I refer to the malaysiakini report Giant plantation merger gets shareholders' nod .

The merger of Kumpulan Guthrie Berhad, Golden Hope Berhad and Sime Darby into a single company (Synergy Drive Sdn Bhd), will certainly be one of the ruling government's biggest mistakes. And the Barisan Nasional will pay heavily for this in the next general election.

Merging three multinational companies, all of which are growing rapidly in terms of size and profitability on their own accords, into a single entity does not make any economic sense. Bumiputeras will be the end-losers. So much for Prime Minister Abdullah Ahmad Badawi's ambitious idea to create 'towering personalities' among bumiputera corporate leaders.

By merging the three companies, there will only be one bumiputera CEO. The other two, although maintained by the merged entity, will become toothless. Their capability as leaders gone to waste.

Scores of bumiputeras in the three companies who were top ranking staff in their respective companies before the merger, will be sidelined post-merger. Some of them have no positions.

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 per cent to 35 per cent as stated in the New Economic Policy, its actions suggest that it is doing the opposite reducing bumiputera participation in the country's economy.

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 making profits and they pay high dividends to their shareholders including PNB (read: the government and bumiputeras).

PNB should also not stray from its original objective which is to narrow the economic disparity between the bumiputeras and non-bumiputeras. The impending merger has already caused casualties among bumiputera professionals. High-ranking bumiputeras in the three target companies have lost their positions to non-bumiputeras.

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 the eggs in a single basket. When the basket falls, 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.

Equally mysterious is the Securities Commission's approval of the impending merger. How can it allow PNB to vote in the forthcoming extraordinary general meetings of the three companies? PNB holds substantial shares in the three companies. By virtue of being a shareholder, it is an interested party. So how can the merger be considered as non-related party transaction whereby PNB can cast its votes?

Like the government, PNB should also be held responsible if the merger fails. PNB should never have accepted the merger proposal. Its chairman Ahmad Sarji Abdul Hamid and president Hamad Kama Piah shoulder the responsibility of ensuring that bumiputeras enjoy good returns from their investment. Operating as separate entities, Guthrie, Golden Hope and Sime Darby have been able to give good returns. But will Synergy Drive be able to do the same?

The argument that the merger is necessary to ward off stiff competition from other large companies, does not hold water. As a merged entity, Synergy Drive will only produce 8 per cent of the world's palm oil. No big deal. In just a matter of a year, an Indonesian conglomerate will become the biggest oil palm plantation company in the world. Indonesian companies can afford to do so because they have all the land they need for future expansion. Synergy Drive's expansion plans, on the other hand, will be at the mercy of the Indonesian government.

Synergy Drive's calculation of future profits are based on current palm oil prices which have reached an unprecedented high. If the price of palm oil plunges, the outcome will be disastrous. And who will suffer? Well, bumiputeras obviously.

The question that the government and PNB should ask themselves is: In the first year, can Synergy Drive make as much as the three companies have made in combined profits over the last financial year?

If it can't, then why bother?

Given the above reasons, it is surprising that the government could give its approval for the merger. Apparently, the same proposal was submitted to the then Prime Minister Dr Mahathir Mohamad several years ago. He shot it down immediately for reasons that it will be detrimental to bumiputera equity holding.

In any case, we know that at least one party will be richer by at least RM3 billion Nazir Abdul Razak, the younger brother of Deputy Prime Minister Mohd Najib Tun Razak, whose CIMB is the merchant bank for the entire deal.