MP warns Parliament of exposure to Syed Mokhtar’s mounting debt

By Shannon Teoh
Malaysian Insider, June 20, 2012

KUALA LUMPUR, June 20 — The surging debt of companies under Tan Sri Syed Mokhtar al-Bukhary has led a federal lawmaker to warn of a repeat of the financial system’s collapse in 1998 that had then been spurred by the failure of Renong Bhd to fulfill its liabilities.

With China’s economy quickly cooling and the persistent euro-zone crisis looming over Malaysia’s export-oriented economy, Petaling Jaya Utara MP Tony Pua told Parliament that a recession may cause the logistics tycoon’s (picture) empire to fall.

“Syed Mokhtar’s group of companies has a combined debt of RM34.3 billion or more than 10 per cent of all local corporate bonds as of 2011 with only RM7.8 billion cash as of May 2012,” he said while debating the supplementary supply bill.

The DAP publicity chief also pointed out that debts raked up by Renong, led by Tan Sri Halim Saad, was about RM20 billion or seven per cent of loans in the banking system 14 years ago, far less than the risk posed by Syed Mokhtar’s four listed entities.

“But Renong’s bankruptcy caused hundreds of millions in losses to investors, the collapse of the stock market and a RM10 billion government bailout,” he also told a press conference.

He pointed out that just like Renong, which won government contracts for highway, rail, property and telecommunications deals, Syed Mokhtar now controlled power, water, port, rail and toll businesses as well as national carmaker Proton with billions in government-guaranteed debt.

The largest is MMC Corporation, in which Malaysia’s richest Bumiputera owns 52 per cent, which has an outstanding debt of RM24.2 billion, followed by DRB-Hicom (56 per cent stake), which raised RM3 billion to take over Proton, Pua said.

“Despite the expansiveness of his empire and debt load, the Prime Minister’s Department wants to privatise Penang Port to him,” he said, adding that there were also reports Syed Mokhtar would acquire Port Klang and Keretapi Tanah Melayu, chalking up even more debt.

Pua called on the government to guarantee “Malaysian taxpayers that in the event of default, their money will not again be used to pay for the follies of Barisan Nasional cronies.”

The Asian financial crisis was a period of financial instability that gripped much of Asia beginning in July 1997, and raised fears of a worldwide economic meltdown due to financial contagion.

By the end of 1997, credit ratings had fallen from investment grade to junk and the stock market and ringgit lost more than half their value, the latter falling from above 2.50 to under 4.57 to the US dollar.

It forced then prime minister Tun Dr Mahathir Mohamad imposed strict capital controls and a 3.80 peg against the dollar.

The opposition has repeatedly questioned Putrajaya’s policy of “contingent liabilities”, or Treasury-guaranteed loans for various “off-balance sheet” projects, pointing to the failure of initiatives such as the Port Klang Free Zone, which could cost taxpayers up to RM12.5 billion.

Malaysia’s contingent liabilities now stand at about RM117 billion, including the Klang Valley Mass Rapid Transit (MRT), Malaysia’s largest infrastructure project to date with a potential RM50 billion price tag.