Putrajaya pushed to lift shroud on multi-billion UEM-Renong deal in Parliament

JUNE 12, 2013
KUALA LUMPUR, June 12 — Putrajaya was today challenged to answer in Parliament questions that have long dogged the government’s secretive multi-billion ringgit deal with Tan Sri Halim Saad that saw the tycoon relinquish his controlling stake in Renong Bhd 16 years ago, and which is seen as a test of the government’s resolve to tackle fiscal reform and fight graft.

Veteran lawmaker Lim Kit Siang (picture) raised today five questions focused on the government’s credit controls and loans given to engineering and construction company UEM Group — a wholly-owned subsidiary of state investment firm Khazanah Nasional — that enabled it to buy the majority shares in Renong, a public-listed conglomerate in 1997, in a deal widely seen to have contributed to the country’s fall in the Asian financial crisis that struck that same year.

In a statement, he asked the federal government to confirm allegations that Abdul Rashid Manaf, a practising lawyer who has been said to be a proxy for Halim and to whom an US$800 million loan was given, did not have the creditworthiness for such a colossal credit line.

Lim also asked the government to answer if tycoon Halim had been the real owner who had gained from the 32.6 per cent stake in Renong, which was bought by UEM from eight nominees.

“The government has been calling on banks to be prudent to tide over the banking crisis by giving priority in allocating credit to borrowers engaged in productive activities in high-technology, foreign exchange earnings industries such as tourism and export-oriented sectors of the economy.

“How can a US$800 million loan to acquire a foreign firm or RM2.4 billion to enable UEM to acquire 32.6 per cent stake in Renong from the eight nominees come under such a category of prudential loans?” the Gelang Patah MP asked.

Malaysian banking laws impose a ceiling to the amount of loans a single customer can borrow. But Lim noted that in the UEM-Renong case, four local banks that he named as Maybank, Rashid Hussein Bank (RHB), Bank Bumiputra and Bank of Commerce, had all breached the single-customer limit by each giving out US$200 million (equivalent to RM500 million at the time) to Abdul Rashid, which the lawmaker said violated the government’s guidelines on bank loans.

He asked further: “What is the magnitude of the such unproductive mega-loans in the banking and financial sector in the country?”

Global ratings agencies have warned that Malaysia’s sovereign credit rating may be downgraded if the government does not deliver promised reforms to cut spending to reduce its fiscal deficits.

Malaysia has run a budget deficit since 1998 — following the 1997 Asian financial crisis that enveloped many countries in the world’s biggest continent — and stated its intention to implement the Goods and Services Tax (GST) several times since approving the law in 2009, but has always delayed the new tax, which has some 3,000 exemptions.

Bank Negara’s 2012 Annual Report has showed Southeast Asia’s third-biggest economy is on a list of countries in debt, with high personal debt totalling RM755 billion or 81 per cent of its gross domestic product (GDP).

Economists have said that a reform of the tax structure was necessary to lift Malaysia out of a middle-income trap.

The Barisan Nasional (BN) government had said, in the run-up to polls, that it would implement the broad-based tax policy if it won the May 5 general election, but continues to dawdle in stating specifics on the amount as well as to its enforcement.

After a lapse of 16 years, the UEM-Renong deal resurfaced on the public radar last week after news broke about Halim’s massive legal challenge against the government to demand full settlement of an over RM2 billion deal that forced him to relinquish his controlling stake in Renong.

According to digital business magazine The Edge Review, Halim, once the sole corporate nominee of the ruling Umno, was offered RM1.3 billion in cash and property as well as control of a private waste management company, roughly valued at RM2 billion, in exchange for his disposal of Renong in the 2001 agreement.

But the business magnate had since only received RM165 million despite giving up his business empire and will be demanding the remainder in the suit filed in April.

The DAP’s Lim, who has repeatedly demanded public disclosure of the UEM-Renong deal over the years, raised further documentation he said showed discrepancy between what the federal government preached in public and what it practised behind closed doors in companies where it is seen to hold vested interests.