Had the Malaysian billionaire Francis Yeoh known that his comments about crony capitalism would create such a sensation, perhaps he would not have said anything at all.
But he did, and the result has been a bitter backlash, with even former prime minister Mahathir Mohamad jumping into the debate.
The fallout has extended to YTL Corp, the conglomerate Mr Yeoh controls. Subsidiary YTL Power International Bhd has been shut out of a 3-billion-ringgit power project in which it had been expected to play a key role.
The fuss started last month at a forum on global business sponsored by Pemandu (Performance Management & Delivery Unit), the agency that tracks the country’s progress toward meeting its development goals. Mr Yeoh was reported to have said that it was “time to end crony capitalism in Malaysia after 20 years”.
The tycoon said that 85% of YTL’s businesses were in Britain, Singapore and Australia because these countries did not tolerate corruption, practised meritocracy and stood for the rule of law.
“For example in Singapore, we own a third of Singapore’s electricity; there is no subsidy of any kind, there is no cronyism of any type,” he was quoted as saying.
“The good thing about these three territories, I don’t have to kowtow to the prime minister before I do a deal. I don't even have to see them, even after I’ve won the deal.”
Before Mr Yeoh knew it, there was an outburst of criticism on social networks. Critics, including Dr Mahathir, pointed out that the billionaire himself had made a tidy pile of money in Malaysia by getting sweetheart government deals.
Founded in 1955 by Mr Yeoh’s father, Yeoh Tiong Lay, YTL has grown from a small construction company to an international infrastructure, utilities and property conglomerate that derives 70% of its revenue from outside its home country. In 1996 it became the first non-Japanese company to be listed on the Tokyo Stock Exchange.
Dr Mahathir named no names in a commentary he published on his blog but the reference was clear: “Recently a public figure claimed that the situation in Malaysia is terrible because of cronyism and favouritism in the form of discrimination toward one party. So he does not wish to do business here.
“Was he born so rich that he could do business in countries free from cronyism, or did he amass his copious capital here before moving abroad to enjoy governance without cronyism?”
At this point Mr Yeoh felt moved to apologise, though he said that his comments at the forum had been misinterpreted.
The timing of the incident couldn’t have been worse, though. YTL Power International was already in the spotlight as a party to a contract worth 3 billion ringgit obtained via direct negotiations with a state agency. In an age when transparency is supposed to be more than a slogan, questions were raised about how the Energy Commission (EC) could even think of “negotiating” such a large deal rather than calling a competitive bid.
The project in question is the Track 4A combined-cycle power plant with generating capacity of between 1,000 and 1,400 megawatts, in Pasir Gudang in Johor state. The Energy Commission offered a conditional contract to a consortium of three parties: YTL Power, Tenaga Nasional Bhd (the country’s biggest electric utility) and SIPP Energy Sdn Bhd.
SIPP is 51% owned by the Sultan of Johor, with the remaining 49% equally split between two company directors – Daing A Malek Daing A Rahaman, and Anuar Ahmed.
The award, according to the Energy Commission, was based on the consortium’s ability to offer more competitive rates than could be obtained through an open tender. As well, the agency said, it wanted to fast-track construction. Both the haste and the closed-door nature of the deal have prompted a public outcry.
YTL Group was one of the few companies selected to be independent power producers (IPPs) two decades ago. While power-purchase agreements ever since have tended to favour IPPs, the company’s expertise and track record in the sector have never been questioned.
Though YTL Power was very keen on the Johor project, Tenaga said it needed time to evaluate the conditional award.
According to sources familiar with the issue, Tenaga’s seeming lack of enthusiasm could stem from the small stake it has in the consortium (the exact shareholding structure has not been disclosed) even though it is providing all the land for the development.
“Why should it partner with another power player when it can do it all since it is the country’s biggest power producer?” asked one analyst who asked not to be named.
Tenaga’s four unions, which oppose the idea of working with YTL, have also lobbied management to reject the deal.
Meanwhile, Tenaga’s CEO is claiming that the company had any prior discussions with any parties about the matter. Datuk Seri Azman Mohd confirmed that the company received the offer letter from the EC but Tenega claims it has not committed to being part of the consortium.
“We are evaluating the offer and also our role in this project before concluding if it is favourable for Tenaga to participate by July 25,” said Azman.
Meanwhile, YTL Power has pulled out of the consortium following the flap over Mr Yeoh’s remarks. With Tenaga appearing to be sitting on the fence, only SIPP remains as a firm player.
So SIPP is shopping for a partner and was reported to have been courting Malakoff Sdn Bhd, another IPP linked to tycoon Syed Mokhtar Al-Bukhary.
However, SIPP subsequently issued a statement saying: “We wish to emphasise that we have never made any overtures to Malakoff Corp Berhad on the project.”
SIPP needs expertise and Malakoff has the credentials, just as YTL Power has. But Malakoff has it own set of problems with boiler tube leakages at its Tanjung Bin power plant in Johor, which has also delayed the company’s initial public offering.
Malakoff is 51% owned by MMC Corp Bhd, which has an effective capacity of 5,350 MW comprising six plants that run on coal, oil and gas. Like YTL Power, Malakoff is also an international player.
Though SIPP is looking for another partner, the Tenaga unions are calling for a competitive bidding process given the large size of the project. They know Tenaga’s expertise. But will there be a bidding process or another negotiated deal?