The Malaysian Insider – What should Lynas tell its shareholders? — Rama Ramanathan

March 20, 2012

MARCH 20 — Much of the discussion about Lynas treats Lynas as if it were like Petronas. Petronas, our national oil company, is blessed with a veil of secrecy and can do what it likes. Our prime minister can do what he likes with the income from Petronas. He can appoint whom he likes to the board of Petronas (remember Omar Mustapha).

State-owned companies in China — whose rare earth strategy I wrote about in my last piece — operate with the same veil of secrecy.

But it is not so with listed companies. Public companies are accountable to their shareholders. Public companies — including many listed in Malaysia — do business worldwide. Such international activity is possible only because of international laws and diplomacy, and the expectation that countries will honour their promises.

If Indonesia were to reverse some promises made to Sime Darby over the grants of land and licences to develop its oil palm industry, Sime Darby would cry foul. The Employees Provident Fund (EPF) and sovereign fund Khazanah Nasional will cry foul. You and I will cry foul because it is our money which is invested by EPF and Khazanah. Our basis for crying foul would be that promises which have been made must be honoured.

This for me is one of the core issues in the Lynas controversy.

Lynas was given approval for the Gebeng project in 2008. I expect the promises made to Lynas included (1) the government would give Lynas a corporate tax break for 12 years; (2) the government would identify land to store industrial waste, just as it does for other industries; (3) the government would not add new requirements without prior consultation. This is standard, international practice.

(This being Malaysia, I have no doubt that some in Umno-BN benefited from the deal with Lynas. I’m sure we’ve been Scorpened. But I’m also sure this is true of many investments in Malaysia, not just Lynas. And I believe this is true of any country ruled by a single party: only China can claim to rule by the same party for 54 years or more, though China’s government is now more serious than Malaysia’s in tackling corruption.)

Lynas believed the government. Lynas raised money. Lynas studied the regulations. Lynas engaged vendors and acquired customers. Lynas bought land and began construction. I’ve not heard Lynas has contravened any regulations. I’ve not heard Lynas has failed to co-operate with the authorities.

It’s now 2012. Lynas began work after inking the deal in 2008, the year of the Malaysian election tsunami. The year things changed. The year we booted out many Umno-BN stalwarts and brought in opposition parliamentarians and state assemblymen. The year the exposure of corruption became a national past-time, and the year in which the use of power to destroy opposition politicians became well-reported: in east and in Peninsular Malaysia.

Umno-BN used money and the courts. Lead by the current prime minister, Umno-BN wrested control of Perak. They persecuted Anwar. They buttressed Taib. They lost by-elections. They resorted to blatant, open, shameless vote-buying and racism.

The people mobilised. Bersih 2.0 happened despite the government turning on peaceful citizens: remember the EO6. Malaysians rallied. Malaysians came of age.

We were flabbergasted by the Election Commission (EC) which is supposed to be independent of the government, but acts like it’s an arm of Umno-BN. Thanks to the vigilance of opposition politicians supported by thousands of volunteers combing through election rolls, the EC has had to admit all sorts of errors. This has strengthened our perception that the EC lacks the will to act independently, without fear or favour.

And we think “if even the constitutionally-independent EC has gone over, how about the Atomic Energy Licensing Board (AELB) and the Department of the Environment (DOE)?” (We ignore the fact that Lynas is a tiny piece of what the DOE and the AELB are responsible for.)

We have become so deeply suspicious of our government that we are afraid to let it carry out any projects it has conceived. We live in such irrational fear of radioactivity that Lynas is an easy target. (We ignore the fact that from 1990 to 2002 Parliament enacted four exemptions to the Atomic Energy Licensing Act 1984.)

We are less opposed to investments in Penang and in Selangor. This is because we believe these non-Umno-BN governments know that if they do anything fishy they will be exposed and crushed by the tools of the state.

We know it’s dangerous to co-operate with the authorities in Malaysia. We remember Balasubramaniam and Teoh Beng Hock.

Lynas too has learned it’s dangerous to co-operate with the authorities in Malaysia. Is that what Lynas should tell its shareholders?

* This is the personal opinion of the writer or publication. The Malaysian Insider does not endorse the view unless specified.

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