PUTRAJAYA • Two former Malaysian leaders at the centre of a probe into multibillion-dollar losses at the central bank in the 1990s yesterday denied they played a role.
Former premier 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's) 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, at its first sitting. Prior to the RCI's formation, the total sum reported by BNM was RM9.3 billion.
Tun 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 Tan Sri Jaffar Hussein.
"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 yesterday that he was never informed by BNM about engaging in currency trading beyond protecting national reserves and the ringgit.
LEARNING FROM EXPERIENCE
The (1997 Asian financial) crisis happened after BNM's losses. We learnt from experience. It would be stupid if we didn't do anything. Much later, I knew that currency trading is bad.
TUN DR MAHATHIR MOHAMAD, on how the government did not monitor Bank Negara Malaysia's currency trading activities, and later imposing capital controls and currency pegs during the crisis.
HINDSIGHT IS 20/20
If I didn't know, how would I disagree? In hindsight, most of us can be very brilliant.
TUN DAIM ZAINUDDIN, who was Finance Minister between 1984 and 1991, on why he did not act against BNM's currency trading.
KEY POINTS AT INQUIRY
These were among the key points that emerged yesterday at the Royal Commission of Inquiry into the massive losses at Bank Negara Malaysia (BNM) in the 1990s caused by aggressive currency trading.
1 Former premier Mahathir Mohamad claims he had no knowledge of the extent of BNM’s foreign-exchange trading, and had no legal power to interfere in the bank’s operations.
2 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 been told.
3 Tun Dr Mahathir, Prime Minister from 1981 to 2003, says he did not know the extent of the losses at the time. He denies a claim he was told in 1993 that the figure amounted to RM30 billion, and says he was only told it was “around RM5 billion or RM5.7 billion”.
4 The commission’s chairman, Tan Sri Mohd Sidek Hassan, expresses doubt about this, as RM5.7 billion were the losses attributed to 1993 and computed and reported only the following year.
5 The commission expresses several times that the prime minister and finance minister are to manage the country and economy, and it seemed there was “no one taking accountability or ownership from minister upwards”.
6 Finance Ministry’s former 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.
"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.
RCI chairman Mohd Sidek Hassan asked "how come everyone else then had seemed to know" about the massive losses.
Said Tan Sri Sidek: "The illogical part, Tun (Daim), is that everyone seems to know, and you do not know. With respect, Tun, the Official Secrets Act is to protect information on the people who are supposed to know. In this case, you are supposed to know."
Dr Mahathir, in his testimony, pointed out that Mr Jaffar had taken responsibility for the losses and resigned in 1994.
The losses should not damage Mr Jaffar's legacy as a trustworthy governor, Dr Mahathir said. Mr Jaffar died in August 1998. An earlier witness, Tan Sri Nor Mohamed Yakcop, had resigned as adviser 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 Berhad started by Datuk Seri 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 (billion) or RM5.7 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.
Former deputy finance secretary Othman Jusoff testified yesterday that shares from state-owned utilities Telekom Malaysia and Tenaga Nasional were sold "discreetly" to BNM at par value, to help the central bank cover its financial losses by selling the shares later at market value.
The inquiry will resume today.