Indian-run and owned cooperatives in the country are small in number and this is the reason why no Indian Malaysian sits on the Co-operatives Commission board of directors.

Commission chief Mangsor Saad said this in response to criticism from MIC president S Samy Vellu.

In a recent interview with Malaysiakini , Samy Vellu had complained about the fact that no Indians were sitting on the board.

Explaining, Mangsor said Indian-based co-operatives only make up two percent of the total co-operatives in the country.

"The first co-operative in Malaysia were the Pos and Telekom co-operatives. At that time, it was headed mostly by Indians, before independence.

"To assist the growth of the movement, the government established co-operatives in rural areas to elevate poverty. Due to expansion, most co-operatives these days comprise rural folk and civil servants. Ninety-five percent of its members are bumiputeras, only five percent non-bumiputera.

"The percentage of Indians in Malaysia is small. Last time, it was less than five percent but it is now seven percent. So of course, Indian representation is not there.

"Currently there are only about 86 Indian based co-operatives out of 6,084 co-operatives. This is a very small amount and it is factual," he said when met recently.

Nothing personal

He said although the philosophy of co-operative cuts across race, religion and political beliefs, the minister has the right to appoint anyone to be the chair of the commission based on feedback from its members.

Mangsor said the commission currently has one Chinese on board, Ooi Siew Kim from Penang Gerakan.

"This is nothing personal against anybody. Since the majority of the co-operative members are bumiputeras, there is a majority bumiputera representation in the commission," he said.

He said the commission was established because of the need to have an independent co-operative body to resolve the financial quagmire faced by the co-operatives.

"Every time the co-operatives fail, they will come after the government. When there are in trouble, they chase the government," he said.

Citing an example, he said in 1974, the government had to pump RM150 million into Bank Rakyat to bail it out as it had a huge membership.

In 1997, another nine co-operatives were in trouble due to the economic downturn.

'Enough is enough'

Mangsor said: "Every time you are in trouble, you come to the government and yet you say you are independent. Enough is enough."

"The commission is established to look into this kind of issues. We have set new rules and also established two new funds - Central Liquidity Fund and Co-operative Deposit Account - to assist co-operatives that are high risk.

"These funds are collected from the co-operatives and placed in a pool so that they can seek assistance when they are in trouble. It is placed in the pool based on their liability," he added.

Mangsor said the commission is in the process of determining who will contribute to the funds.

"Not everyone will have to contribute, only a few co-operatives. We go for the high-risk ones who will most likely face problems.

"Based on their chances of going bankrupt, we determine whether they are high risk or not. Using the 'Z-score', a financially accepted score, we will be able to know if it will go bankrupt. We are not just picking out of the blue," he said.

Money is in safe hands

He assured co-operatives that their money is in safe hands as it would be in their account, like in a fixed deposit.

"The money is not gone, it is in their name. The commission cannot use that money for its purposes. It is an asset to them but a liability to the commission. We guarantee returns similar to the fixed deposits. It is their money, in their name.

“The commission cannot use that money for its own purpose. This money cannot be used as capital. It is not taking away anybody's money,” he said.

Mangsor said that the deposit is based on surplus money that has not been utilized.

"If we see that a co-operative has more money, we will ask them to put it with us instead of in the fixed deposit. We can use the pool money to assist other co-operatives who want to expand. We can also lend to other co-operatives. The Co-operative Deposit Account is to ensure members keep their money as a reserve," he added.

Vetting the bad hats

Mangsor also explained that the commission vets board members as it wants people who are "fit, proper and accountable" to lead co-operatives to avoid bankruptcy.

He cited the example of the Deposit Taking Co-operative scandal in the early 1980's that landed many co-operatives into trouble due to indiscriminate lending to gain profit.

"The co-operatives collect massive amounts of money from the public with accumulated shares of up to RM8 billion and assets worth RM55 billion.

"High risk co-operatives, such as deposit and investment co-operatives, have to be vetted. They cannot be bankrupt, no criminal charged in court, no bad records. All criteria are good governance criteria," he said.

However, he assured co-operatives that the commission only vets but does not decide who would be appointed to the board of directors.

"We do not decide, we vet like how Bank Negara is doing for the banking sector. Once vetted, you can stand for election. Like sieve, we throw the rotten ones, accept the good ones.

"We restrict the shady characters from standing for election, non-competent ones. We do not decide who will be on the board of directors. Members can elect anyone that is cleared by the vetting. It is not undemocratic. Somebody has to do the job to vet the bad characters," he said.