Malaysia Today - Your Source of Independent News
Malaysia Today - Your Source of Independent News |
- Malaysia in the Era of Globalization #81
- Cry of the silent millions goes unheeded
- The NEP and the downfall of Malays
- Malaysia Is Merdeka In Name Only
- Let’s celebrate Sept 16 for its significance
- UMNO turning right leads BN downhill
- AirAsia-MAS share swap: The barbarians have entered the gates
| Malaysia in the Era of Globalization #81 Posted: 04 Sep 2011 09:26 PM PDT
M. Bakri Musa IFIs thrived in the first few centuries of Islam not because those early Islamic thinkers had found a magic way to dispense with the cost of funds and returns on investments, rather they used different terms (or more crudely said, put a different spin on the issue) to circumvent interests payments and earnings. Chapter 9: Islam in Malay Life Reform in Islam Islamic Financial Intermediaries (Cont'd)
IFIs thrived in the first few centuries of Islam not because those early Islamic thinkers had found a magic way to dispense with the cost of funds and returns on investments, rather they used different terms (or more crudely said, put a different spin on the issue) to circumvent interests payments and earnings.
The modern version of Islamic banks was resurrected only in the last few decades. Despite its recent rebirth, its popularity has soared both in Islamic and non-Islamic countries. This recent history should serve as a ready caution. The system has not been tested. The system of auditing, accounting, and regulating has not been standardized. What I fear most is that should Islamic banks fail in an economic crisis, it would not only aggravate the situation but also set back people's trust in them. That in turn would severely shake Muslim's trust in their religion. A senior official of the Federal Reserve Bank of New York, which supervises the world's largest and most sophisticated banks, voiced his concern about this in his address to a meeting of Islamic bankers who were eager on introducing the concept to America. Through bitter experience America has wisely separated commercial banking from insurance and investment banking, and also banking from commerce. A century ago American banks were deeply involved with commercial enterprises much along the lines currently advocated by proponents of Islamic banking. The 1930 depression was blamed in part because banks were deeply involved in speculative share trading activities of companies they owned. Further, such co-mingling of banking and other commercial activities could lead to an unhealthy concentration of economic power. Banks would then cease from becoming an impartial arbiter of credit worthiness. Modern Western banking has been continuously refined over the past centuries. Banks today (at least in Western countries) are safer and offer better services. They have also contributed immensely to economic development. The challenge for IFIs is not simply to say that Western banks are un-Islamic but to offer comparable services to customers and thus serve the economic needs of society. Instead of trying to parse non-existent differences between interest and other costs of funds, modern Islamic bankers and economists should more productively focus their intellectual resources to differentiating the various kinds of lending. Islam rightly prohibits "making money on money," which I interpret as gambling and speculating, but encourages trade, which is taking risks in productive investments. There are certainly significant differences between my borrowing money to buy a Mercedes limousine to show off to my colleagues and neighbors, or to use it as a taxi. The economic multiplier effect of the purchase, for example in creating jobs at the factory as well as the car repair shops, is the same in both cases – the direct effects of consumer spending. From there the economically meaningful differences emerge. With the first instance I am using borrowed funds for consumption; the second for production or investment. With the latter I, as a borrower, would actually earn money (passenger revenues) as a consequent of the loan. And if I share my taxi with another driver, that would create yet another job (making a total of two taxi drivers). No such additional incomes or job creations would result with the first type of borrowing. Additionally, my taxi would provide a much-needed transportation service to the community. My private limousine would only create more pollution and envy from my neighbors. But the most important difference is that with the first borrowing, only the lender (bank) makes money out of the borrower; with the second, both lender and borrower make money. In either case money is being borrowed and interest (cost of funds) incurred. But with the second case the borrowing serves a useful societal purpose; it is in fact a form of trading. I trade my service or expertise as a taxi driver for the bank's capital. The first borrowing on the other hand, is purely for consumption. One can be easily persuaded that borrowing in the second instance should be encouraged as society as a whole would benefit from such activities. No such societal benefits would accrue from the first borrowing. Thus we could properly differentiate, as many recent scholars have suggested, between the costs of capital in the first type of lending as interest, riba; the costs in the second instance should be more accurately called profit on the trading of capital, which in this case is money instead of the usual assets such as goods and real estate. Muslims must remind ourselves that current accepted interpretations of terms such as riba and gharar (risky sale, speculation) are just that: interpretations. Indeed there are some scholars who interpret riba to mean excessive interest. Just as excessive profit is bad (and often illegal as they are usually obtained through such means as market manipulation, monopoly, or plain hoarding) so too are excessive interest rates. Likewise there is a conceptual difference between interests on "productive" versus "consumptive" loans. The latter would more likely fit the description of riba while the former as profit on the trading of capital. There is a comparable controversy on whether insurance, specifically life insurance, is halal or haram. Islam has its own version of managing risks, Takaful. (mutual aid). Again here it is the duty of its proponents to clearly differentiate their product, especially with respect to safety, security, and rate of returns from traditional insurance so consumers could be better informed and be able to "comparison shop" intelligently. In such important matters we must go beyond simplistic and legalistic changes of specific words but instead concentrate on deciphering the meanings and intent of such terms. Indeed Muslim shippers in Spain first started the very concept of takaful or insurance. They would collect levies on each shipper so they would have funds to support the unfortunate shipper who would meet untimely calamity along the way. Of course the concept has since developed a long way from there. When one traces the development of insurance from a mutual aid society, the ulama can easily understand and readily agree to the concept. I once explained to an alim who vehemently opposed life insurance, the concept of risk sharing. I described a community where when someone dies, the rest of the community would contribute some money to take care of the deceased's family. He readily agreed to the benefits of such deeds and went on to quote eloquently some holy passages to buttress his agreement. Then I suggested that instead of collecting the money only when someone dies, we would collect it regularly and put that cash in a pool ready to be distributed at the time of need, that is, the death of a member. Again, he readily concurred. Then I moved on and suggested that instead of giving the same amount of money for each family, we use our judgment and give more to those who die leaving behind young children as opposed to those whose children have grown up. Again, he readily agreed to the rationale that the expenses of a family with dependent children would certainly be greater and therefore they should get more. Then I made the leap forward by suggesting that instead of us or the village committee deciding how much money the deceased family would get, we let individual members decide how much to leave to their family when they die. Surely the individual is the best judge on the needs of his or her family. Those who want to leave more would of course have to contribute more; those who want to leave less would contribute less. Again he saw no problem with that. Then I surprised him by saying that is in essence the concept of life insurance. You decide how much your family would get when you die and you make your contributions (that is, pay your premiums) accordingly. Today, life insurance is much more complex as other risk factors like age and family history are considered. And instead of a village committee we have a team of professional actuaries who assess and price risks as well as invest the premiums. But cut to its core, life insurance is essentially a commercialized mutual aid society. The money contributed (premiums), instead of being left underneath the village headman's mattress, is being invested and thus further contributes directly to the economy. The ulama's prohibition on insurance, specifically life insurance, is simply based on their lack of understanding of the concept of risk sharing. They have this simplistic notion of life insurance as a bounty to invite some mischief on the part of the beneficiary in order to collect the cash. Well, such a scheme is a crime. One would be punished right here in this world for fraud and murder. Life insurance, like other forms of insurances, is merely a form of mutual sharing of risks. Nothing prevents a community, co-operative, or a "mutual" company from offering such investments. Indeed such co-ops and mutual insurance companies are among the biggest issuers of insurances in America. The Mormon Church has a similar insurance-like scheme by levying charges (tithes) on its members to take care of the sick and disabled amongst them. Next: Educating Ulamas on Modern Economics
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| Cry of the silent millions goes unheeded Posted: 02 Sep 2011 11:12 PM PDT When the Malayan flag was hoisted in 1957, 'every person there did not represent one race, they were Malayans," recalls Mrs FR Bhupalan, who was then a 30-year-old mother of two. Having championed causes such as the anti-drug abuse movement, women's rights, education and social justice, Bhupalan was one of the earliest women involved in the fight for Malaysian (then Malaya) independence. Aneesa Alphonsus, Free Malaysia Today At the age of 84, Rasammah Bhupalan's eyes still light up at the mention of Aug 31, 1957. Her eagerness when sharing what she witnessed that momentous day is infectious and at times poignant. Known to many as Mrs FR Bhupalan, she was both a Malaysian freedom fighter and social activist. Having championed causes such as the anti-drug abuse movement, women's rights, education and social justice, Bhupalan was one of the earliest women involved in the fight for Malaysian (then Malaya) independence. At the age of 16, she joined the Rani of Jhansi Regiment, the women's wing of the Indian National Army, to fight the British. As founder president of the Women Teacher's Union, she fought for equal pay for women teachers and tried to bring a disparate teachers' unions under the same roof. With these achievements, which she described as, "modest", it is little wonder why she feels so strongly about the day Malaya was liberated and recalls the day with much clarity and enthusiasm. "It was the most exhilarating and happy period of the time. But it also came with the realisation that therein was a challenge (for me) as a citizen of an independent country and nation. "It made me think about how I must undertake certain responsibilities and have greater participation in the life of our country. I was 30 years old at the time." On the eve of Merdeka, Bhupalan made her way from Ipoh to be in Kuala Lumpur with two of her children in tow – a girl of five and a boy of three. Excitement and anticipation
Having been a student of history, Bhupalan felt it was important that when the Union Jack was brought down and our Malayan flag hoisted, she should be there in order for her to share with her children the value of liberty. So together with her cousins, Mrs Bhupalan arrived at what is now is known as Dataran Merdeka, as early at 9pm on Aug 30. She recalled that even at that time, a massive crowd had already gathered. There is pride in her voice when she recalls that the ambience that night was breathtaking. "People were chatting and there were happy shouts everywhere. I never saw anything like it. Then the Union Jack came down and it was the most poignant moment. "The clock struck 12 midnight and Tunku Abdul Rahman raised our flag. I was emotional with happiness because I felt that the future held great promise. "Here was a country previously under colonial rule but which was now free. "The whole spirit of that night was triumphant. Every person there did not represent one race, they were Malayans," she says, her voice catching. At this juncture, she pauses and shared a thought that had come to her mind while witnessing the historic moment. "My paternal grandfather came to Malaya in 1860 as a contractor and there I was standing as witness to this independence in 1957, three years short of a century. "This fact struck me at the time. For me, there was every hope that Malaya would achieve its independence with a unity in spite of our multi-racial, cultural, language, and socio-economic differences. "Tunku brought forth great hope. There would be no turning back now and as a nation, we would be moving forward," she said. When 'hope' was born
Bhupalan smiles when she recalls the Merdeka morning. She arrived at the newly constructed Merdeka Stadium very early and the first thing that caught her attention were flag poles upon which state flags flew. "The guest list was impressive, but we squeezed ourselves in. Yes, we were insignificant among the illustrious guests, but being there when our independence was declared made me feel very special. "It was a majestic and breathtaking sight to see our nine Sultans decked out in full regalia looking so strong and proud," she said. When asked about her stand on the monarchy and liberty, Bhupalan said she believes in the status of the Sultans. "I knew at the time that we were a constitutionally democratic country where we would have free elections. "There was hope that the nation of Malaya would uphold the constitutional monarchy within a democratic party. "That the government would assure that every man, woman and child would get their place in the sun. The whole concept of a democracy was there." She said she knew then that everyone had rights that would be protected by the constitution, and the government which the citizens would elect would have the power and responsibility to rule this new country. "Electing the government was one thing, but more essential was assuring that each person becomes major players in the various multi-faceted responsibilities. "It was the duty of a citizen to contribute to the progress and development of this new, young nation, " she said, adding that it is not enough to be a recipient of rights without understanding that with this comes both accountability and responsibility. True spirit lost When asked her views on the current situation in Malaysia, Bhupalan was biting. She didn't mince her words. "To be honest and forthright, I am greatly perturbed and disappointed that many aspects of life which we had dedicated ourselves to in the country have not received the same commitment and dedication from the vast numbers of persons. "Many men and women have lost the true spirit of sacrifice, but there are also others who are pushing forward for change. "In our country, we have… acquired a spirit of complacency. We have lost in part our spirit and determination to stand up without fear or favour. "Many have just chosen to accept instead of boldly stating what should be a strong impetus for the country and our people as a whole. "There is a streak of egotistical self-sufficiency, which has become a major part of our individual life. "There are millions in Malaysia who have seen minimal change. The gap between the haves and the have-nots is still with us. "The cry of the silent millions goes unheeded. From 1957 to 2011, could we the citizens have made a greater, positive contribution to the lives of the have-nots? "I ask myself this everyday." No unity now Bhupalan also feels strongly that a predominant part of our early history is tragically lost. She opines that rhetoric from politicians, leaders of corporate bodies, non-governmental organisations and from both men and women clearly shows that the much-needed action is ignored. The need for a strong proponent for unity in the country is unfortunately not present.
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| The NEP and the downfall of Malays Posted: 01 Sep 2011 04:40 PM PDT The NEP may have caused an increase in the wealth of the Malay urban middle class but on the whole, many Malays remain poor. It was not just his work that was a sham. His private life was just the same. There was no personal responsibility and those Malays who entered into polygamous marriages with two or three families to support, invariably ended up with dysfunctional families. The kids would be feral, without a father figure and no role model in their lives. Mariam Mokhtar, Free Malaysia Today Dr Mahathir Mohamad came to the defence of the New Economic Policy (NEP) when economist Ramon Navaratnam and Opposition Leader Anwar Ibrahim condemned the NEP for discouraging foreign investment and for promoting corruption. However, Mahathir failed to note that the NEP, like many of the government's other programs with catchy, meaningless acronyms are only publicity stunts which fail to address the underlying problems that face many Malaysians, principally the Malays. He said: "There may be corruption involved in some cases but the charge is not warranted because in most cases, the benefits of NEP have been enjoyed by almost every Malay and bumiputera. In fact, indirectly and, in some cases, directly it has benefited the non-bumiputera as well." The former prime minister's selective amnesia serves him well. The NEP's short-term benefits may have impressed his Cabinet colleagues but in the long term, the NEP has disadvantaged all other Malaysians. The warped policies have destroyed racial harmony and in East Malaysia, the bumiputeas are more desperate than ever. There is increasing resentment against the Malays who many believe, have squandered the benefits they have been given. The NEP may have caused an increase in the wealth of the Malay urban middle class but on the whole, many Malays remain poor. Despite the housing privileges and discounts, how many Malays can afford to buy houses? How many possess the business acumen to sustain a business without going bust in the first year? Undeniably, those who benefit the most are Umno cronies, whilst the majority of Malays remain marginalised, hoping that things will get better, only because Umno says so. Thus, many live in hope and some shun jobs because one day, they hope to become rich without putting in any effort. The business incentives may have given the Malays a kick-start in life but many did not use them wisely. They did not reinvest the money in the company but instead spent it on the teak desk, the gold watch and the Mercedes car. It was not just his work that was a sham. His private life was just the same. There was no personal responsibility and those Malays who entered into polygamous marriages with two or three families to support, invariably ended up with dysfunctional families. The kids would be feral, without a father figure and no role model in their lives. Many of the children do not have a family life to speak of and education is not an important factor in their lives. Many grow up lacking aspiration and become adults who are just as irresponsible. There are some decent people amongst this lot, but they are trapped in the system, with no way out. Moving forward together He failed to note that there were serious issues that have cropped up. Few of the children of the original Felda settlers want to make a living off the land like their grandparents or parents did.
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| Malaysia Is Merdeka In Name Only Posted: 01 Sep 2011 01:29 PM PDT By Mariam Mokhtar A country that has won Merdeka, in name only, cannot be considered free or independent if its people are afraid to speak up to determine their future. Isn't it time we thought in terms of liberating our minds from the shackles of Umno? We need to be free from thinking that only Umno is our saviour. We need the liberty to appreciate freely that Malaysia is a product of all its peoples and not a success just because of the one race. When the country was a colony, the vanguard of freedom fighters had a common objective – independence. Today, we seem to have lost our sense of direction. We are like a rudderless ship and with no skipper to steer us, we are aimlessly drifting with the tide. On 31 August 1957, Malaya achieved its independence from its colonial masters. However, it appears that we have swopped one set of rulers, the British, for another, Umno. Others will rubbish this claim and say that the real problem is because the current Umno has evolved into a hybrid monster of the old Umno. Maybe the truth lies somewhere in between. Umno duped everyone, including their partners in the BN-coalition, the MCA and the MIC. These two component parties believed that they were representing the interests of the Chinese and the Indians of Malaysia. They took their cue from Umno, to create more fear and instability. Between them, they engineered ways and means to control the people. First, the government used scare tactics on the people. Then, they started to demoralise those whom they had just frightened. We have seen a steady increase in threats including death threats, unlawful arrests, detentions, fire-bombings and protests against law-abiding citizens. To spread the fear, so that the hidden threat reaches as many people as possible, the mainstream media helps Umno. One shopkeeper said, "I dare not open my mouth to criticise because the police would catch me. That would be it for me and my family would never see me again." How can a country be considered independent if its own people are afraid to say and speak their mind, because they know their freedom will be curtailed? Second is the silent majority, who is aware of what is going on but for one reason or another, refuses to voice its disapproval. What is it that motivates them? Is it fear, apathy or their indebtedness to Umno? Why do they remain silent and give the rabble-rousers the courage to continue and destroy the harmony, previously enjoyed by Malaysians? Those who do not benefit from Umno's largesse are full of resentment. It is not just non-Malays against Malays, for within the Malay ranks, there is also great animosity. Umno is aware that the ability to choose, depends on the freedom to make choices. However, when people are indebted to Umno, in one way or another, then the freedom to choose is no longer there. Politicians who have no concept of governance and who are devoid of policies, have no qualms about using religion to divide and rule. For these people, their only hope for an increased following, is by instilling fear. We have observed several downtrends in our educational policies and seen the nation become divided because of our educational system and the preferential treatment being given to the majority race. Again, Umno is aware that with an educated and confident nation, it would be more difficult to rule. Without the ability to free our minds of Umno's brainwashing, many of us become impressed with the show of wealth and the line-up of mega-projects, that Umno displays. If we liberated our minds and thought rationally, we would wonder why it is possible to find billions to build these monuments to Umno and its leaders, but very little money in comparison can be found to help the ordinary people? For decades, Umno conned us with cheap slogans and we went along with them. Originally, the rakyat was complacent, but no more. The turning point was reached in 2008, when it was shown that Umno was slacking. That is why any initiative on our part to strive for change has been challenged forcefully, by Umno. That is why we saw the EO-6 or PSM-6 being detained. That is why Umno have discovered so many perceived threats to Islam. That is why Bersih was seen as a danger to Umno's leaders. Many of us may have lost hope and may refuse to vote because we may feel it will not make a difference. That would spell an even greater disaster for Malaysia. If the poor utilised their power to vote and went out to vote for people who would represent their interests, only then would there be, a true democratic revolution. The rakyat may find that finally, their needs and that of their community, will be met. Now that would be liberating.
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| Let’s celebrate Sept 16 for its significance Posted: 01 Sep 2011 12:28 PM PDT By Wong Sai Wan, The Star It's time to recognise the date our country was actually formed so that we can truly be a single nation. THIS Aug 31 must have been the quietest ever in our 54-year history since independence from the British – no grand parades, no multi-million ringgit fireworks display and no days of closed roads to cater for all sorts of rehearsals. Instead, the streets of Kuala Lumpur were empty as city folks deserted the Klang Valley for their hometowns over the Hari Raya Aidilfitri holidays. The Government realised that it would have been practically impossible – and very unpopular – to stage the Merdeka Day celebrations as usual because it would fall on the second day of the Raya celebrations. Even if they could have forced the civil servants, soldiers, police and other uniformed units to participate in a parade, there would not have been anyone to witness any of the festivities. Instead, the celebrations will now be held on Sept 16 to coincide with Malaysia Day – that is the exact day 48 years ago Sabah, Sarawak and Singapore joined Malaya to form the Federation of Malaysia. Decades ago, the whole nation used to observe Malaysia Day but later, in the 1970s, it was only left to Sabah and Sarawak to do so. It would not be far wrong to say the separation of Singapore from the Federation in 1965 left a bitter taste in many in the ruling Government, thus making it difficult to continue to commemorate that date. However, things have changed recently. The rising political importance of Sabah and Sarawak has made it necessary for the Government to celebrate the formation of Malaysia. For years, the people in the two states have been grumbling as to why they should celebrate Aug 31 when it was not the date they gained independence; they would rather celebrate the day they joined the Federation. After being independent from the British for over 54 years, it is time that we as a nation focus on celebrating the formation of the whole country. Our leaders – past and present and from both sides of the political divide – have often paid lip service that we have to practise integration between the Peninsula and the two states on Kalimantan island. The time for lip service is over and it is time for action, and we can start by making Sept 16 the permanent celebration of our nationhood. We should celebrate how far we have come along, we should celebrate our achievements as a country, and we should celebrate how we are more united now than we were 48 years ago. We should not forget about Aug 31; after all it is the day Malaya became a country. It is an important day in history and maybe it should be a day of remembrance while Sept 16 be the day of celebration. Over the past few years, Aug 31 has become the day of flying the flag and show of patriotism, and somehow this Wednesday felt really different without all the jingoism about the need to show we are Malaysians. In many ways, what we had been doing for Aug 31 was a bit contrived. We now need to bring back the true meaning of what it is to be Malaysian, and to allow that expression of patriotism to be real and from the heart. After all, Prime Minister Datuk Seri Najib Tun Razak had used 1Malaysia as his rallying call to unite the people. Making Sept 16 a permanent celebration date will surely be a step in the right direction for him. Last year, he announced that Sept 16 would henceforth be a Federal holiday. Historically, Malaysia was to have been formed on June 1, 1963, but the date was later postponed to Aug 31, 1963, to coincide with the sixth Merdeka Day. As we all know, that did not happen because Indonesia and the Philippines objected to the formation of Malaysia. The formation date was then postponed again – to Sept 16 – to give the United Nations team time to conduct referendums in Sabah and Sarawak regarding the two states' participation in a new federation. Recognising Sept 16 would also mean re-opening certain issues the two states have with the Federal Government over certain points of agreement when joining the Federation. It is time to take a relook at the issues. For one thing, I could never understand the need for Immigration procedure for travel between the Peninsula and the two states. Yes, at one time there was a need to control the number of people from the peninsular from grabbing all the job opportunities in Sabah and Sarawak. Today, the education disparity has narrowed, and in some cases have become even non-existent. I have met so many capable Sarawakians and Sabahans in my 27-year career in The Star, some of them as colleagues and some people I had interviewed. In my frequent trips to the two states, I have found that the people there can more than stand up to any Orang Malaya (as Sarawakians call those from the peninsular) or Orang Semenanjung (the Sabahan equivalent) in terms of capabilities and qualification. There are a reported 50,000 Sarawakians working in the shipyards of Johor, and they have proven to be essential workers for the industry. They have integrated well into Johor society. This is among the many reasons we have for reinstating Malaysia Day. The following is a ditty I wrote to greet all my friends on Facebook and Twitter: We have had KongsiRaya. We have had DeepaRaya. We have had XmasRaya. In a few hours MerdekaRaya. Selamat Hari Raya. Selamat Hari Merdeka!! To that I want to add Selamat Hari Malaysia come Sept 16. |
| UMNO turning right leads BN downhill Posted: 01 Sep 2011 07:46 AM PDT
What we see today - the impudence of right-wing Perkasa, the use of draconian legislation instead of criminal laws. the steady subsuming of government institutions under the ruling coalition and the conjuring of a Christian threat to Islam - are the results of this imprudent swing to the right that began six years ago. by Ooi Kee Beng, Today Online On July 9, the streets of Kuala Lumpur played host to animated engagements between demonstrators and the police. Bersih 2.0, which started out as a simple and hesitant attempt to revive public interest in electoral reforms, became a huge demonstration that captured the imagination of many young Malaysians.
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| AirAsia-MAS share swap: The barbarians have entered the gates Posted: 31 Aug 2011 04:44 PM PDT
Unlike the RJR Nabisco takeover where there was a fierce battle for control of the company, in the fight for control of Malaysia's skies, AirAsia were allowed to enter the MAS gates without hindrance. The gates protecting MAS's control of Malaysian skies were opened wider and wider for AirAsia over the past 10 years due to inconsistent government policies. William Leong, The Malaysian Insider SEPT 1 — In the 10-year war for control of the Malaysian skies, while a besieged MAS was desperately fighting for survival, someone opened the gates for the barbarians to enter. Barbarians at the gates The AirAsia-MAS share swap reminds me of the takeover saga of RJR Nabisco. The company was a merger of RJ Reynolds, the tobacco company selling "Camel", "Winston" and "Salem" cigarettes and Nabisco, the biscuit company selling "Oreos", "Ritz Crackers" and snacks. The financial firm of Kohberg Kravis Roberts & Co (commonly referred to as "KKR") made a hostile takeover bid for the company. There was a fierce battle for control of the company. The board, in protecting the company's and shareholders' interest, drove KKR and the other bidders to increase their bids several times until KKR won with a bid of US$31.1 billion (RM93.3 billion). It was the largest leverage buyout in history and the record stood for 17 years. RJ Reynolds was subsequently spun out of RJR Nabisco due to tobacco legislation. Nabisco is now owned by Kraft Foods. The RJR Nabisco leverage buyout was considered to be the pre-eminent example of corporate and executive greed. The events were chronicled in a book called "Barbarians at the Gate: The Fall of RJR Nabisco". The fight for control of the Malaysian skies has been an uneven battle from the beginning. In the end those responsible for MAS's defence not only did not put up a fight but opened the gates to allow AirAsia into MAS's management. The share swap has given rise to concerns on the pricing and whether it will benefit the public-funded MAS. Pricing issues One of the favourite sayings of corporate raiders and businessmen is "OPM", that is to operate using "Other People's Money". In the case of the AirAsia-MAS share swap, it is the people's money because MAS is funded by taxpayers. The pricing of the share swap has raised eyebrows. The parties, in using the August 5 closing market price of both airlines as the basis for the share swap, have raised several concerns. Datuk Seri Anwar Ibrahim, in his August 10 article "MAS-AirAsia share swap deal raises serious concerns over effective control and governance", referred, among others, to issues of insider trading and asset stripping. A look at the price charts of the two companies for the past six months supports Datuk Seri Anwar Ibrahim's concerns. The MAS share price fell sharply on May 30, 2011 to RM1.34. It continued to be in the doldrums until August 5, the date of the share swap announcement. AirAsia's share price was on a steep and sharp climb from May. It surged to a height of RM4.20 on August 4, 2011. This is on the eve of the announcement. There may be good reasons for the share prices of the two counters moving the way they did. However, it seems improbable for this to be coincidental. AirAsia's price was trading around its highest and MAS among its lowest when the share swap took place. AirAsia's price fell immediately after the announcement. It could be that those who held AirAsia shares did not like the deal. It could be whoever was playing up the AirAsia shares stopped doing so. There is therefore cause for investigations to be made. Others have raised concerns with the price. Khazanah exchanged 20 per cent of MAS at RM1.60 per share for 10 per cent of Air Asia at RM3.95 per share. They believe the price should not have been based only on the closing market price of the two counters on August 5. They point out that MAS in fact is worth more than the price traded because it is an asset-backed corporation. It has a paid-up capital of RM3.34 billion represented by fixed asset value at RM8.4 billion, net asset at RM6.92 billion. AirAsia, on the other hand, is a debt-laden company. It has borrowings of RM7.7 billion. MAS's cash position is RM2.086 billion while AirAsia's is RM1.7 billion. Those who approved the deal will need to justify the pricing. One other issue on pricing is the timing of the deal. The share swap was announced on August 9. This was within 30 days before both AirAsia and MAS announced their respective 2nd quarter financial results on August 23. Under the Bursa Malaysia Listing Requirements, this is known as the "closed period". Those in possession of the financial results during the closed period are not allowed to deal with the shares until the results are announced. This is to prevent insider trading by those with possession of price-sensitive information. Those who trade in the shares with such information will be taking unfair advantage of the public who are unaware of the situation. Paragraph 14.08 of the listing requirements allows principal officers who do not possess the information to deal during the close period by giving the requisite notification. Although the listing requirements allow such dealings, it would have been more prudent not to enter into the share swap during the closed period. If the share swap was made after the financial results of both airlines were announced, the market price may have given a better reflection of the share price of both airlines. This may be seen from the share price of AirAsia after the results were announced on August 23. Although AirAsia announced it made a profit, it was 48 per cent less than the previous year. The AirAsia share price fell to RM3.57 at 9.04am on August 24, the day after the results were announced. Those involved will have to explain why the share swap was done before the 2nd quarter results were announced. Opening the gates for the barbarians Unlike the RJR Nabisco takeover where there was a fierce battle for control of the company, in the fight for control of Malaysia's skies, AirAsia were allowed to enter the MAS gates without hindrance. The gates protecting MAS's control of Malaysian skies were opened wider and wider for AirAsia over the past 10 years due to inconsistent government policies. Regulation determines airlines' fortunes International air transport operates within the framework of the 1944 Chicago Convention for International Air Transport. Governments enter into bilateral agreements setting out the landing rights, restrictions on capacity and pricing. Sectors within a single country are normally denied to foreign airlines. This restriction is called cabotage. It is recognised that cabotage is the prerogative of the domestic carrier. The system of bilateral agreements between two governments has led to the aviation industry to be highly regulated. There has since been a change towards deregulation and liberalisation. Nevertheless, the industry remains one where regulation plays an important role. Regulation is thus a critical determinant of an airline's performance. It can determine how competitive the market is as well as constrain an airline in its choice of fares, capacity and frequency. Most governments impose entry controls which are usually applied to particular routes. Most governments usually permit one airline to operate a route. The government therefore plays a critical role in determining the fortunes of an airline by deciding on the routes to be given to the airlines. Golden service takes a beating MAS's finance and operation problems to a significant extent are due to the government's inconsistent and contradictory air transport policy. Such decisions gave the MAS Golden Service a beating while AirAsia became the Golden Child. The main asset of any airline is its route networks. The government first allowed AirAsia to compete with MAS and then gave MAS's domestic routes to AirAsia and had its route networks reduced while AirAsia increased theirs.
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