EL ORGANICISMO

Fleet Group still retained a 59 per cent stake in the bank (KLSE, Annual Companies Handbook, Vol XV:664). For an account of the changes that have occurred in the structure and ownership o f BOC see Gomez (1990:68-69) and (1994:76-80).

and the benefits it bestowed on UMNO in terms of wealth and patronage, clearly showed the often incestuous nature of the relationship between the government and the party.

It will be recalled that although UMNO-owned Hatibudi gained control of UEM in March 1985, the Minister for Works, Datuk Sarny Vellu, did not publicly acknowledge UMNO's links with UEM until July 1987. In the interim, the close political ties between the company and the government gave UEM a considerable headstart in preparing its bid for the highway contract. Reports later revealed that on 14 August 1985, the chief executive officer of United Engineers, Halim Saad, wrote to the Prime M inister, Dr M ahathir, forwarding the com pany's proposal on the privatisation o f the highway p ro ject53 (Lim Kit Siang, 1987:11). Cabinet discussed the proposal in A ugust or September 1985 (AWSJ, 18:1:1988). On 27 December 1985 United Engineers paid $26,030 to the Malaysian Highway Authority for documentation and plans for the highway project yet public tenders for the contract were not called until 4 April 1986 (Lim Kit Siang, 1987:11). In addition, applicants were required to submit their tenders by 2 July 1986. So while United Engineers had almost 12 months to work on its proposal other competitors had less than 3 months to work on theirs.

Controversy over the project grew further when the DAP revealed that two other companies, Pilecon and Syarikat Hashbuddin, had produced more competitive proposals than United Engineers. In addition, it was found that United Engineers had never built a major road or bridge and that the company was insolvent (The Star, 1:8:1987). In August 1987 the Leader of the Opposition, Lim Kit Siang, filed a legal suit in which he charged that the proposed award of the highway contract to United Engineers was unlawful and tainted by conflict of interest involving senior government officials who were also UMNO leaders. But the case only delayed matters, for on 15 July 1988 M alaysia's Supreme Court dismissed the challenge, thereby clearing the way for the government to grant the $3.24 billion highway contract to United Engineers (AWSJ, 18:1:1988).

In response to charges of 'conflict of interest', governm ent spokesmen, notably Works Minister Sarny Vellu, countered that Cabinet had not been involved in the decision to award the contract to United Engineers (NST, 11:7:1987). It seems that Daim insisted that the matter not be decided by the Cabinet but within the Ministry o f Works and that

53 _{Apparently the plan to privatise the highway project originated with United Engineers which initially} hoped to be awarded the contract without even having to go through the motions o f a competitive bidding process (AWSJ, 18:1:1988).

Ministry officials make the 'right decision' in favour of United Engineers54. Apparently the quid pro quo was a payoff to the Malaysian Indian Congress (MIC), the ethnic Indian component of the government headed by Works Minister, Sarny Vellu. On 29 December 1986, ten days after the Public Works Ministry gave United Engineers the Letter of Intent, an official of the MIC wrote to Halim Saad, the Chief Executive Officer of United Engineers, and requested the company purchase $290,000 worth of lottery tickets from an MIC-sponsored Institute (AWSJ, 18:1:1988). Later, Halim Saad, in an affidavit to the Supreme Court responding to the legal suit brought against United Engineers by Lim Kit Siang, acknowledged that the company had indeed purchased $250,000 of MIC lottery tickets but claimed, somewhat disingenuosly, that the purchase "wasn't in any way connected with the award of the contract" (AWSJ, 18:1:1988).

The close relationship between the government and the party was not only evident in the manner by which the North-South highway contract was awarded to UMNO- controlled Hatibudi, but also the extraordinarily generous terms of the contract. The contract provided large government loans to United Engineers, a toll collection concession along the highway for 25-30 years, allegedly worth $54 billion (Lim Kit Siang, 1987:111) and a government guarantee of minimum traffic volume for a substantial portion of the life of the concession (AWSJ, 1:18:1988). Such generous government support not only protected United Engineer's profits but also shifted much of the costs and risks of privatisation to the government.

Besides the North-South highway contract, United Engineers Malaysia (UEM), was awarded a string of highly profitable contracts for services the sum of which generated a huge source of funds for the party. The most notable included:

• (1985) a $250 million contract to design a national sports complex (BT, 24:12:1985).

• (1987) UEM was part of a consortium that was awarded the $47.5 million Peninsular Gas Utilisation managment consultancy project in Trengganu (Lim Kit Siang, 1987:v).

• (1990) the privatisation contract for the highly profitable chain of pharmaceutical outlets operated by the Malaysian Governments Health Ministry (FEER, 20:12:1990).

• (1990) the contract to construct the $1 billion second causeway between Malaysia and Singapore (FEER, 20:12:1990).

Another form of privatisation is to issue licences to allow private companies to provide services previously monopolised by the government. This form of privatisation has provided another avenue by which the close govem m ent/party relationship has facilitated the developm ent of UM NO's business interests. An exam ple o f such 'privatisation' was the award by the government in August 1983, of a licence to operate the country's first private television network, Sistem Televisyen Malaysia Bhd (STMB) or TV3, to the UMNO-owned Fleet Group55.

Almost from its inception TV3 has been a highly lucrative business, its pre-tax profit rising rapidly from $2.16 million in 1985 to $31.6 million in 1990 (KLSE, Vol XV: 1990:534) and (NST, 31:12:1990). The initial shareholders of TV 3 were Fleet Group (40 per cent), Utusan Melayu (20 per cent), Syed Kechik Foundation (20 per cent), M aika H oldings (10 per cent) and Daim Zainuddin (10 per cent) (AW SJ, 8:5:1991). Fleet Group won the television licence in competition against a foundation controlled by the then wealthy Bumiputra enterpreneur Syed Kechik Syed Mohamed (AWSJ, 21:9:1983). The ownership of TV 3 was noteworthy for the com bination of party and private interests involved - those of Fleet and the private family companies of Daim Zainuddin, which collectively held 50 per cent of the company.56 The fact that Daim was chairman of the Fleet Group when TV 3 was set up meant that he was able to combine the interests of the party with those of his private companies in a highly lucrative business.

5 5 Besides obtaining the licence to operate Malaysia's first private TV channel, the Fleet Group also later obtained the rights to service users of Malaysia's new mobile telephone system. Apparently Fleet 'cajoled' government-owned Telecom Malaysia to create a new company to service that rapidly expanding and most profitable aspect of telecommunications services (FEER, 20:12:1990). In 1988 a joint-venture company called STM Cellular Communications Sdn Bhd (Celcom) was incorporated in which Fleet Communications held a 49 per cent stake while government-owned Syarikat Telecom Malaysia Bhd (STM) held the remaining 51 per cent equity (Gomez, 1990:97). Later this valuable asset was reshuffled within UMNO's own corporate empire when, in April 1990, Time Engineering bought Fleet Communications' stake in Celcom from the Fleet Group for $81 million. Both Fleet and Time Engineering were UMNO-linked companies which were later incorporated within the party's magaconglomerate, Renong Bhd. Time’s chairman, Datuk Mohd Desa Pachi, was also a director of Celcom and the Fleet Group (AWSJ, 19:4:1990).

56 Daim's interests were held through two family companies, Daan (5 per cent) and Dani (5 per cent).