Dr Mahathir and Daim say they had no role in billions lost by central bank in forex trading

Dr Mahathir, 92, in his testimony said BNM had operated independently as a body created under the Central Bank of Malaysia Ordinance and had its own structure headed by its governor, the late Jaffar Hussein.
Dr Mahathir, 92, in his testimony said BNM had operated independently as a body created under the Central Bank of Malaysia Ordinance and had its own structure headed by its governor, the late Jaffar Hussein. PHOTO: REUTERS

PUTRAJAYA - Two former Malaysian leaders at the centre of a probe into multi-billion dollar losses at the central bank in the 1990s on Monday (Sept 18) denied they played a role.

Former premier Tun Mahathir Mohamad said he had no legal authority to interfere in the policies and affairs of Malaysia's central bank when he was in power, as he testified before an inquiry into Bank Negara Malaysia's (BNM) foreign exchange losses in the 1990s.

Some witnesses have told the Royal Commission of Inquiry (RCI) that the forex losses occurred through aggressive currency trading between 1988 and 1992, with the unwinding of positions taking up to 1994.

The RCI was formed on July 1 to uncover facts behind the massive losses which it determined totalled RM31.5 billion in 1990s value, in its first sitting.

Prior to the RCI's formation, the total sum reported by BNM was RM9.3 billion.

Dr Mahathir, 92, in his testimony said BNM had operated independently as a body created under the Central Bank of Malaysia Ordinance and had its own structure headed by its governor, the late Jaffar Hussein.

  • * Ex-premier Tun Mahathir Mohamad claims he had no knowledge of the extent of Bank Negara Malaysia’s (BNM) foreign exchange trading, and had no legal power to interfere in the bank’s operations.

    * Tun Daim Zainuddin, Finance Minister from 1984 to 1991, claims that despite being the minister in charge of BNM, he was never informed about the bank’s decision to be an active currency trader, and would have stopped it if he had.

    * Dr Mahathir, Prime Minister from 1981 to 2003, says he did not know the extent of the losses at the time. He denies claims that he was told in 1993 that the figure amounted to RM30 billion, and that he was only told it was “around RM5 or 5.7 billion”.

    * The commission’s chairman Tan Sri Mohd Sidek Hassan expresses doubt about this, as RM5.7 billion were the losses attributed to 1993 and only computed and reported the following year. 

    * The commission expresses several times that the Prime Minister and Finance Minister are to manage the country and economy, and it seems there was “no one taking accountability or ownership from minister upwards”. 

    * Former Finance Ministry deputy finance secretary, Datuk Othman Jusoff told the inquiry that shares in utility companies Tenaga Nasional and Telekom Malaysia were transferred from the government to BNM at par value, to be sold into the market for profit to cover the forex losses.

"As prime minister, I was never involved in Bank Negara's administration and I believe that I was not permitted under the law to get involved in its policies and affairs," he said in a prepared statement to the inquiry.

Dr Mahathir was prime minister for 22 years, from 1981 to 2003.

Another key figure during the period, former finance minister Daim Zainuddin, told the RCI on Monday that he was never informed by BNM about engaging in currency trading beyond protecting national reserves and the ringgit.

"If I knew all these things, I would've stopped it. No way I would have let it go on. I would hang (the person responsible)," said Tun Daim, 79.

He was finance minister from 1984 to 1991.

Dr Mahathir in his testimony pointed out that the late BNM governor Tan Sri Jaffar had taken responsibility for the losses and resigned in 1994. Dr Mahathir said the losses should not damage Mr Jaffar's legacy as a trustworthy governor. Mr Jaffar died in August 1998.

An earlier witness, Nor Mohamed Yakcop, had resigned as advisor to the central bank in 1994 and said he also shared the blame for the losses.

Dr Mahathir claimed that the RCI was a move by the Najib Razak administration to divert public attention.

"It is about finding a way to make me look bad, that in my time, money has also been stolen, RM30 billion. They want to make (Anwar Ibrahim and me) look bad, that we told lies and stole money," said Dr Mahathir, who now chairs the Pakatan Harapan opposition coalition.

Dr Mahathir is Prime Minister Najib's fiercest critic in the scandal involving state fund 1Malaysia Development Bhd started by Mr Najib.

Former finance minister Anwar Ibrahim, now an opposition leader, is in jail after being found guilty on a sodomy charge.

Dr Mahathir said he was told of BNM's forex losses in 1993, after it first reported such amounts in its annual financial report.

But he said the losses only amounted to "around RM5 or 5.7 billion", and not the larger figures cited by other witnesses.

The then secretary-general of the treasury Clifford Herbert had told the inquiry that he and Anwar told Dr Mahathir in the latter's office that the losses amounted to RM30 billion.

The inquiry will resume on Tuesday.