PUTRAJAYA: Former Finance Minister Tun Daim Zainuddin today claimed that he was not informed and wasn’t aware of Bank Negara Malaysia (BNM)'s massive foreign exchange (forex) losses of the 1990s, despite his position.
In his written statement and subsequent cross-examination, Daim repeatedly said that BNM was given the full mandate to act independently without the supervision of the Finance Ministry (MoF); and that he was briefed by former BNM Governor, the late Tan Sri Jaffar Hussein in a limited capacity, and that certain documents were not made available to him as it was protected by BNM’s Official Secrets Act (OSA).
This admission, that a former finance minister did not know of the activities undertaken by BNM, which was under the purview of Ministry of Finance (MoF), confounded the members of the Royal Commission of Inquiry (RCI) panel.
“Tun Daim, you must forgive me when I say that your admission has me confused because you said that you, the Finance Minister, was not aware at all of the forex losses when it was in the Central Bank Ordinance (CBO), Section 34 which states that 'The (BNM) Board shall inform the Ministry of its undertakings’.
“And yet, you said the bank didn't,” said RCI chairman Tan Sri Mohd Sidek Hassan to Daim.
“Tun, this is very curious as all the witnesses who came before you, from department secretaries to the Auditor General’s (AG) Office, seem to know of the losses in some capacity or other and yet, you, the Finance Minister, said you didn't.”
Sidek then drew on the testimony of former Director and Assistant General Auditor for all Federal and State Statutory Bodies at the AG’s Office, P. Kanosan Pothinker, who had testified during the Aug 28 proceedings.
Kanosan has stated that he had, sometime in the early 1990s, came upon BNM’s aggressive forex trading stance through media reports and ‘market talk’.
Kanosan had said he had taken it upon himself to pursue the issue by sending two letters to BNM, as well as making a follow-up phone call to then-Auditor General Tan Sri Ainum Mohd Said. His efforts resulted in the now infamous phrase; “Orang atasan cakap jangan campur tangan,” allegedly uttered by Ainum.
Sidek noted that Kanosan was third in line at the AG’s Office and yet he pursued it because he believed that something out of the ordinary was happening.
“And yet, you didn't. Why was that?,” asked Sidek.
Daim maintained that he didn't act on it because he wasn't aware, wasn't notified and didn't hear any 'market talk’. Daim added that BNM is "fiercely independent" of the government and was not instructed on how to handle its trading activities.
It was at this point that RCI panelist Datuk Seri Tajuddin Atan asked Daim if he was aware of the Plaza Accord Agreement of 1985, which was supposedly one of the main factors of BNM's trading losses, which amounted to RM31 billion.
The Plaza Accord was an agreement made between France, West Germany, the United States, the United Kindom and Japan in September 1985, which aimed for intervention in currency markets to depreciate the US Dollar against the Japanese Yen and German Deutsche mark.
In his testimony, former advisor to the Governor, Tan Sri Nor Mohamed Yakcop, had said that the Plaza Accord was "historic" as it was the first time that central bankers had agreed to intervene in the currency market and the first time that governments had set target foreign exchange rates which were to be achieved through active intervention.
As a defensive manoeuvre with a focus on profit maximisation, BNM then took a more aggressive approach towards forex trading.
“Were you aware of this mega trend? I believe you were as you travelled to Japan following this (the Plaza Accord Agreement) to discuss our Yen position. You traveled there, not BNM. And yet, you said BNM was independent of the ministry,” said Tajuddin to Daim.
Daim then replied; “I traveled all over to discuss all kinds of things when I was finance minister.
“It is also not as straightforward, running the MoF, as you are saying. There are many thi
ngs overlapping. A big part of our exports were affected by currency fluctuations and as the minister, I have to take this into account.”
He stressed that when it came to forex trading, BNM had its own run and that the “best people” were appointed to both run the bank and to conduct forex trading.
RCI member Datuk Wira Kamaludin Md Said then asked why Daim, in his capacity as finance minister, appointed Jaffar as BNM’s fourth governor in June, 1985.
Jaffar was the first “outsider” who was not part of BNM’s existing talent pool.
Daim replied that Jaffar’s appointment as governor was upon the recommendation of his predecessor, Tan Sri Abdul Aziz Taha. Daim added that at that point, it was roughly known that BNM would be involved in forex trading.
“Jaffar was well-versed in forex trading, given his background as a commercial banker, as he was group chief executive officer of Maybank Group prior to being the Governor.”
The proceedings then called on the next witness, former Prime Minister Tun Dr Mahathir Mohamad. - Additional reporting by HANA NAZ HARUN