You’d think Anwar Ibrahim would know better.

Malaysia’s premier was, after all, a former finance minister and a good one at that: he delivered two budget surpluses during his tenure. It’s never been repeated.  

He would have witnessed numerous government bailouts during Dr Mahathir’s tenure – from Bank Bumiputera to Renong – and he must have absorbed some lessons.

The Spanish philosopher George Santayana warned that “those who refuse to remember the lessons of history are condemned to repeat it.” That’s exactly what is going on in this case: a proposed purchase of a debt-strapped plantation company (Boustead Plantations or BPlant) by a well-managed plantation firm (KLK) that, in any other capitalist economy, would be as humdrum as waking up to smell the coffee. 

Except that BPlant is Malay and KLK, Chinese. And this is Malaysia where policymakers haven’t woken up to reality for the longest time. 

To understand the fuss, you have to appreciate the New Economic Policy, a 1971 initiative to redress the economic imbalance between Malaysia’s poor Malay majority and their “richer” Chinese counterparts. Its premise was fair enough: the Malays only owned 2% of national wealth then, a recipe for disaster.

When it began, the policy’s litmus test, was for the Bumiputera (Malay) to achieve 30% of national wealth. Over five decades, however, it’s become clear that it will never be achieved. Nor, I think now, was it ever meant to be achieved, the better to remain, forever and ever, amen. 

There are no estimates for the amount taxpayers have spent to uplift the community but it must run into the hundreds of billions. It’s 53 years old now but it’s still a work in progress. 

No one talks about the policy’s other aim – to  eliminate poverty, irrespective of race. Or its overarching aim – national unity.

Indeed, I’d argue the  policy’s implementation has been the single largest hindrance to national unity. Even a simple corporate exercise like BPlant’s, for example, can become tainted with suspicion. 

How does a heavily  indebted state-owned, but politically  important, firm resolve its situation without relying on market forces? 

The answer: the beggar-the-taxpayers approach, aka Bailout. It’s a tried and tested approach, set in stone by Dr Mahathir and continued by successive governments. 

It’s simple, expedient, and convenient.  The problem is much has changed over the last decade:

• Our national debt is now over RM1 trillion;
• Our subsidies are an unsustainable RM81 billion a year; and
• Our pensions bill is escalating alarmingly.

I suppose we can always kick the can down the road, but that’s why we’ve reached this position in the first place. 

Now to the brouhaha. 

BPlant has RM800 million in debt which must be paid by year-end or face bankruptcy. That isn’t all: it has another RM600 million in debt left.  The matter is politically sensitive because of BPlant’s shareholders: Boustead Holdings and its parent, LTAT the military’s pension fund. 

BPlant also needs another RM600 million to cover replanting costs. 

To settle the problems, LTAT wisely put it up for sale by tender. There were six serious offers, the best being KLK’s. This was acknowledged by Boustead, LTAT and analysts alike.  

Indeed, KLK bent over backwards to demonstrate goodwill. Standout statistic: its offer of RM1.55 a share valued BPlant’s shares at 67 times forward earnings, expensive by any standard. In addition, both LTAT and Boustead were offered first dibs at two estates ripe for property development. 

It was win-win all round. But, scenting NEP-sacred cows being sacrificed, the opposition began lamenting the erosion of Malay corporate equity and the hits, as they say, just kept on coming. To a fragile coalition, it was enough. 

The deal got aborted. Nothing has been said about a bailout, but it would seem the expedient solution.   

If so, there are no winners, Not LTAT, not KLK, not Putrajaya, and certainly not Anwar. 

Do you think foreign investors are impressed?   

And you still wonder about the ringgit? 

ENDS