The Edge: How old were you during Merdeka?
Tengku Razaleigh: Slightly less than 20 years old. I was doing my first degree in economics in London. I was in London representing the students.
Was there an opportunity to meet the leaders when they came there?
Yes… I met Tunku Abdul Rahman often, Tun Razak, Tun Sardon Jubir, who was a close family friend. As president of the students' union, I used to host talks and got student leaders to meet and ask questions. Our leaders also sought to meet and interact with us. It was most rewarding.
And what was the feeling then, and what did Merdeka mean to you?
Well a lot… we were students then, excited that we would be free of the colonial yoke. I was active on the international platform as at that time there were a lot of countries still not free from British and French colonial powers. We participated in demonstrations, forums and student activities. We were leaning towards Labour, which was ruling the UK then.
It was very exciting. In my case, I felt excited that now we had a chance to develop the country. Malaysians from all walks of life would be able to develop and participate in the country's development. This opened up new opportunities. For instance, we lagged behind in the field of education. We did not have many people to administer the country and we were fully aware that we were short of manpower.
The only way to upgrade ourselves was through education.
When did you actually take part in politics?
I would say when the visitors came to London, I was always actively involved in their work. The late Tunku always told me to do this and that. I joined Umno when I came back in 1962. Not many months after I joined Umno, I was elected divisional leader of Ulu Kelantan.
During Merdeka itself, you were in the UK?
Yes, in Belfast. I rarely came back.
When you came back, what did you do?
I came back when my father had a stroke. He passed away two days after I came back. I had plans to go back and finish my law. But before that, I went to see the Tunku, a friend of my father, to thank him for arranging an RMAF plane [to fly Tengku Razaleigh straight from Singapore to Kota Baru because of his father's condition]. The Tunku told me to stay back and help him reform Umno in Kelantan [Umno had lost to PAS in Kelantan then]. I told him I knew nothing of politics. I also told him about my intention to finish law. He told me it took him 25 years to finish his law [degree] and that I can wait for another 25 years.
But before I left the Residency [the Tunku's residence], he told me it was better that I go to the UN and get some exposure. So I was on a plane to the UN in early September. I remember that it was the 17th session of the UN general assembly. We had the Brunei rebellion and Cuban crisis. So, there went my law degree; I got embroiled in politics in Kelantan. I hardly came to Kuala Lumpur.
The chairman of the Indian Overseas Bank met me at a reception and offered me a significant block of shares and chairmanship of the bank. Here was my chance to own and participate in a bank. But Tun Razak got wind of it and told me 'no way' was I going to be the chairman of another bank as he wanted me to run Bank Bumiputra. I was already chairman of Bank Bumiputra then. I had earlier turned down the offer as I had told Tun Razak that I couldn't be in KL and also run Umno Kelantan. But Datuk Raslan [Abdullah], who was the first chairman of Bank Bumiputra, had a tragic accident and I was forced to take the job.
That was in 1969? Yes, after the riots.
So that is more or less your first government appointment? Yes. Tun Razak told me that I was destined to run this bank. I remember CIMB Bank was my bank in the early years. It was then known as Bian Chiang Bank when the owner Datuk Wee Hood Teck offered me 80% of the shares. It was cheap.
Somehow or other, word got to Tun Razak and he told me to give it to Umno. That was why it was passed to Umno. I had dealings with all the banks [merged under CIMB now] and it has become CIMB today and run by Tun Razak's son [laughter]. But I have no shares in anything… I sold everything.
Was Fleet Group formed then?
I had already formed Fleet Group to acquire The New Straits Times [group] from Singapore. It was because Tun Razak was under pressure from Umno Youth. Datuk Harun [Idris, the Umno Youth leader then] was going after him on why foreigners controlled the media in Malaysia.
So, your first business dealing for Umno was to bring back the New Straits Times into the party?
That is not correct. We had no intention to control businesses. But it so happened that to effect control of the New Straits Times, we either had to cancel the licence which Tun Razak would never do as he was a liberal or we had to buy it. But what I did was restructure the whole thing and relist where Umno owned 51%.
We had joint accounts with Singapore Straits Times on the advertising revenue. The identities were split, but on commercial matters we were run in consultation with one another to make it viable. Even editorially, although we did not follow Singapore leaders, it was done in consultancy.
Bank Bumiputra was formed in 1965?
Yes, as a result of the Bumiputera Economic Congress in 1965. I started it. I applied for the licence and recruited the staff. The first chairman was Raslan. I took over after he died.
What was the objective? Was it to lend credit to bumiputeras?
Like running a taxi, we cannot pick and choose our customers. It was the same thing with the bank. We opened our doors to everybody. But firstly, we wanted to familiarise the Malays with banking. Before Bank Bumiputra was established, not many had bank accounts. Some had never even set foot in a bank before.
Secondly, no Malays were employed in banks. Thirdly, there were not many Malays running businesses or had dealings with banks. We had the opportunity to educate and extend to them the instruments, but not to discriminate against others.
We also had to take care of shareholders' interest and make money if we want to move forward.
What was the objective after 1969?
It was the same but the focus was to train the Malays to become bankers.
But what would you say is your best contribution to the nation?
The manpower… we were able to train Malays in banking.
Exposing them as borrowers and depositors alone was not enough. We had to train them to become qualified bankers. So that they can sit at any table and talk banking and use the instruments the banks developed to finance deals they were supposed to handle. In that sense, we did contribute quite a lot because many young Malays with potential developed as new bankers and joined other banks.
They diffused into the system. But some banks did not like to recruit Malays although they were qualified and trained. This prompted me to acquire Malayan Banking Bhd. The training of manpower was not only to work in Malaysia but overseas. You can create and build assets but not human capital. In my first year in Petronas, I gave out 3,000 scholarships.
There was a run in Malayan Banking in 1966… It was before Bank Bumi was set up. There were problems in Malayan Banking because of some dealings then. Anyway, because the penetration of the Malays into banking did not work and the competition was mainly Chinese, Tun Razak said, 'Let's put this right'. I said we cannot put it right until we are able to get the Malays who are trained and qualified to go into the system. Otherwise, it will be difficult. Even if they enter at lower levels, it will take years before they can rise. So, that gave me the idea to acquire the biggest bank, which was Malayan Banking.
Pernas was formed then?
Pernas was formed after the second Bumiputera Economic Congress in 1968.
So, when did the deal between Pernas and Maybank take place?
It was in 1972… I acquired for Pernas from the open market less than 30% of Malayan Banking shares, but we effectively controlled the bank. We did not knock off anybody but slowly we got Bank Bumi staff to go into Maybank. We wanted to merge Bank Bumi and Maybank, but politically it was not right.
Firstly, it was Malays acquiring a Chinese bank, something that was not a good thing.
Secondly, Bank Bumi was formed out of a resolution of the Bumiputera Economic Congress and we thought maybe it would not be accepted by the Malays. So, we thought better to leave it as it is but get key people in there [Malayan Banking]. [The late Tan Sri] Khoo Teck Puat was still there as deputy chairman but slowly I was buying the shares from the market.
What did it cost at that time?
I can't remember. But it was much less. But during that time, I was also acquiring Sime Darby shares. The thinking was that it took Tun Razak a long time to grow rubber and oil palm through Felda. I said, 'Why take that long route?' Let's apply what the West had been doing and just take over Sime Darby, Guthrie, Highlands & Lowlands and London Tin, which we did.
Sime Darby was eventually a negotiated deal. It was not as acrimonious as Guthrie?
Yes, it was a negotiated deal when it came to board representation. We wanted BiWater (a UK-based company) to get out. Since we had controlling shares, we signalled to BiWater to get out. We ran the show but I never had any shares in any of the companies that we acquired for Pernas.
London Tin eventually became MMC [Malaysia Mining Corp]?
All the large mines [in Malaysia] were owned by one big company in London. When I talked to these directors [about buying them over], I remember bringing Ananda Krishnan along. These were old people who could hardly hear. Ananda remarked to me that it should have happened a long time ago.
What was Ananda Krishnan's role?
He was my nominee to see how the deal could be finalised. He was based in London and I only went there to see the merchant bankers and directors. All these happened in 1972 and 1973 before I got into Parliament in 1974. In 1974, I was busy with oil. Not only with the formation of Petronas but also negotiating with the oil companies.
The negotiations were tough, protracted. Can you tell us something about that?
I met Tun Razak one evening to ask for areas Shell had relinquished. Shell used to own all the concessions, given by the British, on our behalf without our consent. At that time, the price of oil was less than US$2.50 [per barrel], while the production cost was about US$7 to US$8. We did some brainstorming and forecast that the price of oil would rise. So, I went to Tun Razak and said, 'Why doesn't Umno apply for these concessions?' (Razaleigh was the Umno treasurer then.) So, we don't need to wait for donations if we could own the oil concessions. He told me to see him later.
That was the germination of the National Oil Corporation. The night after, I was at his house and he said, 'What do you think if we get all of the oil, not just what that has been relinquished, for us?' I was very excited as Umno was going to be a very rich party. But he said no and that it belongs to the country.
He told me to think of a corporation or company that could own all the concessions. I was taken aback. I said that is a tall order as the concession was with Shell. He also told me not to breathe a word of nationalisation as there was no money for it. Moreover, he said we wanted foreign capital, expertise and money to come to Malaysia.
We did not want to scare foreigners away. I was given the liberty to craft the law that would give us the power to negotiate [with the foreign oil companies]. Tun Razak told me to work with Tun Salleh Abbas [the solicitor-general then]. While drafting the Petroleum Development Act, from my experience with The New Straits Times, there was a clause in a memorandum of articles called 'management share'.
It means whoever owns the 'management share' controls the company. It is equivalent to 51%. The clause was smuggled into the draft and approved by the Cabinet. It empowered the government to form Petronas the minute the law was approved in Parliament.
Did you join the Cabinet then?
Tun Razak wanted me to join the Cabinet. I said give it to others who wanted to be ministers. This was the second time I was not keen. Tunku wanted me to join the Cabinet after I came back from New York, but he found that I was not eligible to be a senator because I was below 30. So, Tun Razak made me the chairman of Petronas with Cabinet ranking so that I would not lose out to the others in terms of seniority. By then, I was already an Umno vice-president.
What about the negotiations with the oil companies?
It is a long story… some of the oil companies used to put their feet on the table. They thought it was their oil… [they were] so rude and arrogant. So, I used to threaten them. I told them that I could own 51% of their company by buying one share in the company of theirs. It was a law in our country. Because of that, there were demands from the US that I be sacked as chairman of Petronas.
How did your entry into the Cabinet come about?
It was much later in 1976 when Tun Razak was very sick.
Did you know he was sick?
Yes, but nobody knew… not even his wife [Toh Puan] Rahah, who was with him. I was called to London. When I got there, he said he wanted to have a chat with me. Every day we used to have lunch and walked in the park. He was a worried man.
At that time, Tun Datu Mustapha (Datu Harun of Usno, Sabah) and Datuk Harun were giving him problems. He told me that the two were creating problems and that I must come into the Cabinet to resolve the problem.
This was because I was a good friend to both of them. I told him that I didn't think I could help and that was when he told me that he was dying. I said you must be joking but he then told me to see his doctor. His doctor came to see me two days before I left for Kuala Lumpur. The doctor told me that the prime minister could not go back. If he flew, he would die, and that he was suffering from acute leukaemia.
So your taking a post in the Cabinet coincided with Tun Razak passing away?
Yes. When Hussein formed the government, he persuaded me to accept the finance minister's post. Before the full Cabinet was formed, he called me again and asked me to be the deputy prime minister. I was the most senior vice-president. He (Hussein) said one thing against me was that I was not married. I was only 38 and a bachelor.
He (Hussein) asked me who between the two [Mahathir and Tun Ghafar Baba] was the best choice and I said Mahathir because he was the man of the future. The young would look up to him. Tunku was very unhappy.
The story that is commonly told is that Hussein wanted Tan Sri Ghazali Shafie to be the deputy prime minister but the three of you wanted him to choose either one of the vice-presidents.
No, that's not true. Ghafar, Mahathir and I met every evening together with Tun Abdul Rahman Yaakub (former chief minister and later governor of Sarawak) because of supporters pressuring us that we shouldn't allow Hussein to appoint Ghazali. It was the talk of the town. The rumour went to Hussein himself. Mahathir and Ghafar didn't want to go and see Hussein. Mahathir did not get along well with Hussein.
I knew Hussein well because we were in London together. So, I said why don't we all go and see Hussein. But before we got to sit down with him, Hussein said, 'Are you coming to talk to me about No 2?' He told us not to worry because he would choose from one of the vice-presidents. Hussein said I should be deputy prime minister but I said I was too young and not exposed enough. And that was why it went to Mahathir.
Can we talk about the BMF scandal?
Yes, not a problem. We decided to have a Bank Bumi branch in Hong Kong but the laws there could not give us a licence to operate a branch. But we could provide financial services if we opened a bank similar to that in Hong Kong. That was how Bumiputra Finance was formed. This was before I left to become finance minister.
As soon as it was incorporated, I left. That was in March 1976. I knew people were accusing me. I was sure there was some hanky-panky in the dealings between the finance company and the borrower. But the cause of the losses was not because of hanky-panky alone. It was because of [former British Prime Minister] Margaret Thatcher who announced after a meeting with the leadership in Peking that Hong Kong would be handed back to China soon. Property prices crashed.
But why was BMF lending so much in Hong Kong?
It lent more than its shareholders' funds. Yes, it should not have done that. But everybody who lent in Hong Kong was lending big, including Hong Kong Bank, to the same people. It was a matter of judgement, I supposed. But if there was any hanky-panky, I would not know except for the report by [former attorney-general Tan Sri] Ahmad Noordin.
What about Permodalan Nasional Bhd? Were you responsible for it?
No, it was the brainchild of Mahathir. Tun Ismail Ali set up the modus operandi. It was set up because we floated a few unit trusts and found that all failed. When we launched one new unit trust, the funds switched to the new ones. In the end, the unit trusts never got anywhere. We reformed and refined that with the help of consultants from the UK.
During your tenure as finance minister, what do you think was the greatest challenge?
I think it was to control expenditure. Everybody wanted to spend money.
In the later part of your tenure, you were said to be spending too much, especially in the 1980s.
We did not spend any at all because we had no money. In fact, I was guilty of controlling development expenditure. I wanted to get out of deficit because of too much spending. During that time, the ringgit was strong and yet we were able to push exports up.
What happened in 1984 when Mahathir replaced you with Daim?
Did he ever indicate to you why he wanted to replace you?
I was very strict with the spending. I was even against the spending on Penang Bridge. He wanted to telescope the expenditure within three years. I said you couldn't do that. You could borrow but how do we pay?
Could the 1985 recession have been avoided?
Not possible because it was global. The US and Europe were down while Japan was sputtering. For a small country like us depending on exports, we could not do much.
The first IMP [Industrial Master Plan] was only conceptualised in the mid-1980s.
Subsequent to that, the government changed the policies and went into heavy industries. Do you think that was the correct move?
Yes and no. What was the purpose of heavy industry? The objective must be very clear. Of course, we need to have one, but not on the scale that we have. We had debts of RM19 billion because of Perwaja [Steel]. Because of Perwaja, we had to impose taxes on the import of iron because we wanted to support the price of billets. We had to up the price of iron and rods domestically, which actually became a cost to housebuyers. That was my argument. Why do we need all these things?
The same for cars?
I think it was a drain on resources, especially when we had limited financial resources. Until and unless we were able to find a way to market our product, I think we should not drain our resources. The best thing that came to us was palm oil. It provided employment and foreign exchange.
So, you think we should have stuck to commodities?
No, I am not saying that. We should diversify. We needed to create jobs for the young. But we must pick the right kind of industries. Not something that we had to compete with the big countries. No way could we compete with them. There were ways to do it. You must have an objective. For me, the first objective should be to raise the standard of living. If that [heavy industries] was going to be a burden, it served no purpose. Our obligation was to our people.
What do you think of the NEP?
I am for it.
Were you part of the team that formulated the NEP?
I won't say I was involved in the formulation. I was involved in discussion and implementing the policy. The Malays were the majority and were left out by the British. You cannot leave the Malays in the paddy fields and woods. You must bring them into the mainstream. The areas where the Malays were, the income was low.
You must bring them over into the modern sector. How do we come in when all things were in the hands of others? You cannot go, Robin Hood-style, taking from some and giving to others. That is unfair, and we cannot be unfair. When the economy is growing, why not share it. If you had joint ventures with others, why couldn't you have joint ventures with local Malays? Let's share the wealth under the Malaysian sun. I believe in the NEP. Of course, down the line there were people who abused it.
There is abuse of NEP?
I won't say abuse of NEP but facilities given to them. It was not just the contracts. Even on jobs, if the Malays could get an easy way out, they would take it. This is the market… there is no way we can control that. I know people are very much against it. But to me if there was no NEP, it was going to be very much difficult for the country.
The PNB [Permodalan Nasional Bhd] is a success story on keeping shares within, but the same cannot be replicated by individuals given share allocations. Everybody sells because of profits. Even the Chinese do it but their profits are larger because they can hold on to the shares.
Do you think the NEP became too obsessed with the 30% equity instead of its original targets?
Some people are obsessed but some are not. When I was at Bank Bumi, I did not impose such conditions.
So going forward you think the NEP in its present form should not be changed?
No, I think we should refine it.
What should be changed?
In my speech in Parliament when [Datuk Seri] Abdullah [Ahmad Badawi] became Prime Minster, I said at lower levels the privileges (of affirmative policies) should be extended to everybody (regardless of race). I did not define it. At the higher level, we can only extend (such privileges) to the Malays. There should not be any abuse. Getting the licences and leasing them out is not acceptable. If they are not prepared to work, they should be deprived of it.
But what is the argument for extending it to the people already at the higher level?
Where are the Malays involved? In what sectors of the economy are they involved ? Now they have gone into housing which was foreign to them. Now there is only [Tan Sri] Mustapha Kamal [of MK Land Bhd].
Individually, they are not into property development but PNB is one of the biggest developers. But PNB is not Malay.
It is an agency belonging to the government. Mustapha Kamal is a Malay but he owns it with the support of the PKNS. But how many Malays are there like him? There are only a few. But the Chinese, you can go around and look at the list of listed companies. There are so many of them. Unless there is some sort of an intervention, I think it is going to be very difficult for the future.
Who is the prime minister you admire most?
Tunku Abdul Rahman. I was close to him. I was also close to Tun Dr Ismail and Tun Razak. But the man I admired most as prime minister is Tunku.
He was visionary and caring as a leader. I think he discharged his responsibility very ably. I don't think you can find another leader like him. He had feeling for the people and was non-racial.
What are the major challenges for the country?
It's unity. That is why I emphasised the NEP. If the wealth of the country is not equally distributed in a manner that is fair together with the opportunities, then I think we have a serious problem. I think the government also should look at the education policy. It should be reformed. I think we should review because of globalisation and if we want to compete. I think the young could be trained.
Do you think we are ready to move away from the NEP?
I don't think so. I think it is going to be there for another 50 years or more. Don't be idealistic.