Cover Story: Umno's changing business world
By M Shanmugam
Email us your feedback at [EMAIL PROTECTED] The chairman of Realmild Sdn
Bhd, Datuk Latif Abdullah, was surprised when told that he was the first
official from the company who was coming on record about its business
activities.
"Is that really the case? Probably, my predecessors had nothing much to say,"
was his explanation at the Realmild office in KL Sentral.
"But I have something to say
Realmild no longer gets handouts. It has to
compete like any other private entity to get jobs. About 70% of the jobs our
shipyard has secured are from private companies. We are working towards
securing a Petronas licence but want to get the necessary track record before
we apply," he says.
Realmild's position today is not synonymous with the company's glorious and
also painful past.
In the mid-1990s, the company was handed the best of government projects, land
for development and concessions on a silver platter. The prime tract of urban
land, where the Realmild office is located today, was once its domain by virtue
of it being the controlling shareholder of Malaysian Resources Corp Bhd (MRCB),
the master developer and 64% shareholder of KL Sentral.
The company got the best on account of it being one of the two flagship
companies belonging to Umno. The other was Renong Bhd, which was controlled by
Tan Sri Halim Saad, one of the trusted lieutenants of former finance minister
and Umno treasurer Tun Daim Zainuddin.
While the birth of Renong can be traced back to late 1980s and the emergence of
Daim as Umno treasurer, Realmild was the vehicle that was set up and dominated
mainly by those aligned to then finance minister and deputy prime minister
Datuk Seri Anwar Ibrahim. Realmild became a household name overnight when it
emerged as the vehicle used to embark on a RM800 million management buyout of
The New Straits Times Press (M) Bhd (NSTP) and Sistem Televisyen Malaysia Bhd
(now known as Media Prima Bhd) from Renong in 1993.
The four directors of Realmild then were Datuk Ahmad Nazri Abdullah, Mohd Nor
Mutalib, Datuk Khalid Ahmad and Datuk Kadir Jasin. All four were media
managers, at one time or another, with the NSTP group. Nazri, the former group
editor of Berita Harian, held the majority of the shares in Realmild.
Today, Realmild is a pale shadow of its former self. It does not control any
listed companies. What's left in its stable is a 59% stake in Radicare, which
has the concession to provide support services to hospitals, and a 20-year
lease on Labuan Shipyard and Engineering Sdn Bhd, a fabricator handling works
for oil and gas players and marine engineering.
It is working on new ventures such as the supply of armaments to the Ministry
of Defence and providing logistics services, something that Realmild's Latif is
familiar with, considering his background in shipping and logistics.
Renong, now known as UEM World, no longer belongs to Umno. It is owned and
controlled by Khazanah Nasional Bhd, the investment arm of the government,
which took over the conglomerate and the array of companies under its stable
after it ran into huge debts in 2001. Umno could not get back shares
Today, Umno's corporate strategy is different. It no longer has flagship
companies under which it runs its businesses. The total market capitalisation
of its listed companies is less than RM3.3 billion, which is only a fraction of
what it was 10 years earlier.
What it has instead are numerous unlisted companies taking strategic stakes in
business ventures.
For instance, Umno has a 20% stake in Asia Petroleum Hub Sdn Bhd (APH) through
unlisted Trek Perintis Sdn Bhd, the company that has been given the concession
to manage and operate the petroleum bunkering island off the coast of Johor.
The major shareholder and the company managing the operations is the KIC Group.
Umno also has a 49% stake in a subsidiary of MTD ACPI Bhd, called ACP (Tracks)
Sdn Bhd, through Trak Layar Sdn Bhd. The subsidiary essentially manufactures
construction materials such as pre-cast concrete products that are used mainly
in heavy infrastructure projects.
"Like Trek Perintis and Trak Layar, Umno's investments these days are mainly
through unlisted companies. They do not control or manage the companies. The
strategy is for Umno to earn consistent dividend income from these ventures and
realise their investments when the company gets listed," says a merchant
banker.
Umno has directors on board these companies who report to party treasurer Datuk
Azim Zabidi. These directors are not corporate personalities or people with
strong affiliation to party politics.
They are mainly lawyers and accountants. For instance, lawyer Datuk Zulkifly
Rafique sits on the board of Trek Perintis. None of the directors hold shares
under their own name. The shares are held in trust for the party and the trust
deeds are held by the party, which is the ultimate owner. The directors also
are required to sign undated resignation letters.
"These are some of the changes that have taken place in Umno's corporate world
in the past two years. Previously, the shares were held by directors under
their own name. There were trust deeds which stated that the shares were held
on behalf of Umno, but the documents were not kept by the party. So, it was
hard to prove that the shares actually belonged to the party. The people
running the companies in the name of Umno could not be removed," says a trustee
company official who had handled some of the party's business dealing.
It is known that in the past corporate chiefs who were thought to be holding
shares on behalf of Umno and whose companies had secured government projects in
the name of the party had refused to return the shares to Umno or step down
from their positions following a change in its leadership.
Daim was Umno treasurer from 1984 to 2001, a period when powerful corporate
personalities such as Halim, Tan Sri Tajudin Ramli and Tan Sri Wan Azmi Wan
Hamzah emerged in the name of conducting business for Umno.
After Daim left, the Umno treasurer's function was taken over by party
president Tun Dr Mahathir Mohamad, who was also the finance minister. Mahathir
was aided by Tan Sri Nor Mohamed Yakcop, who was then his adviser and mandated
to clean up the mess in the party's assets.
Most of the companies under Umno were deep in debts and yet the people holding
the shares refused to allow new management to come in. That was when the
nationalisation of Umno's assets took place, which saw the forced departure of
personalities such as Halim and Tajudin.
It was also then that the party decided that there should no longer be a
holding company which held all its investments. That did not come as a surprise
because the negatives associated with creating a large holding company far
out-weighed the positives.
The downside of establishing a huge holding company is that there is lack of
transparency as it is difficult to establish what belongs to the party and what
is accrued to the individual running the holding company.
Sources say that when Azim took over as Umno treasurer in October 2004, he was
handed a short list of companies which were Umno assets. The listed companies
were Media Prima, KUB and Putra Capital the latter two of which were ailing
companies.
"When Azim met with people such as Halim and Daim, they denied that there was
anything else which was due to Umno. They stressed that everything had been
handed to Mahathir. And the party had no documents to prove that there other
left, apart from what has been taken over by Khazanah, that was due to the
party," says a party insider.
Another bad side to creating huge holding companies is that the owners become
too powerful to the extent that they are not easily replaced. In their heyday,
the likes of Halim and Tajudin were even more powerful than ordinary Umno
ministers and could not be removed easily.
It was only through the nationalisation of the assets, an initiative engineered
by Nor Mohamed, that the powerful corporate chieftains that Umno bred could be
removed from their positions.
Nor Mohamed also played a key role in coming out with the new structure under
which the party's assets could be kept. It started with Media Prima, the most
valuable company in Umno's stable today. Media Prima sets pace
Apart from Media Prima, the other listed companies in the stable are Utusan
Melayu (Malaysia) Bhd, KUB (M) Bhd, Putera Capital Bhd and PECD Bhd. And all
the companies do not come under the scrutiny of a common person.
Utusan Malaysia is largely left on its own with Umno, its official shareholder.
Media's Prima's single largest shareholder is Gabungan Kesturi Sdn Bhd, whose
directors are Shahril Ridza Ridzuan and Abdul Rahman Ahmad.
The other three companies come under the scrutiny of Umno's treasurer Azim. But
his name does not appear on the board of directors or the shareholders' list.
The directors are mainly accountants or lawyers.
And all the directors have signed undated resignation letters and documents
assigning their rights to the shares, which are all filed and kept by Umno.
The new shareholding structure in Media Prima set the precedent for companies
belonging to Umno.
Media Prima is 51% controlled by Gabungan Kesturi, which in turn has Shahril
and Abdul Rahman as the shareholders. But the shares are held in trust by
Amanah Raya and the trust deeds are held by the party.
"The trust deeds will contain all information of the ultimate shareholder and
the mandate of the trustees. The shares can be owned by Umno, its members or
only the president. Everything will be in the trust deeds which are kept
confidential," says the official of the trustee company.
Even Realmild can ultimately be traced back to Umno, although it is something
which Latif denies.
"I own 99.9% of the company. There is no Umno here. I have a set of
professional directors. I try to stay away from directors who are more
politically motivated. I want to see Realmild run like any other private
company," he says.
But Umno insiders say like all others who are holding assets in the name of the
party, the rights to the shares, including that in Realmild, would have been
assigned to the party and the trust deeds are filed away.
Concerns however, are still lingering in corporate circles over what belongs to
Umno and what is done for the party. The focus is especially on Azim, who was a
corporate personality in his own right before he took over the position as
treasurer in October 2005. Drawing the line
Azim, who is the Umno treasurer but not the finance minister, was and still
sits on the board of a host of companies such as Kumpulan Europlus Bhd, Wijaya
Baru Global Bhd, M3nergy Bhd, Ranhill Bhd and OSK Ventures International Bhd.
Prime Minister and party president Datuk Seri Abdullah Ahmad Badawi's move to
appoint Azim as treasurer was seen as a strategy to minimise the link between
government and Umno. Previous Umno treasurers like Tengku Razaleigh Hamzah and
Daim headed the Treasury and had control over the Economic Planning Unit (EPU)
the two most important portfolios in the government with regards to
contracts.
"But the Treasury today is headed by Nor Mohamed while Datuk Seri Mohd Effendi
Norwawi (minister in the Prime Minister's Department) is in charge of the EPU.
Both are not Umno leaders," says a party insider. (See separate story on the
link between the Umno treasurer and finance minister.)
Azim's involvement in the corporate sector has reduced since he became Umno
treasurer. Nevertheless, whenever his name crops up in any deal, his critics
will ask: is the deal Umno's or his private investment?
One of the recent corporate transactions was Landmarks Bhd's sale of Sungei
Wang Plaza to Kencana Property Management Sdn Bhd, a company linked to Azim
that was completed two months ago.
But those close to the Umno treasurer point out that the Sungei Wang Plaza deal
was a venture that Azim had been involved in for a long time.
"He was negotiating with Landmarks when it was controlled by K K Loo and Halim
Rizap. The deal was delayed when the shareholders in Landmarks changed," says
an Umno insider.
The insider says one way of distinguishing what belongs to Azim from what
belongs to the party is to look at the beneficial ownership. If Azim's name
crops up as a shareholder, then it is his own deal.
"Azim's name will not crop up in ventures that are done for Umno. That is the
rule," says a party insider.
According to insiders, Umno currently has about 50 ventures with private
companies in all aspects of the economy except for the finance sector. But only
a handful is known.
All these companies are separate from each rather than held under a large
holding company like Fleet Group or Hatibudi.
Having learnt from the past, the current party leadership wants to ensure that
there is no blurring of the line between what the party owns and what are owned
by individuals doing work for the party. "Although outsiders may not be able to
figure out what UMNO actually owns, the leadership knows as everything is now
properly documented and kept," says an insider. "This will ensure that what
belongs to the party remains with the party."
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