The cabinet has been urged to decide whether it approves the use of RM10 billion of public funds through the newly formed asset management company Valuecap Sdn Bhd to shore up the stock market, in consideration of the ethical, accountability and good governance issues involved.

"Why should government institutions like Khazanah Nasional Bhd, Permodalan Nasional Bhd and Kumpulan Wang Amanah Pencen (equal owners of Valuecap) be involved in activities to shore up the stock market and the bailout of ailing companies?" DAP chairperson Lim Kit Siang questioned in a statement today.

Should Valuecap turn into a money-losing venture, the cabinet should not be allowed to abdicate from its responsibility, Lim said.

"(If that were to happen), we do not want any cabinet minister to claim ignorance or innocence by saying that they were not privy to the Valuecap decision as it came from one man...the prime minister," he added.

Sustainable operation

Lim also wanted the ministers to consider whether the operation will be sustainable in the long term, regardless of world economic uncertainties and possible US attack on Iraq.

He pointed out several cases of disastrous government intervention in the market during Prime Minister Dr Mahathir Mohamad's administration, namely the Maminco operation (RM600 million losses), the Makusawa operation (tens of million-ringgit losses incurred by the Employees Provident Fund) and Bank Negara foreign exchange market speculation (RM30 billion losses).

The former Opposition Leader also wanted assurance from the government that the RM10 billion investment would not turn into a mega-disaster like what happened to Bank Negara when it speculated on forex.

He said there must be oversight mechanisms to ensure that Valuecap be run ethically and to prevent it from becoming another camouflage company to bail out cronies and their former companies.

Long-term gain

More optimistic of Valuecap's impact was Assoc Prof Dr Abdul Ghaffar Ismail of Universiti Kebangsaan Malaysia (UKM), who believed that the market will gain the confidence of other investors.

"I think that the approach will be effective over a long period and not just for the short term because the injection of RM10 billion would attract others to enter the Kuala Lumpur Stock Exchange (KLSE)," said the lecturer at the economics and finance faculty.

Abdul Ghaffar was also positive that the operation would be beneficial to minority shareholders if parts of the investment go to state trust funds, which are currently ailing.

Asked whether the time was right considering that war is looming in Iraq, Abdul Ghaffar said "uncertainties have to be dealt with".

"So far, even the news (of Valuecap operation) has already stimulated the market, and I believe the market will be even better when the RM10 billion fund starts moving in," he said.

(However, Lim pointed out in his statement that Asian markets yesterday closed sharply higher without massive injection of public funds.)

Nevertheless, Abdul Ghaffar wished to see the public fund channeled into safer stocks and the operation be run by professional fund managers in a transparent and ethical manner "to ensure that the public would not be losing their money".

Yesterday, news of the RM10 billion injection helped the KLSE Composite Index close two percent higher at 651.5 points. However, compare this with South Korea's Kospi index shot up by 3.41 percent, Taiwan's Taiex index, 2.9 percent, and Singapore's Straits Times index, 2.8 percent.

The local bourse has not been performing well since last April.