The three state-owned companies that CMS purchased were subsidiaries of the Sarawak Economic Development Corporation (SEDC). These companies quarry, manufacture, distribute, market and sell a wide range of steel, metal and aggregate building materials. With the acquisition of these companies, CMS obtained a monopoly over the manufacture and supply of virtually all non-timber building materials used in Sarawak.
At the same time CMS purchased the three SEDC subsidiaries, it also purchased a large Taib family holding company, Syarakusa Corporation. CMS's purchase of Syarakusa resulted in the Taib family obtaining majority control in CMS. According to Cheong, the financial writer, "At least three prospective substantial shareholders [of CMS] are presently disclosed, and they are the vendors of Syarakusa Corporation" (Cheong 1993: 56-60).
The fact that Syarakusa is a Taib family company is verified by a financial writer who notes that “the vendors of Syarakusa are Mahmud Abu Bekir Taib, Onn bin Mahmud and Sulaiman Abdul Rahman Taib who are related to the Chief Minister of Sarawak” (Cheong 1993: 56-60). These three are, respectively, the eldest son, the brother, and the youngest son of the chief minister.
The CMS deal was put together by the Taib family’s Sarawak Securities, a subsidiary of the family-owned Syrakusa Corporation. Prior to CMS's acquisition of Syrakusa Corporation, Sarawak Securities used the news of CMS's forthcoming acquisition of value-laden SEDC subsidiaries to drive up the price of Syrakusa Corporation beyond its actual value, and hence increase Syrakusa Corporation's level of ownership in CMS in the final instance. A well-placed and knowledgeable source in Sarawak observed that, “The Chief Minister used Sarawak Securities to bid up the value of Syrakusa prior to Syrakusa's being injected into CMS. The value of the three SEDC companies, drove up the value of Syrakusa Corporation, the Taib-family company” (14 November 1996 interview). The source’s argument, that the value of the SEDC shares drove up the value of the Taib family company, appears to be borne out by looking at the relative sums paid by CMS for the two sets of companies. CMS paid nearly twice as much for the Taib family’s holding company (RM 210 or $84 million) as they did for the three well-functioning SEDC companies (RM117 million or $45 million) according to Cheong (1993: 56-60). When asked to summarize the reason for the existence of CMS in its current form, the source said, "the personal desire for wealth of Sarawak's Chief Minister" (14 November 1996 interview).
Although the primary purpose of CMS appears to be the creation of wealth for the chief minister and his family, some leadership positions in the company are also reserved for political loyalists. For example, the Managing Directorship of CMS is Mohd. Effendi Norwawi whom Cheong says is,
one of the loyalists who stood by Taib Mahmud during the famous 'Ming Court Hotel' affair
in 1987 when an aborted coup was staged to unseat the Chief Minister. Taib Mahmud survived the crisis and came out victorious in both the 1987 and 1991 state elections. As vacancies in powerful places were available after the political dissidents had made their exit, a few people like Effendi were said to be rewarded for standing by the Chief Minister in his hour of crisis (Cheong 1993: 58).
Turning to another important Taib family business, the shipping of all timber exports in Sarawak goes through Archipelago Shipping (Dauvergne 1997: 109), a company almost entirely owned by the Chief Minister’s family.[1] Because shipping a cubic meter of timber to foreign markets costs about $40, and because Sarawak exported an average of ten million cubic meters of timber each year during the 1980s, the company’s cash flow was four billion dollars during the 1980s.[2] Hence, in addition to timber industry holdings, the chief minister and his family are enriched by this shipping monopoly. As Table 4.9 shows, the entire management and 92 percent of the shares in Archipelago Shipping are held by relatives of the chief minister or companies owned by them.
Table 4.9 Taib family ownership of Archipelago Shipping
Name of board member or shareholder | Position in or percentage of shares held in company | Relationship to Taib Mahmud, Chief Minister of |
Onn Bin Mahmud | Director | Chief minister’s brother |
Achi Corporation | 52 percent shareholder | Company 100 percent owned and controlled by Onn Bin Mahmud, the chief minister’s brother |
Fredahanam Bte Mahmud | Director | Chief minister’s sister |
Serira | 15 percent shareholder | Company 100 owned percent owned by the three sons of the chief minister’s sister, Fredahanam Bte Mahmud. |
Mohd. Arip Bin Mahmud | Director and 10 percent shareholder | Chief minister’s brother |
Haji Mohd. Tufail Bin Mahmud | Director and 10 percent shareholder | Chief minister’s brother |
Grand Shine Trading | 8 percent shareholder | No obvious connection to the chief minister |
Masba Holdings | 5 percent shareholder | Company 100 percent owned by Abdul Aziz Haji Hussain, who is married to the sister of the chief minister, Fredahanam Bte Mahmud. |
Source: documents obtained during 28 October 1996 interview with Institut Pekerjaan Komuniti
