The Third Force
Six hundred odd people watched yesterday as Tun Dr. Mahathir Muhammad addressed a public forum at the Straits Quay Convention Centre in Penang. The event was not without irony – despite there being overhead projection and a dimly lit ambiance, the event left six hundred odd people virtually in the dark.
Judging from the intermittent bursts of applause, hardly anyone in the room spotted the pack of lies Mahathir had bundled together with his hour long drivel on this and that. For instance, midway through his speech, Mahathir tried to make a monkey out of Dato’ Seri Najib Tun Razak by implying that the Prime Minister (PM) had saddled 1MDB with unnecessary debt through a banking loan worth 5 billion ringgit.
“When I was Prime Minister, I remember, we never borrowed a billion ringgit,” said Mahathir. And he’s right – he never borrowed a billion ringgit – he helped a private firm borrow one and a half times that amount from a bank and later used public funds to service the loan.
Early in the eighties, Mahathir engaged in speculative trade by using a shell company named Maminco Sdn Bhd to purchase tin futures contracts and stockpile on the commodity. The whole manoeuvre was shrouded in secrecy and was intended to buoy the commodity’s worth at the London Metal Exchange, the world centre for industrial metals trading.
To finance the scheme, Mahathir helped Maminco secure a loan worth RM 1.5 billion from Bank Bumiputra, and that’s to say the least – nobody has a clue as to what the actual borrowings were worth. That said, we’re talking about a loan worth no less than an estimated RM 7 billion by today’s standards, or seven times more the amount Mahathir denied was ever borrowed under his reign.
Notwithstanding the claim, Mahathir’s plan worked like a charm and caused tin prices to soar. While that did help Maminco stuff its vaults with the greenback, the plan worked only to an extent – demand pressures began to stimulate tin production and forced the US to counter-speculate by releasing its stockpile.
It didn’t take too long thereafter for the price bubble to collapse, and when it did, Maminco found itself ill-capacitated to service the loan. That forced the former premier into yet another conspiracy – this time, he okayed the sale of new bumiputera-reserved shares at par value to Makuwasa (rhymes with Maha kuasa), another shell company worth just RM 2.
In a sense, Makuwasa was turned into an investment intermediary for the EPF – all the shares it purchased comprised stock that was diverted from the provident fund as part of an elaborate scheme to bail Maminco out. The whole exercise was sheathed in secrecy and was known only to Mahathir and several of his trusted henchmen.
Makuwasa sold these shares at market value for a margin, part of which Mahathir later siphoned into Maminco to redeem the losses it suffered at the hands of US speculators. So not only was Mahathir instrumental in speculative trading, he effectively used funds originally meant for bumiputeras to help bailout a company that was in colossal arrears with the bank.
The Makuwasa-Maminco scandal wasn’t the first time public funds were compromised in speculative trading by Mahathir. During the mid eighties, the former premier engaged in speculative currency trading through Bank Negara and caused the central bank to go bust almost a decade later.
It all began in 1985 or some time thereabouts, when Bank Negara Malaysia (BNM) registered a diminution of its foreign exchange reserves, then valued at around 5 billion on the dollar. The sudden dip came on the heels of an accord that was ratified by dignitaries of the (then) G-5 nations at the Plaza Hotel in New York. The agreement gravitated towards a protectionist move by the US, which deliberately devalued its currency by about 50 percent to minimize collateral damage between its strategic trading partners.
To recoup losses, Mahathir conspired with the then governor of BNM Tan Sri Jaffar Hussein to loot the currency market by speculating on key global currencies with a zeal that bordered on gluttony. The central bank was said to have relied on information procured from other central banks to earn short-term profits from interest rate differences and exchange rate shifts.
Jaffar triggered cross-border flows of ‘hot money’ and managed to get other central banks to follow his lead. By the turn of the decade, Jaffar had pulled off incredible feats in the foreign exchange market under the vigilance of Mahathir and one of his trusted confidantes, Tun Daim Zainuddin. In the interim, Asian countries granted Jaafar the unspoken distinction of being a trailblazer in the exchange market, meaning, he was the guy every other banker in the region took the cue from.
By the turn of the decade, the trio – Mahathir, Daim and Jaafar – attempted to plunge the British pound sterling by selling off the currency in the truckloads. The move was calculated to coincide with an agreement the United Kingdom had entered into with other European nations which required the British to abide by an Exchange Rate Mechanism (ERM) as a measure of security.
A partially pegged system, the ERM confined participating nations to strict exchange rate margins that were meant to stabilize European currencies. By speculating on the pound, BNM successfully drove the British currency down by as much as four cents just as Britain was delivered its membership approval to the ERM.
More importantly, Jaafar’s speculative whirlwind yanked in a vault full of ringgit, a significant portion of which meandered its way into the accounts of trustees who later helped finance the 1990 general elections. But a large chunk of that sum has yet to be returned to UMNO or the federal government and is believed to have been dumped by these trustees into several of their business interests worldwide.
Two years later, Britain played an accidental number on Jaffar – by then, the United Kingdom (UK) had been luring investors to the pound by inflating interest rates to artificially buoy its currency. Jaffar, being the daredevil he was, had only begun to speculate on the pound when the UK suddenly withdrew from the ERM. The move saw the British pound drop like a sack of hot potatoes and saddled the Malaysian government with losses that were estimated at 3.6 billion on the dollar.
A year later in 1993, team Mahathir-Jaffar dissipated yet another USD2.2 billion in speculative trading – by 1994, the central bank was declared insolvent and was bailed out by the Finance Ministry, a portfolio which was then held by current PKR de facto chief Dato’ Seri Anwar Ibrahim.
Jaffar went on to tender his resignation, though neither he nor Mahathir were investigated for their roles in dissipating billions of ringgit into thin air. By then, losses had ballooned to proportions that were never really accounted for.
Yesterday, Mahathir accused Najib for the zillionth time of having dissipated RM 50 billion worth of 1MDB funds and of siphoning another RM 2.6 billion from the strategic investment firm. He remains haughtily stubborn and refuses to acknowledge the fact that five independent panels bound by various statutes of law have since cleared the PM of criminal malfeasance of any sort.
But what Mahathir also refuses to acknowledge is the losses BNM registered in the mid nineties that was estimated at RM30 billion. By today’s standards, that’s worth a staggering RM 150 billion – coupled with the RM 7 billion I spoke of earlier, you will understand why much of the garbage Mahathir spews against Najib is worth a little over two cents, and that too, in the black market.
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