Economics/Business Malaysia’s Exim Bank: A Morass of Bad Loans | Malaysia’s Exim Bank: A Morass of Bad Loans |
| Written by Jed Yoong | |
| Wednesday, 23 April 2008 | |
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Bank Negara sits on a report that a government-owned bank has lost millions on loans to politicians and royalty An explosive auditor’s report on the government-owned Malaysia Export-Import Bank that details tens of millions of dollars in politically tinged nonperforming loans and possible illegalities has been hidden away in a central bank file for more than four years without being acted upon. The report, by auditors from Bank Negara Malaysia, the country’s central bank, probes borrowers closely tied to the United Malays National Organisation, the leading party in the country’s ruling coalition, as well as companies tied to the Sultan of Terengganu, the current Malaysian king. The report into the bank’s lending activities details inadequate risk management on projects amounting to RM116 million (US$37 million). A copy of the report was submitted to Malaysia’s Anti-Corruption Agency in February by Norhayati Abdullah, a former bank employee who was fired after 12 years, allegedly for taking kickbacks from an advertising firm. She denied the charges and said she was being made a skapegoat for corruptin inside the bank. She was joined in going to the ACA by disgruntled Exim bank officials in alleging that top management were involved in taking kickbacks and other malpractices. Senior bank managers were said to have illicitly purchased luxury cars while also receiving millions of ringit in cash. The whistleblowers also submitted documents claiming that bank managers enjoyed protection from powerful politicians, which gave them a free rein to do as they please. Despite repeated requests for comment, Bank Negara officials have refused comment on why the report was never acted upon. One official acknowledged the existence of the report and then passed the question on to another official who didn’t call back. While an Anti-Corruption Agency spokesman said that the case is being investigated, there seems little evidence that the agency has spoken to any of the complaining witnesses about the allegations. Under Malaysia’s Prevention of Corruption Act, public officials must declare their assets and are required to account for the source of any unexplained cash that doesn’t appear to be earned at their salary levels. Mohd Fauzi Rahmat, the new head of Exim Bank who was appointed this month, could not be reached for comment. Founded in 1995 on the order of former Prime Minister Mahathir Mohamad, the bank was part of his attempt to turn Malaysia into an export powerhouse. It was intended to provide investment credit to help open overseas doors for Malaysian companies. However, according to several sources inside and outside the bank, its first round of financing, just before the Asia Financial Crisis of 1997-1998, fell into a river of red ink. None of the bank’s original loans were ever paid off, the sources say. A second round of financing in 2002 also turned into non-performing loans, the sources added. The magnitude of the NPLs is not listed in any of the Exim Bank’s annual reports and, although it is a government bank, it declined to divulge the amounts to Asia Sentinel. Among other shortcomings, according to the Bank Negara report, was a RM13 million (US$4.13 million at today’s exchange rate) loan to companies related to BTM Resources Group Bhd ‑ Besut Tsuda Wood Products Sdn Bhd, Besut Tsuda Industries Sdn Bhd and Gimzan Plywood Sdn Bhd. The name of Besut Tsuda Wood was earlier changed from Mizan Timber Industries Sdn Bhd to BTM Timber Industries Sdn Bhd. Mizan Zainal Abidin is the name of the current Malaysian king. Sources within the Exim Bank and other Malaysian financial industry sources say the group is headed by Mizan, who is also the Sultan of Terengganu. Besut Tsuda Wood Products, according to the Bank Negara audit report, “suffered repeated losses, tight liquidity and was technically insolvent" and "appeared less efficient than the market because its competitors were making profit despite lower sales." The report described the firm as a "loss making company, (that) resulted to declining shareholders funds." The loans were classified as "high risk lending that may expose Exim Bank to unnecessary losses" and "potential NPLs." Additionally, as valuation reports were not addressed to the bank, the auditors indicated, it might not be possible to claim assets pledged as collateral should the loans turn bad, which they apparently did. A second US$14 million term loan was made to Sun Holding Co Ltd in 2004 to finance the five-star 240-room Don Chanh Palace Hotel in Vientiane, Laos, which hosted the 10th Association of South-East Asian Nations Summit in the same year, and a tourist complex. The company was started by the Cheok family, a property developer helmed by Cheok Thian Sang, who maintains close ties to the Malaysian Chinese Association, the second-biggest ethnic party in the Barisan Nasional. Discrepancies included not assessing the guarantors' and related companies' finances. Another US$2 million was later approved as the initial request did not include a variety of preliminary development costs. In addition, the terms and conditions of the loans were waived and relaxed after approval, the auditors found. Significantly, the security value of landed properties pledged was reduced from RM80 million to RM60 million and the percentage of sales proceeds to be placed in Debt Service Reserve Accounts was decreased from 20 per cent to not more than 5 percent, giving the company more cash reserves to operate with at the expense of potential creditors. The bank also waived requirements for purchases from Malaysian contractors of at least US$8 million, valuation reports on land charged as security and a one per cent upfront fee. A third cross-border credit for RM30.3 million to Jabalpur Corridor (India) Private Limited to build a toll road was approved in 2004 despite feasibility studies that indicated the project might not be viable and that documentation was incomplete. That company is an overseas subsidiary of Dhaya Maju Infrastructure Asia Sdn Bhd (DMI), another UMNO-connected company. Established in 1996, it is a Class A bumiputera contractor. This allows it to tender for the biggest projects of more than RM10 million from government and government-linked companies allocated to ethnic Malays under the country’s New Economic Policy affirmative action program. A traffic consultancy, Frischman Prabhu (I) India Ltd, forecast that traffic flow would not meet the Dhaya Maju projections, only increasing from 3 percent to 5 per cent, not from 5 per cent to 9 per cent as assumed by Jabalpur, which was not enough to repay the loan. The report also criticized projected cash flow submitted by Japalbur as inflated. Earlier in 2002 and 2003, two loans totaling RM28 million were made through UE Development India Pvt. Ltd. a wholly-owned subsidiary of UEM Builders Bhd, a construction that historically has been closely linked to UMNO, to a firm called TDI Infrastructure, which is a subsidiary of Dhaya Maju, to finance another highway in India. Again the loans were improperly secured against a deed of assignment for contract proceeds between the bank and the company. The central bank’s internal auditors deemed the arrangement to be "ineffective due to (the) lack of monitoring by (the) Loan Administration Department on the project account.” Dhaya Maju was also given excessively lax repayment terms by the Exim Bank but still didn’t pay on time, the audit report said. A sinking fund, or custodial account, of 4 percent of progress payments which was to provide additional security for the loan, was only established about a year later, which the report described as "too long". Despite making 49 progress claims to the main contractor, UE Development India, totaling Rs896.2 million, only Rs94.8 million (13 transactions) was credited to the project account. Disbursements were also made without the approval of the head of the loan administration unit or the general manager, as specified by bank regulations. In a different kind of breach of professional conduct, also highlighted by the Bank Negara report were exorbitant petrol and cell phone claims by a general manager, which breached company regulations. Although he was mostly abroad during the time that the claims were made for petrol, the total amount for five months came up to RM11,398. According to marginal notes on the Bank Negara report, the charges appeared to have been run up by the man’s wife. In the same period, he claimed RM10,823 in cell phone charges, far exceeding the stipulated limit of RM200 per month or RM1,000 for five months. How much there is beyond the Bank Negara report remains to be seen. The whistle-blowers, in their letter to the Anti-Corruption Agency, wrote that accounts have turned into NPLs in India, China, Laos, Indonesia and Africa. "How could they (the loans) not turn into NPLs? Because borrowers need to pay commissions to those who have vested interests while the actual loan amount becomes less than what was applied for," a former bank employee wrote in a letter to the ACA. Comments
(26)
 written by Buntang , September 24, 2009
It is the "petty cash" till for the corrupt politicians which infects the whole organisation. I will also be tempted to put my hand into the till if those "up" there are doing the same. Who cares attitude will seep in and it will rot.............no cure lah! habis lah!
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written by Jane Philip , March 06, 2009 Hello i am jane Philip, i tried to get a loan from my bank i was declined because of my low credict balance before i friemd of mine intoruced me to Micro Finance Company where i applied for a loan of 65000USD upen the recival of my credictials my loan was approved and transferred into my account, if you have been searching, this is the right place to get an easy loan contact Micro Finance Company via email: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it report abuse
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 written by Syed Mokhsain , June 19, 2008
Bank Negara has been sitting pretty for too long. Do your job for the good of the nation.
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 written by Subra , May 12, 2008
The then CEO of EXIM made various trip to india with the MD Subramaniam and he was entertained to woman, money and holiday trips.
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Information was given to later the CEO Dato Kamal but.... Melayu sama Melayu nothin was done. The problem is that they is NO Racial mix of staff in EXIM. All abang adik all MELAYU so "you scratch my balls I entertain your ass" attitude. EXIM bank MUST start to engage more Chines and Indians as top senior positions to eridicate this corruption. I have more on EXIM bank and there staff both top AND lower ranks. Please take in more ex bankers who will be able to erridicate this manance. report abuse
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 written by Jamal , May 10, 2008
All politics are bound to corruption..all corporations are bound to corruptions...doesn't matter whether it's Malaysia, or China or India or U.S or U.K...I always accept other races and I would never tell them to leave...but questioning hak bumiputera is like malays questioning hak jus soli. If they were to take hak bumiputera away...all the people who got nationality based on jus soli would should be strip from it too..and btw Agong is there because they were the rulers of the nation until they "let go" of most of their powers to allow Malaysia to be a wholly independence country. If they didn't, Malaysia would either still being suck by the Brits, or if we are dried up...left for dead...and
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 written by a guest , May 05, 2008
Perhaps Bank Negara should fine comb the lending policies of SME Bank too !!
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 written by Overseas Tiger , April 29, 2008
Re: Shafneezal Rashid
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Wow, a misogynist, sexist racist with a severe case of penis envy and a very big chip on his shoulder. Is this the finest and the very best that the UMNO/BN goons have to offer to engage Malaysian netizens into revealing details of themselves so that they can then send in their ISA keystone cops? Or is it the usual sad tactic of trying to play off Malaysian Indians against Malaysian Chinese? So immature or is that your idea of being a good Muslim. You should go back to studying the Koran and reflect more on the tenents of Islam and the teachings of the Prophet, blessed be his name. You should stop corrupting your soul by your visits to prostitutes, but instead find a good decent Muslim girl, if one will take pity upon you and have you as a husband. You should learn to recognise the true evil and the corruption of those in government. You are a shame to all decent Muslim and your family should turn their faces away from you in SHAME. report abuse
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 written by Shafneezal Rashid , April 29, 2008
Dear Periscope,
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Just to make u aware & slap u out of your dream.... NEVER will in your lifetime NOR your great-great-great grandchildren's lifetime will the chinese ever takeover this country. Problem lies... within the pants. The chinese have too small of a manhood. What makes this world goes round is women. And in essence they want just plain good, sweaty animal sexs. Whic ONLY Malays & Indians can deliver that promise. The chinese will always be the stupid guys that comes for a blow job at a whorehouse and goes back to b a slave for money in this world. A chinese men without money is a freak of nature... a bloody loser. A Malay or Indian on the other can still b seen as attractive, naughty, mysterious, saucy etc. Too bad u dont realise that when yur ancestors like that Li Poh Princess preferred a malay cock! =) report abuse
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 written by matjmay , April 29, 2008
WHY Bank Negara does not report this to ACA and the Police, or the Parliament?? Central Bank of Malaysia is the Guardian of people's assets and integrity. Governor must be above all corrupt politicians?
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Bank Negara must act fast to clear its own name in this cover up....I ring alarm bells if the Central Bank also becomes part of UMNOPUTRAS!!!???? report abuse
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written by matjmay , April 29, 2008
HY Bank Negara does not report this to ACA and the Police, or the Parliament?? Central Bank of Malaysia is the Guardian of people's assets and integrity. Governor must be above all corrupt politicians?
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Bank Negara must act fast to clear its own name in this cover up....I ring alarm bells if the Central Bank also becomes part of UMNOPUTRAS!!!???? report abuse
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Corruption is part of the picture but blatant discrimination is just as worse as ever. Read these true stories to feel for them and you won't be surprised anymore where the country's top talents is heading off:
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A daughter devastated, a mother with no answers http://malaysiakini.com/letters/81505 Education system quota abused http://malaysiakini.com/letters/81827 Why bother waking up at 3am to study? http://malaysiakini.com/letters/81940 Top scorer has to give up dream http://thestar.com.my/news/story.asp?file=/2008/3/12/nation/20613972&sec=nation Only one Malaysian for Harvard DESPITE failing to secure scholarships from local organisations for six months, Kajang lad Lee Jia Hui, 19, managed to obtain an offer from Harvard University to pursue his undergraduate studies. http://thestar.com.my/education/story.asp?file=/2008/4/20/education/20984408&sec=education report abuse
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written by Overseas Tiger , April 25, 2008
Malays can be good in finance too irrespective of race. However, Malays often need to reconcile international financial culture with Islam and I am not just talking about usury and interests, but other international financial practices, such that it becomes self-limiting to the sphere of Islamic finance rather than the international financial system as a whole.
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And if any Malays reading this want to invoke the race card know that the "Malay" race is NOT homogenous. There is no such thing as a "Malay" race, who are all actually descended from various other "races", including Chinese, Indians and Arabs etc. Frankly not even the "Bumiputras", such as the Iban or Dayak, are the first to arrive in Malaysia. That honour would have to go to the Negritos, who were like the Aborigines of Australia or the Andaman Islands, but who were later slaughtered by the "Bumis". So If the Chinese or Indians should leave Malaysia, then the Bumiputras as well as the Malays too should also leave Malaysia. Moral of the story: Don't play the stupid F**kin race card. Go get a decent education and so that you don't let yourself be manipulated, THINK FOR YOURSELF!!! So many fools. PS: Why do we need an Agong anyway??? report abuse
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 written by periscope , April 25, 2008
Malay dude asks me to get out of Malaysia. Why should I. This is my country. I have a say. What I said has been borne out by events of the past 50 years. Ever since a Malay has been finance minister, our ringgit has been falling. It will be like the rupiah Indonesia; no wonder it is called RM(Rupiah Malaysia). What Malaysia has been experiencing is economic piracy. "Take what you want from others". A current minister has said that the majority should take everything. This was just before Mahathir stepped down. Isn't that piracy? Malaysians of Chinese descent are better in finance management. Ask Mahathir if you don't believe me. He has also said that if so many Chinese had not left Malaysia, Malaysia would have beaten Singapore hands down in the development game. Face it Malay dude, you grew up under the NEP, without it you would be afraid to do anything for fear of failure. Don't believe me? Ask Abdullah - he said that.
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 written by Malay dude , April 25, 2008
To: Typical Pirates of S.E.A : Periscope, you don't like UMNO, fine, you don't like malays? Get the F*** out of Malaysia! A-Hole!! Leave your comments wisely..
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 written by E. Lubis , April 25, 2008
Give us all a break. Why not say - "The only way to rule Malaysia is to let the White Anglo Saxon Protestants control the finances because they are so gifted and would do a better job." Why not say -"The only way to rule Malaysia to to let the Koreans control the finance.." or why not say - "The only way to rule Malaysia is to let the Japanese control the finance...etc. Again, the question is not about race here but about finding the most honest, ethical, hard working individual whether he or she be Chinese, Indonesian, Indian, Malay, Japanese, Korean, Persian, White Anglo Saxon, African or Orang Asli. The most important rule to remember is - "The only way to rule Malaysia is to let the most highly qualified people regardless of what race control the finance.......
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 written by egra , April 24, 2008
Guys, pls read both sides of the stories first before make your judgement.
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Read here http://www.malaysia-today.net/...w/6517/84/ on what Raja Petra eplained on this issue. THINK before you SPEAK... report abuse
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 written by WHOSAIDSO , April 24, 2008
READ MALAYSIA KINI BEFORE YOU PUBLISH THIS PIECE OF RUBBISH and PLEASE , GET THE FACT RIGHT FIRST..READ , PLEASE READ WHAT RAJA petra said...and apologize to AGONG ..
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written by Prism , April 24, 2008
So that's why there is no more money for a second Penang bridge. Maybe Penang can raise finance overseas just like Orange County, California, did by passing appropriate legistlations. The Federal govt can then go scr*w themselves.
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 written by Oj , April 24, 2008
I'M not surprise at all.....that what we have frm.era Dr M until today! That why people wants NEW leader to run M'sia. Like my case, I can't pay the credit cards in time, the banks have run after me like hell issued lawer letter then they charge me.WHATS ACTION they take agaisnt this coorpution? Don't worry I'll "berdiri teguh dibelakang you". mampuslah..........
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 written by tuabak , April 23, 2008
Why is it so obvious that every sen that is loaned out has something to do with UMNO? Looks like the bank has broken every rule in the banking system, and yet Bank Negara is sitting on it! yalah, how to take action 0n Your Boss. Nak Mampoih..In this case you don't really need professionals to run the Bank. Our school boys with basic accounting knowledge can do a better job, I'm sure.
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Wonder if the writer had downplayed the collaterals..? report abuse
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 written by whatsup_man , April 23, 2008
This is just the tip of the iceberg and nothing new. Since BMF banks whats new..... at the end of the day it's EPF or Petronas to the rescue ... tax payer suffers and scoundrels go free
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written by Periscope , April 23, 2008
What do you expect. By now everyone should know the culture of UMNO and their cronies. Piracy, piracy, piracy all the way round the country and then to the rest of the world. UMNO and the Malays have failed in their responsibility to rule the country. Their weaknesses are money,power and women. Whether they are in BN or PKR, they will all turn out the same. The only way to rule Malaysia is to let the Chinese control the finance. At least we will have something left over for our children.
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