Metramac Scandal

Below is an interesting observation on the Metramac issue.

http://malaysia-today.net/reports/2006/01/metramac-scandal-no-light-at-end-of.htm

Friday, January 20, 2006
Metramac scandal: no light at the end of the tunnel
Kim Quek

Court of Appeal Justice Gopal Sri Ram's damning judgment on the Metramac Concessionaire case is a sad reminder of the Mahathir era cronyism and abuse of power under an opaque system of governance - a dubious system of dishing out government largesse that regrettably still persists today.

In vivid language, Gopal lashes out in no uncertain terms at the connivance between former Finance Minister Daim Zainuddin and his protégé Halim Saad in wresting the Cheras Toll concession from its then concessionaire, Syarikat Teratai K.G.Sdn Bhd (STKG), when the latter was ordered to suspend its toll collection for not fault of its own. The occasion was the continuous public demonstrations against such toll collection soon after it started in September 1990. To quell such demonstrations, Kuala Lumpur City Hall (DBKL), which awarded the concession, asked STKG to suspend the toll collection. DBKL later accepted in principle the option of terminating the concession agreement with compensation to the concessionaire. However, finance minister Daim was adamant that the Federal Government could not afford to pay any compensation.

At such hour of desperation for STKG, in came UEM Bhd, which in November 1990 offered to buy over STKG for RM 97.5 million. Facing huge debt and without the prospect of resuming toll collection or compensation, STKG shareholders had no alternative but to accept UEM's offer and the sale was sealed in an agreement (dated 23 January 1991) with UEM nominee Metro Juara Sdn Bhd whose only two shareholders were Halim Saad and Anuar Othman. STKG was later re-named Metramac Corporation Sdn Bhd.

Lo and behold. Soon after the takeover, a silver lining appeared for the Halim owned Metramac. The government, hitherto claiming to be impoverished, suddenly and explicably found itself flush with funds to compensate Metramac - the latter received compensations that eventually totalled a whopping RM 756 million, in addition to resuming toll collection.

Thus the concessionaire underwent a complete reversal of fortune, changing from a hellish pit to a goldmine after the takeover, and all it took was for the government to wave its magic wand over its subject before and after the takeover. Keeping in mind that the new owners of the concession were intimately linked to the power that be, can anyone be blamed for sensing foul smell in the entire episode?

HALIM'S QUESTIONABLE STATEMENT

The man in the eye of the storm, Halim Saad, released a statement on January 16, protesting his and Daim's innocence. Unfortunately that statement aroused more questions than it provided answers.

Halim claimed that the government, through a Cabinet decision, "ordered" his company to take over STKG, because the latter was in a "serious mess" and the government wanted to "move on". This statement is dishonest and is blatantly unfair to STKG.

The so-called "serious mess" was entirely the handiwork of the government. Which concessionaire wouldn't be in the same predicament if it is stopped from collecting tolls and denied compensation? If STKG had in the first place received the same indecently generous treatment from the government as Halim had after his takeover, STKG would surely have done very well and with bumper profits to boot, keeping in mind that STKG had already demonstrated its competence by having successfully completed the project and started the toll collection. There was no need to invite anyone to takeover STKG then.

If the government had no intention to resume toll collection or pay compensation then, did it make sense to invite UEM, or for that matter any company to take over STKG? Who would have agreed to such a stupid takeover anyway, since there was no prospect of revenue or compensation and only the obligation to repay huge debts?

If on the other hand the government had decided to cancel the toll collection, then it must terminate the concession agreement and pay appropriate compensation as it must under the law. In that event, it should just simply pay STKG, and not fool around by asking someone to take over STKG.

That leaves us with no alternative but to conclude that the government did in fact intend to resume toll collection with commensurate compensation when it invited UEM to take over. In that event, why didn't the government just say so to STKG, which should then be quite happy and capable of carrying on with its obligations in the concession agreement? Why must the government drive STKG to the wall before getting UEM to come in, if there was no dishonourable intention on the part of the government? There was no possible justification for the government to invite UEM, unless STKG had defaulted or proven incapable, which was obviously not the case.

Hence, Halim's claim of STKG's incompetence and UEM's shining record as reasons for the government's "order" on UEM to take over STKG is pure nonsense!

Since Halim has alleged that the Cabinet had "ordered" for the take over, the latter is now duty bound to declare its stand. Did it or did it not give such order to UEM? If it did, why?

The next big question is: why did the government awarded such a disproportionately stupendous compensation of over RM 700 million, when Metromac was already allowed to resume toll collection and the original construction cost could not be far from RM 100 million, considering that the toll road was constructed with a capital infusion of RM 65 million and debt of RM 40 million?

Halim claimed that the money was not for compensation but for financing the "expanded additional works". What kind of gigantic works is he talking about when the toll road was already completed and in operation? What "expanded additional works" could these be when they required expenses many times the costs for completing the entire toll road? Will Halim please furnish the details of these "expanded additional works" with a breakdown of their costs, together with the total costs for completing the original toll road prior to the "expanded additional works"?

In view of Halim's above allegations, the government must now justify its decision to award these huge compensations with full details.

Halim complained of injustice against him as he had not been accorded a hearing. Complain no further, Opposition Leader Lim Kit Siang had just proposed that Halim, Daim and Elyas Omar (Kuala Lumpur Mayor then) appear themselves in the first public hearing of the Parliamentary Select Committee on National Integrity on Feb 13 to air their views on this controversy. There is no reason why Halim should not jump at this opportunity to exonerate himself if he has told the truth in his statement.

DUBIOUS AWARD OF CONCESSION

When I said earlier that STKG was a competent contractor that could fulfil its contractual obligations, it was not the case when it tendered and when it was awarded the concession. The STKG that completed the toll road project was a transformed company that bore little resemblance to the one that tendered and won the contract - a Kuala Lumpur City Hall privatisation project to design, construct, finance and operate certain roads.

At the time of tenders in 1986/87, STKG was run by a businesswoman Fauziah, who together with her mother were the only two shareholders in the company. STKG was chosen in spite of the fact it was hopelessly unqualified financially and lacking in management expertise to undertake such a major project. This was evident from the fact that after being awarded the contract, it engaged a leading foreign consultant to help in re-structuring the company and in securing investment from several reputable local and foreign institutions of sound financial standing, including Bank Pembangunan Malaysia and Lembaga Urusan dan Tabung Haji. The resultant infusion of RM 65 million in capital saw Fauziah and her mother losing majority share and management control. It is noteworthy that this transformation of STKG was only completed more than a year after it was awarded the concession, when an agreement was sealed among all the shareholders on 29 December 1988.

Question is now asked why City Hall had chosen STKG among other more competent competitors when it was obvious that STKG had no capacity to complete the project and should probably not even have been pre-qualified in the first place? Surely, City Hall's professionals couldn't be that inefficient as to have committed such a blunder. What conclusion can we draw other than there had been improprieties of a criminal nature?

NO HOPE OF NAILING THE CULPRITS

Since Gopal delivered his judgment on Jan 12, there have been public indignation and outcries for investigations by law enforcing agencies. Opposition, NGOs and others have called for independent commission of enquiry, investigation by the Attorney General (AG) and by the Anti-Corruption Agency (ACA); and police reports have also been lodged. Will these lead to anything? Let us hear some of the responses from the relevant government agencies:

Director General of ACA said on Jan 16: I will not make any comment at this stage, as we have not studied the case yet. We will only decide whether to investigate after we have completed our study.

AG said on Jan 17: We have no authority to investigate. It is up to the police and ACA to do so. With regards to the controversy arising from Gopal's judgment, I will comment on it only after I have studied the judgment.

Deputy Inspector General of Police said on Jan 17: Please be patient. The investigation is in the preliminary stage. Not expecting any new development soon, nor do we know when we will question the parties concerned. This is a case that requires long term investigations.

Malaysians should have no difficulty in deciphering the hidden messages from the above responses. Where it comes to high level corruption, especially those involving top UMNO leaders, the chances of nailing the culprits is almost nil. It was the case in Mahathir's reign, and it is the same now, in spite of all the ballyhoo of integrity and transparency by the current Prime Minister.

As happened to numerous high level scandals in the past, the present one will fizzle out without any clue - a well preserved Malaysian tradition that sees no end in sight yet.