THIS LAND IS OUR LAND, NOT FOR PRIVATISATION

Press statement by Kua Kia Soong, SUARAM Adviser 10 Oct 2018

Prime Minister Tun Dr Mahathir Mohamad has said the government may sell the people’s land and other “valuable assets” to private interests to pare down its debt. Such a quick fix argument is flawed and totally unacceptable. The reality is that we expect the new PH government to do the reverse and reclaim our public assets that have been privatised since the Eighties. 

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DON’T LET DR M PRIVATISE OUR NATIONAL ASSETS AGAIN

Press statement by Kua Kia Soong, SUARAM Adviser 14 July 2018

The common mythology is that Dr Mahathir came back from the “twilight of the gods” to save Malaysia from the kleptocrat Najra. Methinks he has a bigger agenda, an agenda that had been skewed by his successors, Badawi and then Najib. Who would have missed the fact that his attacks on his successors had started from the moment Badawi did not follow his agenda? His recent adverse remarks on Khazanah and how it has deviated from its original goals of temporary ownership of companies on behalf of Bumiputras has raised new fears that he is going to privatise Khazanah and take us back to the days of Mahathir style crony capitalism. We hope he will prove us wrong…

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PAKATAN HARAPAN MUST ADDRESS INSTITUTIONALISED KLEPTOCRACY

By Kua Kia Soong, SUARAM Adviser 16 October 2017

Now that the slugfest over kleptocracy is over, it is time for sober reflection on how we can prevent institutionalised kleptocracy in the Malaysian political economic system.

The present prime minister of Malaysia is mired in a scandal that involves hundreds of millions of dollars allegedly siphoned from 1MDB and Malaysian tax payers certainly hope that the culprits get their just desserts. Nonetheless, we expect Pakatan Harapan leaders to tell us how they will reform this political economic system so that these scandals do not keep recurring to bleed our coffers dry.

It does not give cause for putting our hearts at ease when former kleptocrats are sharing the moral high ground with the Pakatan leaders in an “Anti-Kleptocracy” rally.

Were other kleptocracy scandals besides 1MDB in recent Malaysian history even mentioned?

What reforms will Pakatan bring in to ensure they never happen again?

What will they do about the growing wealth concentration which is only one aspect of our increasingly kleptocratic system?

In case they have forgotten, some of the most fabulous financial scandals happened during Dr Mahathir’s term as prime minister.

Maminco-Makuwasa scandal 1981

Soon after Mahathir became the PM in 1981, the Maminco-Makuwasa scandal occurred, incurring a loss estimated to be RM1.6 billion or more. In this scheme, a RM2 company Maminco Sdn Bhd was set up and used to buy tin future contracts in order to push up prices on the London Metal Exchange. Maminco obtained financing up to RM1.5 billion from Bank Bumiputra. The tin price could not be maintained at the artificially high level for long and eventually the tin market collapsed. In the process, MAMINCO lost RM600 million of national funds. (The Star 15.10.84) In an attempt to hide the losses incurred by Maminco from the Malaysian public, another RM2 company, Makuwasa was set up. It acquired shares cheaply from funds allocated to EPF for bumiputras and sold them for a profit at market price. These profits made by Makuwasa were used to cover Maminco’s losses. In 1986 Mahathir publicly admitted that Makuwasa was created to recoup the government’s losses from the Maminco debacle and to repay its loans to Bank Bumiputra. (FEER 18.12.86)

BMF scandal 1984

The Bank Bumiputra Malaysia Finance (BMF) was also one of the earliest scandals when it surfaced in 1984. BMF gave out loans in amounts that exceeded its capital, losing RM2.5 billion in the process and a bank official sent to investigate the scandal was murdered in Hong Kong. In the 15 years following that, Bank Bumiputra had to be bailed out at least four times until it was merged with Commerce Asset-Holding Bhd to form Bumiputra Commerce Bank.

Bank Negara forex losses 1992

In the early nineties, the botched attempts by Bank Negara to wager vast amounts of its assets on the forex market left the country between RM16 billion to RM31 billion poorer after George Soros “broke the Bank of England” on 16 September 1992. Clearly a reckless (moronic?) gamble using Malaysian taxpayers’ money, Mahathir then called Soros a “moron”. Then Finance Minister Datuk Seri Anwar Ibrahim assured Parliament that it was only a “paper loss”. Former finance minister Tengku Razaleigh Hamzah reckoned that the amount of money Malaysia lost was closer to RM31 billion over the two years from 1992 to end 1993. (Aliran Monthly 1994:11, p.36) It was easily Malaysia’s biggest scandal at the time.

Perwaja steel 1996

It was Perwaja Steel which made accumulated losses of RM9.9 billion by 1996 and thus had to be privatized. But that was not all:

“An unknown portion of the RM15 billion or more that the company consumed was ripped off in various rackets and ruses. Although both internal and external reports confirmed that the company was bled white, almost nothing was done to bring the culprits to justice and recover the funds. Eric Chia, a former CEO, was arrested only after Dr. Mahathir left the prime minister’s office, and he was eventually found not guilty of criminal breach of trust involving the relatively paltry sum of RM76.4 million.” (Barry Wain, ‘Malaysian Maverick, p158)

These sensational financial scandals characterized the Mahathir era. They were the outcome of an ascendant capitalist class in charge of the state that was using “Bumiputeraism” as the carte blanche for maximizing its business exploits with little regard for accountability.

Privatisation scandals

The economic recession during the mid-eighties hastened the process of privatization with the passage of the Promotion of Investment Act 1986 in order to open up the economy to private investments. Thus, one state sector after another became corporatized followed by privatization: Telekom in 1987, followed by Malaysian Airlines (MAS), MISC (the shipping corporation), TV3, North-South Highway, Pos Malaysia, the electricity board (TNB), the railways (KTM) and HICOM (heavy industries).

In reality, the privatization policy involved UMNO-linked businessmen using personal connections to influence the allocation of those favors. Since that time Bumiputeras have been given, among other privileges, priority for government contracts, increased access to capital, opportunities to buy assets that are privatized and other subsidies. Those who benefited most from these privatization transfers were the UMNO state capitalists. (Gomez, E.T. 1990: 59-104)

From the start of the NEP, UMNO had begun to appoint trustees in charge of investments in corporations such as Fleet Holdings. This was a strategic move to exert control over the media besides generating revenue for its political fund. One of the largest and most controversial of the privatization projects was the North-South Highway, which was given to United Engineers Malaysia (UEM), over which UMNO had a controlling share. The company had apparently access to the plans long before the tender was called. (AWSJ, 18.1.88) Other controversial contracts involving UMNO conflict of interests included the National Sports Complex, a gas processing plant, privatization of pharmaceutical stores and services and the RM6 billion sewerage project. (Gomez, op cit p.129)

Mahathir was criticized for handing these multi-billion projects to UMNO controlled companies without any competitive tender. His response to these criticisms was bewildering and typically cynical:

“We agree…but who is going to pay for the RM360 million for the UMNO complex?” (The Star, 29.8.87)

The projected toll collection was estimated to amount to RM54 billion over the 30-year concession period, with the burden of toll to be borne by the public. (NST 10.12.92)

With the adoption of the Privatisation Master Plan in 1991, a total of 246 government companies and projects were targeted for transfer into private hands. Likewise the price paid for MAS (RM1, 202 million), MISC (RM1, 329 million), FIMA (RM189 million) and PEREMBA (RM171 million) was extremely low, while consultancy charges were high (RM400, 000 for privatizing MAS). (Bank Negara 1991:197)

Thus, the continued domination of these strategic and profitable industries by multinational companies meant further dependence on them for technology, managerial and financial knowhow. As a consequence, much of the industrial inputs have had to be imported which in turn further aggravated the outflow of capital and dependence. Mahathir’s vast privatization drive was accompanied by deregulation with further incentives provided for foreign capital. These included 100 per cent equity holding, tax concessions and others. Before long, manufacturing employment increased to almost 18 per cent by 1990. (43) Foreign capital investors were also allowed to bring in their polluting industries such as the storage of radio-active wastes by the “Asian Rare Earth” plant run by Mitsubishi in Perak. It led to a campaign of protests by the affected residents which caught the attention of the whole country.

The neglect of small Bumiputera entrepreneurs was highlighted by the Deputy Prime Minister Datuk Seri Anwar Ibrahim in 1996 when he criticized certain giant Bumiputera companies and government agencies for monopolizing certain industries and depriving small Bumiputera entrepreneurs of opportunities. He said these corporate giants would set up subsidiaries by the hundreds to take over all related aspects of the industry which they monopolized. (NST 30.6.1996)

Crony capitalism

Thus, Mahathir’s privatization drive was a boon for crony capitalists, especially those linked to UMNO. Malaysian tax payers were the losers since these erstwhile profitable public utilities were sold for a song to the private capitalists and we became captive to UMNO-linked monopolies, such as the North-South Highway operator. The lack of competitive tenders for many of these privatization projects not only penalized tax payers but also discriminated against the smaller Bumiputera entrepreneurs. The leader of the Opposition called this ‘piratisation’.

Mahathir’s mission to transfer state capital to private Malay capitalist hands was well on target. His justification for doing needed no accountability:

“The best way to keep the shares in Bumiputera hands is to hand them over to the Bumiputeras most capable of retaining them, which means the well-to-do.” (FEER 13.4.89)

Thus, in the mid-1980s, Tajudin Ramli’s Technology Resources Industries was given an effective monopoly of the mobile-phone market. Then he was allowed to buy state-owned carrier Malaysia Airlines for 1.8 billion ringgit in borrowed funds. Invariably, Umno-linked corporate entities would get the benefit of the mandatory 30 per cent of share allocation for bumiputeras during any corporate public listing or restructuring:

“With privatization, too, UMNO was used as a vehicle to transfer government holdings to private or semi-private ownership, mostly for the benefit of the same clique.” (Barry Wain, op cit p.114))

The extent of UMNO’s investments was not clear because under the Societies Act 1966, UMNO was not allowed to be in business:

“To conceal its assets, the party used the common practice of nominee companies or executives, or alternatively, trusted individuals, prominent businessmen who surreptitiously held stakes in various companies on UMNO’s behalf.” (ibid, p.115)

During Mahathir’s tenure as Prime Minister, three main UMNO officials focused their attention on building “Bumiputera capitalists”. This was facilitated after UMNO was declared illegal in 1988 and its assets were required to be sold off. The three were Mahathir himself, Daim Zainuddin who was his finance minister during two phases in Mahathir’s term and thirdly, Anwar Ibrahim who, before his downfall in September 1998, was second in power to Mahathir. All three had their respective corporate connections. Fleet Holdings under Daim, took over TV3, Faber Merlin, Cold Storage and CIMB: (Peter Searle, ‘The Riddle of Malaysian capitalism 1999: 106)

“By the mid-80s, the number of companies had almost doubled, extending the Fleet Group’s reach into construction, plantations and management services as well as print and electronic media, telecommunications, banking, insurance, retailing, property and hotels.”

In 1993, during the power struggle within UMNO, Halim Saad had to relinquish Renong’s interest in TV3 and New Straits Times Press to businessmen linked to Anwar Ibrahim since Anwar wanted control over the media in his bid for the deputy presidency of UMNO. It provoked an academic observer, Terence Gomez to ask:

“How could a company with only RM100,000 paid-up capital seize control of an RM800 million media empire overnight?” (Gomez, ET, ‘Political Business’ 1994:159)

With the overnight affluence among the UMNO leaders, money politics became the norm in the party elections and the stock market was blatantly manipulated to raise funds for the political campaigns: (Aliran Monthly 1993:3(3)

“Amidst speculation about a snap general election in the second half of 1989, for example, the share price of several UMNO-linked companies rose spectacularly for no other apparent reason. Kinta Kellas PLC, Time Engineering and United Engineers soared between almost three- and eight-fold within six months.”

The periodic power struggles within UMNO often produce unexpected revelations of great interest to the people. Thus, in November 1994 it was revealed that relatives of prominent UMNO politicians had been profiting from the preferential share-allocation scheme originally designed to help ordinary Malays under the NEP. Among these were Mirzan Mahathir, son of the Prime Minister; Marzuki Ibrahim, brother of the Deputy Premier Anwar Ibrahim, and Fazrin Azwar, son-in-law of International Trade and Industry Minister Rafidah Aziz, who happened to chair the allocation committee.  (Asiaweek 30.11.94) This information was only leaked to the public by Rafidah Aziz because she wanted to show that it was not just her son-in-law who had gained from the allocations.

Once Anwar Ibrahim was regarded by Mahathir as a potential rival and from the time of Anwar’s demise at the hands of Mahathir in 1998, the firms linked to the former deputy Prime Minister were either taken over by pro-Mahathir management or had switched allegiance to Mahathir. Likewise, after the Mahathir-Daim split in 2001, Halim Saad lost control of Renong. This has typified the vagaries of power struggles in UMNO and the economic consequences for these Bumiputera capitalists.

After Anwar Ibrahim was arrested, the UMNO-owned New Straits Times began to spill the beans regarding his cronyism. The newspaper revealed that one of his allies, former Penang UMNO Youth Chief, Abdul Rahim Ghouse was a director and/or shareholder of 44 companies. (NST 6.12.1998) This was followed a few days later by revelations of other aides and allies of the former Deputy Prime Minister with links to some 300 firms including Anwar’s former private secretary Datuk Nasaruddin Jalil (112 companies); former political secretary Datuk Sarit Yusoh (80 companies); another Anwar ally Datuk Ahmad Saad (53 companies); Senator Datuk Ghazi Ramli (43 companies); former Negri Sembilan UMNO Youth chairman Ruslan Kassim (50 companies) and UMNO MP Ruhanie Ahmad (42 companies). Anwar’s own father, Datuk Ibrahim Abdul Rahman was reportedly on the board of more than 50 companies. (NST 8.12.1998)

Favoured Bumiputera entrepreneurs

Mahathir’s favoured “Bumiputera entrepreneurs” included Tajudin Ramli, Yahaya Ahmad, Halim Saad, Samsudin Abu Hassan, Wan Azmi Wan Hamzah, and others. All these nominees were presumably Umno’s nominees who were holding all these business interests on behalf of Umno. Mahathir’s own children didn’t do too badly either – In 2011, Forbes named Mokhzani Mahathir as the 15th richest Malaysian, worth US$560 million. (Forbes Asia March 2011)

Privatisation of public services included multi-billion projects such as the North-South Highway, water and sewerage, the Bakun dam, Light Rail Transit System and the National Train Service (KTM). The negotiated tenders mainly benefited companies linked to these favoured bumiputera capitalists. Some, for example Renong in the LRT Phase 2 project, was also given ‘soft loans’ paid for by taxpayers. (AWSJ 13.11.2003) The public pension fund, Employees Provident Fund became a convenient source of capital for private companies such as STAR, the operator of LRT Phase 1, as well as the independent power producers.

During the financial crisis of 1997, the state provided support for favored firms linked to the “Bumiputera capitalists” after the imposition of capital controls, such as reflationary measures which included cutting interest rates and making credit more readily available to these fledgling firms.  Banks were also encouraged to lend more, and to bail out troubled firms and a new expansionary budget was introduced in October 1998.

Mahathir’s son, Mirzan had shipping interests that had to be bailed out in 1998 with RM1.7 billion of Malaysian taxpayers’ money. In December 2000, the government bought back the 29% stake held by Tajudin Ramli in Malaysian Air System (MAS), the operator of Malaysian Airlines. The price was reported to be about twice the market price, thus effectively bailing out Mr. Tajudin.  At the same time, large companies, such as Renong and the Lion group were allowed to repeatedly roll over their debts with government help.

When Abdullah Badawi took over from Mahathir in 2003, he had to deal with a railway privatization deal that had been negotiated privately without open bidding and public disclosure. It had gone to a businessman who had no less than RM22 billion in government contracts in the past six months, including 60 per cent interest in the RM6.4 billion Bakun Dam project.

Mahathir was unapologetic about using state largesse to profit these favoured Bumiputera capitalists. In any event, the Anti-Corruption Agency came under the Prime Minister’s Department and had no independent status. His response to queries and criticisms of these policies was typically evasive:

“I don’t want the Malays to ask too many questions about the wealth of their fellow Malays…Why don’t we ask how the non-Malays acquired their wealth?” (Zainuddin Maidin ‘The other side of Mahathir’ 1994:240)

Non-Bumi crony capitalists

After Mahathir retired, the issue of crony capitalists in Malaysia became topical after Francis Yeoh of YTL made his pitch about how this had sullied the business climate in Malaysia. It led to many indignant responses including Dr. Mahathir’s who insinuated that Francis Yeoh himself had been a “crony capitalist” who had made his break as an Independent Power Producer during the energy crisis of the early nineties.

Mahathir, in his capacity as finance minister, had awarded a gambling licence to Ascot Sports, which was controlled by one of his favoured non-Bumiputera capitalist friends, Vincent Tan Chee Yioun. It allowed Ascot Sports to conduct nation-wide off-site betting on local and international sports events for 20 years that would generate annual turnover of RM1 billion. (AWSJ 25.10.2004)

In truth, non-Bumiputera crony capitalists have been instrumental in perpetuating Malaysia’s New Economic Policy. This, in turn, has provided the UMNO leaders with the defence that the NEP has also benefited the non-Bumiputeras. Thus, it was not unexpected that when he left office, Mahathir left the country in deep red:

“Overspending reached its peak near the end of his tenure, when the government blew almost its entire RM110 billion development budget for 2001-2005 in the first three years. In his last budget speech, Mahathir added a further RM50 billion for development in 2004-2005. Abdullah Badawi inherited a budget deficit for 2003 of 5.5 per cent of GDP.” (FEER 4.3.2004)

His privatization goal had likewise gone awry:

“The list of the top 20 publicly-listed firms in 2000 plainly reveals the dismal failure of Mahathir’s goals. Of his industrialisation endeavors, the cement industry is now well embedded in the hands of foreign firms, the steel industry is in the dock, while the car project is mired in controversy, loudly criticised for being privy to protection over and beyond what should be accorded even to a national project. Malay capitalists were quickly created, within a decade, only to disappear even faster because selective patronage had engendered little independence or competence to deal with competition or crises. Government ownership of half of the top 20 companies was tangible evidence that privatisation had failed.” (Gomez, ET, Mkini 25.8.2005)

Petronas, Mahathir’s cash cow

Since the seventies, the NEP has been largely funded by the exploitation of offshore oil which, by 1985 contributed 26 per cent of all government revenues. Oil registered a 29.6 percent share of major commodities export, with palm oil contributing 10.4 per cent while rubber and tin had declined to 7.5 per cent and 4.2 per cent respectively.

Tengku Razaleigh Hamzah, or Ku Li, who was the founding chairman and chief executive of Petronas, has recently been quoted as saying that Putrajaya had been using the oil and gas firm as a cash cow, especially in bailing out government-linked outfits of financial trouble. (Malaysian Insider 4.4.2014) He said that since its inception in 1974 and until 2011, Petronas had paid the government RM529 billion in dividends, taxes, petroleum proceeds and export duties. He said the reliance of Petronas to help government-linked outfits out of financial trouble had been going on since 1985.

A finance minister from 1976 to 1984, Ku Li said Petronas had rescued Bank Bumiputra with a RM2.5 billion bailout in 1985 and again in 1991 when it coughed up another RM1 billion. He said Petronas also had to rescue the financially ailing Konsortium Perkapalan Berhad for RM2 billion in 1997. He added that Petronas was made to underwrite the construction of the Twin Towers, located in the heart of Kuala Lumpur, for RM6 billion and the building of the extravagant Putrajaya, the administrative capital of the Federal Government, for RM22 billion:

“This amount could have been used more productively to fund a national pension programme for Malaysians, as has been done by a certain Scandinavian country.”  (ibid)

Ku Li said the exorbitant amount of the bailout and construction of these projects that was forced onto Petronas had deprived the company of the much needed cash build-up for reinvestment, which would ensure its business sustainability. According to him, since 1997 the subsidies to the national power supplier, the independent power producers and some other non-power outfits amounted to RM136.5 billion. And while these power producers continued to enjoy subsidized fuel price, petroleum subsidy to the consumers – which purportedly cost the government RM14 billion in 2011 – was partly discontinued. (ibid)

All in all, Barry Wain claimed that during his term in office from 1981 to 2003, Mahathir lost or squandered RM100 billion through mismanagement, corruption and financial scandals. If it had not been for the fortuitous outflow of oil, most of the prestige projects associated with the Mahathir era would not have been possible. Still, the profligate spending on these projects has left little for reinvestment and social services for the present and future generations.

Thus, Malaysians must ask the leader of Pakatan Harapan: If you want our vote, we need to know what specific reforms you are going to put in place to ensure that institutionalised kleptocracy that we have seen since the era of Dr Mahathir does not happen again?

REVISITING MAHATHIR’S FLAWED TRANSPORT RECORD

By Kua Kia Soong, SUARAM Adviser 24 July 2017

Now that Dr Mahathir is the chairman of Pakatan Harapan, his former critics who are now his allies seem to be mouthing sweet nothings into his ears while ignorant sycophants are even calling him the ‘father of Malaysian public transport’!

Really? Concerned Malaysian historians need to start telling it like it is. Allow me to remind the country of the litany of woes we have suffered under Dr Mahathir especially the decades of traffic jams while fighting for a good public transport system in our country.

Malaysia is supposed to be on the final leg of the sprint toward attaining high-income status in 2020 only to be reminded by the World Bank (WB) that it is time for us to get serious about developing a more integrated urban transport system in our major cities. Today, Penang, Johor Baru and Kota Kinabalu are facing similar challenges as those in Kuala Lumpur, says the World Bank. Only 17% of commuters in Kuala Lumpur use public transport compared to 62% in Singapore and 89% in Hong Kong. Residents of Greater Kuala Lumpur spend more than 250 million hours a year stuck in traffic. The total cost of traffic in Greater Kuala Lumpur is estimated at 1.1 – 2.2% of GDP in 2014. (WB)

Failed opportunities

The quality of public transport continued to worsen as the non-accountable (non-elected) municipal councils and the property and motor industry barons had their day. More than enough taxpayers’ money had already been spent on endless studies of the transport problem. When the Japanese International Cooperation Agency (JICA) was contracted to undertake the Kuala Lumpur Transport Master Plan in 1997, it was the EIGHTH such study since 1963! (The Sun, 20.8.97)

“This study was clearly biased towards capital intensive road building projects. Policies toward encouraging the use of public transport and the restraining of private transport use during peak hours were noticeably absent.” (ibid)

Subsequent plans did call for a total transport plan including adequate public transport services but somehow, the political will was absent. In 1990, Japan’s Overseas Economic Cooperation Fund warned that Malaysia faced critical bottlenecks in its infrastructure if nothing was done to reform our transport system. (FEER, 5.4.90) By the mid-1990s, there was still no national transport policy in Malaysia.

As early as 1992, a Kuala Lumpur Transport Blueprint was drafted by an offshoot of KTM, Relk and a Canadian transport firm, Delcan. Its aim was to create an integrated bus-rail transport system for Kuala Lumpur by 1996. The plan involved harnessing an existing network of barely used railway tracks that criss-cross the inner city; foreign-designed rail cars and buses would be assembled in Malaysia and it would all cost a modest RM2 billion. The plan also involved including commercial outlets in the new rail stations that would produce profits to defray construction costs. (Doug Tsuruoka, FEER 29.10.92:68) Like the other plans, this blueprint never saw the light of day…

Structure Plans that got overridden

The first Kuala Lumpur (KL) Structure Plan was drafted in 1984 and intended for use until 2000. The strategy was to balance the development in KL through a moderate growth rate in the city centre and a rapid development of new growth centres Wangsa Maju, Bandar Tun Razak, Damansara and Bukit Jalil. (NST 11.3.2003)

As expected, instead of being followed, this first KL Structure Plan was “overtaken” by market developments and the new KL Structure Plan 2020 had to redefine the planning direction:

“The preparation of the Kuala Lumpur Structure Plan 2020 is undertaken in the conviction that most of the policies of the 1984 Kuala Lumpur Structure Plan (KLSP 1984) need to be revised due to unprecedented economic boom and rapid changes in the last 20 years. Some of the major developments that have taken place were not anticipated in the structure plan. Development such as the Multimedia Super Corridor (MSC), the Kuala Lumpur International Airport (KLIA) at Sepang and the transfer of federal government administrative functions to Putrajaya are anticipated to stimulate and influence future changes and growth.” (KL Structure Plan 2020, www.dbkl.gov.my/pskl2020/english/introduction/index.htm)

Bus service as chaotic as ever

In December 1993, the government’s vision of an efficient public transport system was launched through the mid-term review of the Sixth Malaysia Plan. It was announced that the bus companies in Kuala Lumpur would be merged in 1994 and a better bus service could be expected. When the Seventh Malaysia Plan was tabled the following year, the government announced that the bus services in the city would be operated by two consortiums, Intrakota Komposit Sdn Bhd and Park May Bhd. Intrakota took over the mini-bus services that had served Kuala Lumpur since the seventies and replaced them with new buses. Before long, the buses, drivers’ attitudes and the general bus service deteriorated. By end 2000, Intrakota had accumulated losses of RM339 million, partly the result of competition from other bus companies. (Nadeswaran, The Sun, 18.12.2001)

When the 21st century dawned, 13 bus companies in all were operating in the capital and the bus service was as chaotic as ever:

“At least two companies have sold their shares to politically well-connected individuals, whom they believe will be able to stave off any attempts to create the consortium.” (R. Nadeswaran & G. Shamala, The Sun, 16.12.2001)

On 29 November 2003, DRB-HICOM sold its Intrakota Komposit Sdn Bhd assets to state-owned Syarikat Prasarana Negara Bhd for RM177 million. Intrakota had suffered losses of RM450 million since the 1997/98 economic crisis from competition with the LRT systems, other bus services and unprofitable routes. (NST 8.12.2003)

Park May was a unit of the UEM-Renong group. Despite the backing of this conglomerate, it had been losing money since 1997. Among its problems were excess capacity, competition among the city bus operators and high maintenance cost. In late 2003, the leading express-bus operator Konsortium Transnational Bhd (KTB) took over debt-laden Park May.

 The National Car & Highways Projects

One of Mahathir’s earliest megaprojects, the national car was promoted at the expense of public transportation. The proportionately huge public development allocation for roads and highways paralleled the expenditure on the National Car Project.

 The number of registered vehicles in Kuala Lumpur more than doubled in seven years from 327,602 in 1985 to 662,717 in 1992. As a result, more than 150,000 man-hours were lost every day by motorists in the Klang Valley. Furthermore, the ratio of people using public transport compared to private vehicles had declined from 40:60 in 1980 to 30:70 in 1990. (NST 16.11.94) By 1998, there were 8.9 million motor vehicles on our roads of which 4.5 million were motorcycles, 3.5million were cars and the remainder being utility vehicles, trucks and buses. (1998 Environment Quality Report)

In recent years, residents in the Klang Valley have seen the rampant building of highways which have accompanied the national car project. In other environmentally conscious cities, there would have been protests over their indiscriminate construction with no heed for the environment, aesthetics or the peoples’ right to the commons and public footpaths.

A sustainable solution that ensures both the preservation of Malaysian nature and enables ease of mobility for majority of urban dwellers lies in creating an effective integrated public transport system, and not endless highways and tunnels for the driving pleasure of the middle and upper class. It is also time for Kuala Lumpur to emulate Singapore and London by limiting congestion by imposing entry charges for vehicles entering the city centre at peak hours, instead of dreaming up one populist measure after another.

The excuse most frequently heard for not implementing traffic restraining measures in the Klang valley is that there is no efficient public transport alternative. This is not convincing when we see that in other cities such as Singapore, Hong Kong and Tokyo, such policies were already in place before the completion of their mass transit systems. Public transport in the Klang Valley has been further undermined by high motorcycle ownership and use (an offshoot of the national car project) which has further contributed to the serious air pollution in the city. (Barter, A.R.P., 1997:9)

Failure of the Privatisation Policy

Dr Mahathir launched the privatization policy during the mid-eighties recession. The financial crisis was worsened by the fact that we had an over-developed public sector. This had come about because after 1971, the New Economic Policy had created more and more Bumiputera trustee enterprises and agencies. The public sector development expenditure for the Fourth Malaysia Plan (1981-85) was RM80 billion. Out of this, 34.5% was accounted for by the Non-Financial Public Enterprises, which were mainly Bumiputera trustee enterprises.

When I was Member of Parliament for Petaling Jaya from 1990 to 1995, I brought up many of these issues. Thus, the Government had certainly been forewarned about these problems. Many of the inside stories of the numerous contracts have been hidden from the public through the years involving corruption and the lack of accountability resulting in delays and inflated costs of these transport projects.

The failure of having a seamless integrated public transport system in the capital city is the result of UMNO’s obsession with its Bumiputeras-only patronage contracting and Prime Minister Mahathir Mohamed’s crony capitalism that would hand over these contracts only to the chosen Bumiputera trustees. Because of their lack of experience in these fields and the failure to secure bank financing, these projects were continually delayed. This in turn led to ever-increasing costs.

Failed Light Rail Systems

A Light Rail Transit (LRT) implementation study for Kuala Lumpur was first launched in 1984 by then Minister of Federal Territory Shahrir Abdul Samad. At the time, financing was a major question. The study was undertaken by a Belgian-French consortium. This LRT system was to be powered by overhead electric lines or catenaries and would cover 18 stations between Petaling Jaya and Sentul. The RM697 million project was targeted for completion in 1988. Unfortunately, the project did not take off. Along the way, the monorail was also proposed and was to have started in 1990. (Business Times, 18 December 1996).

The first phase of the Light Rail Transit (LRT) project comprising 12 km was privatized in December 1992, by which time its cost had increased five times the original estimate. It was awarded to Sistem Transit Aliran Ringan (STAR). The Renong group was given the franchise to undertake the second LRT project which was scheduled to be operational by the end of 1997 before the start of the Commonwealth Games in 1998.

In 2001, the government took over the light rail systems Putra and Star because they were having difficulties servicing their loans. At the time, the bus, LRT and KTM Komuter systems were not integrated at all and feeder buses at LRT stations were inadequate. The Commercial Vehicles Licencing Board had refused Putra’s application to operate a feeder bus service and the local authorities were not helpful in providing the necessary facilities for bus stops. (ibid)

When we look at STAR’s LRT project, how does a project that had failed for seven years to get any financing suddenly become “financeable” by EPF? STAR, after all, started as a 2-dollar company. STAR had claimed capital returns of as much as 18 per cent. But what penalty would it be liable should this not be possible? What assurances did EPF give Malaysian workers that this would not happen? Furthermore, as construction was not awarded under open tender, the private contractor could cream off a high proportion as construction profit, thus pushing up costs. To recover these high costs, fares had to be raised and we ended up with an LRT system that was not affordable even with government subsidies.

By the end of 1996, the first phase of the LRT was six months behind schedule because the mass transit system was facing some serious technical problems not easily corrected: “The delay could be a costly embarrassment, not just to the government but to the LRT’s British civil contractors – especially since Malaysia is also experiencing difficulties with fighter jets and frigates ordered from the British.” (Asiaweek 18. 10.1996)

Considering such staggering amounts of public subsidies, how can the government claim that privatization has saved the country millions in state revenue? Besides these soft loans from Government coffers, these private monopolies have also relied on Malaysian workers’ Employees Provident Fund (EPF) to finance their projects. Apart from the transport sector, EPF funds have been used to back such privatized projects as the Independent Power Producers (IPP) Segari power station at Lumut, the Kuala Lumpur International Airport, Bakun HEP, the Sewerage project as well as the Light Rail Transit (LRT).

But the ultimate subsidy that taxpayers provide these privatized industries is when we have to bail out ‘lame duck’ companies such as BMF, Perwaja, Ekran, UEM, MAS, the list goes on. Two LRT operators had to transfer the rail lines to the government-owned Syarikat Prasarana Negara Bhd in 2002, while the monorail was transferred in 2007. These operators had found themselves in financial distress after failing to make sufficient returns on the operations to finance their debts incurred in the construction and operational demands. (Star 26.6.2010)

Monorail too had to be bailed out

Kuala Lumpur City Hall first announced the monorail project in January 1990 after it had been approved by the cabinet in June 1989. The 14-km, 22-station system designed to carry more than 34,000 passengers a day through Kuala Lumpur’s commercial centre was estimated to cost RM143 million and was scheduled to begin in June 1990. This was then postponed to May 1991 because the city’s mayor complained that tenders submitted for the preparatory work were too high. The main contractor was a company, BNK, which had no experience in such urban transport projects and had reported a loss of RM224,660 in the year up to 31 March 1990. (Doug Tsuruoka, FEER, 26.9.91)

The RM1.18 billion KL Monorail project finally started in 1997. It was to be built by a consortium of Japanese companies including Hitachi Ltd and Toyo Engineering Corporation but the financial crisis of 1997 stalled it. Work only resumed in 2000 with financial assistance from the government, lending the company RM610 million in addition to RM300 million soft loan given in 1998.

KL Monorail Systems began operations in July 2002, providing an additional 8.6km of transit network stretching from Jalan Tun Razak to Jalan Tun Sambanthan near KL Sentral, interfacing with STAR-LRT at the Titiwangsa and Hang Tuah and Putra-LRT at Dang Wangi and KL Sentral stations.  Unfortunately, its huge elevated concrete infrastructure served to screen many of Kuala Lumpur’s oldest heritage sites such as the Guan Yin temple and the Chen ancestral temple.

Prasarana had to purchase the monorail after it faced bankruptcy in 2004 and gave operating rights to their subsidiary Rapid Rail Sdn Bhd. The light rail projects also faced problems when Putra defaulted on interest payments totaling RM44.6 million after its revenue could not cover its expences. (Business Times, 28.10.2000) The LRT operator STAR also faced closure when it accumulated debt of RM1 billion at the end of 2001. Its creditor Commerce International Merchant Bankers Berhad (CIMB) applied to wind up the company on 2 April 2002. (Star 3.4.2002) Rapid Rail Sdn Bhd was established to place all three rail operators – STAR, PUTRA and KL Monorail – under one administrative umbrella in 2004.

The KL Monorail was not able to meet even half its ridership target of 85,000 passengers a day by 2003 because it was not conveniently linked to the other two mass transit systems, Putra and Star. Passengers had to alight and walk considerable distances between systems to get to their destinations and feeder buses were not available at many stations. By 2005, Putra’s daily ridership was 170,000, Star’s was 100,000 compared to Singapore’s MRT achievement of two million passengers a day. (Malaysian Business, 16.5.2004:22) The planned Putrajaya monorail costing RM400 million to be built by MTRANS Holdings Sdn Bhd was shelfed in 2004.

Mahathir and the failure of Malaysia’s public transport

From the foregoing, it is clear that Mahathir failed to implement the necessary reforms for an integrated and efficient public transport system in the country because of his obsession with the national car project and privatisation. He does deserve the epithet ‘Father of neo-liberal capitalism in Malaysia’ after witnessing the spate of privatisation of our national assets and his promotion of crony capitalists in the country.

This is just to put the record straight. We must now ask, which political coalition can provide an efficient, affordable and sustainable public transport system in Malaysia and how can long-suffering Malaysian consumers be empowered in the process?  Such an important public service such as public transport system needs state support, regulation and intervention to operate efficiently and fairly; power must be devolved to regional transport authorities which then integrate all rail, bus and transit systems; certainly, local government must be elected by the people to ensure accountability and efficiency in the provision of public transport services, environmental protection and regulation of city traffic. Last but not least, Malaysian workers’ pension fund (EPF) should not be used by businessmen who have failed to obtain financing from banks.