purpose of making money and satisfying whatever share holders/ stake holders is actually accomplished.

    For contracts which involves public money, this is even more of a requirement and all parties are careful to avoid scrutiny that comes with failure to discharge obligations or negligence or disregard in carrying out functions.

    The problem with Malaysia and especially the Malay business elite is that cronyism is considered a privilege (racial) and not the natural consequence of a capitalistic society.

    The above difference is what makes this problem extremely difficult to solve here in Malaysia.

    Others may have a differing view or experience.

  6. I am sure if the extra RM2 billion is scrutinised (and even the RM11.5b), provided the whole shebang is not ‘protected’ by the OSA, the astuteness of Mr Salim & Sons will become as clear as daylight. At RM320 million a km, it probably should help fund a lot of shopping trips for the well-connected, plus much left over to keep the down-liners sated well into the middle of this century.

    Its painful to be a loser. Especially if you have to put up with all the inconveniences, pot holes, the danger of beams and other miscellaneous bric-a-brac cascading onto ones head, detours, jams while such first-world infrastructure is put in place. Well, at least the 1.5 million Banglas to be imported will be gainfully employed, and add to the wealth of the other well-connected minions.

  7. /// TL Man September 20, 2015 at 8:29 pm
    Globally all entrepreneurs got to where they are today on the same principle. ///

    I think you a little confused because the phrases are terbalik.
    In most developed and functioning countries, contracts are won on the basis of know-how.
    In Malaysia and other corrupt countries, contracts are won on the basis of know-who – see the difference?

  8. Please also read in between the lines. But at the same time do not forget to read the lines. On the one hand M\many of us read the lines and forget to read in between the lines. On the other many of us read in between the lines and then deliberately forget to read the lines.

  9. This is what I have been saying in this blog, the NEP is good for all races at the top and useless in solving the problems faced by the poor and contrary to popular beliefs UMNO politicians are not racists but used racism to maintain power and consequently their wealth.Working hard alone wont make you the big bucks Dato Din but big connections can make you super rich most of the time.

  10. That is why economist are inclined to believe that the state should not enter into business. Yes, infrastructure projects such as roads power, water, education health, are few of the areas in which the state should be involved and use its judgement to ensure that the parts of them that can be privatized or incorporated are done so in an efficient manner and at least cost to the state.

    Today all over the world sovereign funds are playing a big role in developing economies. That is why you find that the steady rising curve on the economic graph is being replaced by half-yearly ups and downs. Add to that where the the person who accumulates equity and capital is punished by low interest rates and now threatened with zero interest rates and possibly a fee based on his deposits to keep to keep his money in the bank while the person who borrows is well rewarded with
    low interest rates you know that all is not well.

    Social engineering is not and will never be an exact science. There are always unintended consequences. Just take those countries that restricted population growth today. They want to increase the production of babies. The role of the state is to ensure that citizens are given the opportunity to be treated fairly taking into account that those on the top of the pile constantly justify their action based on the world is not fair theory.

    Money like love and religion can evoke very powerful emotions and in many cases can change your fundamental make up of a person. When there is too much cash around your imagination runs wild and you desire things that you may not use or need. That is why we have laws ever since Adam too that Apple. A man with power is too weak to be left alone to his whims and fancies.

  11. Abdul Jalil,

    Quote:- “Working hard alone wont make you the big bucks….”

    In terms of the abilities of scoundrous politicians to generate artificial racism for personal or Party ends, “working hard” to make a decent dignified living for the bottom 99% of the population of any race will see the death of such abilities.

    If 50% of the Malay population are comparable in standards of living as the Malaysian Chinese population, (by working hard, saving and investing), no way any politician can whip up any kind of racist agitations.

    So we should be talking about “working hard” for these people, not the 0.001% of super rich cronies if racism, or politically generated racism advantaging on poverty is to be a thing of the past in Malaysia.

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