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Cabinet should formally decide tomorrow whether it approves the use of RM10 billion public funds in the Valuecap operation to shore up the stock market and the conditions and criteria to address the grave ethical, accountability and good governance issues Media Statement by Lim Kit Siang (Penang, Tuesday): The mass media are ecstatic about the RM10 billion Valuecap Sdn. Bhd. operation to prop up the stock market on its second day, jacking up the benchmark Composite Index (KLCI) by more than 2.46% or 15.6 points higher to 651.48 yesterday, with newspaper headlines like "Valuecap news sparks off KL market rally" (Star) and "Local stocks surge on renewed investor interest" (New Straits Times) without any query or doubt about the propriety, wisdom or accountability of using RM10 billion of public funds for such an operation. In actual fact, Asian markets yesterday closed sharply higher with several Asian bourses registering even bigger percentage jumps yesterday than the Kuala Lumpur Stock Exchange (KLSE), such as South Korea's Kospi index which shot up by 3.14%, Taiwan's Taiex index which ended up 2.9% higher and Singapore's Straits Times index which jumped 2.89% - the big difference was that their sharp increases were not artificially created by the massive injection of public funds to jack up the stock market. This itself is a reflection of the weakness of the Malaysian economy as compared to those of other countries in the region. As the RM10 billion Valuecap operation is a government operation using public funds - Valuecap Sdn. Bhd. is equally owned by Khazanah Nasional Bhd., Permodalan Nasional Bhd and Kumpulan Wang Amanah Pencen - the Cabinet tomorrow should formally decide whether it approves the use of RM10 billion public funds to shore up the stock market and the conditions and criteria to address the grave ethical, accountability and good governance issues involved. In recent months, the Cabinet has never been so irrelevant and marginalized in its 45-year history since Independence in 1957 - the most classic example being the total disregard of the Cabinet in the establishment of the second Mahathir education review committee which was decided by the UMNO Supreme Council on Nov. 29 last year and which immediately started work the following week, but for six long weeks, approval from the Cabinet was never sought whether for its establishment or to finalise its objectives, terms of reference, composition and modus operandi. The Cabinet should not be allowed to abdicate from its responsibility for the RM10 billion Valuecap operation to use public funds to shore up the stock market, for if things go terribly wrong in the cluster of grave ethical, accountability and good governance issues after October this year, we do not want any Cabinet Minister to claim ignorance or innocence by saying that they were not privy to the Valuecap decision as it was the decision and operation of one man - the longest-serving Prime Minister of Malaysia in his final ten months when nobody dare to question or cross him! In deciding whether approval should be given for the use of public funds in the RM10 billion Valuecap operation to jack up the share market, among the issues the Cabinet Ministers should consider are the following five: 1. Is it right, proper, sound and wise for the government to use public funds to jack up the share market. 2. Is the RM10 billion Valuecap operation good for the country in the mid-term and long-term and whether it is sustainable, regardless of the external conditions, as for instance the worsening of the world economy whether because of war prospects in Iraq or the weakening of the US economy. 3. The history of previous disastrous government interventions in the market during the Mahathir administration, which have cost losses to the country running into tens of billions of ringgit, such as: The Maminco operation in the early eighties to corner the international tin market resulting in over RM600 million losses; The Makuwasa operation in the mid-eighties to use Employees Provident Fund monies to jack up the stock market, resulting in tens of millions of ringgit of losses to the EPF contributors; The Bank Negara foreign exchange market speculation in the early nineties resulting in the loss of some RM30 billion (losing to among others George Soros, which may explain Mahathir's animus for the currency speculator). 4. Assurances and guarantees that the RM10 billion Valuecap operation to play the share market is not another mega financial disaster in the making, especially as its mastermind is none other than the Special Economic Adviser to the Prime Minister, Tan Sri Nor Mohd Yakcop, who was singly responsible for the Bank Negara foreign exchange speculation resulting in RM30 billion losses a decade ago. 5. The criteria and conditions for the RM10 billion Valuecap operation to address the grave ethical, accountability and good governance issues in the use of public funds to prop up the share market, in particular oversight mechanisms to ensure that it is not another camouflage to bail out crony or former crony companies. The statement by the Employees Provident Fund denying press report that it was involved in the RM10 billion Valuecap operation is most significant and deserves serious consideration by all the Cabinet Ministers. The EPF statement on Friday stressed that it "invests in companies with sound fundamentals, long-term growth potential and good management" and that it is not involved in activities to shore up the market or had used its funds to bail out ailing companies. The logical question is why government institutions like Khazanah Nasional Bhd., Permodalan Nsional Bhd and Kumpulan Wang Amanah Pencen should be involved in activities to shore up the share market and the bail-out of ailing companies like the RM10 billion Valuecap operation - which EPF has now distanced itself in its Friday statement? All Cabinet Ministers must bear collective and individual responsibility for the RM10 billion Valuecap operation to jack up the share market after the Cabinet meeting tomorrow, whether directly through a specific decision or indirectly by not questioning and stopping it. After tomorrow, no Cabinet Minister can absolve himself or herself of responsibility for the RM10 billion Valuecap operation in the future by claiming that it was solely decided by Mahathir in his final 10 months as Prime Minister.   (14/1/2003) * Lim Kit Siang, DAP National Chairman