I have already demonstrated that there was a PRECEDENT case of political conspiracy when Dr. Mahathir engineered the removal of Tun Salleh Abas in order to ensure that he would remain head of UMNO and Prime Minister. This case clearly demonstrates that Dr. Mahathir is CAPABLE of such a feat. (Please see my earlier posting on Conspiracy).
Having proven that Dr. Mahathir is capable (because he's done it before), the next question to be answered is WHY would he do so.
The simple answer is that Anwar Ibrahim could no longer be trusted by Mahathir and Daim to keep their secrets and Anwar was about to expose these "secrets" in his bid for the UMNO presidency in 1999. While there are a number of skeletons in Mahathir's and UMNO's closet, the biggest is RENONG. And Anwar could no longer "play along" and watch this duo from Kedah steal the rakyat's wealth.
Before I get into details, let me first say that, Anwar had the right intentions in UMNO. He was seeking reform. But anyone familiar with the mechanics of UMNO knows that UMNO runs on a feudalistic system where the leader is absolute, and dissention or even differences of opinion areSimply not tolerated. He had to "tow the party line" and start small: Low-cost housing, rural welfare, and even tightening the Anti-Corruption regulations when he was acting Prime Minister. Even with that, he was already stepping on a lot of (self-interested) toes. Had he been more vocal and confrontational, he would have simply been kicked out. And there would go the only chance we have at a candidate who can "cleanse" the system. He took the right approach during his 16 years in UMNO, working from within: Evolution, not Revolution.
However, when the economic crisis kicked in, Dr. Mahathir decided to take some dramatic, selfish actions to preserve his hold on power that Anwar simply could not tolerate any longer. Dr. Mahathir had crossed the line...and the protege had to be sacrificed... By the 1997 UMNO general assembly, there were already 10 UMNO "veterans" who envied Anwar. They felt they deserved the Prime Ministership more than he does. After all, they were in UMNO longer, they were more qualified (they looked down at Anwar being only a Malay Studies graduate), and they were even jealous of Anwar's popularity, charisma, and good looks. (Let's face it, he is so much more handsome than all of them combined - to deal with their own insecurities, they had to resort to using their money and power to get young girls to satisfy their egos. (Daim, Sabaruddin Chik, Mohamad Rahmat, Megat Junid, and Najib to name a few). They were all to willing to go along witl Mahathir's scheme.
Anyway, back to the main issue.
To understand why Anwar had to be ousted, you need to understand Dr. Mahathir's basis of power. Like every power-monger in the world, it is simply: MONEY. Mahathir has made UMNO a multi-billion enterprise in order to finance his political campaigns, and use it to lure whoever he needs to do his bidding, be they judges, police, or heads of Economic Planning Unit. Remember: Dissention is not tolerated. Mahathir justifies this use of money because he does not use it for himself, but to keep him in power, and since he believes that he is doing the people good, then the use of money is justified.
There are several examples of Mahathir using his power, in his perception, benignly. For example: He instructed Perwaja in 1991/1992 to build their downstream steel bar/rod and beam/section plants in Gurun, Kedah, his home state. As Mahathir sees it, it provides employment for that rural town. Good for the people (his voters). Except... By building downstream plants in Kedah, Perwaja, who has their upstream (billets) plants Kemaman Terengganu (built earlier), now has to transport by truck, each billet from Terengganu to Kedah! (Each billet, by the way is about one ton). I'm sure you've seen the Perwaja trucks going from Terengganu down to KL and then up to Kedah by the highway. This unnecessary transportation cost (about RM100 per ton) essentially wipes out all the margin for Perwaja. Overall, the people suffer because their "investment" (via Min of Finance inc. and later Khazanah Nasional) does not provide returns. It would have been better financially had Mahathir instructed a portion of the profits to be given simply to Gurun residents. Less value would have been destroyed. Same thing with the Chemical Fertilizer plant in Kedah (again!). The upstream natural gas processing plants are in Terengganu (Petronas), but the gas has to be piped down to Johor and then all the way up to Kedah - incurring unnecessarily high transport costs.
Now, the main vehicle for UMNOs assets which are used to finance Mahathir's plans is RENONG BERHAD. A bit of background:
In 1987, Renong was owned by two Chinese families. Sales was a mere RM 7 million and it was running at a RM4 million operating lost. Then, in 1989, after the Team_A/Team_B/UMNO_11/Salleh_Abas episode, ownership was transferred to Dr. Chan Chin Cheung, a business man with close ties to Dr. Mahathir. UMNO was declared illegal by Justice Harun Hashim February 1988. This was because it had about 30 unregistered divisions (used by Dr. Mahathir to enter votes to ensure that he defeated Razaleigh in the 1987 elections), and under the societies act, made UMNO illegal. All UMNO's assets had to be transferred to the government's official assignee. UMNO's original investment holding company, FLEET GROUP, was the major portion of the assets.
While UMNO BARU was rapidly reconstituted by Mahathir (killing the judiciary in the process, i.e., Amendment to Article 121) there was an imperative to consolidate UMNO's assets to finance an impending political battle in the October 1991 general elections (big threat from Razaleigh's Semangat 46). Thanks to the intricate corporate maneuverings orchestrated by Daim, the opposition parties were unsuccessful in legally proving UMNO's direct re-ownership of its numerous assets through Renong. (Of course, with the courts being made of Mahathir's stooges, it was impossible)
"The way UMNO has gone through the restructuring (from the Fleet Group to Renong) is remarkable — With nominees holding UMNO’s business interests, it will be difficult to prove where the UMNO connection begins and where it actually ends," said one analyst (May 2, 1990 - Reuters).
Overnight, Renong was transformed into an investment holding firm for
a major bank, the three largest engineering and construction firms, the
largest cement manufacturer, a national television station, and the largest
newspaper publisher. Daim Zainuddin , the powerful former Finance Minister
and UMNO treasurer, now a close advisor to Dr. Mahathir, engineered the
deal and positioned a protégé and close associate, Halim
Saad as the new executive chairman. Together with his wife, appointed as
a Renong director, Halim initially held a 17% stake in this emerging conglomerate.
The infrastructural development required to achieve Vision 2020, and Renong’s strong UMNO connections enabled its subsidiaries to win billions in high-profile contracts especially in the Engineering & Construction and Property Development sectors:
* 1992: Malaysia’s first private power station. Estimated value RM 1.4 b
* 1992: Second bridge and expressway linking Malaysia’s main highway to Singapore. Estimated value RM 1.1 b
* 1992: 27,000 acre city around the second bridge (Nusajaya). Estimated value RM 8 b
* 1994: Phase 2 of a subway system in and around the capital, Kuala Lumpur. Estimated value RM7.2 b
* 1996: Renong leads a consortium (share 51%) to privatize the national railway, KTM. Estimated total value RM 2 b
* 1997: Renong leads a consortium (share 55%) to develop Phase 1 of
the Multimedia Super Corridor. Estimated value
RM 3.5 b
* 1997: Construction of the world’s longest bridge between Peninsular
Malaysia and Sumatra. Appointed by the Malaysian
government to co-lead the project with an Indonesian firm. Estimated value RM 6 b (since postponed)
Easy access to attractive financing enabled Renong to carry a project load and debt burden which would likely to be unsustainable under less advantaged circumstances. Foreign investors unfamiliar with, and uneasy about, investing in Malaysia due to imperfect information viewed Renong — the largest government- supported conglomerate — as the "political blue-chip" of the Kuala Lumpur Stock Exchange. Renong would fill the institutional capital markets gap, and provide private and institutional investors with exposure to Malaysia’s fast-growing infrastructure sector.
* Receives an initial government loan of RM 1.6 b to develop the national
highway project, PLUS, originally priced at
* Raises RM 2.1 b through offshore loans and 1 b through equity offerings
in 1993 to cover PLUS cost overruns amounting
to RM 2.2 b
* Raises US$ 230 m and US$ 175 m in 1994 and 1995 respectively through Eurobond issues
* Takes on a US$ 150 m revolving credit in 1995
* Raises nearly RM 1 b through a RM 478 m rights issue of Irredeemable
Convertible Unsecured Loan Stocks (ICULS)
and a RM 500 m secured bond issue in 1995
Renong’s steady stream of attractive national projects and easy access to financing have left it highly-leveraged (debt to equity of 123%) and committed to significant investment in major development projects. This has translated into a growing gap between the application of funds and operating cashflow. In 1996, this gap was as large as RM 4.2 b!!! With the long payback periods of its high investment projects, this gap is expected to remain till 1999 and beyond.
The recent volatility in Southeast Asian currencies, has seen the Malaysian Ringgit and the Kuala Lumpur Stock Exchange (KLSE) lose over 25% and 40%, respectively, of their value in less than 8 weeks. Raising capital through the equity markets is therefore neither easy nor affordable. Furthermore, Renong’s practice of pledging shares in subsidiaries as collateral for loans to finance its projects could lead to a spiral of margin calls - at a time of major economic and construction sector slowdowns. (It almost did, but Mahathir reprimanded one of banks for initiating). By 1998, virtually all of Renong's subsidiaries were technically insolvent (their operating cash flow could no longer keep up with the debt payment Tsunami). PLUS was perhaps the only viable business left, ONLY by virtue of it being a monopoly and again, dependent on further toll rate hikes. Renong loans to Bank Bumiputra, Bank of Commerce and a host of other banks were virtually all non-performing.
It had reached a critical level. UMNO's cash machine had dried up, and Mahathir and Daim knew that a General Election was looming (latest by 2000). In tough economic times, they would need more money than usual to buy votes.
Mahathir was furious with Governor Ahmad Don and Finance Minister Anwar Ibrahim trying to increase interest rates and restructure the banking sector. While it would stabilize the ringgit, it would suffocate bad businesses, ie RENONG. The thing to note about the Interest Rate vs. Currency Control debate, is that, regardless of which policy mechanism chosen, success Depends on actual restructuring of the economy. That means killing off deadwood businesses and cleaning banks' balance sheets, and using the cash for selected growth industries. The reason why the Bank Negara's policies did not work initially was because international investors KNEW that a lot of hanky-panky was going on and the Mahathir government was not interested in reforming its economy, but protected their own interests.
By July 1998, with Renong all but dead, Mahathir had to perform drastic surgery. The central bank governor and his policies had to go. He needed about RM20 billion ringgit to rescue Renong and Anwar was not going to take it. He was going to expose Renong. Mahathir, desparately needing the money to survive, had to kill off Anwar.
With all these made up sexual charges that caught everyone's attention, Mahathir has managed to pull off the third bail out of Bank Bumiputra under most people's noses. It was extremely suspicious that Bank Bumiputra's financial results (for the year ending March 31 1998) were not disclosed till September. That was because BBMB was technically insolvent. Over a billion in losses. Most of its non-performing loans were Renong's. They had to merge it with a slightly less sickly bank, Bank of Commerce, of which Renong is a major shareholder. Khazanah Nasional had to inject more than a billion. Danaharta, the National Asset Management Company, was instructed to take BBMB's Renong bad loans off. One of the first deals was Linkedua (the second causeway to Singapore), a poorly managed Renong project.
To successfully pull off the Anwar character assasination, Mahathir had to remove influential media leaders. You all know the story there. Last note. while in the past, the MRCB group which includes NST and TV3 were "connected" to Anwar, by end 1997/early 1998, it was usurped by Mahathir and Daim (Remember that MRCB is a mere spin-off from Renong). It too was financially sinking, and had to trade their allegiance to Dr. M for survival (Daim engineered the financing deals).
Thus, Anwar's "crime", if you can call it that, was to expose this abuse of power. Sadly, he paid the price. And while we are all so embroiled in the current sex saga, about RM20 to 40 billion will be siphoned off from public funds to bail Renong - which is to bail UMNO, and ensure that UMNO has enough money to win the upcoming General Elections..... and Malaysians will be none the wiser.