Raja Petra explains the Malaysia Exim Bank's Loan wrt the Royalty.

Spin machine spinning out of control
23 April, 2008

The Agong is not the only victim of this spin machine. There is a book called ‘100 DALIL MENGAPA NAJIB TAK BOLEH JADI PM’ that Malaysia Today has received from an anonymous source.

THE CORRIDORS OF POWER

Raja Petra Kamarudin

‘Malaysia’s Exim Bank: A Morass of Bad Loans’ said Asia Sentinel, an online newspaper. The Asia Sentinel report went on to say:

Bank Negara sits on a report that a government-owned bank has lost millions on loans to politicians and royalty

An explosive auditor’s report on the government-owned Malaysia Export-Import Bank that details tens of millions of dollars in politically tinged nonperforming loans and possible illegalities has been hidden away in a central bank file for more than four years without being acted upon.

The report, by auditors from Bank Negara Malaysia, the country’s central bank, probes borrowers closely tied to the United Malays National Organisation, the leading party in the country’s ruling coalition, as well as companies tied to the Sultan of Terengganu, the current Malaysian king. The report into the bank’s lending activities details inadequate risk management on projects amounting to RM116 million (US$37 million).

Among other shortcomings, according to the Bank Negara report, was a RM13 million (US$4.13 million at today’s exchange rate) loan to companies related to BTM Resources Group Bhd ‑ Besut Tsuda Wood Products Sdn Bhd, Besut Tsuda Industries Sdn Bhd and Gimzan Plywood Sdn Bhd. The name of Besut Tsuda Wood was earlier changed from Mizan Timber Industries Sdn Bhd to BTM Timber Industries Sdn Bhd.

Mizan Zainal Abidin is the name of the current Malaysian king. Sources within the Exim Bank and other Malaysian financial industry sources say the group is headed by Mizan, who is also the Sultan of Terengganu.

Besut Tsuda Wood Products, according to the Bank Negara audit report, “suffered repeated losses, tight liquidity and was technically insolvent" and "appeared less efficient than the market because its competitors were making profit despite lower sales." The report described the firm as a "loss making company, (that) resulted to declining shareholders funds."
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(http://asiasentinel.com/index.php?option=com_content&task=view&id=1162&Itemid=32 )
Here's the full report from Asia Sentinel:
Malaysia’s Exim Bank: A Morass of Bad Loans

Jed Yoong

23 April 2008

Bank Negara sits on a report that a government-owned bank has lost millions on loans to politicians and royalty An explosive auditor’s report on the government-owned Malaysia Export-Import Bank that details tens of millions of dollars in politically tinged nonperforming loans and possible illegalities has been hidden away in a central bank file for more than four years without being acted upon. The report, by auditors from Bank Negara Malaysia, the country’s central bank, probes borrowers closely tied to the United Malays National Organisation, the leading party in the country’s ruling coalition, as well as companies tied to the Sultan of Terengganu, the current Malaysian king. The report into the bank’s lending activities details inadequate risk management on projects amounting to RM116 million (US$37 million). A copy of the report was submitted to Malaysia’s Anti-Corruption Agency in February by Norhayati Abdullah, a former bank employee who was fired after 12 years, allegedly for taking kickbacks from an advertising firm. She denied the charges and said she was being made a skapegoat for corruption inside the bank. She was joined in going to the ACA by disgruntled Exim bank officials in alleging that top management were involved in taking kickbacks and other malpractices. Senior bank managers were said to have illicitly purchased luxury cars while also receiving millions of ringit in cash. The whistleblowers also submitted documents claiming that bank managers enjoyed protection from powerful politicians, which gave them a free rein to do as they please. Despite repeated requests for comment, Bank Negara officials have refused comment on why the report was never acted upon. One official acknowledged the existence of the report and then passed the question on to another official who didn’t call back. While an Anti-Corruption Agency spokesman said that the case is being investigated, there seems little evidence that the agency has spoken to any of the complaining witnesses about the allegations. Under Malaysia’s Prevention of Corruption Act, public officials must declare their assets and are required to account for the source of any unexplained cash that doesn’t appear to be earned at their salary levels. Mohd Fauzi Rahmat, the new head of Exim Bank who was appointed this month, could not be reached for comment. Founded in 1995 on the order of former Prime Minister Mahathir Mohamad, the bank was part of his attempt to turn Malaysia into an export powerhouse. It was intended to provide investment credit to help open overseas doors for Malaysian companies. However, according to several sources inside and outside the bank, its first round of financing, just before the Asia Financial Crisis of 1997-1998, fell into a river of red ink. None of the bank’s original loans were ever paid off, the sources say. A second round of financing in 2002 also turned into non-performing loans, the sources added. The magnitude of the NPLs is not listed in any of the Exim Bank’s annual reports and, although it is a government bank, it declined to divulge the amounts to Asia Sentinel. Among other shortcomings, according to the Bank Negara report, was a RM13 million (US$4.13 million at today’s exchange rate) loan to companies related to BTM Resources Group Bhd ‑ Besut Tsuda Wood Products Sdn Bhd, Besut Tsuda Industries Sdn Bhd and Gimzan Plywood Sdn Bhd. The name of Besut Tsuda Wood was earlier changed from Mizan Timber Industries Sdn Bhd to BTM Timber Industries Sdn Bhd. Mizan Zainal Abidin is the name of the current Malaysian king. Sources within the Exim Bank and other Malaysian financial industry sources say the group is headed by Mizan, who is also the Sultan of Terengganu. Besut Tsuda Wood Products, according to the Bank Negara audit report, “suffered repeated losses, tight liquidity and was technically insolvent" and "appeared less efficient than the market because its competitors were making profit despite lower sales." The report described the firm as a "loss making company, (that) resulted to declining shareholders funds." The loans were classified as "high risk lending that may expose Exim Bank to unnecessary losses" and "potential NPLs." Additionally, as valuation reports were not addressed to the bank, the auditors indicated, it might not be possible to claim assets pledged as collateral should the loans turn bad, which they apparently did. A second US$14 million term loan was made to Sun Holding Co Ltd in 2004 to finance the five-star 240-room Don Chanh Palace Hotel in Vientiane, Laos, which hosted the 10th Association of South-East Asian Nations Summit in the same year, and a tourist complex. The company was started by the Cheok family, a property developer helmed by Cheok Thian Sang, who maintains close ties to the Malaysian Chinese Association, the second-biggest ethnic party in the Barisan Nasional. Discrepancies included not assessing the guarantors' and related companies' finances. Another US$2 million was later approved as the initial request did not include a variety of preliminary development costs. In addition, the terms and conditions of the loans were waived and relaxed after approval, the auditors found. Significantly, the security value of landed properties pledged was reduced from RM80 million to RM60 million and the percentage of sales proceeds to be placed in Debt Service Reserve Accounts was decreased from 20 per cent to not more than 5 percent, giving the company more cash reserves to operate with at the expense of potential creditors. The bank also waived requirements for purchases from Malaysian contractors of at least US$8 million, valuation reports on land charged as security and a one per cent upfront fee. A third cross-border credit for RM30.3 million to Jabalpur Corridor (India) Private Limited to build a toll road was approved in 2004 despite feasibility studies that indicated the project might not be viable and that documentation was incomplete. That company is an overseas subsidiary of Dhaya Maju Infrastructure Asia Sdn Bhd (DMI), another UMNO-connected company. Established in 1996, it is a Class A bumiputera contractor. This allows it to tender for the biggest projects of more than RM10 million from government and government-linked companies allocated to ethnic Malays under the country’s New Economic Policy affirmative action program. A traffic consultancy, Frischman Prabhu (I) India Ltd, forecast that traffic flow would not meet the Dhaya Maju projections, only increasing from 3 percent to 5 per cent, not from 5 per cent to 9 per cent as assumed by Jabalpur, which was not enough to repay the loan. The report also criticized projected cash flow submitted by Japalbur as inflated. Earlier in 2002 and 2003, two loans totaling RM28 million were made through UE Development India Pvt. Ltd. a wholly-owned subsidiary of UEM Builders Bhd, a construction that historically has been closely linked to UMNO, to a firm called TDI Infrastructure, which is a subsidiary of Dhaya Maju, to finance another highway in India. Again the loans were improperly secured against a deed of assignment for contract proceeds between the bank and the company. The central bank’s internal auditors deemed the arrangement to be "ineffective due to (the) lack of monitoring by (the) Loan Administration Department on the project account.” Dhaya Maju was also given excessively lax repayment terms by the Exim Bank but still didn’t pay on time, the audit report said. A sinking fund, or custodial account, of 4 percent of progress payments which was to provide additional security for the loan, was only established about a year later, which the report described as "too long". Despite making 49 progress claims to the main contractor, UE Development India, totaling Rs896.2 million, only Rs94.8 million (13 transactions) was credited to the project account. Disbursements were also made without the approval of the head of the loan administration unit or the general manager, as specified by bank regulations. In a different kind of breach of professional conduct, also highlighted by the Bank Negara report were exorbitant petrol and cell phone claims by a general manager, which breached company regulations. Although he was mostly abroad during the time that the claims were made for petrol, the total amount for five months came up to RM11,398. According to marginal notes on the Bank Negara report, the charges appeared to have been run up by the man’s wife. In the same period, he claimed RM10,823 in cell phone charges, far exceeding the stipulated limit of RM200 per month or RM1,000 for five months. How much there is beyond the Bank Negara report remains to be seen. The whistle-blowers, in their letter to the Anti-Corruption Agency, wrote that accounts have turned into NPLs in India, China, Laos, Indonesia and Africa. "How could they (the loans) not turn into NPLs? Because borrowers need to pay commissions to those who have vested interests while the actual loan amount becomes less than what was applied for," a former bank employee wrote in a letter to the ACA.

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The Asia Sentinel report certainly looks bad for Malaysia’s Agong if you do not know the real story behind this whole thing. It makes one wonder who is behind this ‘leaked information’ and whether it was done to intentionally embarrass the Agong as punishment for throwing a spanner in the works. Last month, the Agong rejected Umno’s choice of Terengganu Menteri Besar and it is an open secret that His Majesty’s displeasure resulted from the siphoning out of RM1 billion a year in oil royalty since 2000.

It all started in November 1999 when the opposition kicked Umno out of Terengganu. A few months later, the federal government cancelled the 5% oil royalty that the state had been enjoying for more than two decades. They then handed the money over to Idris Jusoh, the Umno state chief, to manage. To circumvent the law, they reclassified the oil royalty as wang ehsan.

In the first place, Terengganu should have been allowed to retain 100% of the oil revenue under the terms of the Federation Agreement which stipulates that all state resources belong to the state. However, in 1974, they passed the Petroleum Development Act, which allowed the federal government to ‘rampas’ the state’s oil resources and nationalise it. This in itself was a breach of the Federation Agreement. The federal government then gave back 5% of this revenue to the state in the form of ‘royalty’. But in 2000 even this was rampas from the state when it fell to the opposition.

The misappropriation of this wang ehsan and how Idris Jusoh, Patrick Lim, Wan Farid, and their friends in Umno, siphoned out the money through various projects such as the Monsoon Cup is well-documented and has been discussed in great length in this same column so we do not need to repeat the details here. Suffice to say that The Agong saw more than RM7 billion of Terengganu’s money, from more than RM150 billion that the federal government pumped out of the ground since 2000, disappear and His Majesty decided that enough is enough.

The new Menteri Besar, who was handpicked by His Majesty, has now demanded that the RM1 billion a year be paid direct to the state and that it should no longer be handed over Idris Jusoh, Patrick Lim, Wan Farid, and his gang of thieves. And this has upset Umno who now wants to hit back at The Agong. And this was why the ‘secret’ about the EXIM Bank was leaked. Of course, those who do not know what is going on behind the scenes would quickly jump to the conclusion that The Agong is a slimeball just like all those others who have been robbing this country blind. But there is certainly more than meets the eye as far as this case is concerned.

Mizan Sawmill was a company set up more than 35 years ago by the then Menteri Besar, Wan Mokhtar Ahmad, and his business partners, Dato Yong, Dato Azhar and Dato Yusoff. Dato Yong was a gangster who had been banished to Terengganu under the Prevention of Crime Ordinance (PCO). Dato Azhar later became the Terengganu State Secretary while Dato Yusof was the then Sultan of Terengganu’s Private Secretary. The Sultan then was the present Agong’s grandfather.

The present Agong was still in primary school and not at all involved in the business of these very notorious plunderers infamously known as ‘The Gang of Four’. Even back then the Terengganu Malay Chamber of Commerce was very upset with how ‘The Gang of Four’ raped and plundered the state’s resources but no one could do anything about it since the four were the Menteri Besar, a Chinese gangster, the State Secretary and the Sultan’s Private Secretary.

About 25 years ago, the Terengganu Malay Chambers of Commerce raised the matter with the Parliament Back Benchers’ Club (BBC) Chairman, Shahidan Kassim, who then brought it to the attention of the Deputy Prime Minister, Ghaffar Baba. There was a huge brouhaha, which made the front pages of the mainstream newspapers, in particular the Malay language newspapers, but because of the Constitutional Crisis that had just blown up, they decided to play up the issue and slant it as if it was the Sultan himself who was behind all this.

Mizan Sawmill then applied for huge tracts of forestry land in the Kenyir Lake under the guise of ‘tourism’ project. But what they really wanted to do was to cut down the trees, not to embark on any tourism project, and no one dared take any action to stop them, mainly because of the powerful people behind the company. This upset many members of the Terengganu Royal Family, the present Agong included, but then Umno and not the palace called the shots -- and in the 1980s, at the height of the Constituational Crisis, who dared challenge Umno? Even the palace kept mum lest they incur the wrath of the Umno warlords and kingpins.

Besut Tsuda, the company that was mentioned in the Asia Sentinel report, was a joint venture between Japanese interests and the Terengganu State Economic Development Corporation (SEC). This was set up about 35 years ago and was the cashcow to siphon out money to fill up Umno’s war chest. The head of Besut Tsuda was an Umno man appointed by the Menteri Besar. Besut Tsuda and Mizan were two separate entities. Besut Tsuda was for purposes of financing Umno Terengganu while Mizan was for the personal coffers of the Umno Menteri Besar of Terengganu.

Both these companies that were set up 35 years ago by those who walk in the Terengganu corridors of power when the Agong was still in primary school are now being linked to The Agong. This is clearly a spin machine that is spinning out of control. Maybe they think that this ‘revelation’ will frighten The Agong and will probably make His Majesty ease up on the demand that the RM1 billion a year wang ehsan be taken back from Umno and handed over to the state as what had been decided by Parliament in 1974.

The Agong is not the only victim of this spin machine. There is a book called ‘100 DALIL MENGAPA NAJIB TAK BOLEH JADI PM’ that Malaysia Today has received from an anonymous source. Of course, the party that gave us this book wants Malaysia Today to publish it, maybe a dalil a day for 100 days. We are still studying the contents of this book to assess whether the 100 dalils are mere innuendoes and insinuations or are really points of substance. No, contrary to what the government says, Malaysia Today does not publish innuendoes and insinuations.

Those close to the Deputy Prime Minister are not being spared either. Malaysia Today was given the name of the ex-Minister who has been accused of molesting the cigar girl in the Havana Club in a five-start hotel in KL Sentral. Malaysia Today’s initial investigation points to a smearing campaign aimed at bringing down all those close to the Deputy Prime Minister and it seems the incident has been denied by the girl concerned.

On Sunday, Najib sealed a secret pact with Prime Minister Abdullah Ahmad Badawi. Yes, Najib has thrown his forces behind Abdullah and has sworn to sink or swim with his boss. This has riled the Team B forces and they now want Najib and his boys brought down as fast as possible so that Abdullah can be isolated and brought down as well in due time. And this is probably the reason for the smear campaign that suddenly intensified the last few days.

Hmm…everyone is trying to bring down everyone so maybe we should just sit back and watch who is going to be the last man standing. Then, maybe, we can leisurely stroll in and pick up the pieces, if there is anything left to pick up after this.