Tuesday, July 6, 2010

Excerpts Chapter 4 : Unofficial Timber Rent Appropriation in Sarawak (Part 1)

Sarawak politics and forest management

"Although Sarawak is only a state within the Federation of Malaysia and not a country, Sarawak will be considered as a nation for the purposes of this dissertation as it maintains complete control over its timber resources and, in that sense, retains the policy characteristics of national sovereignty.

During the period covered by this study, Sarawak had two chief ministers: Tun Rahman Abdul Yakub, who served from 1971 to 1981, and his nephew, Taib Mahmud, who served from 1981 to the present. As with the recently deposed Suharto, Taib Mahmud's power is almost absolute. Asiaweek identified nine "political warlords" in Asia: two each were identified in Thailand, the Philippines, Pakistan, and India, and one in Malaysia, the chief minister of Sarawak. Taib Mahmud is described: "He has no private army, but he runs the closest thing to a Malaysian political fiefdom. Kuala Lumpur leaves the Sarawak chief minister alone in return for keeping the state sweet at election time. Massively wealthy from timber concessions, he drives around in a Rolls Royce" (Asiaweek 1995b)."

"The Sarawak Forest Department controls the majority of Sarawak's forests and issues regulations designed to achieve the sustainable harvest of those forests. The autonomy of the department, however, is severely limited due to the fact that it is under the control of the Ministry of Resource Planning. Taib himself has held the position of Minister of Resource Planning since 1985. Therefore, Taib has the final say over the level at which timber revenues will be collected from concessionaires and over the distribution of timber concessions. A source makes the following observation about Taib's omnipotence in the awarding of timber concessions:

         At the top of the hierarchy is the minister of resource planning, who has sole discretion to give out logging concessions. Taib finds the time to hold this portfolio himself, along with that of chief minister. Under the law, he can grant concessions to anyone he wants: relatives, friends, political associates, or nominee shareholders - people who hold concessions on behalf of secret beneficiaries. The concessions are granted free of charge, and the holder isn't required to know the difference between a live tree and a telephone pole (Sesser 1989: 282).

In Sarawak, as in Indonesia, the head of state has found it to serve his financial and political interests to informally appropriate timber rent. One source estimated that Taib has amassed $4 billion through his connections to the timber industry (Rainforest Action Network 1993). According to an interview with a former Sabah chief minister, Taib personally takes RM30 ($12) from each cubic meter of timber cut in the state (1 and 2 October 1996 interview with Harris Salleh). The chief minister is the state's third largest timber concession holder (see Table 4.3 below). His appropriation of timber rent is in large measure intended to augment his and his family's personal wealth.

The use of timber rent to further national and state political objectives is also important. As Chief Minister Taib Mahmud stated succinctly, "'Sarawak politics is timber politics'" (FEER 1987). Since the early 1970s, Sarawak has unofficially delivered to the national ruling party a share of Sarawak's timber rent. The rent is used by the national ruling party both for political expenditures at election time and for financing the business objectives of ruling party-linked conglomerates (28 March 2001 interview with Daniel Lev).

At the state level, the use of timber rent for political ends was perhaps best demonstrated in the Ming Court affair of 1987, when Taib fought off a challenge from his uncle and former chief minister, Tun Rahman. Although the seeds of the Ming Court affair were sown long before, the crisis was precipitated by Taib's cutting off timber rent to a wide range of politicians, especially state assemblymen loyal to his uncle, and by his move to gain full control over the granting of concessions by assuming the additional portfolio of Minister of Resource Planning. Both actions created considerable resentment among politicians who had been tacit supporters of Taib up to that point. As recounted in one publication:

        In early May [1985], Taib all but named three principal 'co-conspirators,' in a plot to oppose his leadership. . . . But the orchestrator of the machinations, Taib alleged, was his uncle. [The chief minister told this reporter that] the depressed timber market had put concession operators in a tight spot, leading in turn to pressure for relief on some payments to business partners [‘business partners’ here denotes Sarawak politicians]. These partners need more funds, it was suggested, but the current leadership [Taib] balked at their incessant demands. The statutory powers to supervise the granting of concessions, which reside in the minister of forests, obviously command close political attention - especially as the minister potentially has wide powers to revoke
licenses. . . . The Review understands that Taib intends, personally, to assume the portfolio [of minister] . . . in June (FEER 1985f).

Plots by co-conspirators continued during 1986, driven by Taib's threats to take away their lucrative timber concessions. The Ming Court affair in 1987 was precipitated by the chief minister’s plan to "screen," in reality to single out for punishment, concessions held by politicians whom Taib chose to no longer favor and to revoke those concessions. As described by a Sarawak-based correspondent who followed the story closely at the time,

The Sarawak political crisis is believed to have been triggered by the move to screen timber licenses in the State – a great portion of which belong to certain politicians and their supporters. To date, about 30 timber licenses of companies linked to an ex-politician [Taib’s predecessor Tun Rahman] have been revoked. According to sources, the State Government’s recent drive forced an ‘underground movement of politicians’ linked to timber concessions to act fast to protect their interests . . . Recently the state government stepped up its drive against Datuk Taib’s detractors and revoked the timber licenses of two businessmen for transferring their concessions without informing the authorities. Following that, the State Government announced that it would screen all timber licensees who ‘abused the timber industries.’ This included licensees who sold or transferred their licenses or sold or transferred shares. Last week’s screening of timber licenses made mandatory the obtaining of approval from the Government even for a change in partnership in a timber company or appointment or change of logging contractors, otherwise the license would be rendered invalid. According to Taib loyalists, the move hurt the pockets of the ‘Old Guards’. . . The sources said the political group opposed to Datuk Taib’s administration was desperate (Sunday Mail 1987).

The revocation of timber licenses on the magnitude of that precipitating the Ming Court affair is unprecedented in Sarawak's history, as shown in Table 4.1.

Table 4.1 Natural forest timber concessions granted and revoked by Chief Minister Taib during his first twelve years in office, 1981-1993

Year                   Number of concessions granted                     Number of concessions revoked
1981                                   7                                                                    0
1982                                   3                                                                    0
1983                                   8                                                                    0
1984                                 17                                                                    2
1985                                 35                                                                    1
1986                                 19                                                                   10
1987                                 36                                                                   26
1988                                 13                                                                    7
1989                                  7                                                                     4
1990                                 23                                                                   21
1991                                  4                                                                     3
1992                                  6                                                                     4
1993                                24                                                                    20

Source: Annual Reports of the Sarawak Forest Department (1981-1993)

Once the press reported which politicians would lose their timber concessions, events moved quickly. Threatened politicians flew to the Malaysian capital for a secret summit on unseating Taib. Tun Rahman, who had started a new party called Permas, led the rebels. The rebels also included PBDS, a party that had broken away from the ruling coalition. The rebels planned to bring a vote of no confidence in the state assembly and to obtain a parliamentary majority. Chief Minister Taib responded to this threat by dissolving the state assembly and by calling for elections to be held a month later. The rebels responded by promising cash payments of $500,000 to every state assembly contestant who joined the opposition camp, a sum that would have been paid out of timber rent had the opposition won. However, in the end, Taib maintained his power. These events are summarized in Table 4.2.

Table 4.2 Dates and key developments during the Ming Court Affair of 1987

Date of event                             Key development
Friday, 6 March 1987                People’s Mirror carries story of Chief Minister Taib’s intention to put
                                                  a  “Screen on Timber Licenses” (Ritchie 1987: 18).

Sunday, 8 March 1987               Anti-Taib rebels fly from Kuching (capital of Sarawak) to Kuala Lumpur                                                     (capital of Malaysia) to meet and discuss how to unseat Chief Minister Taib

Monday, 9 March 1987             Secret meeting begins at Ming Court hotel in Kuala Lumpur. A journalist                                                        monitoring events conjectures that there was “sufficient resentment for with                                                     rebellion. Those who would be dissatisfied would include those . . .                                                      timber concessions. . .” (Ritchie 1987: 17).

Tuesday, 10 March 1987          Four ministers, three deputy ministers resign from Taib’s cabinet and join the
                                                 opposition. Taib announces at press conference that there is a plot forming
                                                 against him at the Ming Court Hotel. Mood of opposition politicians said to
                                                 be “euphoric” as they decide amongst themselves, “who gets what . . . who
                                                was going to take over the various government statutory bodies and
                                                corporations” (Ritchie 1987: 27)

Friday, 13 March 1987            Taib dissolves the Sarawak state assembly. It is announced that a statewide
                                                vote will follow on 15-16 April 1987. “[W]hen it appeared clear that an
                                               election was imminent, two reliable . . . sources said that value of each rebel
                                               went up to the tune of $500,000 per contestant” (Ritchie 1987: 38).

15-16 April 1987                   Statewide elections are held. Pro-Taib forces prevail, maintaining a majority of
                                              seats in Sarawak state assembly. Taib is nominated to a third term as Chief

The Ming Court affair is perhaps the most visible instance of the use of the state’s timber resource to achieve political objectives. However, timber rent is used in more direct ways to achieve political objectives, such as buying votes at election time. Elections in Sarawak are expensive. 

To illustrate the high cost of buying elections, the ruling party spent about $400 per voter, or $4 million to defeat a candidate for the state assembly, Chiew Chin Sing, who would have represented only about 10,000 voters. During the weeks approaching the election, ten different teams of senior Sarawak Alliance officials, their officeholders and retinues visited all of the 180 longhouses in the district, holding parties each night in ten different longhouses. Chiew explained how these 10,000 voters were wooed:

Expenses were as follows: most members of the traveling parties were paid a salary. For each longhouse party that was held, five pigs and fifty cases of Heineken beer were purchased. In addition to the good times at the parties, where many promises were made, each family was given RM1,200($480) to vote for Chiew’s opponent.

The ruling coalition ensured that a family whose head received a $480 bribe would actually vote for the ruling coalition candidate by paying only $240 per family up front, with the remaining half to be paid only if the ruling coalition candidate carried a large majority in that longhouse.

To pay the second installment, the ruling coalition rented out as campaign headquarters the entire Lee Hua hotel in Sibu, the large city downriver from Chiew's largely rural district. Chiew said after the election, the headman from each longhouse would travel to stay at the hotel, and collect the second installment of the bribes for the families in his longhouse. In that particular election the ruling coalition candidate defeated Chiew by a vote of 6,938 to 1,457 (19 July 1997 interview with Chiew Chin Sing).

Charges of vote buying in Sarawak were confirmed in a review of Malaysian politics:
[T]he High Court made political history when it declared an election victory by the ruling Barisan Nasional (BN) coalition null and void due to vote buying. The judge ruled that "vote buying was so extensive [that] it had affected the election result" in the Bukit Begunan constituency in the September 1996 Sarawak state election. Although vote buying by the BN is widespread in Malaysia, hitherto it has been almost impossible to prove it in court. In this case, however, there was clear evidence including photographs showing cash being handed out by BN campaigners to voters just prior to election day. In the subsequent by-election, the same BN candidate from Parti Bansa Dayak Sarawak (PBDS) who had won in the voided election easily won the seat again (Asian Survey 1997).
Another source who was in Sarawak for the 1996 state elections said that on the final day before polling, he saw RM660,000 ($264,000) in bribes being given out to voters in a single location. The bribes ranged in size from RM600($240) for each indigenous voter to RM2,200 ($880) for each Malaysian Chinese voter (1 October 1996 interview with a knowledgeable Sabah-based source).

In Sarawak, much of the money to buy votes comes not from timber rent appropriated by the chief minister but from that of his political supporters, who have been given timber concessions for that purpose. Sarawak Alliance party operatives and Sarawak Alliance state assemblymen are awarded timber concessions provided that they make cash available during election time. Similarly, politicians who can secure large majorities for the Sarawak Alliance in their areas can prevail upon the chief minister to award them timber concessions (26 May 1997 interview with Lao Siew Chang).

For timber conglomerates themselves, so long as they are willing to make money available to the ruling party during election time, this will ensure their ongoing ability to gain access to new timber concessions as they exhaust old ones. Some conglomerates control so many concessions because during election time senior politicians come to them for campaign donations. Once the politician has been re-elected the timber conglomerate comes back to the politician and requests his help in obtaining new concessions from the chief minister (26 May 1997 interview with Lao Siew Chang).

When political supporters serve as board members and shareholders in timber concessions, they do not simply serve as a conduit for funds to the ruling party during election time but also gain personal wealth as a payment for their loyalty. At some level, it is a meaningless exercise to try to determine whether a political supporter's position on the board of a timber company signifies that they are there to get rich and in exchange for that privilege remain loyal to the chief minister, or to finance the political expenses of the chief minister’s party. According to James Chin, board members and major shareholders work both for themselves and their parties, depending on the electoral cycle. If it is not election time, then the board members and major shareholders bank substantial salaries. However, if it is election time, especially during the final months, the political supporter is expected to contribute funds to the ruling party. If they do not perform this latter function or if they have otherwise demonstrated disloyalty, when their concession is up for renewal the "chief minister asks the forestry department to rigorously enforce" its regulations with respect to that disloyal politician's concession, which provides a pretext to deny the renewal of the concession (30 June 1997 interview with James Chin).

In short, timber wealth is used both to create wealth for the chief minister and his political supporters and to ensure his political longevity. My analysis rests on a review of the managerial and equity profiles of the timber concessions licensed to each of the state's four largest private timber groups and more general types of information on the state's fifth through ninth largest private groups. Sarawak's nine largest private timber groups are ranked by size of concession holdings in Table 4.3 below. The forest areas being logged by the four largest groups are mapped in Figure 4.1.

Table 4.3 Ranking of Sarawak timber groups by concession holdings, 1996

Ranking   Name of timber conglomerate     Senior figure             Total area (hectares)    Source(s)

1                Samling group                 Yaw Teck Sing               1,636,320                 Samling Corporation internal document obtained 22 October 1996; written estimates of a Sarawak-based researcher obtained 15 November 1996.

2                Rimbunan Hijau group           Tiong Hiew King           1,500,000             Remarks of William Wong, head of investor relations for Jaya Tiasa, Rimbunan Hijau’s publicly listed flagship, during a 29 October 1996 visit to Rimbunan Hijau headquarters.

3               Taib family group                  Chief Minister Taib Mahmud   998,011       Ritchie 1987: 84-85; Sarawak Tribune, 11 April 1987

4               KTS group                            Lau Hui Kang                        500,000       The Edge 1995d

5               WTK group                            Wong Tuong Kwang            400,000       The Edge 1995d

5              Shin Yang group                     Ling Chiong Ho                     400,000       Sarawak Securities 1997b: 22

7               Ting Pek Khiing group           Ting Pek Khiing                     311,239       Business Times 1992a&b; Jardine Fleming 1993; Star 1995b

8               Limbang Trading                   James Wong                          185,490       Asian Wall Street Journal 1994b

9               Ling group                            Ling Beng Siew                      120,000       Sarawak Securities 1996: 4

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