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 THE RISE AND FALL OF ONE CRONY

  When the topic is Malaysian crony capitalism, Halim Saad's name  is   usually one of the first to come up. In the 1980s, Prime  Minister  Mahathir Mohamad and his economic guru, Daim Zainuddin,   recruited   the talented Malay businessman to run a company set up to manage  the   ruling party's businesses. The corporation, called Renong,   became   the flagship for Mahathir's vision of development: a handful of   government-supported companies would lift the Malay majority   from   poverty. Halim's financial rewards allowed him to indulge a  taste   for luxury cars, Cuban cigars and expensive European art. His   personal assets were once estimated at close to $1 billion.   During   the boom times of Malaysia's double-digit growth, Halim's  connections seemed to guarantee success. Not anymore. Today   Renong,   worth $3 billion at its peak, is struggling with $5.3 billion in   debts and a portfolio of unprofitable infrastructure projects.  So as   officials hammered out a plan to save the company, Halim's fate  seemed to symbolize the future of Mahathir's system, dubbed  Malaysia  Inc. Would Mahathir throw his trusted follower overboard? Not  without a fight. Announcing the plan last week, Halim said, "The  captain is the last to leave the ship." ~C.I.A REFORMASI

  So this is reform, Mahathir style. When the country's feisty  leader  slammed the door on foreign speculators last fall by imposing currency controls, foreign investors went running. Careful
  analysts  said Mahathir had a chance of resuscitating his flagging  economy—but   only if he implemented changes in the collusive way business  gets  done. So investors welcomed the government announcement that it  will  not directly bail out Renong. Yet the government isn't exactly
  staying out of the Renong restructuring, either. Renong's most  profitable business, a toll-road operator, will issue bonds to  cover  the company's debts—and those bonds are going to be easier to  sell  now that the government has extended the toll contract by 12  years.
  "We have to crack the myth that bailouts are the only way out,"  says  K. S.  Jomo, a respected political economist. "If we don't speak  up  now, there will be more."

  To fix the system, Mahathir would have to abandon a strategy  that  served him well in the past. In Malaysia Inc., huge contracts  were  awarded to Mahathir's friends without open bidding. In return,
  the  businessmen were expected to contribute when the ruling party  needed  support. During the 1980s, it was a win-win proposition: the   friends  got rich, the economy grew and the ruling party prospered.   Renong has long been at the center of Malaysia's political   struggles.  In 1987 an opposition politician tried—and failed—to   block the award of the first big privatization contract to
  Halim's   company, arguing for an open tender. In November 1997 Halim   tried to   bail out his company with a $700 million infusion from a   relatively   healthy sister company. Deputy Prime Minister Anwar Ibrahim   tried—and failed—to open up the deal to the public. Last   September,   after Anwar started criticizing cronyism, Mahathir sacked him.   He   sits in jail, facing corruption charges—but crony capitalism   remains   a key target of his "reformasi" movement.

  At the core of Malaysia's economic problems is an opaque,   politicized banking system. Mahathir was not alone in using   banks to   fund his friends' projects. Anwar, too, cultivated crony
  bankers.   Spending became reckless because it seemed the money would just   keep   coming.  Today some 8 percent of all bank loans are   nonperforming.   The government has tried to clean up the mess without letting  anybody go bankrupt. The government has absorbed 30 percent of   the   bad loans and injected $1.2 billion into ailing financial   institutions. Moody's Investors Service says such government   protection could make the system more vulnerable to political   pressure. "We are taking the soft approach to reform," says   Razak   Baginda, who heads a Kuala Lumpur think tank. "You're not going   to   see any blood." The efforts, in the short run, may pay off. This   year Malaysia could post 2 percent growth, after shrinking more   than   6 percent last year. ~C.I.A REFORMASI

  While the money flowed, Mahathir's favored tycoons lived it up,   with   fleets of Rolls-Royces, beautiful women and private jets. Halim   once   flew in an entire Russian orchestra to play at his prep school.   The   high fliers "thought they were good businessmen because they got
  sweetheart deals," says Jomo. Now that cronyism has become   Malaysia's dirty little word, Halim is no longer running   Renong's   day-to-day operations. "I try to keep a low profile," he says.
  But   for now Mahathir is still standing by his boys.   http://newsweek.com ~C.I.A REFORMASI
 
Sumber:Tengku Intan.TQ