Hi guys, when surfing the web a while ago, I accidentally happened to read an interesting article titled " The Dam that Wouldn’t Die" published in www.asiasentinel.com on 15 August, 2007.
I post the said article here for your leisure reading as well as to let you have better understanding of our CM and his family's businesses in Sarawak and worldwide.
"The Dam that Wouldn’t Die":-
Sarawak’s politically motivated Bakun Dam has a new Australian friend to help keep it going.
The resuscitation of the controversial Bakun Dam as the result of an agreement to build a nearby aluminum smelter is the latest chapter in a long running saga to push forward the environmentally sensitive project closely linked to the longstanding Sarawak chief minister, Abdul Taib Mahmud, and his family.
The mammoth dam, one of the cherished mega-projects of former Prime Minister Mahathir Mohammad, has already wiped out 23,000 hectares of virgin rainforest, delivered the timber into the hands of timber barons and displaced 9,000 indigenous people. It is also a textbook example of how the New Economic Policy, Malaysia’s affirmative action program to improve the economic wellbeing of its bumiputera, or ethnic Malay majority, instead concentrates riches in a few hands.
On August 7, Australia-based Rio Tinto Aluminum signed a deal with Malaysian conglomerate Cahya Mata Sarawak, whose principal stakeholders are members of the Taib Mahmud family, for a joint study to build a US$2 billion smelter in Similajau, near Bintulu, 80 km inland from the dam itself. Expected to open in 2010, it will be one of the largest in the world, with initial production capacity is projected at 550,000 tonnes a year with the capability to expand to 1.5 million tonnes later.
Rio Tinto, with its projected takeover of Alcan, Inc., of Canada, is already expected to become the largest aluminum producer in the world. The smelter, which will use power from the Bakun dam, is expected to be the fifth and biggest aluminum plant for Rio Tinto, its external affairs manager Jim Singer told The Associated Press. Rio Tinto picked Sarawak for the project due to strong government support, a credible local partner, abundant electricity supply from the Bakun dam and robust demand in the region, Singer said.
Critics are livid. In a forum early this month organized by the United Nations Development Program in Kuala Lumpur to mark World Indigenous Day, Colin Nicholas, the coordinator of the Center for Orang Asli (Indigenous People) told local reporters that "From our point of view, by allowing the Rio Tinto project to go ahead, it is just like trying to cover up one natural disaster with another.”
“There was no open tender for the (aluminum smelter project) and no public announcement of it,” fumed opposition leader Anwar Ibrahim in an email to Asia Sentinel. “Combined, the smelter and the dam raise serious concerns about environmental impacts and the treatment of indigenous populations.”
Just as disturbing, to some observers, is the way Cahya Mata Sarawak, which means “light of Sarawak’s eye” in English and goes by the acronym CMS, has maneuvered itself into position to benefit from the dam.
Begun in 1974 under the name Cement Manufacturers Sarawak Bhd, the company originally produced Portland cement as a state-owned firm. Its transformation has been remarkable, according to a doctoral thesis submitted to the University of London in 2002 by Andrew Aeria, currently a lecturer in the Faculty of Social Sciences at the University Malaysia Sarawak in Kuching.
“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 privatization 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 state rents CMS secured for itself and its subsidiary companies from 1992 through political patronage,” Aeria wrote.
Aeria’s study tells the story in voluminous detail. Beginning in the early 1990s, Cement Manufacturers Sarawak Bhd, a state-owned company, bought major stakes in three highly profitable subsidiaries of the Sarawak Economic Development Commission – PPES Quarry, Steel Industries Sarawak and PCMS, for 117.4 million Malaysian ringgit, 50 million of that in cash, the rest covered by 13.48 million shares. For that, CMS got, in addition to the assets, 30.94 million ringgit in cumulative retained profits, according to the company’s annual reports. That moneyproved helpful, allowing CMS to acquire two other companies owned by the Mahmuds, namely Syrakusa Sdn Bhd and Concordance Sdn Bhd, via cash and share swaps. This resulted in the "privatization to the Mahmud family via a reverse takeover. Bank Utama, Sarawak Securities and Archipelago Shipping -- all Mahmud family companies -- were subsequently injected into CMS.
The CMS takeover also reflects the politics of New Economic Policy privatization exercises in Malaysia, which tend to favor hiving off profitable public enterprises instead of loss-making ones to well-connected individuals in the private sector, Aeria claims. Apart from cultivating cronyism and promoting rent-seeking, such privatizations deprive the state sector of lucrative sources of income end up raising the tax burden of ordinary taxpayers, he writes.
During the privatization and restructuring of CMS, numerous public-funded infrastructure projects also were channeled to CMS. These 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.
By 1996, the Mahmud family had consolidated the cement business, Bank Utama, Sarawak Securities, and Archipelago Shipping, turning the firm, now named Cahya Mata Sarawak, from a publicly-owned cement producer into a private-sector diversified conglomerate involved in stock brokering, road construction, water, quarry operations, steel bar manufacturing, trading, cement production and investment holdings.
“Taib Mahmud’s control over the levers of power and resources in Sarawak saw the SEDC (Sarawak Economic Development Commission) privatize profitable state enterprises to his family,” Aeria wrote in his thesis. “Similarly, his position of favor with the federal government meant that his family received various rents, principally a stockbroker license (to Sarawak Securities) 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.”
Taib Mahmud’s 26-year tenure as the chief minister of Sarawak also gave the company at least the appearance of having ready access to government power and favors during a time when the family company had a healthy cash flow and high annual turnover that drove up the share price. The company also got involved in numerous infrastructure projects.
“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,” Aeria writes. “Not only were many public sector projects channeled 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.”
Born in relatively modest circumstances, Taib Mahmud now is locally famous for wearing double-breasted suits and driving around Kuching, Sarawak’s capital city, in a cream-colored Rolls-Royce. According to Aliran Monthly, the reformist Malaysian magazine, Taib Mahmud’s spouse Laila and his children are the majority shareholders of Sitehost Pty. Ltd., Australia, which owns the Adelaide Hilton Hotel. Company records dated December 2000 show them holding 95 percent of the company or 9.5 million fully paid up shares, the magazine said.
Onn Mahmud, Taib Mahmud’s brother, his daughter Jamilah Hamidah Taib and her husband Sean Murray are listed as director-shareholders of SAKTO Corporation, a major real estate operator of non-residential buildings in Ottawa, owning and managing more than half a million square feet of prime office space with affiliate offices in the US, Asia, the UK and Australia. They also own SAKTO Development Corporation, a multi-million dollar development and construction company in Ottawa. Jamilah is the sole director of SAKTO Investment Corporation.
“Now, it may well be that the Mahmud family is one of the best and most astute business families in Malaysia,” Aliran wrote. “And more power to them on that account. But much of their known wealth has arisen during the tenure of Abdul Taib Mahmud as Sarawak chief minister. Is there then any wonder why there exists so much public skepticism about the sources of Abdul Taib Mahmud’s family wealth? Would not a transparent audit do well to quash such obviously unscrupulous rumors once and for all?”
The construction of the dam, which had been under development in fits and starts since the 1960s, began to mesh with Cahya Mata’s capabilities in 1994, when construction began, led by a privatized joint-venture consortium called the Bakun Hydroelectric Corporation comprised of Ekran Bhd, the national power company Tenaga Nasional Bhd, the government of Sarawak, Sarawak Electricity Supply Corporation (Sesco) and Malaysian Mining Corporation Bhd (MMC).
The dam project itself is part of a grandiose plan to meet electricity demand in peninsular Malaysia, nearly 700 km away, via a high voltage direct current cable, since the entire island of Borneo, where the dam is situated, is unlikely to be able to use the amount of electricity it is projected to produce.
Thus an additional 300km line was also envisioned to feed power throughout peninsular Malaysia. Because of the distance of transmission, the underwater cables are expected to leak more than half of the wattage before the power reaches peninsular Malaysia. Even without Bakun, Sarawak’s installed electricity reserve capacity was estimated at 25 percent two years ago. At one point, the massive operation was projected to tie up the world’s entire cable-laying capability.
In 1996, Cahya Mata expanded its steel and cement production capacities in response to a massive economic boom in the construction sector. CMS’s new steel and cement plants were financed by large short and long-term loans from both local and international offshore money markets.
The Asian financial crisis, however, brought the Bakun dam project to a halt and forced the government to assume control from the consortium at an estimated cost of 1.6 billion ringgit to Malaysian taxpayers. It was revived in 2000 through a wholly owned-government company, Sarawak Hidro, along with the Malaysia-China Hydro JV consortium. (This also isn‘t Bakun’s first flirtation with an aluminum smelter. One was previously proposed for Similajau, to be funded by the international financier Mohamed Ali Alabbar as a joint venture between Dubai Aluminum Co. Ltd and Gulf International Investment Group. Those plans collapsed due to construction delays and squabbles over contractual terms. By 2004 most of the minor partners to the consortium posted losses or substantially decreased profits.)
The Asian crisis of 1997-1998 also resulted in a spectacular 439 million ringgit pre-tax loss for Cahya Mata for the year ending December 1998 and a reversal of fortunes to the tune of 670.7 million ringgit, primarily because of severe nonperforming loan losses in the company’s banking and financial services arms. By 1999, the company’s total debt burden ballooned to 787.33 million ringgit and resulted in a downgrade of its bonds.
Cahya Mata’s cumulative debts and financial troubles at the turn of the century meant that Bakun took on added importance. A large portion of its debt was secured by 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, Aeria wrote.
The revival of Bakun became an overnight confidence boost to Cahya Mata and strengthened the financial status of its majority owners as well as numerous other shareholders. But Bakun was more than just that. From a political standpoint, the dam was a major lifeline thrown at a very crucial time to Taib Mahmud, other client businesses having dealings with the conglomerate, and ordinary shareholders in Sarawak. This lifeline was thrown back in the form of a Sarawak majority party that delivered all 28 of its parliamentary seats to offset the federal Barisan Nasional’s losses of seats in national elections and helped Mahathir to maintain his critical two-thirds majority in parliament.
Taib Mahmud himself has faced numerous corruption allegations by critics over his 26-year career as chief minister, most recently earlier this year when Japanese media reported that he had been implicated in a 1.1 billion yen timber export kickback scheme involving a cartel of nine Japanese timber shipping companies through Hong Kong-based Regent Star, which is linked to Taib Mahmud and his family. He has not been charged and has publicly denied any wrongdoing. He recently said he would sue several Malaysian publications for defamation over articles relating to the case.
When Abdullah Ahmad Badawi came to power in 2003 as Malaysia’s prime minister, he vowed to cut back on the number of mega-projects that Mahathir had lumbered the country with, telling delegates to the 57th United Malays National Organisation’s 57th general assembly that he would turn away from Mahathir’s economic strategies. “That era is over,” he told the delegates. But Abdullah Badawi has been weakened by a series of missteps and scandals, and meanwhile Bakun dam soldiers on.
