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A Mahathir crony falls, but the Perwaja Steel mess is as intractible as ever

WHEN THE ANTI-CORRUPTION Agency (ACA) arrested Perwaja Steel's former managing director, Tan Sri Eric Chia, this week (09 Feb), it raised more questions than answers. Perwaja Steel was to have been Malaysia's crowning jewel in its idiosyncratic bid to be an industrialised country by 2020. He is arrested and charged in court nine years after the ACA began investigations into this Mahathir crony's stewardship of the now shut-down Perwaja Steel. ACA had wrapped up its case years ago, but it was never allowed to prosecute. It now acts because the new Prime Minister, Dato' Seri Abdullah Ahmad Badawi, has to show he is not tied to his predecessor's apron strings.

But it did not have the impact Pak Lah expected. The newspapers, radio and television gave Tan Sri Eric's arrest extensive coverage but it did grip Malaysians as, for instance, when the government considered serious proposals to cane rapists in public, chemically castrate them, put them to death. The melodrama of his arrest was to show how the ACA, the police, the Attorney-General's Chambers worked in tandem to arrest the man. The Inspector-General of Police said: "Several policemen were deployed to assist in the arrest ..." We are told he was arrested after a dramatic "chase" that began in Sungei Patani. Was it necessary? Tan Sri Eric is a diabetic, is confined to his house, moves about in a wheelchair. If he had been ordered to report to the police station, he would have, without the theatrics.

Pak Lah, on taking office three months ago, said he had called for the papers on the case, and linked it to his crackdown on corruption. He said after the arrest that it was "done in accordance with the law". Why was it necessary to give that assurance? Was there a danger or doubt it would not? Why does he have to assure Malaysians that if corruption is proven, the law would take its course? One gets the feeling that this arrest is done to show the new administration is doing it as a new broom. Which is a pity. So many inquiries and investigations in the past have not been followed through. The police record for solving high profile crimes, including murder, is abysmal. Often cases are resolved when the accused confesses. This one would not be. He would fight it to the hilt.

There is more to Perwaja Steel than meets the eye. It was set up in 1982 as part of an ambitious plan to lurch Malaysia into developed status by 2020. Tun Mahathir had just become Prime Minister, with Perwaja Steel the fulcrum of his grandoise plans to frogmarch Malaysia into industrialisation whether Malaysians wanted to or not, if the country was ready for it or not. It collapsed spectacularly. Within six years, it was on bankruptcy's door. The government kept it afloat. It would not have shut down had Dato' Seri Anwar not been finance minister. He did not see why good money should be thrown at the bad, especially when it was done at the expense of social and other services. Perwaja, like the Bakun dam, became casualties in this confrontation between the Doctor and the Sheikh. Given what happened since the Sheikh was sacked and jailed, his prescience cut losses much. Pak Lah is now left to pick up the detritus of that. The first casualty is Tan Sri Eric Chia and Perwaja Steel.

The ACA began its investigations in 1996, amidst this confrontation, when Perwaja Steel had suffered losses of RM2.98 billion and owed banks another RM7 billion. The annual RM815 million interest on a yen loan bled the company, the then finance minister, Dato' Seri Anwar Ibrahim, informed Parliament. It was insolvent in 1988 but the government kept it alive by injecting fresh funds into it. It was shut down in 2003, with registered losses of RM11 billion. After Tan Sri Eric's departure, Perwaja Steel was handed over to other cronies, who made an equal mess of it. It was finally shut down last year, the biggest loss incurred by a Malaysian company. The BMF scandal cost its parent only RM2.5 billion. But none matches the RM33 billion forex losses by Bank Negara Malaysia.

This charging of Tan Sir Eric for corruption is a blip on the screen, with nothing resolved and the problems arising out of proportion into an unresolvable mess. No one in Government admits to what Perwaja Steel would eventually cost it. But in once sense, it was doomed from the start. The Indian steel consultants, Mr M.N. Dastur & Co, was brought in to review the plans when the original joint venture between the Malaysian government and Nippon Seel Corporation of Japan fell apart. But Perwaja Steel rejected most of its recommendations, and the company was set for the mess it became. Tan Sri Eric Chia's role in it ended in 1996. It was handed over to two crony entrenpreneurs, one of whom saw it as a threat to his own steel operations and went into it to stymie it, the other saw it as an opportunity to be known as a steel man. Not the best of intentions to rescue a steel company. It does not surprise Perwaja Steel's subsequent inexorable descent into unrepayable debt.

Tan Sri Eric Chia is a small cog in that wheel. Whether he is convicted or acquitted does not alter the fact that there was no rational reason for Perwaja Steel to take off. It was founded on false premises, and once the losses began, it was hidden with unmentioned subsidies which would have remained hidden but for the political quarrels over how the country's finances were run that led the government with no choice but to throw someone to the wolves. The first is Tan Sri Eric. Would there be others? Yes, if Pak Lah needs more bodies to strengthen his hold on the country and UMNO. No, if he does not need it. So, when you come down to look at the impact of this high profile arrest and, one presumes, high profile trial, it proves nothing. Unless this is followed by similar high profile arrests in a sustained barrage to show Pak Lah means business. But for that to happen, he must, in the process, run to ground the legacy of Tun Mahathir. He has no stomach yet for that.

[I wrote this analysis for Harakah, the PAS organ, for its latest issue, out today, 10 February, 2004.]

M.G.G. Pillai
pillai@streamyx.com