If you follow Malaysia’s ups and downs – although increasingly, few people do these days – you will know that the central question on people’s lips this year was whether Tan Sri Halim Saad would honour his put option to United Engineers Malaysia (UEM).
The answer has hardly left the cynics surprised.
The said put option was granted to UEM in the wake of UEM’s purchase of Renong stock in 1997. The UEM purchase was widely considered to be one of the corporate governance low points of the Asian crisis, because cash-rich UEM bought a third of its ailing parent, Renong, at the inflated price of M$2.34 ($0.62) a share – using up M$2.34 billion of its cash. Foreign investors were big holders of UEM and ran for the exits. The general index plunged.
In order to save face and restore confidence, Tan Sri Halim offered UEM a put option whereby he would personally buy back the Renong stock in February 2001. From that point on, everyone wondered where the cash-strapped ‘tycoon’ would find M$3 billion to honour the put.
Well yesterday, investors in UEM finally got their answer. Tan Sri Halim would pay, he said, but he wants an extension. In a marvellous Christmas present, UEM has granted him until 14 May 2002 to honour the put. That extra 14 months of grace may prove crucial, as it is thought that Halim has already secured commitments from several major banks to lend him the requisite monies and the more time he has to secure this, the better the terms he will get.
Given that Tan Sri Halim has testified in the past that he holds Renong in proxy for governing party UMNO, it seems highly likely these loans will be forthcoming. That will make Malaysia second only to Japan in successfully micromanaging its unique ‘system’ – in this case the pro-Bumiputra New Economic Policy – through the rigours of Asia’s worst ever crisis.
One must take one’s hat off to the Malaysians. It ain't pretty, but it has been effective. The Malaysian system remains alive and well, with all the right cronies still in place, debt mountains or not. And that’s probably why foreign investors will remain highly cautious about investing in Malaysia Inc.
