As chairman of the Yayasan Pelaburan Bumiputera which holds majority shares in Permodalan Nasional Berhad, Prime Minister Abdullah Ahmad Badawi will be held responsible if the merger of Sime Darby Berhad, Golden Hope Berhad and Kumpulan Guthrie Berhad does not produce results.

Worse, he will also be accused of causing the erosion of bumiputera shareholding. This is because PNB which holds majority shares in all three companies was founded with the aim of narrowing the economic disparity between the bumiputeras and the other races.

The government's decision to allow the merger is mind-boggling as all three companies are making profits. These profits are used to pay dividends to bumiputeras who purchase unit trusts issued by PNB through Amanah Saham Nasional, Amanah Saham Bumiputera, etc.

If these companies are running at a loss, then a merger would seem logical. But they are profit- making and they pay high dividends to their shareholders including PNB (read government and bumiputeras)

So why then is the government doing it? Is the government interested in attracting foreign participation in the equity structure of this merged entity? If that is the case, then the end-losers will be the bumiputeras. Simple logic dictates that when a foreigner buys a substantial equity in a company, he would most certainly want a representation on the board. If that happens, the board will not be able to make any decision favouring the bumiputeras as it will be rejected by the foreign board member.

It is more and more evident now that our present government is a government of contradictions. While it says that it wants to increase bumiputera equity from the current 18.9 percent to 30 percent, its actions suggest that it is doing the opposite reducing bumiputera participation in the country's economy.

Merging the three companies into a single entity promises nothing. It will be a messy affair. At the moment, these companies (maybe with the exception of Sime Darby) are focused on their core competencies. Golden Hope is a fully integrated plantation company while Guthrie concentrates on plantations and property.

Merging them into a conglomerate is akin to the age-old saying of 'putting all your eggs in one basket'. When the basket falls, all the eggs will break. You will be left with empty shells.

The merged entity will be a mess. It will be running all sorts of businesses ranging from hospitals to tyre production to sales of heavy equipment. Perhaps, Abdullah needs to be told that conglomerates are out of fashion. Companies now focus on their core competencies. Large companies like Toyota and Microsoft ventured into other businesses unrelated to their core activities. They failed. They are successful today because they divested their non-core businesses to focus on what they know best.

The entire merger proposal of Sime Darby, Golden Hope and Guthrie reeks of a scandal involving the government. The Abdullah-led government, although claiming to be more transparent then the previous government, has not been transparent at all in this merger proposal.

So who is behind it? Already there are many speculations linking the merger idea to members of Abdullah's family. Or is it because Synergy Drive Sdn Bhd, which is leading the merger exercise is headed by Nazir Abdul Razak, the brother of Deputy Prime Minister Najib Razak?

Is this nepotism of the highest degree? Have we given the proposed merger another thought? Are we going to end up with a messy and unprofitable conglomerate? It is a scary thought. I don't think I am going to be envious of the CEO of the merged entity. I will be sympathetic.