When Ong Ka Ting was the party president, the MCA’s annual budget was presented, discussed and approved by the central committee in the first quarter of the year. But no one really knew just how much the MCA really had in terms of assets. As a political party, it did not have to be transparent in its financial reporting.
Even so, the MCA was regarded as being both asset and cash-rich. Speculation about the value of the party’s assets therefore varied, with most observers believing it was somewhere between RM1 billion and RM2 billion.
Most of the MCA’s income was derived from dividends earned by the shares it held in Star Media Group Bhd. Of the RM25 million spent annually, RM5 million was allocated to the president. This was a tradition begun by Ka Ting when he was president. This money enabled the president to allocate funds to schools, NGOs and temples as he visited the various constituencies in the country.
Ka Ting (photo) began the practice because he did not have any ministerial post and therefore did not have direct access to the resources of the government.
However, when Ong Tee Keat was the president, he continued the arrangement despite the fact that he was a minister.
Since I was not a minister when I served as president, I must admit that this RM5 million came in handy. It sounds like a large amount. However, since I travelled throughout the country frequently and attended many functions, I had to use the amount prudently. If not, I would run short of funds in the third or fourth quarter of the year.
However, I also felt that the management of MCA assets needed to be handled in a more professional and transparent manner. Despite attending many MCA central committee meetings between 1990 until 2010 when I became the president, I could not recall any detailed discussions of party assets and their management. Only the treasurer and the party president seemed to be acquainted with the true situation.
But the party assets belonged to MCA members. Hence, they were entitled to know how these assets were managed and utilised. When I was appointed chairman of party affairs under the Great Unity and Peace Plan during Ong Tee Keat’s presidency, I made the unprecedented decision that all MCA divisions, Youth and Wanita wings should receive funds from the MCA headquarters. But this was an ad hoc decision, not something based upon a systematic analysis of the party’s financial position.
As MCA president, I believed the time had come for the party to handle its assets in a more professional and transparent manner. In reality, the president and members of the central committee were only the temporary custodians.
After the party election every three years, a new crop of central committee leaders would emerge and become the custodians. As party president, I believed it was my job to manage the assets in the best possible way.
I asked Dr Fong Chan Onn and Chua Tee Yong to seek professional advice on how best to manage and utilise party assets. Dr Fong was the former dean of the Faculty of Economics at the University of Malaya, while Chua Tee Yong (photo) was a chartered accountant and the MCA’s MP for Labis.
While waiting for their recommendations, MCA, being the major shareholder of the public listed entity Star Media Group Bhd, had to nominate three directors to represent the party. During the central committee meeting on 25 May 2010, it was decided to appoint merchant bankers Lee Siang Chin and Kuah Hun Liang.
I also appointed Vincent Lee, a businessman widely regarded as the brains behind the success of many high-profile brands in the market. He was also the founder of Naga DDB, the nation’s largest advertising and communications agency, and the group executive chairman of Foetus International, a multifaceted conglomerate specialising in advertising, marketing, communications, customer relationship management (CRM), public relations and event management.
These appointees replaced Ng Beng Lye, Tan Foong Luen, Datuk Leong Tang Chong and Tan Sri Dr Sak Cheng Lum, all of whom did not seek renomination.
It was during this meeting that I emphasised that The Star newspaper should be managed professionally and be free from political interference by party leaders. This was to ensure that it remained a credible newspaper.
The former practice, in which party presidents used the English-language newspaper to attack party comrades, was despicable and should not be repeated. In particular, MCA leaders should not engage ghostwriters to attack political opponents in The Star’s letters column.
During the central committee meeting on 26 April 2012, I reported that Vincent Lee, who had since become The Star’s deputy executive chairman, had donated RM4.5 million to the MCA. The donation clearly demonstrated his desire to serve the party rather than obtain wealth by holding key corporate positions. We were thankful for his generosity.
At the central committee meeting on 13 August 2010, Dr Fong and Tee Yong recommended that the party appoint BDO Malaysia, a diversified corporate entity focusing on business and taxation matters, as financial advisers. An asset management team was subsequently formed with the aim of providing greater transparency and governance, as well as tax efficiency across all the entities owned or controlled by the MCA.
However, the financial affairs of The Star, Universiti Tunku Abdul Rahman (UTAR) and TAR College were not included. The BDO Advisory Service was asked to:
- ascertain the assets and investments owned or controlled by the MCA;
- establish a reporting and monitoring system;
- ascertain the governance status; and
- increase tax efficiency
- establish a reporting and monitoring system;
- ascertain the governance status; and
- increase tax efficiency
Purchase of The Star’s shares from Huaren Holdings
Based on the recommendations of BDO Advisory Service, the party decided that it should purchase the shares held in The Star by Huaren Holdings.
Since Huaren was the investment arm of MCA and wholly owned by MCA, this purchase could be likened to the left hand passing something to the right hand. But from the tax point of view, there was a big difference.
As a political party, the MCA did not have to pay tax. Hence, the move would yield considerable tax savings. According to BDO Advisory Service, the party would be able to save about RM37.5 million on the dividends it received.
The central committee subsequently agreed that:
- the power and authority of the trustees, namely Chua Soi Lek, Kong Cho Ha and Tan Chai Ho (“Trustees”) to acquire for and on behalf of MCA 313,315,760 ordinary shares of RM1 each in Star Publications (Malaysia) Bhd (“the Star Shares”) from Huaren Holdings for a consideration of RM1,281,461,458 at RM4.09 per share was confirmed. Since Huaren Holdings was wholly owned by MCA, no money changed hands. It was a mere paper transaction;
- the power and authority of the Trustees appointing relevant professionals to make an application for an exemption from the obligation to undertake a mandatory general offer and to advise on such an application was confirmed;
- the power and authority of the Trustees appointing relevant professional custodians to act as custodians for The Star’s shares and to operate a Securities Trading and Central Depository System (CDS) account were confirmed; and
- the power and authority of the Trustees to attend to any other matters in connection with the above-mentioned acquisition of The Star’s shares were confirmed.
After these transactions, The Star was directly owned by MCA.
Birth of Wisma MCA
BDO Advisory Services advised me that for long-term investment, MCA should invest in an office tower in the Kuala Lumpur city centre. This was to provide an additional source of income for the party.
Under the new proposal, a corporate trust entity would be set up that was directly controlled by the party headquarters. This entity would then collect rental from the tenants.
While Wisma MCA Sdn Bhd remained the legal owner of the building, it was suggested that a subsidiary also be established to manage the building.
After this reorganisation, the party would be able save on income tax incurred from rentals.
The above corporate manoeuvres were quickly and unanimously approved.
Central committee members were also surprised that none of the previous MCA treasurers, many of whom claimed to be accountants, had ever thought of such a thing.
I must thank BDO Advisory Services for their excellent tax-saving advice.
CHUA SOI LEK is a former health minister and MCA president. - Mkini
Source | https://malaysiansmustknowthetruth.blogspot.com/2018/10/how-mca-came-to-own-star.html
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