DR M, DAIM CLAIM IGNORANCE
FORMER prime minister Tun Dr Mahathir Mohamad and former finance minister Tun Daim Zainuddin yesterday shifted blame for the huge foreign exchange trading losses suffered by the central bank in the 1990s to its former governor, the late Tan Sri Jaffar Hussein, who died in 1998.
BOTH SAY THEY HAD NO CLUE OF THE MASSIVE LOSSES DESPITE THEIR POSITIONS
TREASURY OFFICER TOLD BY ‘HIGHER-UPS’ TO ‘DISCREETLY’ FACILITATE SHARE TRANSFERS OF TM, TENAGA TO BNM TO BAIL IT OUT IN 1994
PUTRAJAYA: Former finance minister Tun Daim Zainuddin yesterday claimed that he was not informed and wasn’t aware of Bank Negara Malaysia’s (BNM) massive foreign exchange (forex) losses in the 1990s despite his position.
In his written statement and subsequent cross-examination, Daim repeatedly said BNM was given the full mandate to act independently without the supervision of the Finance Ministry, that he was briefed by former BNM governor, the late Tan Sri Jaffar Hussein, in a limited capacity, and that certain documents were not made available to him as it was protected by the Official Secrets Act (OSA).
This admission, that a former finance minister did not know of activities undertaken by BNM, which was under the purview of the ministry, confounded the Royal Commission of Inquiry (RCI) panel.
RCI chairman Tan Sri Mohd Sidek Hassan said: “Tun Daim, you must forgive me when I say that your admission has me confused because you said that you, the (then) finance minister, was not aware at all of the forex losses when it was in the Central Bank Ordinance, Section 34, which states that ‘The (BNM) board shall inform the ministry of its undertakings’.
“And yet, you said the bank didn’t.”
“Tun, this is very curious as all the witnesses who came before you, from department secretaries to the Auditor General’s (AG) Office, seem to know of the losses in some capacity or other and yet you, the finance minister, said you didn’t.”
Sidek then drew on the testimony of former director and assistant auditor general for all federal and state statutory bodies at the AG’s Office, P. Kanason, who had testified during the Aug 28 proceedings.
Kanason had stated that he had, in the early 1990s, came upon BNM’s aggressive forex trading stance through media reports and “market talk”.
He said he took it upon himself to pursue the issue by sending two letters to BNM, as well as make a follow-up phone call to then auditor-general Tan Sri Ainum Mohd Said.
His efforts resulted in the now infamous phrase: “Orang atasan cakap jangan campur tangan,” allegedly uttered by Ainum.
Sidek noted that Kanason was third in line at the AG’s Office and yet he pursued it because he believed that something out of the ordinary was happening.
“And yet, you didn’t. Why was that?” Sidek asked Daim.
Daim maintained that he did not act on it because he was not aware, was not notified and did not hear any “market talk”.
He said BNM was “fiercely independent” of the government and was not instructed on how to handle its trading.
It was at this point that RCI panellist Datuk Seri Tajuddin Atan asked Daim if he was aware of the Plaza Accord Agreement of 1985, which was supposedly one of the main factors for BNM’s trading losses, which amounted to RM31 billion.
The accord was an agreement made between France, West Germany, the United States, the United Kindom and Japan in September 1985, which aimed for intervention in currency markets to depreciate the US dollar against the Japanese yen and German deutsche mark.
In his testimony, former adviser to the governor, Tan Sri Nor Mohamed Yakcop, had said the accord was “historic” as it was the first time central bankers agreed to intervene in the currency market and the first time governments set a target foreign exchange rates that were to be achieved through active intervention.
As a defensive manoeuvre with a focus on profit maximisation, BNM then took a more aggressive approach in forex trading.
“Were you aware of this mega trend? I believe you were, as you travelled to Japan following this (the accord agreement) to discuss our yen position. You travelled there, not BNM. And yet you said BNM was independent of the ministry,” Tajuddin said to Daim.
Daim replied: “I travelled all over to discuss all kinds of things when I was finance minister.
“It is also not as straightforward, running the (ministry), as you are saying. There are many things overlapping. A big part of our exports were affected by currency fluctuations, and as the minister, I have to take this into account.”
He said when it came to forex trading, BNM had its own run and the “best people” were appointed to run the bank and to conduct forex trading.
RCI member Datuk Wira Kamaludin Md Said asked why Daim, in his capacity as finance minister, appointed Jaffar as BNM’s fourth governor in June 1985. Jaffar was the first “outsider” who was not part of BNM’s talent pool.
Daim replied that Jaffar’s appointment was on the recommendation of his predecessor, Tan Sri Abdul Aziz Taha.
He said at that point, it was roughly known that BNM would be involved in forex trading.
“Jaffar was well-versed in forex trading, given his background as a commercial banker, as he was group chief executive officer of Maybank Group prior to being the governor.”
The proceedings then called on the next witness, former prime minister Tun Dr Mahathir Mohamad.