Syed Mokhtar’s Proton win raises concerns over wealth concentration

(The Malaysian Insider) – The addition of national carmaker Proton to Tan Sri Syed Mokhtar Al-Bukhary’s growing empire yesterday has economists concerned that too much strategic corporate wealth is being accumulated in the hands of an elite few in the country.

Apart from Proton, the media-shy tycoon recently acquired Pos Malaysia, also from state investment arm Khazanah, and is reportedly pursuing rail service operator KTM. He is also poised to enter the telecommunications space via newcomer Puncak Semangat, which was reported to be among the biggest winners of 4G spectrum allocations.

His flagship enterprises — MMC Corp and DRB-Hicom — are also involved in a wide array of nationally strategic sectors and industries from the KL MRT project to multi-billion defence contracts, from rice and sugar to ports and independent power generation.

“Concentration of corporate wealth in an elite few is not good for any economic system,” said Edmund Terence Gomez, a political economist with the University of Malaya when asked about Khazanah’s move to sell its stake to Syed Mokhtar’s DRB-Hicom. “The state should be concerned about concentration of wealth.”

The economist also questioned whether a diversified conglomerate such as DRB Hicom was the best option to bring Proton to greater heights and said he preferred if the state remained the controlling stakeholder and ensured that the company was professionally run.

He noted that many public projects had been entrusted to diversified conglomerates — the former Renong group being one of them — in the heyday of privatisation, but they in the end had to be re-nationalised and the government appeared not to be heeding the lessons of the past.

“It (privatising national assets to diversified holding companies) didn’t work in the past, how sure are we that it will work now?” asked Gomez.

The debt burden collectively shouldered by Syed Mokhtar’s companies, which is widely estimated to be about RM30 billion, could be another cause for concern.

“During the 1998 Asian Financial Crisis, the problem faced by Malaysian banks was that it was a small number of firms that owed a huge amount of money,” noted Gomez.

RAM Ratings chief economist Yeah Kim Leng said it would be more prudent for the economy to be less concentrated within a few hands.

“They key is to ensure that strategic businesses are not overly concentrated so as to reduce systemic risk and so that the moral hazard risk of government bailouts does not kick in,” he said.

He added that it would be best for the economy to have a diverse entrepreneurship and ownership base and having so much strategic corporate ownership with one individual raises concerns that such an individual would have undue market power over the country.

Yeah said that following the sale of Khazanah’s stake in Proton to DRB-Hicom, there should be no more subsidies or tariff protections for the new owner.

“Level the playing field for all carmakers so the Malaysian public can look forward to more variety and cheaper cars,” he said.

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