TODAY June 26th, Eric Chia Has been dismissed from the court. He won. What do you think? I recalled the Asia Week 1996, you read and you decide for it?

IN LATE 1993, ERIC Chia, then managing director of Malaysia’s state-owned Perwaja Steel company, told Asiaweek how surprised he had been when his good friend, Prime Minister Mahathir Mohamad, had personally asked him to take charge of the ailing industrial giant. Said Chia: “I was shocked when Doc asked me to do it. I didn’t know anything about steel. But if the PM asks you to do something, how can you say no?” Some might wish that is precisely what he had said. Perwaja now seems to be insolvent. Last week, Finance Minister Anwar Ibrahim confirmed in parliament that the steelmaker had racked up debts of $975 million under Chia’s stewardship. Unofficial numbers, based on figures reportedly derived from an earlier company audit, put the debt at closer to $2.3 billion, while oppositionists have claimed it may reach $3.9 billion.

How did Perwaja — and Chia — get into such trouble? When he was handpicked by Mahathir in 1988 to take over Perwaja, Chia came with a good track record. He had been managing director of EON, the distributor of national carmaker Proton, and had seen that company through its initial teething pains. A diabetic who would unflinchingly bare his stomach in public to take his regular insulin injections, Chia was a no-nonsense guy. Many found him arrogant, but he got things done and Mahathir admired that.

When he took over, Perwaja was already a loss-making concern, with operational problems and manpower difficulties. In Dec. 1986, after its first year in business, it ended up with a loss of $51 million. The plant, located in the northeast state of Trengganu, had to depend on a largely untrained, strongly conservative workforce of Malays, who were not used to making steel.

At first, Chia seemed to make headway. Production was 21,000 tons per month when he took over; four years later it was 80,000. The local press reported in 1993 that Perwaja’s Trengganu operations were so healthy that “it will produce one million tons this year and it will have written off all its debts.” The company even expanded, with the opening of a second plant at Gurun in the Prime Minister’s home state of Kedah. But these good signs hid the fact that the company continued to suffer from operating problems, dubious contracts issued without any tendering, and lots of debt taken on to ride out earlier difficulties and finance expansion. Much of the leverage came from Japanese banks and trading companies, and was denominated in powerful yen.

When pay back time arrived, there was no money to cover those investment loans since Perwaja, even with a protected home market, remained unable to turn a respectable profit. In fact, for the fiscal year ending in March 1995, the company reported a loss of $147 million.

How Chia was able to gloss over an impending financial disaster remains unclear. But finally the magnitude of the mess became apparent and the government stepped in. Chia was sent packing last August, leaving behind not just a mountain of Malaysian and yen-denominated debt, but also, Anwar told parliament, evidence of an apparently fraudulent transaction. During Chia’s tenure, $30 million of Perwaja money was paid to a non-existent Hong Kong-based company named Frilsham Enterprises. Where that money went — indeed where Chia went — is anybody’s guess. The executive has vanished from his opulent Petaling Jaya residence in the suburbs of Kuala Lumpur.

When asked where Chia is, Anwar pointedly declined to answer. Says opposition MP Lim Guan Eng: “He refused to say where Chia is when I asked him. He said it would be revealed when the next audit is done.” At Anwar’s instigation Price Waterhouse is conducting another company audit to discover the full magnitude of the Perwaja fiasco. This will be the third. Lim sees it as a “waste of time and money,” and claims another audit “is just damage control, a political exercise.” UMNO MP Ruhanie Ahmad disagrees, saying the government will take action on the Price Waterhouse report. “We are being very accountable and very transparent,” he says. “Nobody responsible will be allowed to escape.”

Given the closeness of Chia to Mahathir, the Perwaja affair has heavy political overtones. Chia was Mahathir’s man and 81% of Perwaja’s stock is owned indirectly by Anwar’s Finance Ministry. Anwar did not mince words when he told parliament that Perwaja’s woes — which included possible malpractice and fraud — resulted from decisions that “were made by a single person or a group of people.” And Lim Guan Eng says: “That single person is Eric Chia.” Almost daily for the past two weeks, government MPs have been standing up in parliament lambasting both the Perwaja losses and Eric Chia. Though the Prime Minister has said that it is unfair to use the freedom of parliament to accuse people by name, he did acknowledge the allegations of abuse.

As to what will happen to Perwaja, Mahathir promised no haste, more study and action against any wrongdoing. “If we can turn it around, we will do so,” he said. “If we can sell it, we will sell it.”

Recall Back The AsiaWeek 1996

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