Crony companies' bailouts costly: economist
An economic lecturer yesterday said that while the number of bailouts of troubled companies was small, these bailouts have been very costly to the country.
Universiti Malaya associate professor Dr Edmund Terence Gomez said that the government has failed to learn any lesson from the 1997 financial crisis.
He said that financial institutions that are controlled by the government or politically well-connected businessmen, are being used to channel loans to a privileged few who are facing problems in servicing their debts.
According to him, 15 corporate groups accounted for 20 percent of Malaysia's entire bank loans during the economic crisis.
"Of the RM39 billion loaned by banks for share acquisition, almost 45 percent were given to the individuals. One company, the Umno-linked Renong, had accumulated debts constituting more than five percent of loans in the Malaysian banking system in 1998."
Gomez was speaking at a seminar organised by DAP on "Bailouts and buyouts - Are EPF, Pensions Trust Fund and Public Monies Safe?" in Kuala Lumpur yesterday.
He added that former Umno deputy chief Anwar Ibrahim has alleged that less than 10 people linked to party leaders were jointly responsible for the loans worth around RM70 billion.
Gomez also said the banks with the most non-performing loans were mainly government-owned institutions including Sime Bank and Bank Bumiputra.
The government has bought over Bank Bumiputra's non-performing loans, he said, adding that Sime Bank's debts were absorbed by the government before the takeover by the well-connected Rashid Hussain group.
Varied criteria
Gomez, who is from UM's Faculty of Economics and Administration, said that the criteria for those bailed out are based on a variety of considerations.
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