Govt bailouts affect credibility, says transparency head
K KabilanPublished: Jan 5, 2001 11:11 AM | Updated: Jan 29, 2008 6:21 PM
In order for Malaysia to be internationally recognised and have an acceptable capital market, standards of corporate governance must be impeccable and the government should not keep bailing out unsuccessful businesses, an anti-corruption proponent said today.
Tunku Abdul Aziz, who is the vice-chairman of Transparency International, said that the government could no longer afford to use public funds to bail out crony businessmen.
Abdul Aziz, who is also the president of the Kuala Lumpur Society for Transparency and Integrity, said this in a paper he presented at the Institute of Southeast Asian Studies' Regional Outlook Forum 2001, which began in Singapore yesterday.
In the paper titled Challenges Facing Corporate Governance in Southeast Asia, Abdul Aziz said that like certain other countries, after many years in the denial mode, Malaysia finally came clean in admitting that the government engaged in many rescue operations during the financial crisis.
He said that the deputy prime minister Abdullah Ahmad Badawi had admitted that a more laissez-faire government would have allowed many key companies to sink.
"He said that the government was well aware of the rumblings and discontent among the professional business community that the government should not continue to protect those who have blatantly mismanaged their corporate empires and have repeatedly come back crying for help," said Abdul Aziz.
MAS bailout
He, however, noted that this did not stop the government from again using public funds to bail out the debt-ridden and incompetently managed national flag carrier, Malaysia Airlines, by purchasing the 29 percent stake of its chairman at RM8 per share when the shares were trading at around RM3.60 each.
"The perception, rightly or wrongly, is that it is not MAS that is being saved but the chairman of MAS is being let off the hook with his original investments intact."
"It is only in cronyland that you are rewarded for running a national airline into the ground. The fact that he is politically well-connected lends credence to the suspicion that this is just another victory for cronyism," he added.
"And yet, when it was suggested that it was a bailout, Daim Zainuddin, the Malaysian finance minister is on record as saying, 'No, it is not true, it is a wrong perception.' He rationalized cynically by suggesting that it was a deal done on a 'willing buyer and willing seller' basis," said Abdul Aziz.
He added it was this sort of unaccountable official behaviour that stopped investors dead in their tracks.
Similarly, he said, in Malaysia the protection of minority shareholder interests have been compromised through transactions which have conflicts between the interests of the company itself and its major shareholders.
He said that if Malaysia was to be fair to its own investors and minority shareholders and become an internationally recognised and acceptable capital market, standards of corporate governance would have to be nothing less than impeccable.
"There are strong arguments for capital controls and fixed exchange rates. But there is none whatsoever for poor corporate governance and insufficient protection of minority shareholder interests," he said.
Global trends
He added that no change or improvement in the way business operations are managed can be sustained if the attitude to good governance is out of step with contemporary global trends and this applies both to government and corporate leadership.
"The principles of good governance, grounded as they are in trusteeship, stewardship, transparency, accountability and integrity, are as relevant to the governance of a state as it is to the management of a public listed company," said Abdul Aziz.
He added that the challenges facing corporate governance in Southeast Asia stem from the somewhat relaxed cultural, social, and political attitudes to stewardship.
Abdul Aziz said this was what led a government to secretly dip its sticky fingers in the national pension fund to support an undercover operation to corner the international tin market, which in the event proved to be an unmitigated disaster.
"And how else do you explain a government, using public funds and the dubious expertise of its central bank, to speculate on the international money markets? It is mind boggling to say the least," he said.
Public censure
He added that in a more open and democratic society, such unethical behaviour would not only have attracted the most severe public censure but also brought the government down.
Corporate governance practice in Southeast Asia remains, at best, "patchy and uneven and, at worst, downright unwholesome in ethical terms," said Abdul Aziz.
He said that it was quite apparent from all this that effective supervision by the various regulatory bodies remains problematic.
He also said that an important institution that underpins good corporate governance is the judiciary.
"Again, with the exception of Singapore, the integrity of the judicial system in each of the countries coming under the purview of our discussion cannot be taken for granted. Can the courts be relied upon to dispense justice without fear or favour?" he asked.
He added that there must also be a sufficient political will to ensure that the change in the pipeline is of such quality as to sustain long-term growth.
Tunku Abdul Aziz, who is the vice-chairman of Transparency International, said that the government could no longer afford to use public funds to bail out crony businessmen.
Abdul Aziz, who is also the president of the Kuala Lumpur Society for Transparency and Integrity, said this in a paper he presented at the Institute of Southeast Asian Studies' Regional Outlook Forum 2001, which began in Singapore yesterday.
In the paper titled Challenges Facing Corporate Governance in Southeast Asia, Abdul Aziz said that like certain other countries, after many years in the denial mode, Malaysia finally came clean in admitting that the government engaged in many rescue operations during the financial crisis.
He said that the deputy prime minister Abdullah Ahmad Badawi had admitted that a more laissez-faire government would have allowed many key companies to sink.
"He said that the government was well aware of the rumblings and discontent among the professional business community that the government should not continue to protect those who have blatantly mismanaged their corporate empires and have repeatedly come back crying for help," said Abdul Aziz.
MAS bailout
He, however, noted that this did not stop the government from again using public funds to bail out the debt-ridden and incompetently managed national flag carrier, Malaysia Airlines, by purchasing the 29 percent stake of its chairman at RM8 per share when the shares were trading at around RM3.60 each.
"The perception, rightly or wrongly, is that it is not MAS that is being saved but the chairman of MAS is being let off the hook with his original investments intact."
"It is only in cronyland that you are rewarded for running a national airline into the ground. The fact that he is politically well-connected lends credence to the suspicion that this is just another victory for cronyism," he added.
"And yet, when it was suggested that it was a bailout, Daim Zainuddin, the Malaysian finance minister is on record as saying, 'No, it is not true, it is a wrong perception.' He rationalized cynically by suggesting that it was a deal done on a 'willing buyer and willing seller' basis," said Abdul Aziz.
He added it was this sort of unaccountable official behaviour that stopped investors dead in their tracks.
Similarly, he said, in Malaysia the protection of minority shareholder interests have been compromised through transactions which have conflicts between the interests of the company itself and its major shareholders.
He said that if Malaysia was to be fair to its own investors and minority shareholders and become an internationally recognised and acceptable capital market, standards of corporate governance would have to be nothing less than impeccable.
"There are strong arguments for capital controls and fixed exchange rates. But there is none whatsoever for poor corporate governance and insufficient protection of minority shareholder interests," he said.
Global trends
He added that no change or improvement in the way business operations are managed can be sustained if the attitude to good governance is out of step with contemporary global trends and this applies both to government and corporate leadership.
"The principles of good governance, grounded as they are in trusteeship, stewardship, transparency, accountability and integrity, are as relevant to the governance of a state as it is to the management of a public listed company," said Abdul Aziz.
He added that the challenges facing corporate governance in Southeast Asia stem from the somewhat relaxed cultural, social, and political attitudes to stewardship.
Abdul Aziz said this was what led a government to secretly dip its sticky fingers in the national pension fund to support an undercover operation to corner the international tin market, which in the event proved to be an unmitigated disaster.
"And how else do you explain a government, using public funds and the dubious expertise of its central bank, to speculate on the international money markets? It is mind boggling to say the least," he said.
Public censure
He added that in a more open and democratic society, such unethical behaviour would not only have attracted the most severe public censure but also brought the government down.
Corporate governance practice in Southeast Asia remains, at best, "patchy and uneven and, at worst, downright unwholesome in ethical terms," said Abdul Aziz.
He said that it was quite apparent from all this that effective supervision by the various regulatory bodies remains problematic.
He also said that an important institution that underpins good corporate governance is the judiciary.
"Again, with the exception of Singapore, the integrity of the judicial system in each of the countries coming under the purview of our discussion cannot be taken for granted. Can the courts be relied upon to dispense justice without fear or favour?" he asked.
He added that there must also be a sufficient political will to ensure that the change in the pipeline is of such quality as to sustain long-term growth.
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