Renong Bhd has submitted a bail-out proposal - prepared by the Credit Suisse First Boston (CSFB) merchant bank - at great cost to the Malaysian people. We must first denounce the role of CSFB, Renong's consultants, who should be referred to the Permanent International People's Tribunal for Justice for proposing such a financial crime against the people of Malaysia, to enable a few to abuse public funds. The proposed deal will rob the Malaysian public in the following ways: The government will forego future tax payments by PLUS of RM4.5 billion at a time when the government faces a large budgetary deficit and has cut public spending in general, including for health, education and welfare.

The government will transfer the RM824 million soft loan provided to finance completion of the Second Link from PLUS to Linkedua, who are unlikely to ever be able to pay back, while the Renong group gets to keep the 27,000 acres it received at a nominal price of just over RM1 per square foot to cross-subsidize the Second Link. The government will guarantee RM8 billion in zero-coupon [meaning no income between the date of purchase and the date of redemption] bonds (likely to be sold to the EPF, etc., i.e. public funds under government control) to replace the Renong group's debts to lenders.

The government may extend the North-South Highway toll concession to PLUS. The proposal claims that the bail-out is necessary because the Renong group owes around RM20-28 billion, i.e. accounting for more than five per cent of the loans by the Malaysian banking system. Without such a bail-out, it is claimed, the Renong group's debts will put the Malaysian banking system under great stress. Even if this argument is true, the key questions are: how did Renong get into such a mess and why was it allowed to rack up such a huge debt in the first place.

Further, there are ways of resolving the problem that duly punish - not reward - the culprits responsible for the mess. In fact, the proposed bail-out is against the clearly stated principle of the National Economic Recovery Plan that the culprits will not be allowed to get away without penalty; in this case, nothing happens to either the top management or the major shareholders of the Renong group. Worse, much of the benefits of the bail-out will go to the Renong group's foreign creditors, to whom at least RM3 bn is owed. Furthermore, since many of the major shareholders of Renong and UEM are foreigners (many using nominees), the Renong group bail-out proposal will benefit them as well.

In short, Malaysian public funds will be used to allow the owners of Renong, including its foreign shareholders, to get away with their recklessness, and to pay off creditors, including foreigners, who clearly were less than prudent. The proposal seeks to 'nationalize' the Renong group's debts and liabilities, while allowing Renong to retain its profitable privatized assets. For example, the Second Link was not expected to be profitable in the short-term; but Renong bid for it and, as an inducement, the government gave the group more than 42 square miles of what is now valuable land around Gelang Patah. The CSFB proposal will have the proposed Infrastructure Development Corporation take over the Second Link while the Renong group gets to keep the land, some of which it has already resold for more than RM10 per square foot, i.e. ten times the price it paid for it!

Similar bail-out proposals are being made for the light rail mass transit system in the Kelang Valley, KTM and other losing privatized infrastructure projects. The 1 September 1998 introduction of currency and capital controls provides the government with an opportunity to use monetary and macroeconomic policy to bring about economic recovery and to clean up the abuses of recent years. But it is now clear that this opportunity can also be abused, not only to bail out select companies, but also well-connected individuals.

On Thursday, 15 October, Dr Mahathir said the government would consider this proposal. If the Renong proposal goes through, other similar bail-outs are likely to follow. Already, Renong, which is dominant in the consortium which has taken over KTM, has suggested the proposed IDC takes over railway services while Renong retains the lucrative railway land for itself. Similarly, Vincent Tan was supposed to build the RM2.2 billion monorail project for the government in exchange for the right to develop his Linear City project, touted as the longest building in the world, on the banks of the Kuala Lumpur rivers and the space over them. The government is being asked to step in to take over the monorail project while Tan's linear City property will remain unaffected.

If we do not stop it, more will follow. Hence, it is very important that the Malaysian public make it very clear that we will not tolerate this nonsense. If public outrage does not stop the proposed Renong rip-off, there will be more bail-outs of a similar type. The people must register their clear opposition to the proposed Renong rip-off in no uncertain terms.

The bail-out proposal is an outcome of the privatization policy. That policy has not served the public interest, but has instead only enriched a well-connected few at the expense of the government and the public. Now that the Renong group is in trouble, it wants the government and the public to subsidize it and to take over the group's debts and liabilities while leaving untouched the profitable corporate assets and private wealth of the owners. The fact is many of the assets now in the Renong group should not have been privatized in the first place.

According to Dr Mahathir, the North-South Highway (NSH) was privatized to UEM under very generous terms to help UMNO pay for its new building (the Putra World Trade Centre complex). The NSH has been and is the main ‘cash cow’ for the Renong group. Whatever the rights and wrongs of the justification for the original privatization of the NSH, the UMNO building has been more than paid for and the Renong group has grown with the NSH toll revenue. There is no reason why the Highway should not revert to the Malaysian Highway Authority (LLM) or to the government in some other form. Instead, the bail-out now suggests that the concession may be extended.

Clearly, some people get rewarded for making a mess of things, at the public expense. Renong and UMNO Renong Bhd emerged in the late eighties as the core listed company of the group which took over UMNO's assets after UMNO was declared illegal in a desperate attempt to preserve Mahathir's position after a court challenge by supporters of his opponent then, Tengku Razaleigh Hamzah. The group is led by Tan Sri Halim Saad, a protégé of UMNO Treasurer, former Finance Minister, Minister with Special Functions and Executive Director of the National Economic Action Council, Tun Daim Zainuddin.

Nowadays, it is often claimed that UMNO is no longer involved in business. If so, the Renong group is not controlled by UMNO; certainly, the UMNO Supreme Council does not control Renong. Thus, for all intents and purposes, it is the private property of Tan Sri Halim and other major shareholders, and those behind them. Hence, there is no reason why UMNO members and supporters should accept any bail-out proposal for the Renong group even though some UMNO leaders will try to imply that the bail-out, in saving the group, will benefit UMNO.

The Renong group is not accountable to UMNO in any way, and there is no evidence of it contributing to UMNO's finances, although it may well contribute to the finances of certain UMNO leaders. Since top UMNO leaders insist that UMNO does not control Renong, UMNO members and supporters too have an interest in opposing the proposed bail out of Renong, since it is not only at great cost to the public, but it will inflict further damage on the party's image.