In 1991, Ting Pek Khiing, a businessman from Sarawak, built the five-star Sheraton Langkawi Beach Resort in under four months for guests and VIPs attending the inaugural Langkawi International Maritime and Aerospace exhibition.
Ting’s impressive feat befitted his reputation: by 1980, he was the go-to turnkey contractor for quick turnarounds. Such a unique ability earned him the favour of then Sarawak chief minister Taib Mahmud, an important ally as Ting soon ventured into the lucrative and controversial timber trade.
But with the completion of Sheraton Langkawi, Ting scored major political capital as he impressed the likes of Dr. Mahathir Mohamad and Daim Zainuddin, the then prime minister and economic adviser, respectively.
This relationship with Daim and Mahathir would benefit Ting when his company Ekran Berhad was able to secure the RM15 billion Bakun dam project in Sarawak, with Ting being awarded the concession without a tender.
Back then, this project was billed as Malaysia’s largest privatised project and a significant gamechanger, as well. Through the Bakun contract, Ekran became the only company to receive an independent power producer (IPP) licence to produce and transmit electricity as the government only issues such IPP licences for sale to Tenaga Nasional Berhad.
But while Ting was familiar with construction and timber, neither he nor Ekran had any experience constructing dams. It is speculated that Ekran secured the project through relations with Daim.
According to the Wall Street Journal (WSJ), Daim is widely credited as the success factor to some of Malaysia’s top businessmen such as Halim Saad of conglomerate Renong Berhad and Vincent Tan Chee Yioun of Berjaya Group.
During the early stages of the project, it was reported that Bakun appeared more lucrative than expected with Ekran announcing the awarding of contracts valued at RM9 billion for construction and maintenance of the dam.
But Ekran soon found itself embroiled in contractual disputes with its engineering partner, the Swiss firm ABB ASEA Brown Boveri AG. The project took a turn for the worse when the Asian financial crisis began in 1997.
Then finance minister Anwar Ibrahim announced the cutting back of various “mega-projects” late that year, including the Bakun Dam project, but not without Mahathir intervening to ensure contractors, such as Ting, were handsomely rewarded for work done.
Ekran and Ting received RM950 million in return for the takeover despite failing to deliver on the project which displaced thousands of indigenous people, all of whom are still struggling to adapt. Some of the problems include being allocated infertile farmland and the lack of access to nearby forests.
Stories like Ting’s are classic examples of crony capitalism. Defined as the close relationship between politics and big business, the practice was laid bare during the Asian financial crisis, after the Mahathir administration bailed out key politically connected companies and individuals.
But Mahathir is back at the helm as prime minister and Daim and Anwar has returned to politics. The question is whether Malaysia will see a throwback to 90s-style crony capitalism
Because weeks after Mahathir swore in as prime minister, the likes of Ting, Tan and Lee Kim Yew – businessmen who owe much of their success to Mahathir – pledged billion-ringgit projects in a move that signalled a throwback to a 90s style wheeling and dealing.
Academician Edmund Terence Gomez, in his book Chinese Business in Malaysia: Accumulation, Ascendance, Accommodation, produced a chart explaining crony capitalism – or political patronage as it is used synonymously in the book.
There are a few things to note in discussing crony capitalism. The New Economic Policy (NEP), with its preferential policies, did create a class of Malay capitalists. But non-Bumiputera businessmen also benefitted from relations with these Malay capitalists as evidenced with the names mentioned above.
In fact, one research paper traces crony capitalism to the pre-NEP era and argues that its roots are deeply embedded in the Malaysian (or Malayan) economy.
“Moreover, during the early years of independence, the business careers of T. H. Tan, Nik Kamil, Robert Kuok and Tengku Razaleigh (Hamzah) reveal the importance of nationalist political connections for business success a decade before the NEP,” writes Nicholas J. White, in The Beginnings of Crony Capitalism: Business, Politics and Economic Development in Malaysia, c. 1955-70.
There is no evidence that the many of these relationships between politicians and businessmen were the result of anything other than chance. For example, Anwar’s connection with Kamaruddin Jaafar, linked to Setron Berhad at the time of the Asian financial crisis, dates back to their days as schoolmates at the Malay College Kuala Kangsar.
Or, Daim’s relationship with Tajudin Ramli, who controlled Technology Resources Industries in 1990, was forged in the early 1980s before Daim came to power as Mahathir’s finance minister.
Crony capitalism certainly correlates with an authoritarian political system. Peter Enderwick of Auckland University of Technology in New Zealand believes “the intimate relations between government and business also have significant political impacts on adjustment processes”.
“First, in a number of crony economies the underdevelopment of democratic processes has resulted in the undersupply of appropriate institutions that provide regulation, super-vision, transparency and balance between growth and stability.
“Second, the absence of rights to NGOs – freedom of expression, association and assembly – attenuate processes of pluralism and the likelihood of negotiated change.
“Third, over-centralisation of government, characteristic of crony capitalism, is associated with an increased likelihood of corruption,” Enderwick writes in a journal article, What’s Bad About Crony Capitalism?, published in 2005.
Despite economic control moving from the hands of individuals to government-linked companies (GLC) under then prime ministers Abdullah Badawi and Najib Razak, crony capitalism is still entrenched in the way business is done in Malaysia.
The GLCs were supposed to create a new class of self-reliant and independent Bumiputera entrepreneurs, but “we see much of the opposite occurring: a rise in crony capitalism, regulatory capture and grand corruption”, Jayanth Menon, lead economist at the Asian Development Bank, writes in a 2017 policy paper, Government-Linked Companies: Impacts on the Malaysian Economy.
“Evidence for these types of concerns are generally difficult to identify or quantify, but there are indirect indicators,” he adds, citing the Economist’s crony-capitalism index.
But, while identifying crony capitalism might be tricky, scholars like Enderwick believe two entities could potentially serve as a check and balance: strong civil institutions and a free press.