PAS’s head of research Dr Dzulkefly Ahmad said the decision by several renowned multinational companies to withdraw from bidding for government projects would only speed up Malaysia’s demise as an investment destination, and warned prime minister Najib Razak against interfering in tenders.
Noting that some RM160 billion worth of railway infrastructure projects could be up for grabs by international engineering firms, Dzulkefly drew attention to recent reports that some foreign companies had been shying away from Malaysia’s rail sector due to dubious decisions in the tender process.
“The poor management of tenders for rail job in Malaysia by Najib will cost the country dearly,” said Dzulkefly, who is also Kuala Selangor member of parliament.
His comments came in the wake of the latest exposure by prominent whistleblower Rafizi Ramli showing how Najib had interfered in the tender process for the RM1 billion Ampang LRT extension project by awarding it to construction firm George Kent.
The firm, which supplies water-metres, has been cited by an independent evaluation report as having failed to meet criteria for the job. Despite this, it was preferred over more qualified bidder BBRail Consortium.
“It will not be a surprise if global companies will pull out and not participate in future tenders. What happens to BBRail Consortium in the case of Kelana Jaya and Ampang Line jobs, having quoted the lowest and scored the highest in technical evaluations for both jobs and yet ended up losers, will surely stave-off other internationally reputable companies from future participation,” stressed Dzulkefly.
He pointed out that withdrawing was understandable as the companies had spent money and man-hours to get professional teams prepare the bids according to international norm, “and yet the PM has other set of unwritten criteria in awarding the winners”, he added.
Dzulkefly said many of the companies have adopted strict codes of conducts forbidding officers from giving bribes in the form of “excessive gifts, lunches, dinner entertainment or travelling expenses” to secure contracts.
“These codes of ethics are seriously being scrutinised in all their employees claims and will be deducted immediately if it exceed the prescribed limit.
“Can anyone take a Senior Government Officer in charge of tender out for dinner on an RM50 allocated budget?” he asked.
Calling the decision to choose George Kent for the Ampang-LRT project a “sham”, Dzulkefly sugggested it could be just the tip of the iceberg.
“There are lot more dealings shrouded in mystery than meet the eyes.
“It is this and not Bersih or anti-Lynas that are chasing away foreign direc investments.”
Consider just this month’s news in financial services.
First, Barclay’s has been manipulating the Libor, the main interest rate upon which most other interest rates and financial transactions are based, since 2005. Moreover, Barclay’s traders were colluding with traders in many other banks to assist them in manipulating the Libor too, so that they could all profit from their bets on it.
Second, JP Morgan Chase is having a really great month. Recent reports describe how it is resisting Federal subpoenas related to price-fixing in U.S. electricity markets. It is also accused (by former employees among others) of deliberately inflating the performance of its investment funds to obtain business. And finally, JP Morgan’s failed “London whale” trade, which has now cost over $5 billion, is being investigated to determine whether the loss was initially concealed from regulators and the public.
Third, HSBC is paying a fine because it allowed hundreds of millions, perhaps billions, of dollars of money laundering by rogue states and sanctioned firms, including some related to terrorist activities and Iran’s nuclear efforts. But HSBC is only one of at least 12 banks now known to have tolerated, and in some cases aggressively courted, money laundering by rogue states, terrorist organizations, corrupt dictators, and major drug cartels over the last decade. Others include Barclay’s, Lloyds, Credit Suisse, and Wachovia (now part of Wells Fargo). Several of the banks created special handbooks on how to evade surveillance, created special business units to handle money laundering, and actively suppressed whistleblowers who warned of drug cartel activities.
Fourth, a new private lawsuit cites documents indicating that Morgan Stanley successfully pressured rating agencies into inflating the ratings of mortgage-backed securities it issued during the housing bubble.
Fifth, Visa and Mastercard have just agreed to pay $7 billion to settle a private antitrust case filed by thousands of merchants, who alleged that Visa and Mastercard colluded to fix fees and terms of service.
Just another month in financial services. Is it unusual? No, it’s not. If we go back just a little further, we have UBS, HSBC, Julius Baer, and other banks actively marketing tax evasion services to wealthy U.S. and European citizens. We have senior executives of several banks (including JP Morgan Chase and UBS) strongly suspecting that Bernard Madoff was running a Ponzi scheme, but deciding to make money from him rather than turn him in. And then, of course, we have the financial crisis and everything that led to it. As I show in great detail in my book Predator Nation, we now possess overwhelming evidence of massive securities fraud, accounting fraud, perjury, and criminal Sarbanes-Oxley violations by mortgage lenders, investment banks, and credit insurers (including senior executives of Countrywide, Citigroup, Morgan Stanley, Goldman Sachs, Bear Stearns, AIG, and Lehman Brothers) during the housing bubble that caused the financial crisis. If we go back to the late 1990s, we have the massively fraudulent hyping of Internet stocks, and several banks (including Merrill Lynch and Citigroup) actively aiding Enron in committing its frauds.
So, July 2012 really isn’t abnormal at all. The reason for this is very simple. Over the past two decades, the financial services industry has become a pervasively unethical and highly criminal industry, with massive fraud tolerated or even encouraged by senior management. But how did that happen?
Well, deregulation helped, of course. But something else was far more important. It is the one critical factor that unites all of the episodes cited above, including those of this month. This critical unifying factor is the total number of criminal prosecutions of major firms and senior executives as a result of all of these crimes combined.
And what is that number?
Zero.
Literally zero. A number that neither President Obama nor Mitt Romney shows the slightest interest in changing.
Consider the Obama administration’s choices for the four most important positions in financial sector law enforcement. The attorney general (Eric Holder) and the head of the Justice Department’s criminal division (Lanny Breuer) both come to us from Covington & Burling, a law firm that represents and lobbies for most of the major banks and their industry associations; indeed Breuer was co-head of its white collar criminal defense practice, and represented the Moody’s rating agency in the Enron case. Mary Schapiro, the head of the SEC, spent the housing bubble in charge of FINRA, the investment banking industry’s “self-regulator,” which gave her a $9 million severance for a job well done. And her head of enforcement, perhaps most stunningly of all, is Robert Khuzami, who was general counsel for Deutsche Bank’s North American business during the entire bubble. So zero prosecutions isn’t much of a surprise, really.
In contrast, what do you think would happen to you if, as a lone individual, you were caught supporting Iran’s nuclear program? Do you think that you would get off with a “deferred prosecution agreement” and a fine equal to a few percent of your annual salary? No?
But that’s because you don’t live right. You probably haven’t been to the White House a dozen times since President Obama took office, or attended White House state dinners, like Lloyd Blankfein has. Nor have you probably overseen millions of dollars in lobbying and campaign donations, or hired senior administration officials, or sent your executives into the government in senior regulatory positions, or paid $135,000 for a speech by someone who later became chairman of the National Economic Council. And, well, you get the law enforcement that you pay for.
Angered by crony capitalism in India and the power of the top 1% in the West, some analysts favour the so-called Beijing Consensus, or China’s model. Sorry, but China has as much cronyism as other countries.
Angered by crony capitalism in India and the power of the top 1% in the West, some analysts favour the so-called Beijing Consensus, or China’s model. Sorry, but China has as much cronyism as other countries.
A recent study in Financial Times shows that relatives galore of Chinese politicians have become millionaires. The “princelings”, as children of top Chinese politicians are called, have riches that dwarf comparable Indian princelings.
Wen Yunsong, nicknamed Winston, is the son of Prime Minister Wen Jiabao. His China Satellite Communications aims to become Asia’s largest satellite operator by 2015, with 15 satellites and annual revenues of $ 2.5 billion.
Educated in the US-like most princelings-the young man established his first company, New Horizon Capital, in the Cayman Islands, a tax haven. It raised over $ 2.5 billion from global giants like Deutsche Bank, JP MorganChase and UBS. Would this be possible for any young Chinese entrepreneur unrelated to a politician? Not a chance.
“Winston blatantly uses his political background to get deals. If Winston is bidding for a deal, we wouldn’t even try – we try to avoid competing with the big princelings.” So says a top foreign investor.
The prime minister’s wife, Zhang Beili, controls vast operations in jewellery and property. The Financial Times cites a Wikileaks document as saying the lady and her children “get things done for the right price”.
The relatives of Chinese President Hu Jintao are powerful to o. His son, Hu Haifeng, was once president of state-owned Nutech which makes security scanners. After he took over, the company was granted a virtual monopoly in this market. In 2008 he moved up into Tsinghua Holdings, which controls 20 companies including Nutech.
His sister is married to Daniel Mao. This young man once headed Sina.com, one of China’s largest web portals. His personal wealth was estimated in 2003 at $ 35-60 million.
An earlier Chinese President, Jiang Zemin, has spawned millionaires too. In 2000, his son Jiang Mianheng founded Grace Semiconductor, one of China’s first microchip companies, partnering the son of Taiwan’s top tycoon. Today he heads Shanghai Alliance Investment, an investment fund with stakes in major Chinese companies.
Jiang Zemin’s grandson, Jiang Zhicheng, worked for Goldman Sachs in 2010. He now works at Boyu Capital Advisory.
Most princelings have fancy degrees from western universities. Many may be talented, but nobody believes that talent alone has explains their meteoric rise. Their family connections mattered hugely.
Top politicians claim they have no links with the businesses of relatives. But a veteran diplomat says “everything is controlled by a couple of hundred powerful families….most foreign companies are trying to hire the sons and daughters of Chinese officials so they can get access and do business.”
Multinationals often start joint ventures with the princelings, who typically hold their stakes through holding companies in Hong Kong or Caribbean tax havens. This helps hide business secrets.
Consulting fees are often paid abroad in Dubai or Hong Kong. Agreements are frequently written on red paper, because xeroxes or scans of red paper turn black and become unreadable. This limits leaks.
Princelings are no longer content with fat consultancy fees. “The big families want to get into private equity or do business themselves, because that’s where the real money is.”
When Deng Xiaoping launched China’s pro-business reforms, he declared “to get rich is glorious.” He meant productive businesses should be gloriously rich. But his party colleagues have found the ultimate glory in family enrichment. In the 1990, when the Chinese private sector skyrocketed, some top politicians tried to rein in their princelings. “But now there is almost no restraint,” says a top official.
Indian politicians during the independence movement aimed for ideals, not money. But once in office, their relatives became influence peddlers. Today, people enter politics mainly to make money. The emergence of political dynasties should surprise nobody: they are business dynasties by another name.
In India too, the sons and relatives of politicians often boast foreign degrees, and claim to have high technocratic skills. Here too, corporations want to hire these relatives to gain political access and influence. But we have fewer cases of princelings becoming big businessmen.
The mere fact that China has corrupt princelings does not make India less corrupt. It is no excuse for slackening our own anti-corruption efforts. Yet i suspect that most readers will, like me, grin at the expose of the princelings. The Germans call it schadenfreude-finding pleasure in the travails of others. It’s mortifying to be beaten by China in one field after another, but we can enjoy China’s victory over us in corrupt princelings.
No comments:
Post a Comment