With the recent sealing of Agreement between the Stock Exchanges of Malaysia and
Singapore on the solutions to the CLOB impasse, the saga of shame on the
Malaysian authorities seems to be over.  But it is not.

The final solution seems to embody only mild demands from the CLOB shareholders
compared to previous demands, but it is still morally indefensible on the part
of the Malaysian authorities.  In addition, it shows up the unrelenting
determination by the ruling power in Malaysia to squeeze illegitimate profits
out of the CLOB shareholders.

Why must the Malaysian authorities insist on an unconnected third party to
collect fees from the CLOB shareholders, before the Malaysian authorities would
agree to implement a straightforward Agreement between the 2 Exchanges?  Under
that Agreement, entered into between the 2 Exchanges at the freezing of CLOB
shares in September 1998, KLSE agreed to arrange for the transfer of CLOB shares
to the Malaysian Central Depository (MCD) under individual accounts.

There is no possible justification for Effective Capital to come into the
picture and asked for a fee (totaling almost RM 300 million), and for KLSE to
support it exclusively, when there is no provision whatsoever in the Agreement
(Sept 98) between the 2 Exchanges for any intermediary role by any third party.
KLSE is absolutely competent to fulfil its obligation to migrate the CLOB shares
without the participation of any parasitic third party.

The hands of the Malaysian ruling power in this debacle are obvious.  Both Prime
Minister Mahathir Mohamad and Finance Minister Daim Zainuddin have publicly
uttered words of coercion to CLOB shareholders to accept the Effective Capital
offer.  CLOB shareholders and Singapore leaders had countered by announcing
their intention to take legal action and to bring the matter up to the World
Trade Organisation, if necessary.  This latest flexing of muscles by both sides
culminated in the signing of the Agreement between the 2 Exchanges on 25th
February 2000, which contains a watered-down version of Effective Capital’s
previous offer, as well as another Option.  The latter was thrown in to provide
camouflage to the Effective Capital proposal, which would otherwise be too
apparent as an act of naked greed.

In Effective Capital’s final offer, the fee is reduced from 2% to 1.5% payable
to Effective Capital, and the staggered share release period is reduced from 18
months to 13 months starting from 1st July 2000.  The other Option is a direct
deal with KLSE’s subsidiary Scans, whereby the fee is 1% payable to Scan, and
the staggered share release period starts only from 1st January 2003 and lasting
9 months.  The unreasonably long waiting period offered in the Second Option
makes it an impracticable proposition and is unlikely to be taken up by the vast
majority of CLOB shareholders.  Its inclusion in the Agreement has the effect of
making the whole deal look less unethical.  It has thus saved the face of the
Singapore Government and soothed the ego of CLOB shareholders for not appearing
to have been clobbered.  At the same time, it has somewhat repaired Malaysian
leaders’ image, hitherto appearing as untrustworthy and greedy violators of
foreigners’ assets in this Country over this issue.

To those Malaysians who have sighed relief that the long ordeal of the CLOB
controversies is finally over and are rejoicing at the prospect of foreign
investors, including Singaporeans, pouring their capitals into Malaysia again,
they are well advised to pause and to reflect deeply into this whole episode.

Daim Zainuddin is well known to have forged close ties with Effective Capital’s
apparent owner Akhbar Khan.  Daim had practically served ultimatum to CLOB
shareholders earlier to either accept Effective Capital’s offer or face the fate
of having their shares transferred to the Malaysian Government (Daim’s
brinkmanship was abetted by Mahathir who chorused that CLOB shareholders had
better be reasonable).  On the part of KLSE, it had ensured that only Effective
Capital’s was put on the platter, by crudely brushing aside the other Offer by
contender Bintang  Melewar, on lame excuses.

The above series of events speak for themselves.  Under these circumstances, how
can any one dispel the pall of suspicion over our top political leaders for
having manipulated KLSE for personal gains by milking the maximum possible from
these foreign investors who had the misfortune of being trapped in this infamous
sham?  Imagine how daring and ruthless these “clobbers” were when Effective
Capital’s first Offer was to buy all the CLOB shares at more than 50% discounts
to the market price!  These “clobbers” would have profited many billions
(instead of the present RM 300 million) if they had their way then!

Irreparable damage has been done to the reputation of Malaysia as host to
foreign capitals.  That our top political leaders have been allowed to indulge
in such crude display of greed and immorality with impunity is a poor reflection
on the moral fibre of this  Country.

Kim Quek.

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