KUALA LUMPUR – The underperformance of the Kuala Lumpur Stock Exchange (KLSE) in the early 2000s can be attributed to the aftermath of the 1997 Asian Financial Crisis and the economic policies implemented during Tun Dr Mahathir Mohamad’s tenure as prime minister.
These allegations were brought forth by former Renong Bhd chairman Tan Sri Halim Saad in his suit against Mahathir and the federal government.
Halim seeks compensation for what he claims was the forced takeover of UEM and Renong.
In response to Halim’s claims, the defendants had initially argued that Halim had consented to the takeover, citing a letter he had sent to Khazanah Nasional Bhd on May 13, 2003, and noting that RM165 million in compensation had been provided as part of the deal.
They contended that because the companies involved in the takeover were significant players in the KLSE, their poor performance inevitably had a detrimental impact on the stock markets.
However, Halim refuted these allegations in his reply to the defendant’s defence, emphasising that Renong had been one of the most successful Bumiputera-led listed companies.
He argued that any decline in performance was primarily a consequence of the 1997 crisis and Mahathir’s inability to implement effective policies to counter the recession, which, in turn, drove away foreign investors.
Halim highlighted several key measures in his response:
– The introduction of exchange controls on the ringgit in 1998 after its significant devaluation against the US dollar (USD), leading to the artificial pegging of the ringgit to RM3.80 against the USD. This artificial peg was only removed in July 2005, replaced by a managed float system.
– An amendment to Section 365 of the then Companies Act 1965, which placed severe restrictions on the declaration and payment of dividends by Malaysian companies.
– The suspension of the Central Limit Order Book (CLOB) trading method, widely used by most global exchanges, resulted in a freeze of approximately US$4.47 billion worth of shares and affected 172,000 investors, primarily foreign investors.
– Restrictions imposed after September 1998 on non-resident sellers of Malaysian securities, requiring them to hold onto their ringgit proceeds for at least 12 months before being allowed to repatriate them.
– Non-residents needing approval from Bank Negara to convert ringgit held in external accounts into other currencies.
In addition to his critique of economic policies, Halim also pointed to alleged scandals during Mahathir’s prime ministership in the 1990s, which led foreign players to perceive the political situation in the country as unstable.
Specifically, he addressed the arrest of then-deputy prime minister Datuk Seri Anwar Ibrahim, a move he claimed was instigated by Mahathir himself.
“The said incident and events preceding it, including the 1988 attack on the judiciary, gave rise to an impression that the federal government was not concerned with the rule of law.
“It was also perceived that there was interference by the federal government in matters concerning the economy.
“The deployment of government-controlled public funds was seen as the government’s bail-out of some politically well-connected and influential individuals. These factors made Malaysia unattractive to foreign investors, resulting in a sharp decline in foreign direct investments in the country,” according to court documents.
Despite Halim’s assertions, on October 6, the defendants contended that the plaintiff’s claim should be struck out.
Among others, the defendants argued that Halim was time-barred from initiating the lawsuit under the Public Authorities Protection Act 1948 which stipulates such actions must be filed within three years from the date the cause of action arose.
“Although the plaintiff’s claim is for a declaration and remedy for the alleged infringement of his rights, the foundation of his claim is for compensation with regards to the take over of his share.
“Based on that reason, this claim is barred by virtue of the Limitation Act 1953 and/or Public Authorities Protection Act 1948,” the statement of defence read.
Further, the defendants also relied upon the principles of res adjudicata which prohibits individuals from initiating legal claims which have already been settled by the courts.
Here, the defendants point towards Halim’s lawsuit against former finance minister Tan Sri Nor Mohamed Yakcop, Khazanah Nasional and the federal government claiming he was cheated in the takeover deal.
The case went all the way to the Federal Court, where Halim lost.
“The plaintiff had filed the same claim in 2013 for compensation with regards to the takeover and the high court struck out the claim on October 31, 2013.
“The plaintiff’s appeal to the Court of Appeal was rejected and his application to challenge the decision further to the Federal Court also failed in 2015.
“Thus, the plaintiff’s claim is barred via the principles of res adjudicata and estoppel,” the statement of defence read.
Following Halim’s reply to the defendant’s statement of defence, the Kuala Lumpur High Court has scheduled the next case management for November 20.
In addition to Mahathir and the federal government, Halim also named Nor Mohamed as a defendant. – November 6, 2023
