We were not prepared to sacrifice our country to the bloody economic hitmen, and there was Danaharta
Recently, while clearing the cabinet at my office, I found the Final Report for Danaharta that reports its life story from 1998 to 2005. Danaharta's shout of excellence printed in the report gave me the feeling of satisfaction - that we saved the country without taking aids from the financial superpowers of the world. In short, the success story is narrated as follows:
The 1997 economic crisis roiled the country's banking system. Set up to help avert the collapse of the banking system, Danaharta brought relief to beleaguered banks. Danaharta dealt with 2,902 NPL accounts and from an NPL portfolio of RM50 billion, recovered RM30 billion - Recovery Rate of 58% surpassing the typical 20 - 50% experienced internationally.
For most of the citizens, understanding what Danaharta represents may be a bit difficult. Not all of us are bankers. Not all of us are accountants. Some of us who are teachers, shop owners, sales men or any other professions that do not revolve around money management wouldn't have a clue what the above paragraph means from a national pride perspective. They do not (and did not - back in 1998) realise that the country was saved from modern economic slavery. So, how do we ('non-monetary-professioned' citizens) comprehend Danaharta? Let me attempt to explain.
Basically, Malaysian banking system was about to go bankrupt when the recession hit many shores globally, including Malaysia. 1997 was not a good year indeed. Our banks had too many low quality loans, i.e. those with poor payment behaviours. These are called Non-Performing Loans ('NPL'). With almost all Malaysian banks owning high level NPLs in their loan portfolios, they were about to lose it all. Borrowers' businesses got hit by the economic turmoil. Loan repayment obligations were not being honoured.
We could have ended with a puppet government whose balls gripped by the hands of those economic hitmen.
Had these local banks collapse, Malaysia would have been swamped by international banks, such as Bank of America, and many other banks driven by the world superpowers. We would have been back under colonisation - only this time, through economic slavery instead of military. Something had to be done. The only path (other than selling our souls) was to save these banks with internal resources - with tax payers' money - a noble and patriotic decision. So, Danaharta was incorporated in 1998 to acquire all these NPLs at a discounted values from the local banks financed by the country's coffers which adds up to about RM3,000 million. Danaharta was to restructure these NPLs and recover as much as they can allowing the banks to concentrate on their business without the burden of NPLs. But of course, the banks had to take some hit. They took the hair cut of those NPLs being sold at a heavily discounted price to Danaharta.
I do not intend to go into detailed banking calculations of bloody Rate of Returns, Recovery Rates, Net Present Values and other similar crappy financial jargons. But what I do want to share with you is the lay man's comprehension of what we, as the citizens of this beloved country, has collectively contributed to this success. To do this, we need 2 sets of data. First, the financial information from Danaharta. Second, a set of assumptions for hypothesis sake. Here goes:
1. Let us assume out of the 30 million population of Malaysia, one third are minors and one third are retired citizens. This assumption may not be correct but hey,... it is believeable though. let's just adopt this assumption anyway.
2. So, we have 10 million of the population earning income from their employment. Now, let's assume only one third have to pay taxes. So, we are down to 3 million. However, many of us, dishonestly and irresponsibly avoid taxes. So, let's say out of the 3 million, only 1 million actually pay taxes.
3. As extracted from Danaharta Final Report 1998 - 2005, the shareholders' funds stood at RM1,864 million. For those who are financial illiterate, shareholders' funds represent the money Danaharta has at the end of its lifespan in 2005. What this means is that, out of the RM3,000 million funds injected by the Government, from the country's coffers, we have lost RM1,135 million.
4. Simply take the RM1,135 million and divide by the 1 million tax payers. Each tax payer contributed RM1,135 over the lifespan of Danaharta of 8 years. This means that the contribution averages at about RM142 per year = RM12 per month.
Wow! that is simply magnificent! Imagine that! What we, tax payers, had to do was just pay RM12 per month for 8 years to save the country from being dragged into economic slavery that could have deprived us freedom forever. How's that compared to taking financial aids from superpowers such as IMF? Sure we suffered loss given that NPL recovery was not 100% and that our banks still had to take haircuts. However, on a bigger picture, that loss only represents RM12 per month for us who pays taxes. We get to keep our country away from economic colonial masters. What is RM12 really? If everyone of us stop buying pirated DVDs for 8 years, it would have meant nothing to us really! In fact, even if we did spend that RM12 elsewhere, an additional RM12 still means nothing... 6 cups of coffee per month... no big deal.
What we, tax payers, had to do was just pay RM12 per month for 8 years to save the country from being dragged into economic slavery that could have deprived us freedom forever... RM12 means nothing... 6 cups of coffee per month... no big deal!
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