Posts Tagged ‘Cronyism


Malaysia rises to No. 2 in crony capitalism index

Malaysia rises in The Economist’s crony capitalism index

The Economist’s second run of the index of crony capitalism saw Malaysia rising to number two, just behind Russia which clinched the crony capitalism crown.

Malaysia was number three in the index when it was first instituted two years ago in 2014, to test if the world was experiencing a global re-run of the late 19th century age of the American ‘robber barons’.

This, stated the business publication, is against the backdrop of the global fraud investigations into the state-owned investment arm, 1Malaysia Development Berhad (1MDB), that is answerable to prime minister Najib Abdul Razak

But The Economist said that despite the unearthing of crony capitalism by global probes, Malaysia continued to score badly on the index as cronyism has led to political instability.

Another interesting statistic to note is that if one were to look at the chart for the crony income and non-crony income in the countries listed, there is usually a substantial and noticeable gap between the two.

However, Malaysia’s statistic showed almost all of the wealth in the country is crony wealth, with just a smidgen of difference between the two.

In any case, the index found that Russia scored the worst, “reflecting its corruption and dependence on natural resources. Both its crony wealth and GDP have fallen in dollar terms in the past two years, reflecting the Rouble’s collapse. Their ratio is not much changed since 2014.”

Malaysia rises in The Economist’s crony capitalism index
6 May 2016 – Malaysiakini


Stupidity plus corruption is worse!

Stupidity plus corruption is worse! – T. K. Chua

I wrote this piece before I chanced upon Tony Pua’s “outrageously stupid agreements” as published today. I have taken another approach to look at the “stupidity”.

When we say corruption is killing this country, we are perhaps only half right. I think a more comprehensive answer is corruption plus stupidity.

True, corruption trades away public/national interests in exchange for private gains. But if public officials are sufficiently stupid, the giveaways are far greater than the private gains they solicited.

This is what I gathered from most of the events unfolding around us today.

Do our public officials know the worth of guarantee letters issued by the Ministry of Finance? Do they know how much they have short-changed the country in return for the pittance they have received, if indeed they are corrupted? Seriously, I think we need brains to be corrupted too.

Crony capitalists, project promoters and highway concessionaires have never had it so good in this country.

When they get a privatised project, the government guarantees them revenue flows, profits and even loans they take from the banks.

Immediately, the feasibility of these projects is thrown to the wind. Who would want to work out the risk and return trade-off when the government has stood as the guarantor for everything?

The guarantees have assured the promoters to make an enormous amount of money practically with no risk. It is just a one way bet for them. When they make money, it belongs to them. When they lose money, the government bails them out or takes over.

The promoters get loans from banks easily, sometimes even generously evaluated. But who cares when banks and the promoters know that these loans are guaranteed by the government. If the promoters can’t pay, the government will pay on their behalf. Loans have effectively become incomes to some of these promoters.

This is the degree of moral hazard we are facing today where promoters of projects and crony capitalists are not concerned with risks and inefficiency since they are securely protected by the government. Seriously, what could be more lucrative and beneficial than doing business without risks and over and above that, using other people’s money?

Through sheer stupidity, public officials have given away billions to crony capitalists, privatised concessionaires and promoters without them realising it. The “tragedy” is some of these public officials are not even corrupted. – October 16, 2015.

Stupidity plus corruption is worse! – T. K. Chua
16 October 2015 – TMI


New Crony Scandals for Malaysia’s 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.

The new major shareholder and group managing director of Malaysian Resources is Mohamad Salim Fateh Din. 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.

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.

New Crony Scandals for Malaysia’s Najib
September 17, 2015 – Asia Sentinel


Questionable motives and benefits in bringing in 1.5 million migrant workers

Press Statement

Lawyers for Liberty views with extreme concern the government’s plan to bring in 1.5 million Bangladeshi workers over the next three years when clearly its migrant workers management, policies and laws are in dire need of serious reform after decades of mishandling and abuse.

It is all the more of serious concern when it was revealed that Real Time Networking Sdn Bhd, one of the companies bidding to provide a registration and management system for these workers is owned by Home Minister Zahid Hamidi’s brother Abdul Hakim Hamidi, surely a clear case of conflict of interest and nepotism.

Questions must surely be asked if Malaysia really do need these workers, whether a study was done to justify the number of workers required in the next three years and for the various sectors or are they being brought in so that others can profit off them.

We commonly hear of complaints that Malaysia is being ‘overrun’ by undocumented migrants and the terrible abuses and work conditions they go through, even for the documented ones. Instead of addressing the serious complaints of abuse, exploitation and cheating these migrant workers face, the authorities are taking the easy way out by bringing in more migrant workers and in the process, allowing the recruiting agents, brokers, middlemen, outsourcing companies and rent seekers connected to both Bangladesh and Malaysia to make huge profits off these desperate and poor migrants.

We urge the Home Ministry to consult all stakeholders including the Human Resources Ministry, MTUC and the Malaysian Employers Federation before taking such a drastic step especially since there already exist a ready-made labour force – some estimated 100,000 refugees and two million undocumented migrants who are already working in the country albeit without proper documentation.

As many of these refugees and undocumented migrants are working without lawful authorisation, they are extremely vulnerable to exploitation and abuse, often underpaid, cheated and extorted by unscrupulous employers and law enforcement personnel.

The move to bring in 1.5 million migrant workers is certainly questionable as to the motives and who it actually benefits. It is a far more sensible and practical solution to regularise the refugees and migrants already present and working in the country, thus protecting them in the process.

Press Statement
Questionable motives and benefits in bringing in 1.5 million migrant workers
12 August 2015 – LFL


Zahid’s brother eyes system for 1.5m Bangladeshis

A firm owned by Deputy Prime Minister Ahmad Zahid Hamidi’s brother is in talks with Dhaka and Putrajaya to provide a management system for the 1.5 million Bangladeshi workers Malaysia intends to allow in through a new business-to-business system.

Real Time Networking Sdn Bhd, in which Zahid’s brother Abdul Hakim Hamidi is executive chairperson, aims to provide an online system where, for a fee, workers can be registered and monitored from Bangladesh and Malaysia.

Zahid is also home minister, and the approval of foreign workers into Malaysia comes under his ministry’s purview.

Real Time’s online system – dubbed Workforce Management & Networking System (Workman) – is similar to that provided by Bestinet, a firm owned by former home minister Azmi Khalid.

Bestinet’s agreement with the government was suspended earlier this year after outcry by recruitment agents in sending countries over its high service fees.

When contacted, Hakim confirmed that Real Time is eyeing the deal but stresses that it is not a government contract.

Rather, it is in collaboration with the Bangladesh Association of International Recruitment Agencies (Baira), he said.

“We have the model of a system where we get a payment for a package (service) and we can send people (from Bangladesh) for 60,000 Bangladeshi taka (RM3,000), including the air ticket.

“This is not a government contract. Yes, their government need to approve because it involves citizens but they are only monitoring,” Hakim said.

If approved, agencies such as the Immigration Department and Manpower Department will be linked to Real Time’s system and all recruitment agents must go through Real Time to send workers to Malaysia.

‘No issue if brother’s minister’

He also refuted any claim of nepotism, arguing that he is experienced in the field.

“My brother is the minister but I am a businessman. It is a democratic country and I can do anything, other than be a drug pusher.

“Malaysians are very difficult. They say if my brother is a minister, I cannot do anything. They want us all to be jobless.

“I have experience in the field and I am an IT man. All these designs are from my brain,” Hakim, who is now in Dhaka, told Malaysiakini.

Hakim has experience in IT operations at Motorola Semiconductors and Tenaga Nasional Bhd and is an executive director of labour supply firm Warisan Juara Padu Sdn Bhd.

Documents show that Real Time was incorporated in March this year.

Aug 11, 2015 – malaysiakini
Zahid’s brother eyes system for 1.5m Bangladeshis


10 years on, defence academy’s completion date remains a mystery

Ten years after a project to build Puspahanas, a Defence Ministry academy, was awarded to an Umno-linked developer with no track record in construction, the government is no clearer on when the building, already beset by delays, will be completed.

Deputy defence minister Datuk Abdul Rahim Bakri when asked by The Malaysian Insider for the latest update, said he had no information on the expected completion date, but added that it would be finished at some point.

“It’s alright, it will be finished, so don’t worry. The project is to build a college for the ministry, so we are monitoring it,” he said when approached on the sidelines of a ministry event recently.

Located in Precinct 1 in the federal administrative capital of Putrajaya, Puspahanas, or the National Defence Education Centre, will house the National Defence College and the Armed Forces’ Command and Staff Training College.

Awan Megah Sdn Bhd, which was given the project in 2005, is owned by Umno’s Selangor senator, Datuk Raja Ropiaah Abdullah. The academy was slated for completion in 2011 but has been delayed numerous times, invoking criticism from opposition lawmakers and the public.

The controversy lies in the manner Raja Ropiaah was awarded the project. She won it in exchange for some 80 hectares of land in Bukit Raja, Selangor, and RM27 million.

PKR politician Rafizi Ramli had scrutinised the deal and claimed it made no commercial sense since Awang Megah had no track record in construction.

Rafizi had also done a check with the Companies Commission of Malaysia and found the filings made by Awan Megah showed that its last activity was on December 31, 1993. This was 12 years before it won the Puspahanas deal.

A check in December last year with the consulting engineering firm working on the project found that Puspahanas was now some 70% completed.

An engineer with the firm KTA Tenaga Sdn Bhd, who refused to be named, said it could be completed by the middle of this year.

“We are not sure of the date when it can be fully operational yet,” he said.

10 years on, defence academy’s completion date remains a mystery
18 January 2015 – TMI


Malaysia’s rank in crony-capitalism index

Our crony-capitalism index

The countries where politically connected businessmen are most likely to prosper

Crony Capitalism index

AMERICA’S Gilded Age, in the late 19th century, saw tycoons such as John D. Rockefeller industrialise the country—and accumulate vast fortunes, build palatial mansions and bribe politicians. Then came the backlash. Between 1900 and 1945 America began to regulate big business and build a social safety net. In her book “Plutocrats”, Chrystia Freeland argues that emerging markets are now experiencing their first gilded age, and rich countries their second, with the world’s wealthiest 1%, who benefited disproportionately from 20 years of globalisation, forming a “new virtual nation of Mammon”.

Inventing a better widget, tastier snack or snazzier computer program is one thing. But many of today’s tycoons are accused of making fortunes by “rent-seeking”: grabbing a bigger slice of the pie rather than making the pie bigger. In technical terms, an economic rent is the difference between what people are paid and what they would have to be paid for their labour, capital, land (or any other inputs into production) to remain in their current use. In a world of perfect competition, rent would not exist. Common examples of rent-seeking (which may or may not be illegal) include forming cartels and lobbying for rules that benefit a firm at the expense of competitors and customers.

Class warriors and free-market devotees alike are worrying about rent-seeking. American libertarians fear an elite has rigged their country’s economy; plenty of ordinary Joes reckon the government and Federal Reserve care more about Wall Street than Main Street. Many hedge-fund managers sniff that China is a house of cards built by indebted cronies.

To test the claim that rent-seekers are on the rampage, we have created a crony-capitalist index. Our approach builds on work by Ruchir Sharma of Morgan Stanley Investment Management, Aditi Gandhi and Michael Walton of New Delhi’s Centre for Policy Research, and others. We use data from Forbes to calculate the total wealth of those of the world’s billionaires who are active mainly in rent-heavy industries, and compare that total to world GDP to get a sense of its scale. We show results for 23 countries—the five largest developed ones, the ten largest developing ones for which reliable data are available, and a selection of eight smaller ones where cronyism is thought to be a big problem. The higher the ratio, the more likely the economy suffers from a severe case of crony-capitalism.

We have included industries that are vulnerable to monopoly, or that involve licensing or heavy state involvement (see table 1). These are more prone to graft, according to the bribery rankings produced by Transparency International, an anti-corruption watchdog. Some are obvious. Banks benefit from an implicit state guarantee that lowers their cost of borrowing. When publicly owned coal mines, land and telecoms spectrum are handed to tycoons on favourable terms, the public suffers. But the boundary between legality and graft is complex. A billionaire in a rent-heavy industry need not be corrupt or have broken the law. Industries that are close to the state are still essential, and can be healthy and transparent.

Our crony-capitalism index
The countries where politically connected businessmen are most likely to prosper
Mar 15th 2014 –


Tycoons can protest, but Malaysia’s crony capitalism is real

Tan Sri Francis Yeoh does protest too much for someone who has benefited from being part of the system.

Listening to him, you would think that YTL Corporation became financially strong only on the back of astute decision-making and the innovation of company executives; that the raft of lucrative projects from the lopsided IPP concession contract to the lucrative 1Bestarinet project just landed on the company’s books through the competence of company executives.

This is what Francis said in a statement to clarify what he allegedly said at a talk at Pemandu, the government agency famous for blowing its own trumpet with mind-numbing statistics.

Francis was quoted as lamenting the culture of crony capitalism in Malaysia and added that cronyism and the current penchant for racial and religious rhetoric was holding back Malaysia on the global stage. He also allegedly said that the bulk of YTL’s business was now in Singapore, the United Kingdom and Australia – jurisdictions where there was meritocracy and rule of law and where a businessman did not have to kow-tow to the prime minister.

A pretty harmless statement in most countries. On any given day, thousands of businessmen in Malaysia are saying the same thing – more or less the same thing, with only a couple of caveats. Ninety-nine percent of them do not have the cushion of multi-billion ringgit business in Singapore, the UK and Australia. Or whose business entities have received some favourable deals by the government.

In any case, Francis was prompted to issue a clarification, taking issue with a report published in a news portal that he said inaccurately portrayed what he told the audience at the Pemandu talk.

He said that during the presentation he attempted to dispel the notion that crony capitalism was rife in Malaysia. He even denied that YTL received the IPP concession because he was a crony of former prime minister Tun Dr Mahathir Mohamad.

It is the right of Francis to say whatever he wants and to believe whatever he chooses to say.

But it our right as Malaysians to look at the whole picture, to examine the facts and to look at the nuts and bolts of the IPP deal and just shrug our shoulders and laugh at Francis’s protest.

The only thing going for Francis is that he is not alone. More than 80% of Malaysia’s richest businessmen owe a significant portion of their wealth and success to who they know, instead of what they know. It is a fact. And many owe their big break to that champion of skewed privatisation, Dr Mahathir.

They owe their big break to Dr Mahathir, whether it was road toll concessions or an opportunity to buy and re-develop choice pieces of property in downtown Kuala Lumpur.

But ask them about their success and wealth and it is always about coming up the hard way, about their know-how rather than their know-who.

Many of them have earned colossal profits from concessions at home and pumped those funds abroad. Good for them. Money makes money.

But we Malaysians can choose our own narrative about them and their businesses. – June 5, 2014.

Tycoons can protest, but Malaysia’s crony capitalism is real
5 June 2014 – TMI


Ridiculous estimate of RM400 billion to buy back highways

RM400 billion to buy back highways? Ridiculous, says DAP MP

How did Putrajaya come up with the incredulous amount of RM400 billion as the cost of buying back the highway concessions in Malaysia, a DAP lawmaker asked today.

Party national publicity chief Tony Pua said the construction costs of the 26 tolled highways in Malaysia amounted to a mere RM28.5 billion.

“The most expensive highway in Malaysia is the North-South Expressway which cost RM5.95 billion to build,” he said in a statement.

Pua questioned how Putrajaya could have come up with a figure which is more than 14 times the amount it cost to construct the 26 highways in the country.

“Works Minister Datuk Fadillah Yusof must be out of his mind to claim that it will cost RM400 billion to re-acquire all the tolled highways in Malaysia,” he said.

“Is Putrajaya attempting to compensate the highway concessionaires for the loss of future profits?” he asked.

Pua said that the highway concession agreements clearly stated that Putrajaya did not need to make such compensation payments.

He said if the RM400 billion was to compensate concessionaires for the loss of future profits, it defeated the purpose of such an exercise in the first place.

“The government might as well let the concessionaires earn the profit over the next 20 years or so instead of laughing all to the bank in one trip.”

Pua said with the exception of the North-South Expressway and the Penang Bridge, all the concession agreements had clauses which allowed Putrajaya to buy back the concessions based on the cost of construction with the guarantee that the concessionaires had received an annual return of 12% for each prior year of operation.

“So if we assume that all the highways in Malaysia did not make a single sen of profit since they began operating, then the buyback cost will merely be a maximum of RM50 billion.

“This is one eighth of Fadillah’s estimate of RM400 billion,” he said.

Moreover, Pua said, most of the highway concessionaires had made fantastic profits in excess of 12% per annum since they began operating.

“This means that Putrajaya does not need to compensate for insufficient profit during the operating years.

“Instead of discussing buybacks, perhaps the government should focus on highways which are making unreasonable profits, such as the Lebuhraya Damansara-Puchong.”

Pua said the LDP had a net profit margin in excess of 40%, which was at the rakyat’s expense.

RM400 billion to buy back highways? Ridiculous, says DAP MP
April 03, 2014 – TMI


Launch of C4 (Centre to Combat Corruption and Cronyism)

C4 explodes amid kangkung and whistle-blowing

PETALING JAYA (Jan 16): A new body calling itself C4 was launched with much kangkung waving, whistleblowing and singing of songs.

The Centre to Combat Corruption and Cronyism declared that it is not just another non-governmental organisation (NGO) and it will make sure that the people become the whistleblowers (the reason for the whistles) on corruption and cronyism in the country.

“It is really difficult to prove corruption especially among the powerful and wealthy. The only answer lies within us and we have to depend on ourselves.

“The launch of the centre is a drop in the ocean of what we have to do. You and I have the responsibility to fight corruption,” said C4 founder and co-director Cynthia Gabriel.

C4 boasts high profiled directors such as Richard Yeoh, formerly of Transparency International; Tan Sri Simon Sipaun (former Suhakam commissioner) and Dr Ahmad Farouk Musa, Deputy Head of Bersih and founder of the Islamic Renaissance Front (IRF).

Gabriel said that while ministers and public servants continue to spend lavishly, the rakyat is being told to tighten their belts.

“They are mocking us,” said Gabriel, waving a kangkung stalk.

The stalk of water convolvulus refers to a recent news trend in which Prime Minister Datuk Seri Najib Razak came under fire for having claimed that when prices – like kangkung – is reduced, no one praises the ruling Barisan Nasional government.

C4’s guest of honour, former Bersih head Datuk Ambiga Sreenevasen, launched the NGO stating that despite all the hardware that Malaysia has set up to combat corruption, we were devoid of software.

“We lack the most important element – we have zero political will. We say we want to get rid of corruption but we do not mean it,” said Ambiga.

She pointed out that Hong Kong managed to eliminate corruption by setting up ICAC, which the Malaysian Anti-Corruption Commission (MACC) claims to have been modelled after.

She also took MACC to task for claiming it cannot investigate anyone living beyond their means.

C4 explodes amid kangkung and whistle-blowing
by Zakiah Koya
Jan 16, 2014 –

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All that is necessary
for the triumph of evil
is for good men
to do nothing.

- Edmund Burke
When the people
fears their government,
there is TYRANNY;
when the government
fears the people,
there is LIBERTY.

- Thomas Jefferson
Do you hear the people sing?