Bagaimana Taib Mahmud Merompak Kekayaan Bumi Sarawak

Tiga Rakyat Sarawak Ke SPRM, Lapor Salah Guna Kuasa RM3 Bilion

Tiga rakyat Sarawak hari ini membuat laporan kepada Suruhanjaya Pencegahan Rasuah Malaysia (SPRM) di Putrajaya berhubung dakwaan rasuah dan salah guna kuasa oleh ketua menterinya Tan Sri Taib Mahmud.

Tiga pengadu itu - John Brian Anthony, Ting Cek Ming dan Kung Chin Chin menggesa suruhanjaya itu menyiasat 'empayar' perniagaan Taib dan keluarganya yang didakwa bernilai 'lebih RM3 bilion' berdasarkan apa yang dilaporkan di blog sarawakreport.org.

Aduan dibuat kepada pegawai kanan SPRM, Ranjit Singh.

Ini adalah aduan kedua yang dibuat berhubung perkara yang sama. Aduan pertama dibuat kepada SPRM di Kuching, semalam oleh Ahmad Nazib Johari.

Menurut seorang daripada pengadu itu, Ting Chek Ming, proses membuat aduan berjalan lancar berbanding minggu lalu apabila beliau bersama Ahmad Nazib dan James Wong cuba mengemukakan aduan mereka.

"Kali ini, kami datang dengan salinan laporan yang ditaip dan pegawai SPRM menandatangani mengesahkan penerimaan aduan berkenaan di salinan kami bagi memastikan tiada perubahaan dibuat terhadap aduan itu,” katanya.

Minggu lalu, Ting, Wong dan Ahmad Nazib terpaksa menarik balik laporan mereka kerana mendakwa pihak SPRM di Shah Alam enggan memberikan salinan aduan yang ditulis dengan tangan.

Hadir bersama menemani ketiga-tiga mereka membuat aduan hari ini adalah pemimpin wanita PKR, Rozaini Mohd Rosli bagi menzahirkan sokongan Pakatan Rakyat berhubung isu berkenaan.

Ketiga-tiga pengadu berkenaan dinasihatkan bahawa mereka mungkin akan dipanggil kemudian bagi memberikan kenyataan terhadap apa yang diistilahkan oleh suruhanjaya itu sebagai 'kes besar'.

"Kami diberi jaminan yang SPRM akan menyiasat kes itu dan dinasihatkan menulis kepada Pengarah Siasatan bagi mendapatkan perkembangannya,” kata Ting.

Sarawakreport.org mendakwa Taib dan keluarganya mempunyai empayar perniagaan antarabangsa, termasuk memiliki hotel mewah di Australia dan hartanah komersial di tapak utama di Kanada melalui cara yang disangsikan.

Blog, yang dikendalikan oleh “rakyat prihatin' itu juga mempersoalkan pembabitan keluarga Taib dalam konglomerate terbesar negeri itu - Cahaya Mata Sarawak.

Ia juga mendakwa 85 peratus saham CMS dimiliki oleh Taib dan keluarganya serta rakan-rakan karib mereka ketika syarikat berkaitan kerajaan itu diswastakan yang menimbulkan dakwaan salah guna kuasa. -TVS

HOW TAIB HAS ROBBED SARAWAK

How many billion dollars is that Taib?

No secret about Taib’s thieving ways

Chief Minister Abdul Taib Mahmud’s methods for milking Sarawak’s wealth at the expense of its people has been documented by numerous respected international news organisations, including Bloomberg, The London Times and Al Jazeerah TV. The real scandal is that Malaysia’s forces of law and order have not long since arrested him and brought him to trial.

Taib abuses his positions as Finance Minister and Chief Minister to make sure that nearly all state contracts go to companies that he and his family own. He runs Sarawak like his own private enterprise. This is the essence of corruption. Under proper governance all state contracts should be independently awarded to companies that gives the taxpayer best value for money by the job. This should be an open process that everyone can check. But in Sarawak Taib hands out contracts behind closed doors – and he gives them to himself!

Dishonest Contracts

A brand new building that no one needs to feather Taib’s nest

Abdul Taib Mahmud governs Sarawak purely in order to make a profit for himself. The biggest company in Sarawak is Cahya Mata Sarawak, the huge construction conglomerate, which is owned mostly by himself and members of his family. Before Taib took power CMS was a profitable public company owned by the State, but he used his influence to privatise it and then take it over himself. Nowadays Taib makes sure numerous government projects, involving huge payments from the taxpayer, are given to CMS.

An estimated MR 500 million are handed out each year to CMS by the department of Public Works alone. On top of that there are numerous one-off projects, for example the construction of the multi-million US dollar Aluminium Smelter project linked to the controversial Bakun Dam and of the new MR300 million Parliament Building in Kuching - guess which company the Sarawak State ‘negotiated’ to give these contracts to?

Straight Scams

Another frequent scam is when money ‘disappears’ through sub-contracting. What happens here is Taib hands out a huge government contact to CMS or another family company, which is then allowed to sub-contract the whole job to another company for far less money. In this way the Taib family can make millions of ringits of profit for doing nothing at all. The Malaysia Anti-Corruption Commission announced in November that a staggering 60% of the money laid out every year by Taib’s government on state projects ‘disappears’. It is easy to see how.

Kickbacks worth billions of Ringits

Taib also makes sure his companies and family members control all the key positions where is it possible to accept big bribes from businesses. Take the scandal exposed when the Japanese tax authorities revealed some months back that tens of millions of US dollars have been paid in secret, illegal kickbacks by Japanese shipping companies exporting timber from Sarawak. The money, which adds up to hundreds of millions of ringits over the last 20 years, was paid directly to companies owned by Onn Mahmud, the brother of Chief Minister Taib Mahmud.

Your wealth, but Taib's profit

Faced with prosecution for not declaring these bribes, the Japanese timber companies explained that the Sarawak government does not allow export permits unless they ‘negotiate’ with a companycalled Achi Jaya Shipping. Achi Jaya Shipping is owned by Onn Mahmud, the brother of Tab Mahmud.

Taib has taken millions of hectares of native customary rights lands from their rightful owners, the indigenous peoples of Sarawak. The estimated value of timber exported from Sarawak is US$ 25 billion. He has taken billions of that profit for himself. How much went to the rightful owners? In the process, his careless, unsustainable logging has destroyed one of the world’s most precious natural jungles.

Jobs and concessions for the family

Taib Mahmud has handed out over 1 million hectares of logging concessions to his own family. He has also made sure that all the most influential jobs in the Government and state companies go to his own family. Particularly favoured is his cousin, Abdul Hamed Sepawi, Chairman and major shareholder in the developer Naim Holdings Bhd., which has received numerous government contracts.

All but gone

The Managing Director of Sarawak Energy Bhd (SEB), which is handing out the contracts for the dam-building, is Taib’s brother-in-law, Aziz Husain. Taib’s brother Onn Mahmud controls shipping permits.

Taib’s sister Roziah Mahmud controls a huge business empire in Sarawak and was handed control of the Royal Mulu Hotel in Mulu National Park. Now Taib’s son Suleman has been given a parliamentary seat and as Taib grows visibly weaker every day the talk is all about making him the new Chief Minister!

Why vote back a weak and corrupt old man, who is dashing early into the elections just so that he can use his last fading influence to hand over to his inexperienced son? PKR have pledged to chase the Taib family for their money and return it to invest in Sarawak. Suleiman Taib will seek to continue his father’s rape of this country. -Sarawakreport

MACC Urge to Investigate Taib Mahmud Family

See the most corrupted leaders in Malaysia being sorrounded by the bosses of government officers. On his rigt is the SSS while on his left is the most powerful people in the MACC.

The MACC should avoid itself from getting closer to Taib Mahmud to avoid public perception that Taib Mahmud is bribing MACC to avoid prosecution.

The public wants MACC to walk the talk especially against Taib Mahmud. Taib Mahmud and his family members, from his cousins, uncle, brothers and children have been widely reported locally and globally for collecting wealth from Taib position as the Chief Minister of Sarawak.

But despite being widely discussed and reported, so far Taib Mahmud and the members of his family have never been grilled or called by MACC for investigation.

On 8th December 2009, its Deputy Chief Commissioner Datuk Abu Kassim assured that MACC will carry out without fear and favour investigation into government funds that were diverted elsewhere in Sarawak. The Fund diversion is just a tip of an iceberg on corruption and abused of power in Sarawak. Sarawak is

one of the richest state in Malaysia in term of natural resources but place in top five among the poorest states in Malaysia.One of the logic reason why Sarawak is placing among the top 5 poorest states in Malaysia is because most of our wealths have been siphoned-off by Taib Mahmud and his family members.

Today I would like to expose how Taib Mahmud and family members siphoning government monies.

THE CASE OF CAHAYA MATA SARAWAK (CMS) aka CHIEF MINISTER SARAWAK AND SONS

Cahya Mata Sarawak (CMS), a company majority-owned by Abdul Taib Mahmud’s family, is one of Malaysia’s leading public listed corporations with numerous subsidiary and associate companies and a group annual turnover of about RM1.4 billion in 2002. The first company from Sarawak to be listed on the KLSE, it is the acknowledged market leader in the financial and infrastructure sectors in the state. It is widely regarded as “one of the major forces behind Sarawak’s rapid economic development and an increasingly important contributor to the overall Malaysian economy” (CMS, 1997:3). Until recently, it controlled four monopolies in Sarawak, namely the monopoly on the production of cement, steel, agency services for log export shipments, and stock-brokerage services, and has regularly secured a majority of large public infrastructure projects.

Incorporated in October 1974 as a “manufacturer and wholesaler of ordinary portland cement”, Cement Manufacturers Sarawak7 was a joint-venture of the Sarawak Economic Development Corporation (SEDC) and the Sabah Economic Development Corporation (SEDCO), set up to drive industrial development and restructure society under the NEP in the two East Malaysian states.

CMS has long been a profitable company. From 1992, CMS profits increased substantially before sustaining stunning losses associated with the Asian Crisis in 1997/98. CMS’s share price on the KLSE moved in tandem, rising from RM8.30 in July 1993 to an ll-time high of RM31.00 in March 1997 before collapsing dramatically to RM1.61 by November 1997 (CMS 1998a). Its share price presently languishes at RM1.68 (Borneo Post, 31.7.04).

The rapid growth and transformation of CMS since the 1990s has been nothing short of phenomenal, and is due to two main factors, namely the privatisation and restructuring of CMS from a State-owned public-listed company into a private sector public-listed conglomerate owned by the Mahmud family, and the huge amount of rents CMS secured for itself and its subsidiary companies from 1992 through political patronage.

Beginning in the early 1990s, a series of privatisations and complicated corporate re-structurings led to the privatisation of key SEDC enterprises to CMS, and subsequently the privatisation of CMS itself, but under the pretext of corporate acquisitions. In July 1993, CMS purchased major stakes in three highly profitable SEDC subsidiaries for RM117.4 million (The Star, 23.7.93), namely PPES Quarry (51%), Steel Industries Sarawak (60%), and PCMS (55%) (CMS 1994). This purchase was funded by a RM50 million cash payment and the issue of 13.48 million CMS shares valued at RM5.00/per share (RM67.4 million) to SEDC (CMS 1994). However, considering that all three SEDC companies held a total of RM30.94 million in cumulative retained profits (CMS 1994), this privatisation exercise of SEDC subsidiaries was very beneficial to CMS. This cash hoard proved helpful, allowing CMS to acquire three other companies owned by the Mahmud family (Syrakusa Sdn.Bhd., Concordance Sdn.Bhd. and Achipelago Shipping) via cash and share swaps, which resulted in CMS being ‘privatised’ to the Mahmud family via a reverse takeover.

Mahmud Family Gain Control of CMS

This series of acquisitions saw the Mahmud family gain control of CMS, consolidating the cement business of CMS, the financial and brokerage services of Bank Utama and Sarawak Securities, and the shipping interests of Achipelago Shipping. CMS the publiclyowned cement producer became CMS the private-sector diversified conglomerate encompassing stock broking; road construction, maintenance and water supply; quarry operations; premix manufacturing; manufacture of steel bars and wire mesh; trading and group product marketing; manufacture and sale of cement; and investment holding (The Star, 4.10.94). This consolidation made it the unrivalled infrastructure and financial conglomerate in Sarawak and one of the major players in the KLSE (CMS 1996a; CMS 1996b).

The Mahmud family greatly benefited from this series of privatisations of profitable State enterprises. Taib Mahmud’s control over the levers of power and resources in Sarawak saw the SEDC privatise profitable state enterprises to his family. Similarly, his position of favour with the federal government meant that his family received various rents, principally a stock broker licence (to Sarawak securities, a subsidiary of Syarakusa) that became a lucrative monopoly and waivers on mandatory general share offers.

Taib Mahmud’s powerful political position also meant that the companies linked to his family easily raised loans from the capital market.

The CMS takeover reflects the politics of recent NEP/NDP-style privatisation exercises in Malaysia, which tend to favour the hiving off of profitable public enterprises instead of loss-making ones as rents to well-connected individuals in the private sector. Apart from cultivating cronyism and promoting rent-seeking, such privatisations deprive the state sector of lucrative sources of income and inter alia end up raising the tax burden of ordinary taxpayers (Jomo 1995).

During the privatisation and restructuring of CMS, numerous public-funded infrastructure projects were channelled to CMS. These projects helped CMS maintain an extremely healthy cash flow and high annual turnover. They bolstered its restructuring efforts, hiked up the share price of CMS and helped CMS raise funds easily from banks and other money markets.

What is notable about these infrastructure projects is that most of them were secured via negotiated tender from the Sarawak government and its agencies without going through a process of competitive tenders. Not only were many public sector projects channelled towards CMS but CMS also actively undertook a process of seeking out profitable public sector jobs like the maintenance of federal and state roads by the Sarawak Public Works Department estimated at between RM300-RM500 annually, and negotiated for their being transferred to CMS on a turnkey basis (Malaysian
Business, 16.9.97).

Most of these rents were assigned to CMS via PPES Works (an SEDC associate company) by the state government and bureaucracy dominated by Taib Mahmud.10 Many were justified on the basis that they were contracts implemented by SEDC and its subsidiaries, long the main contractor of public sector contracts and projects.

Unspoken was the fact that SEDC by virtue of owning approximately 8.5% equity in CMS (as of June 1997) and 49% equity in PPES Works (through its 49% shareholding of Sara Kuari Sdn.Bhd.), actually functioned as a conduit of public projects to CMS which owns 51% of the share capital of PPES Works.

CMS presently has a healthy infrastructure current order book valued at some RM1 billion (CMS Annual Report 2003). Although PPES Works implements some construction projects itself having its own expert engineering/construction staff and equipment, nonetheless, a substantial amount of all public infrastructure projects secured by PPES Works have consistently been subcontracted to other CMS subsidiaries or other external companies like Hock Seng Lee Berhad. PPES Works then takes a commission off the contract price.

For example, the RM200 million Sarawak River Regulation Scheme projects was secured by PPES Works but the largest and most technically sophisticated package was sub-contracted to Daelim Industrial Co. Ltd. (a South Korean company) and Hock Peng Furniture & General Contractors Sdn.Bhd. (a local Chinese company) (The Star, 30.1.95; 12.5.95; 27.5.95).

Similarly, PPES Works secured the Mulu airstrip and runway upgrade/extension project and the Kuching Airport runway resurfacing project but subcontracted both to its subsidiary, PPES Premix. (The Star, 16.10.95; 8.1.96; 13.3.96). PPES Roads, a subsidiary of PPES Works, also sub-contracted at least three jobs to Hock Seng Lee, namely the Sarikei/Serdeng/Pulau Beruit/Tebang Road, the Kuching-Kota Samarahan Expressway Stage 1 and the Kuap River and Setutong River bridge projects (HSL 1996; Kenanga Morgan Grenfell Research 1996).

This middleman role undoubtedly enhanced the profits of PPES Works and CMS. But they did so at the expense of PPES Works and CMS improving is technical capabilities. Nonetheless, this strategy served patronage purposes of distributing infrastructure sub-contracts to other political and corporate clients favoured by Abdul Taib Mahmud.

In 1996, CMS expanded its steel and cement production capacities in response to a massive economic boom in the construction sector11 and in anticipation of further lucrative projects, especially the Bakun Dam mega-project costing an estimated RM15 billion (INSAN 1996).12 CMS’s new steel and cement plants were financed by large short and long-term loans from both local and international offshore money markets.

Alas, CMS did not anticipate the Asian Crisis of 1997/1998. In March 1999, CMS declared a huge pre-tax loss of RM439.4 million for the year ending December 1998, a reverse of RM670.7 million (270%) from 1997 (CMS 1998b). This was mainly due to severe losses in CMS’s banking and financial services sector arising from non-performing loans (20.1%) given its subsidiary, Utama Banking Group’s (UBG) over-exposure in the volatile property, construction and stock-broking sectors along with inexperienced credit risk management systems, and weak credit policies and procedures (RAM 1999; UBG 1998). By October 1999, the total debt burden of CMS was estimated officially at RM787.33 million (RAM 1999).13 Given the continued impact of the Asian Crisis, CMS bonds were downgraded (RAM 1999) reflecting serious concerns about CMS’s deteriorating financial performance and doubtful debt repayment capacity. To make matters worse, demand in the construction sector remained weak leaving CMS with massive excess capacity in its new seel and cement plants (RAM 1999).

In financial services, CMS’s lucrative Sarawak Securities did not seem to have in place robust management and audit controls. At the end of 1998, Sarawak Securities was in technical breach of a debt facility agreement by RM4.1 million to other financially troubled companies within the CMS group (RAM, 1999:10). In May 1999, a major financial scandal engulfed Sarawak Securities when certain irregularities amounting to approximately RM56 million were discovered (The Star, 7.5.99; RAM 1999). Investor business confidence in Sarawak Securities was deeply affected. Sarawak Securities’ chief executive officer Benny Ng, its share margin manager Winnie Leong, a margin clerk and an administrative supervisor were subsequently charged in court for fraud (ST, 4.7.00; 8.7.00).

Surprisingly, Sarawak Securities was not penalised by the relevant federal government agencies entrusted with regulatory oversight of the securities industry.Instead, at the height of the scandal, the Kuala Lumpur Stock Exchange (KLSE), voiced an opinion that despite the irregularities and the on-going independent audit investigation, Sarawak Securities was “fully in compliance with its financial requirements” (The Star, 7.5.99).

CMS cumulative debts and financial troubles at the turn of the new millenium meant that the mega-dam Bakun project,15 despite being an unnecessary project (INSAN 1996; The Economist, 18.11.00),took on an added importance for two reasons. A large portion of CMS debt was secured by way of pledges of securities as collateral, the share price of which was tied directly to the terms of its debt.CMS’s share price dropped below RM3.00 beginning November 1997 and has languished there since. When the revival of Bakun was announced in June 1999 (NST, 8.6.99),18 Bakun became an overnight confidence boost to CMS19 and strengthened the financial status of its majority owners as well as numerous other shareholders. But Bakun was more than just that. Since Prime Minister Mahathir, UMNO and the federal BN were at that time fighting desperately for their political lives with an impending general election (eventually held in November 1999) in the face of an unprecedented collapse of Malay support, Bakun was a major lifeline thrown at a very crucial time to close ally Chief Minister Taib Mahmud (and ipso facto to the Mahmud family, other client businesses having dealings with CMS, as well as to ordinary CMS shareholders in Sarawak). This lifeline ensured the Sarawak BN delivered all its 28 parliamentary seats to the off-set federal BN’s losses of UMNO seats. These seats assisted Dr. Mahathir in maintaining his critical two-thirds majority control in parliament.

Secondly, given CMS monopoly control in the cement, steel and infrastructure sectors, main sub-contractors like Hock Seng Lee Sdn.Bhd. and other trading companies like Shin Yang Trading Sdn.Bhd., Borneo Corporation Sdn.Bhd. and Pan Sarawak Company Sdn.Bhd. (RAM 1999) depend heavily upon CMS. These companies are politically well-connected and benefit from CMS patronage, whether in terms of construction sub-contracts or wholesale dealerships. In turn, they parcel out contracts to other sub-bcontractors and dealers. Indeed, up to 32 native companies set up under the auspices of the government’s Bakun Hydro-electric Development Committee, many with lesser native politicians as their shareholders, were expected to benefit from the numerous subcontracts that was to flow from the revived Bakun project (Malaysiakini, 13.3.2001). As of 2004, Bakun is still on the cards, albeit scaled back to RM4.5 billion (Malaysiakini, 26.7.04). In July 2004, CMS announced that its wholly-owned subsidiary, CMS Energy Sdn Bhd, jointly with Special Triumph Sdn Bhd and Posco Machinery & Engineering Co. Ltd had been awarded a RM129.9 million contract for the design and execution of the Hydraulic Steel Structure Package (Package 8) for the Bakun Hydroelectric Project by Sime Engineering Sdn Bhd., subject to approval by main contractor, Malaysia-China Hydro Joint Venture. CMS Energy was to hold 51% of the said contract. Posco Machinery & Engineering Co. Ltd is a company incorporated in South Korea (CMS Corporate announcement, 2.7.04).

Within CMS, the overall group financial picture has also since improved with CMS registering group net profits of RM111.6 million, RM 48.4 million and RM23.6 million for the years 2001, 2002 and 2003 (CMS Annual Reports, various issues).

THE CASE OF HOCK SENG LEE (HSL)

Hock Seng Lee (HSL) is a civil engineering company with over 30 years specialist experience in land reclamation, dredging and coastal protection works. Originally set up as a partnership by three brothers of the Yu/Yii family, it was later incorporated in 1979 as a RM3.00 company. In its early days, the partnership was a successful Chinese family-run one-barge operation. It has since evolved into a major public-listed company on the KLSE21 with expertise in fully integrated marine engineering and construction. With a market turnover of RM138.3 million in 1998 (2003: RM287.5 million), HSL is mainly involved in transforming large tracts of peat swampland into “modern housing and industrial estates, tourist resorts, commercial centres, international sea ports and highways” (HSL Corporate Brochure, undated) apart from also being “involved in the shipping business with a fleet of 55 vessels, tug-boats and barges to transport logs, sand machinery and building materials in Sarawak” (The Star, 24.10.95). HSL holds Class A licences from the Pusat Khidmat Kontraktor and the Public Works Department enabling it to participate in any civil engineering project of any size and all land reclamation works, road works and earthworks projects (The Star, 24.10.95; HSL 1996). Though not as large as CMS, HSL is nonetheless well established within its niche market and has ventured aggressively into other areas of construction and property development. It has since become Sarawak’s largest builder of roads. With an impressive record of bidding successfully for numerous major contracts, especially over the last six years, its corporate motto, “Building your future today” adorns most major project signboards. HSL has consistently made profits. Between 1999 and 2003, HSL’s after tax profits were RM16.36 million (1999), RM6.6 million (2000), RM7.48 million (2001), RM12.17 million (2002), and RM20.7 million (2003) (HSL Annual Report 2003).

The Secret of HSL

The secret to HSL spectacular growth is rooted in its superlative political contacts, in this case, the family members of Abdul Taib Mahmud. Until 1994, the shareholdings of HSL remained wholly a family concern. In November 1994, HSL made a bonus share issue, which it capitalised out of unappropriated profits. Of over four million shares issued for otherwise than in cash, 10.9% of the shares were allotted to six members of the Mahmud family and two others.22 The Mahmud bloc subsequently increased their shareholdings during the year until they held 13.5% of the company as of June 1995. In April 1996, HSL undertook a corporate restructuring exercise designed to ensure the Yu/Yii family retained control of the company even after its public listing.

A bonus and rights issue was made to HSL’s shareholders to increase HSL’s paid up capital in anticipation of its public listing. By this time, the Mahmud bloc held 6.75 million shares (13.5%), HSL Enterprise held 25.5 million shares (51%), while the Yu/Yii brothers individually owned the remaining 17.75 million shares (35.5%), giving the Yu/Yii family 86.5% ownership of HSL.

In May 1996, HSL went public. Both reserved institutional placements and an initial public offering (IPO) took place. Interestingly, the Mahmud family bloc gained most of the shares on offer despite the IPO being over-subscribed 77.6 times. Of the shares reserved for institutional Bumiputera investors, Permodalan Nasional Berhad received 5.25 million shares, Amanah Saham Sarawak received 2.5 million while Zaleha bin Bujang received 500,000 shares.

Of the shares reserved for members of the public, the Mahmud bloc received a total of 5.85 million shares (91%) (NST, 23.6.99), giving the Mahmud bloc a total share of 26.2% in HSL after the IPO.

After its public listing, HSL’s share price soared over the course of the next few months and peaked at RM54.50 in 1998 giving shareholders a capital gain of over 17 times its listing price before falling back during the Asian Crisis.25 It presently trades at RM2.98 per share (BP, 31.7.04).

In other words, the Mahmud bloc were not only recipients of bonus shares and preferential access to IPO shares, they also benefited from a large pay-off of share dividends on HSL stock for the year ended December 1996 when dividends totalling RM4.857 were paid out on each share. This meant that the Mahmud bloc received a cash windfall of about RM3.28 million as share dividends at the end of 1995. This money more than amply covered their subsequent purchase of shares during the rights issue of 1996, which amounted to approximately RM3.02 million. Then, there was the capital gains windfall, which occurred when HSL shares soared skyward in the months after its public listing.

All these transactions represented substantial rent-seeking from a business client to a political patron with a view to securing public infrastructure contracts. Such rents are evident when one scrutinises HSL’s impressive increase in its turnover, net profit and earnings per share from 1994 onwards (See Table 2). Also impressive is the sudden increase of development projects awarded to HSL from 1993/1994 onwards by the Sarawak state government, public agencies and other companies like CMS.

Appendix 2 details a partial list of development construction contracts procured by HSL from all public and private sources between 1991 and 1998. Of their bigger marine and civil engineering construction projects, all of them are located in Sarawak, 60% of which were secured from the public sector (Kenanga Morgan Grenfell 1996). I have estimated that HSL secured approximately RM115.4 million worth of sub-contracts from other private companies (like CMS) who themselves secured contracts/projects from the state government.

On its own or in joint ventures with other companies, HSL secured a total of RM3.233 billion worth of projects. A high number of the public sector contracts were secured via negotiated tender including the massive RM3 billion Demak Laut Industrial Park Phase II project which was awarded to a joint-venture comprising HSL and Yakin Imbuh Sdn.Bhd. By December 1998, HSL’s projects order book value was RM300 million with a further RM400 million in the bidding stage (HSL, 1998:5). Subsequent diversification into property and housing development has seen HSL’s project book order increase to over RM850 million by 2002 (HSL 2003).

An extremely important question however, is whether and to what extent such projects have been developmental in nature and scope. HSL’s many projects are mainly civil engineering infrastructure projects like land reclamation, marine engineering, port construction, road building projects, integrated industrial park development, property and housing development, etc. Clearly, apart from physical infrastructure improvements, such projects, like those of CMS, make large contributions towards the overall Sarawak economy via major economic and social linkages and contractual spin-offs.

HSL is technically competent since it undertakes all engineering and construction work itself using in-house skilled labour, site experience and engineering expertise developed over the years. HSL rarely, sub-contracts its major technical jobs to other subcontractors.

If anything, HSL secures sub-contracts of technically sophisticated projects from other less technologically competent firms like CMS. HSL also claims to be a pioneer in the application of sophisticated geo-technical soil drainage and compacting techniques like “suction dredging, hydraulic sand haulage and vertical drain soil improvement techniques”. It has invested millions of ringgit to “acquire specialised suction dredgers and hydraulic pumping equipment”. It also “claims to be the only Malaysian company to own a RM30 million hydraulic suction dredger”27 (The Edge, 24.3.97). HSL prides itself on its technological expertise, which is on tertiary and technical degrees (HSL Corporate Brochure, undated). It has “assembled a formidable and comprehensive machinery portfolio and had been turning to locally reconditioned machinery as well as continuing its reliance on local shipyards for its marine fleet renewal” (The Star, 12.1.98).

HSL is also involved in reconditioning heavy machinery locally via HIBCO Holdings Sdn.Bhd.28 HIBCO was the first Malaysian company granted pioneer status by the Malaysian government for the reconditioning of used heavy machinery. HIBCO’s reconditioning work is carried out by wholly-owned subsidiary, Hock Seng Lee Heavy Industries (HSLHI) Sdn.Bhd., which reconditions a broad range of used heavy machinery including hydraulic and mini-excavators, wheel loaders, crawler loaders and tractors, bulldozers, forklifts and industrial equipment like welding sets, air compressors and generators. Besides reconditioning, HSLHI modifies and customises existing machinery to suit the specialised requirements of local industry. HSL also has an active and competent research and development (R&D) unit (The Star, 2.9.97). Such activities, arguably, have the potential to contribute positively towards the country’s efforts to cut down imports of new heavy machinery and equipment to reduce the balance of payments deficit while offering tremendous growth potential as the country steps up its industrial programme. An associate company, HSL Machinery (HSLM) Sdn.Bhd. purchases second-hand heavy construction machinery, which it then re-conditions for sale overseas. HSLM is also sole distributor for Hyundai and Volvo heavy construction equipment (The Star, 24.10.95; 2.9.97).

Apart from technological competence, HSL is committed to a corporate strategy of mainly relying on its own internally generated finances to fund its growth and expansion and has a conservative policy of keeping borrowings to a minimum. While it has created abut 15 charges from local banks totaling RM15.6 million in the past, it has a very impressive track record of repaying all loans promptly, and as of December 1997 had no foreign currency exposure. HSL has consistently maintained either zero or a very low gearing ratio for its operations (The Star, 31.5.99). And by relying primarily on local banks for their loans, HSL has reduced financing costs and has avoided foreign exchange fluctuation risks.

In other words, HSL is well poised to contribute to development achievement. Not only does it contribute towards physical infrastructure development but its corporate outlook is also very sound. Indeed, the very structural obstacles that forced it to engage in rent-seeking with the Mahmud family pushed it to perform well since, as a Chinese company, it cannot rely upon State rents in the long run for its profits and growth.In other words, HSL is well poised to contribute to development achievement. Not only does it contribute towards physical infrastructure development but its corporate outlook is also very sound. Indeed, the very structural obstacles that forced it to engage in rent-seeking with the Mahmud family pushed it to perform well since, as a Chinese company, it cannot rely upon State rents in the long run for its profits and growth.

Please wait for my next posting on Tun Rahman Yakub family, Taib Mahmud's uncle. -bukittunggal