Recently we spoke to one of Taib’s key business partners in strict confidence. He explained to us what he described as the 10 main income streams that have turned the Chief Minister into a multi-billionaire over the past 30 years. In the process he gave us a fascinating insight into the business practices of Abdul Taib Mahmud.
They all involve the abuse of power, corruption and the exploitation of the people and environment of Sarawak. Our interviewee, who has done years of business with the Mahmud family, told us he believes that Taib is probably the richest man in South East Asia, having cashed in the Sarawak Rainforest.
Income Stream 1
Timber Licences– The Ministry of Forests issues timber licences for 5, 10, 15 years. It is the Chief Minister who decides the price and he demands money to issue them.
Cronies who deal with the Chief Minister are instructed to pay their bribes and kickbacks into foreign bank accounts outside of Sarawak, often in Hong Kong or Singapore in the early days.
The informant told us that, because the timber companies declare so little profit, very little tax is paid and hardly any of the money made from felling the trees came back into Sarawak.
Income Stream 2
Tonnage- On top of this, our informant told us, he charges the timber company a kickback of RM100 per ton of wood they log. This alone is worth RM2 billion a year, since for the last 30 years around 20 million tons have been felled each year.
Income Stream 3
Extending Timber Licences – Companies wanting to be listed on the Stock Exchange have a requirement that the expiry date for their assigned areas has to be at least 15 years, meaning they have to extend their licences.
They go to the CM who says “Ok can you see my brother Onn” [in the earlier period Onn managed Taib’s businesses in Sarawak and abroad].
Because the requirement by the KL Stock Exchange was 30% Bumi Shareholders the timber tycoon would invite a Taib family member of Taib’s choice to take these 30% of the shares for free!
But these family members are usually nominees – they sign a blank share transfer form and a blank director resignation form, which Taib takes and keeps in his safe or in the foreign bank’s safe deposit box. In this way Taib can make them resign whenever he likes and keeps ultimate ownership of the shares!
Income Stream 4
Achipelago Shipping- Using their control over the monopoly over timber export licences, handled by Onn Mahmud’s company Achipeligo, the Mahmuds charged US$ 4.00 per cubic metre in kickbacks from the Japanese shipping companies.
Since 16 million cubic meters were exported most years, this was worth US$64 million a year (RM200,000,000).
Another insider has explained to us the system. The logs would be weighed going onto the ships and every ship’s tally would be recorded and sent to Onn Mahmud’s office manager in Hong Kong, who was Mr Shea Kin Kwok.
The Japanese shipping companies would pay the money into one of around six companies in Hong Kong. In 2007 the Japanese tax authorities fined a number of companies for undeclared tax on some of these payments to the Taibs.
Income Stream 5
Achipelago Shipping (2)- Agency fees from the shipping company. Achipelago had the monopoly of all documentation for shipping. One shipment would have to pay US$2,000 in agency fees plus other charges.
It would amount to US$10,000 (RM30,000) per ship per visit. All this of course just added to the cost to the buyers in Japan.
Onn Mahmud was only a nominee in this enterprise, we are told. Taib would give him 10%. The insiders say that Achipeligo Shipping was the major ‘cash-cow’ for the Taibs. Onn had not wanted to take on the job of managing it at first, as he did not understand the potential, but in the end and it made the family billions in black money.
Income Stream 6
Privatisation of Government Companies- Taib corporatizes and then privatises state assets, selling them off to public listed companies, which are in fact majority-owned by the Taib family and nominees. Sarawak’s largest company CMS was formed in this way, it is mainly owned by Taib’s family and the Chief Managers are his son Abu Bekir and son-in-law Alwee Alsree.
According to our insider, the method is to pretend the state asset is losing money and decide to sell it. Before privatisation money is poured into up-grading the facilities and then it is corporatized. Then finally, it is ‘privatised’. He will make an offer from eg CMS to buy it and the negotiations all go on behind closed doors, where he represents the State of Sarawak as Finance Minister.
Taib makes a big play at the closing stages of the negotiations, when there is a meeting to make the final decision. He excuses himself on the grounds that he has an interest and leaves the meeting to be chaired by Jabu or George Chan, who waves it through.
Income Stream 7
Illegal Logging in Indonesia- Hardwood Timber Sdn Bhd licences wood which has been illegally logged and brought over the border, according to the business associate.
“They levy handling fees in the border area. They charge RM17 per ton. There are many, many little companies doing this. A lot of jobless gangsters”.
It legitimises the theft from the Indonesians. Indonesia has complained in the past, but it is still going on.
Income Stream 8
Federal Government Contracts- Nearly all the Federal Government projects in Sarawak are done by the Taib family companies. Roads, schools, hospitals – nearly all the projects that the Prime Minister is going around promising now as he tries to buy the election, will end up profiting the Taib family more than anyone else!
This is because the CM has the sole authority to endorse an application to pre-qualify to tender. In order to get a permit to tender for a project you need a supporting letter from the CM and generally only his family companies get them!
Hardly anyone else gets a chance, says our business insider. Some Iban companies do get projects, because the Federal Government does not want to be seen to be giving them all to Taib, but he gets 70-80% of them!
Once the Taib company has received the Federal Contract it then sub-contracts the work for a nice profit and lets someone else do the work with a much smaller budget. This means there is a likelihood that it will be sub-standard and everyone else is squeezed.
Income Stream 9
The Alienation of State Land to Oil Palm Plantations – Our business leader informant tells us that Taib charges at least RM 1,000-1,500 per acre in kickbacks.
This amounts to at least RM20,000,000 for a 10,000 hectare plantation His chosen negotiator will explain this to the purchaser. The licensee has to pay the money outside of Sarawak into an off-shore account.
Leaked records from the Land and Survey Department to Sarawak Report shows that around 1.4 million hectares has been handed out by land and survey for plantations. So if our informant is right this amounts to a very nice sum of money for Taib 1,500 X 1,400,000 is RM 2,100,000,000 or RM2.1 billion.
How it works is the person who wants land writes to the Land and Survey Department run by Taib. You pay the official premium to the Government, which is for example RM300-350 per acre, but on top of that it is the secret RM1,500 that you have to pay to Taib.
Now the prices are rocketing, Taib likes to complain to his business cronies that he regrets having sold so much off so quickly in the early years!
Income Stream 10
State Contracts- Taib has full control over these and at least 70% goes to his own family companies, bringing in hundreds of millions annually.
Recent eye-catching state projects that went to the Taibs have been the new DUN Parliament Building and the Borneo Convention Centre
Our contact says this is by no means a complete list of the money-making opportunities the Chief Minister has enjoyed in Sarawak, but it goes some way to explain the enormous wealth visibly enjoyed by himself and by his family. One other obvious way in which the Mahmuds have made even more money is their urban landgrabs. The areas taken by Raziah in Miri, Batu Lintang and Bintulu Airport, taken by Naim Cenderas are just some which have been covered by Sarawak Report.
Once this wealth has been taken abroad and invested in property and other ventures there has been a whole new opportunity to multiply the wealth several times over.
Taib is known to have done very well investing in rocketing property markets in the US, Canada, UK and Australia. However, he is also believed to have lost money in poor investments such as the Icelandic banks!