Business as usual in Sarawak

Taib's anticipated departure as chief minister has not convinced many that it would bring about a change in the way wealth is distributed in the state. But would that really be the case?

THE departure of Sarawak’s long-serving Chief Minister Tan Sri Abdul Taib Mahmud is imminent but not many believe that a shift at the helm of the resource rich state would bring about a change in the way business is done there.

Serving as chief minister since 1981, Taib has had an iron grip on the state in both the political and business affairs of the state. In politics, he heads the Parti Pesaka Bumiputera Bersatu (PBB) that has the most number of seats in the state although he is from the minority ethnic Melanau descent.

In the corporate world, through his family company, Cahya Mata Sarawak Bhd (CMS), the family of the chief minister has a hand in a plethora of businesses ranging from construction to maintenance of roads and production of cement.

The other listed company with links to Taib is Naim Holdings Bhd. It has a substantial interest in oil and gas outfit Dayang Enterprise Holdings Bhd.

Apart from CMS and Naim, family members associated to Taib have interest in many private companies reportedly undertaking extensive business activities in the state. Among the common names that crop up in the companies are his son Datuk Seri Mahmud Abu Bekir Taib, Taib’s cousin Datuk Abdul Hamed Sepawi and occasionally his sister Datuk Raziah Mahmud.

In a nutshell, the wealth of the family members is estimated to run into billions but nothing can be substantiated so far.

Nevertheless, it is an embarrassing point for Barisan Nasional (BN) leaders in Putrajaya that have been trumpeting transparency and governance in the handling of public funds and distribution of the nation’s wealth.

Hence Taib’s departure as chief minister has been a much-awaited event. According to reports, he is to be made the Yang Di-Pertua Negeri (TYT) of the state when the term of the present TYT ends this month. The three candiates tipped to succeed him are Datuk Adenan Satem, Datuk Seri Abang Johari Tun Openg and Datuk Awang Tengah Ali Hassan.

Political scientist Dr Jeniri Amir of University Malaysia Sarawak (UMS) is of the view that Taib’s elevation as TYT would not bring about much change to the way business is conducted or wealth is distributed in the state.

“Only someone who is close to Taib would be the CM. So there is no reason to doubt that business will be as usual. There is unlikely to be any change in the distribution of wealth that has been a sore point among many in the state,” says Jeniri.

That, Jeniri says, will be the scenario unless the new man at the helm comes under pressure to divide contracts and wealth to appease his own supporters.

“Only then can we expect to see some changes and maybe the repeat of the Ming Court episode,” says Jeniri.

The episode happened in March 1987 when 28 out of the 48-member Sarawak Legislative Assembly gathered at the Ming Court Hotel in Jalan Ampang Kuala Lumpur demanding the removal of Taib as chief minister.

Taib’s uncle, Tun Abdul Rahman Yakub, led the revolt which included several political heavyweights. However, Taib in a tactical move called for fresh state elections where his party managed to capture 28 seats while the faction led by Rahman got only 20.

The support from the Chinese community was largely seen as the reason for Taib’s victory in the 1987 state polls.

In fact, Dr Jeniri contends that the reason for the revolt was because of the change in the distribution of the wealth in the state after Taib took over as chief minister from his uncle.

After Taib became the chief minister, he took over the portfolio that covered the natural resources in the state that paved the way for him to control the award of timber concessions.

The beneficiaries of the timber concessions were companies such as the Rimbunan Hijau group, the Samling group and the WTK group, whose shareholders were mainly Foochows and had every reason to support Taib then.

A senior politician when contacted says Taib is an astute politician and has put in place a structure that would see that his business legacy continue even without him being the chief minister.

“In the 1980s, the political leaders were commission agents. But today, CMS controls businesses that sees it get steady cash flow with or without its shareholders at the helm of the state administration,” says the politician.

CMS is the largest producer of cement in the state and handles the long-term concessions to manage state roads. It has interest in a wide array of companies involved in fabrication of oil and gas structures to provision of financial services.

CMS is the best proxy to the Sarawak Corridor of Renewable Energy (Score) initiative and the company features well in road shows organised by brokerages such as Kenanga and AmInvestment to expose companies in Sarawak.

A key component to the Score is the controversial Bakun hydroelectric dam, which was a facility built by the federal government with the view of the electricity being transmitted to the peninsula.

However Taib had always advocated that electricity from Bakun should be used for the benefit of Borneo and finally got his way when the federal government decided not to proceed with a multi-billion project to build an undersea cable to transmit electricity to the peninsula.

After lengthy discussions with the federal government, Sarawak Energy, an entity controlled by the state and the sole authority to transmit and distribute electricity in the state, managed to get favourable rates for the supply of power from Bakun.

The cheap electricity has proved to be pivotal to the development of Score, which kicked off in the second quarter of 2011.

CMS has several joint ventures with foreign partners and is developing an industrial park.

“Generally, CMS takes a minority interest of between 20% and 40% in companies that set up their operations within the Score,” said an investment banker.

An example is CMS having a 20% stake in a ferro-silicon and manganese alloy plant while the remaining 80% is held by Australian listed OM Holdings.

“Another major tie-up is on the way,” says the banker.

Since the general election was concluded in May this year and thereafter eased political uncertainties, CMS share price has doubled to hover closer to RM7 as at last Thursday.

However some economists are of the view that a new person at the helm would bring about some changes to the way business is done in Sarawak.

Manu Bhaskaran, the chief executive officer of Centennial Asia, a firm that undertakes research on policies and strategies, says the departure of a leader who has been in position for 33 years should have some impact, at least on the style of governance and its impact on the business environment.

“The priorities of the new leader may differ as well as the sectors and activities that he favours. The new leader will also be under some pressure to demonstrate that he is bringing in some fresh blood into the administration as well as tackling some of the weaknesses in the business environment that businesses complain about.

“He may also be more willing to tackle some of the issues that allowed the opposition to make headway in the state assembly elections and in the general elections,” he says when contacted by StarBizWeek.

Nevertheless, to the ordinary folks in Sarawak, Taib has and will continue to be seen as the astute politician who capitalised on the state’s political strength to get major concessions from the federal government for delivering the seats that proved to be vital in BN staying in power in Putrajaya in the last general election.

The issue on the distribution of wealth concentrated to a few people is much spoken about but has not caused a shake up.

This is evident as the fact remains that Sarawak remains somewhat of a backwater in the overall Malaysian economy where a large portion of the population are poor due to lop-sided distribution of wealth.

“More can be done to reap benefits from its vast agricultural, mineral and tourism potential. A new leader may bring fresh thinking and new determination to make Sarawak more dynamic,” says Manu.

by m shanmugam, gurmeeet kaur, AND yvonne tan, thestar.com.my