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The politics, and greed, of privatisation

PRIVATISATION of government assets and an over-reliance on management consultants, so wet behind their ears, most in their late twenties and early thirties, is, if truth be told, to gut the companies of its valuable assets, run them into unrepayable debt, give up the ghost, and force the government to step in. But since all this is done in private, with no accounting, market talk is full of rumours of how it is done, how its senior officers rape the assets for private gain, dress up the accounts, and decamp when the pack of cards so elaborately created threaten to fall.

But since the government assets are all in crucial and critical areas where in the past the private sector was not interested in, the government has no choice but to take it back. In Malaysia and, no doubt, elsewhere, privatisation has a dirty name and future: the ruling party and its acolytes muddy the pool as its untested management in their twenties and thirties run into debt and for personal gain. The crisis in Tenaga Nasional Berhad (TNB) reveals how it is done. It is a shoddy tale of all that is wrong with privatisation made worse when it would not respond to the growing public clamour.

The TNB scandal is so sharply focussed that no one involved leaves without mud on the face. It is not allowed to run professionally, its senior staff are chosen for political reliability and propensity to greed, rules and regulations are thrown aboard along with the senior technical staff who had spent a lifetime with TNB to short circuit the system. Without it, TNB cannot be laid to waste. As it now has. The man who directs operations from behind the scenes is the prime minister's son-in-law, Khairy Jamaludin, who appointed its chief executive officer, Che Khalil Mohamad Noh, and key officials.

TNB is subject to Umno political will, its once vaunted professionalism and efficiency reduced into a political football. As damaging information of this comes out, its senior management threatens its staff: when a TNB sub-contractor printed hundreds of what I wrote about this last month and placed them in prominent areas for distribution, the management stepped in with threats. They were then removed to areas where the management would consider it beneath their status and dignity to invade. It is still distributed widely.

The blackout last month happened when the Sultan Salehuddin Aziz power station in Klang tripped. It should not have, but it did. Negligence is the only cause. It is not maintained as it should. An outside firm of consultants is brought in to find out why. In normal times, the internal inquiry would have revealed why. But the standard operating rules in TNB is to deny those who know to be involved. It is a fair bet that the outside consultants, Advanced Power Solutions, is independent or is unconnected to Umno.

Little happens in TNB in which Umno does not have a hand. Are we then surprised at the mess that is the TNB today? No wonder that a senior TNB official likened the company to a whorehouse. The senior officials, long on experience and little on political connexions, know the flaws and await, in fear, of what is to come.

Let us look a little closely to a few of its projects. A company called RPJaya went into the Tuanku Jaffar Power Station in Teluk Kemang (Port Dickson) without authorisation after it was discovered that TNB had offered the contract to gut it was given to two companies, RP Jaya and an Indonesian company, Bukaka. Attempts to resolve the impasse failied, Bukaka threatens to sue for RM20 million, the contracts are cancelled. RP Jaya brings its men into the power station and in stealth guts it.

The publicity about it forces TNB to chase it out, but not before tens of millions of ringgit worth of equipment is removed. TNB, if it means what it says, should sue it for the recovery of what RP Jaya stole. It should first file a police report. The BN government should then insist that the ACA investigate it, and bring those responsible, however high he may be, to court. But it is a forlorn hope.

Then there is Che Khalib telling the TNB tender committee and its board of directors that a company that was not prequalified got the contract since he was instructed by Khairy Jamaluddin to issue it to that company, Bras Ventures, which is run by one Mr Barry Goh. Mr Khairy has since denied he did, but Che Khalib has since given another instance where Khairy ordered him to give another contract to one similarly unqualified.

One is inclined to believe Che Khalib more than Khairy. Bras Ventures is given the contract by direct negotiation to build the Lenggeng power sub-station for thrice the RM100 million put aside for it. There is more. Bras Ventures is given another 11 contracts to build power substations elsewhere in the country at double its anticipated cost of RM800 million each. In the end, it got six at an average RM1.2 billion each, the others put to open tender.

This flawed reliance on management consultants and privatisation is on the premise that when business once made products, it now makes deals. This is the experience of privatisation all over the world, and in every instance, failed. In Malaysia, the trick is to keep the outside consultants brought in to dress up the accounts for three years, then depart to another company to rape and destroy, leaving a new group to carry the can. In good times, it can last a few rounds of this, but someone in the end must carry the can.

TNB is in that position now. The present team of management consultants should be forced to run TNB for five years or so, taking the blame for the damage it has done. For that, more than political direction is required. It would not happen for that would reveal for what privatisation is all about: an unalloyed rape of government assets for private and political greed.

This happens because the public is suckered into believing, as John Kenneth Galbraith wrote in his class work on the 1929 Wall Street Crash: "Nothing so gives the illusion of intelligence as personal association with large sums of money." In Malaysia, it is political power as well. Look at half-educated and illiterate cabinet ministers prescribing wisdom for the masses so they could grab as much loot as they can. Closeness to political power gives one a certain immunity which often is translated into weath and debt beyond greed.

The affluent society we live in makes no distinction between luxuries and necessities. Governments follow suit and blur the disctinction even more. And begin to believe that the world is only for the rich and those who can bribe their way to greed and beyond. This is the creed in Malaysia. The TNB mess is but the tip of the iceberg. When greed was not why we are now presumed to believe in, it would not have happened. No privatisation in Malaysia has succeeded, not would it ever.

What frightens the government is that this move into greed as national policy is challenged by those who are destroyed by it. They come out into the streets. When governments behave as Marie Antoinette when told that Parisians were rioting because they had no bread, retorted: "Why don't they then eat cake!" In time, she lost her head. So would BN if it continues to ignore the growing dissatisfaction and frustrations brought about this new found belief in greed and privatisation.

Few in politicians bother to understand this. One can see the growing estrangement between the governed and the governors. But few do. It is a safe bet to predict the worst in these circumstances. Especially there is none on the government benches with the wherewithal to turn the clock back. The rot has set in. How it can be reversed is another matter altogether.

[This is my first in a new column "Sang Kancil" in Malaysia Today (www.malaysia-today.net), and appeared today, 16 February 2005.]

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