Chapter 6 Research Design, Revisited

In trying to explain how the incentive structure embodied in timber can institutionally weaken states, it is useful to consider the similarities between the timber and the narcotics sectors.  Both sectors have technologically simple and low cost methods of production.  Both have products that sell for high prices on the world market.  Both have extremely high rent earnings resulting from the difference between low production costs and high market prices.  Moreover, rent earnings in both sectors are typically magnified because of government trade restrictions:  narcotics exports are illegal and so are log exports from many tropical nations, including Indonesia.  Finally, entry into both sectors is mediated, if not by the state then by violence.  For those who think this a far-fetched parallel, consider the fact that Wong Tuong Kwang, before he became the head of the WTK timber conglomerate in Sarawak, got his start in opium smuggling.  

Wong Tuong Kwang . . . used more than two dollars to start his career. He smuggled opium during the colonial time . . . many people had learnt about it. When I was a small boy, I stayed at Chung Cheng Primary School in Sg. Ma'aw. [Wong Tuong Kwang's] youngest son, Qi Zhi was my classmate and I often visited his house at Sg. Paradom. His neighbor Ting Ming Hui was not on good terms with him. Whenever they quarreled, Ting and his family were always the losers. But they could make their opponents speechless when they told them not to be so arrogant since they were opium smugglers only (Lau 1995: chapter 19, page 1).

If the timber trade produces rent like the narcotics trade, it is not difficult to imagine that the timber trade can have just as corrosive an effect on proper governance as the narcotics trade.  The essence of the problem is that it is so easy for heads of state to obtain enormous levels of rent from narcotics, or timber, that once these sectors are up and running and providing enormous unofficial streams of rent to political elites, a set of overwhelmingly strong disincentives are created.  In this sense, it may not be the institutional weakness of states that leads to the suboptimal regulation of the timber sector.  Rather, it may be the perverse incentive structures embodied in the extraction of timber that lead to the institutional weakening of governments. 

Chapter 4 : Unofficial Timber Rent Appropriation in Sarawak (Part 7 - KTS, WTK & Shin Yang,)

KTS 

Lau Hui Kang, the head of the fourth largest timber group KTS, has paid a growing price to Sarawak's head of state to maintain access to timber concessions, according to S.K. Lau.

Lau Hui Kang, like all others in the timber sector, had pledged his full loyalty to the former Chief Minister and Governor. When Taib gained power, they all turned round to lean on Taib. But Lau said something to me, which gave me much food for thought, "We in fact [thought] it would be easier to serve and attend to Taib. This is why all of us [rallied] together . . . against Yakub. [But] unexpectedly, Taib [turned out to be] even more demanding than Yakub" (Lau 1995: chapter 5, page 3).

In some cases, the price exacted from timber companies by the chief minister includes not just an unofficial stream of timber rent but, in one case, being required to turn against one's own family. In the case of KTS, Taib asked the head of the group, Lau Hui Kang, to wrest control of the Borneo Post, the state’s second largest newspaper, from his own brother, the paper's owner. The state’s largest newspaper, the Sarawak Tribune, was already under the control of the chief minister’s party, the PBB, but the Borneo Post, controlled by Lau Hui Kang's brother, Lau Hui Siong, had a relatively more independent voice. Lau Hui Kang was told that if he did not convince his brother to let PBB interests obtain a controlling stake in the paper, or at least a substantial degree of editorial control, that KTS would lose its timber concessions. Turning against his brother, Lau Hui Kang tried to lead a hostile takeover of his brother’s newspaper on behalf of PBB interests, but failed, resulting in the permanent estrangement of the brothers (5 November 1996 interview with a Sarawak journalist). S.K. Lau’s unpublished manuscript confirms most aspects of this incident:

Many Chinese businessmen would become unscrupulous because of selfish aims and Lau Hui Kang was prominent in this field. During the 90's, Wahab Dollah, a State Legislative Member and the right hand man of Chief Minister wanted to buy over the Borneo Post English daily. Wahab Dollah contacted Lau Hui Kang who had the intention to sell the [Borneo Post] to the Malays ["Malays" is a shorthand reference to denote Sarawak's Malay- power structure led by Taib Mahmud]. In order to please the Chief Minister, Lau Hui Kang did not care [that his actions would make him a permanent] enemy of his brother Lau Hui Siong. . . . Luckily Lau Hui Siong was clever enough to unite all the small shareholders into a collective share. Thus, Lau Hui Kang lost his say.

Due to the shares of the English daily, the fraternal ties between the brothers . . . [split] up. The family members of Lau Hui Kang all resigned from the Board of Directors of See Hua which was under the control of Lau Hui Siong's family and Lau Hui Siong's family members resigned from the posts they held at KTS which was under the control of Lau Hui Kang's family (Lau 1995: chapter 12, page 4).  

While a substantial portion of the timber rent earned by the Lau family, and the unity of the family itself, were taken away by Sarawak's chief minister, it should not be forgotten that rent appropriated by timber giants such as the KTS group are used to support exorbitant life styles. Having said that, a search of articles of incorporation of the concessions licensed to KTS suggests that the most important recipients of rent from KTS concessions, outside the Lau family, were Taib Mahmud's family, proxies, friends and political supporters.

Table 4.10          KTS timber concessions in which family members, friends, proxies or political allies of Taib Mahmud are board members or shareholders

Name of  KTS timber concession	Name of board member or shareholder	Position in or percentage of shares held in company	Relationship to current chief minister, source of information.
Bigwood; Bintulu Lumber Development, 82,448 hectares	Datuk Haji Bujang Mohd. Nor	Director; Director	Former State Secretary of Sarawak under Chief Minister Taib from the early-to-middle 1980s (26 May 1997 interview with a reliable and informed academic).  Former state financial secretary.  Regarded as a potential candidate for the post of Governor.  Former chair of Bakun Hydroelectric Electric Corporation (28 May 1997 interview with a Sarawak journalist).  Current executive chairman of Harwood.  His position on the boards of these concessions may be a golden handshake for holding one or more of the posts mentioned above (12 August 1997 interview with James Chin).
Bintulu Lumber Development, 82,448 hectares	Mohd Amin bin Hj. Satem	Chairman of the Board	Formerly with Sarawak Economic Development Corporation (26 May 1997 interview with a reliable and informed academic).  Older brother of Sarawak's current Minister for Social Development.  Chairman of BIG, a company specializing in the manufacturing of industrial cases, redi-mix concrete, and quarrying.  Chairman of the Sarawak Chamber of Commerce (28 May 1997 interview with a Sarawak journalist).  Original director of CMS, the largest and most important financial entity in the state, and widely regarded as the personal financial vehicle of the chief minister of Sarawak (29 May 1997 interview with Dominique Ng). A "former PBB nominee" (12 August 1997 interview with James Chin ).
Bintulu Lumber Development, 82,448 hectares	Sim Kui Hock, son of Sim Kheng Hong (28 May 1997 interview with a Sarawak journalist).	Director	Sim’s position on the board of this concession is a political payback to his father, now deceased.  At one of the pivotal moments in the Ming Court affair, Chief Minister Taib’s press conference of 10 March 1987, when Taib announced the plot against him,  Sim’s father, then the Deputy Chief Minister, was one of two men who stood shoulder-to-shoulder with the embattled Taib (Ritchie 1987: 22).

Table 4.10 (continued)              KTS timber concessions in which family members, friends, proxies or political allies of Taib Mahmud are board members or shareholders

Name of  KTS timber concession	Name of board member or shareholder	Position or percentage of shares held in company	Relationship to current chief minister, source of information.
Bintulu Lumber Development, 82,448 hectares	Ong Guan Tee	Director	Ong Guan Tee is a SUPP nominee (12 August 1997 interview with James Chin).  He is also the son of Ong Kee Hui, a leading Malaysian Chinese architect of the handing over of Sarawak to Malaysia. (9 June 1997 interview with Sim Kwang Yang).
Hua Lim Sawmill, 14,568 hectares	Wong Nai Huo	Six percent shareholder	SUPP nominee (12 August 1997 interview with James Chin).
Juta Intelek, 39,753 hectares; Polymore, 41,709 hectares	YB Datuk Amar Hamid Bugo'	Director; Director	Current State Secretary.   Most powerful bureaucrat in Sarawak (19 July 1997 interview with Jomo K.S.).
Juta Intelek, 39,753 hectares	Haji Abdul Aziz Haji Hussain	Director	Current Deputy State Secretary.  Third in the chain of command of the State Secretariat.  Married to Taib's sister. (4 June 1997 interview with a state assemblyman)
Malkita, 31,435 hectares	Ting Ing Mieng	Managing Director and Secretary, Director of Lee Hua Sawmill, 50 percent shareholder in Malkita.	State Assemblyman representing one of the two Sibu city districts on behalf of the SUPP party, and a member of Chief Minister Taib’s ruling coalition.  He was for a long time perceived as someone who could deliver Sibu votes for to the Barisan (5 June 1997 interview with Jason H.I. Wong).  He is on the board of this company as a reward from Taib (12 August 1997 interview).
Malkita, 31,435 hectares	Datuk Ting Ming Hoi, former Sibu Senator, now deceased.	Director	James Chin says that Ting Ming Hoi is a "SUPP nominee" (12 August 1997 interview).
Malkita, 31,435 hectares	Abdul Ajis Majid	30 percent shareholder	State assemblyman from Mukah (28 May 1997 interview with a Sarawak journalist).

Table 4.10 (continued)              KTS timber concessions in which family members, friends, proxies or political allies of Chief Minister Taib Mahmud are board members or shareholders

Name of  KTS timber concession	Name of board member or shareholder	Position in or percentage of shares held in company	Relationship to current chief minister, source of information.
Malkita, 31,435 hectares	Mohd Ghazali Kipli	Director and 25 percent shareholder	Ghazali is a proxy for Taib Mahmud (printed research materials obtained from Institut Pekerjaan Komuniti on 28 October 1997).  Ghazali is also the brother of Baijuri Kipli, Director of the Sarawak Department of Land and Survey.  As such, Baijuri reports directly to the chief minister on all matters of land classification. (Aidan Wing told me that Baijuri is on the phone with the chief minister 3-4 times a week.)  On a daylong trip along a seldom visited stretch of Sarawak’s coastline, Baijuri told me that considerable amounts of forest reserve, including a large, already-logged over lowland peat forest that we were driving by, were being re-classified as agricultural land, and would be handed over to plantation companies.  At the same time, forest reserves would be re-supplemented by Native Claims Rights (NCR) lands in the interior of the state, thus wiping out the claims on these lands by the state’s indigenous groups.  NCR lands provide a sort of perpetual land bank that can be converted to forest reserves as old forest reserves become exhausted (5 June 1997 interview with Baijuri Kipli).  Baijuri is also an unofficial political advisor to, and emissary from, Chief Minister Taib.  I spent two days in the city of Mukah with State Assemblyman Aidan Wing and Baijuri, during the medical leave of the state assemblyman from that city.  Aidan and Baijuri were there to consult with Mukah's political elders on how to go about electing a new state assemblyman whom the community would find to be more suitable.  This discussion took place at a dinner on the night of 4 June.  Aidan Wing said of Baijuri, who is tall, thin, has a perpetual smile, is super-friendly, but is also quite disheveled, "Baijuri may look like a crazy man, but people respect his political advice.  If he tells you that you can win, then you can win.  If he tells you that you will lose, then you will lose. The chief minister respects his views."  It is widely believed that Baijuri reports regularly to the chief minister on all the political developments he observes during his travels around the state.

Table 4.10 (continued)              KTS timber concessions in which family members, friends, proxies or political allies of Taib Mahmud are board members or shareholders

Name of  KTS timber concession	Name of board member or shareholder	Position in or percentage of shares held in company	Relationship to current chief minister, source of information.
Polymore, 41,709 hectares	Tai Sing Chii	Director	Tai Sing Chii's position on the board of this KTS timber concession may be a reward for his support for Taib Mahmud.  S.K. Lau writes, “when he was having trouble raising political funds in 1970, Tun Abdul Rahman Yakub turned his target to Tai Sing Chii, owner of Pan Sarawak, and hoped that he could ‘borrow’ three units of outboard engine and a few hundred khatis of rice from the latter.  Later . . . staff of the company disclosed that Tai Sing Chii had donated about 3,000 dollars to Yakub.  So after the latter came to power, he repaid Tai Sing Chii for his donation for more than 3,000 times of the amount donated.  As a whole, Tai Sing Chii had made a wise decision.  Yakub could still remember him several years after he stepped down from the post of chief minister.  One day, when we met at Singapore . . .  Airport, he still praised . . . Tai Sing Chii. . . .  After Yakub lost his power, all of us thought Tai Sing Chii had lost his strong backing also.  It seemed that he was finished.  But he turned to support Taib.  Since then, he got richer and richer” (Lau 1995: chapter 18, page 1).

WTK

In the 1970s the largest timber concession holder in Sarawak was the WTK group, named for the initials of its owner, Wong Tuong Kwang.  WTK is Sarawak's fifth largest timber concessionaire with an estimated 400,000 hectares under license (The Edge 1995d). As with all of Sarawak’s large timber groups, making substantial payments to the chief minister was necessary for WTK to stay in business. S.K. Lau, half homespun philosopher, half investigative reporter, describes how growing demands for timber rent from Sarawak's successive chief ministers plagued the WTK group.

Once, I had a chat with Lau Hoi Kang [son-in-law of Wong Tuong Kwang] in his office for quite long. There came his brother-in-law Wong Siew Kwong. Lau then immediately opened the drawer taking out a few thousand dollars [in] new notes to give to Wong Siew Kwong. Lau said to him, "You immediately fly to Kuching to hand this money over to a Malay [the individual is not named in Lau’s account], and then bring back the 'license' quickly.”

The great majority of the rich men in Sarawak depend on [the] timber industry/business to amass wealth. The Sarawak state timber concession licenses can only be awarded to the Malays since the national policy is to safeguard the privileges of [the] Bumiputra ["bumiputra" literally translates as "sons of the soil" and is how Malays refer to themselves]. The Chinese can only be the contractors. But the Malays are well known for their laziness. They get the licenses but don't know how to do business. The Chinese would then offer them a lump sum of money. As such, they would have money to spend without using their brains. Therefore, it would not be necessary for them to learn to do business. However, nowadays they have learnt to become smarter and cleverer. A timber concession license [could] be bought for only one million dollars in the 70s. But when coming to the 80s, [Chinese timber businessmen] needed to pay at least ten times more for a timber concession license. This is the "conspicuous feature" of the Chinese. If one only has money, one would be able to do anything. As the saying goes, "With money you can make the devil turn the millstone." This is entirely correct. As learnt in the 90's, Wong Kie Nai paid the price of 10 to 20 million dollars just to secure a contract for a piece of timber forest.

Every time during the Chinese New Year, the Chief Minister would bring along his family to pay new year visits to the rich men in Sibu. This would be a good opportunity for the Chief Minister to make a fortune, since these prominent figures and celebrities would not hesitate to do anything to please the Chief Minister, including giving the giving of big and small "angpau."

Once I waited for the CM's arrival at Wong Tuong Kwang's house. Wong Kie Nai, the 2nd son of Wong Tuong Kwang asked me whether I knew others had given how much "angpau money" to the Chief Minister. I replied, "I learnt Ling Beng Siew had given 300 thousand Singapore dollars [$187,500] to the CM. What about you?” On hearing this, he said, "Only that much!" Though he did not tell me how much he had given, I thought it should be more than that amount" (Lau 1995: chapter 4, pages 1-2).

Aside from helping to enrich the chief minister, the WTK group has begun to strengthen its political standing in other camps. One of Wong’s sons, Wong Kie Yik, is now a federal senator (26 October 1996 interview with John Phua). WTK's corporate strategy is to tie up with other politically strong timber players. For example, WTK injected eleven of its timber concessions (totaling 254,000 hectares) and five mills into publicly listed Samanda. Completion of the deal was projected to allow the WTK group to emerge as the major shareholder in Samanda with a 32 percent stake (Sarawak Tribune, 1997c). Samanda’s chairman is William Lau, Wong’s son-in-law (Sarawak Securities 1997c: 23). Lau is close to timber baron Ting Pek Khiing and is the director of Ting's Seaga Airlines (5 November 1996 interview with a well-placed and knowledgeable source in Sarawak). Finally, Sabah timber baron Wee Boon Ping, who is actually a Sarawak resident, is a 9.9 percent shareholder in Samanda Holdings (Sarawak Securities 1997c: 23).

 Shin Yang

Shin Yang is the newest timber operator among Sarawak’s big five, and came to prominence in the 1980s. The group, headed by Ling Chiong Ho, has concessions in Sarawak totaling 400,000 hectares (Sarawak Securities 1997b: 22). Like all other major timber groups in the state, Shin Yang's share of Sarawak's timber concessions is contingent upon the degree to which it allows the chief minister's family to unofficially appropriate timber rent. Sanyang, a concession identified by an informant as belonging to the Shin Yang group, has two of the chief minister’s brothers, Mohammad Tufail Bin Mahmud and Mohammad Arip Bin Mahmud, serving on its the board and holding two-thirds of its shares (28 May 1997 interview with a Sarawak journalist).

In an effort to help promote the patronage objectives of the chief minister, the company in 1995 appointed Hamid Bugo to the position of chairman of the Shin Yang group (Malaysian Business 1995b). Hamid Bugo is Sarawak’s state secretary and, as such, is the most powerful bureaucrat in the state (19 July 1997 interview with Jomo K.S.). Another board member is Mohamad Asfia Bin Awang Nasar, the deputy speaker of the state assembly (28 May 1997 interview with a Sarawak journalist). Asfia was instrumental during Ming Court affair in eroding the support of the Tun Rahman faction. He also serves as an informer to Taib, via his brother Ali, on the activities of the Sarawak Alliance's PBDS and SNAP parties. Asfia is also the executive editor of Borneo Post, People's Mirror, Sarawak Tribune, and Utusan Sarawak, in which capacity he serves as the enforcer of news blackouts on the activities of the state's senior non-Melanau politicians including Abang Johari, a Malay, and Alfred Jabu, an Iban (Sayottaib 2001: sulit 6, dokumen 5).