By M Santhananaban
While in Hong Kong, I had the opportunity to bring to the attention of the government the availability of a commercial building that could serve as an office for our consulate-general and all related government agencies.
One of the now disgraced Bumiputra Merchant Finance (BMF) bankers was keen to handle this transaction.
I went above the heads of the mediocre, meddlesome Wisma Putra officers who were wary about this project.
They cautioned me, saying I was too junior, jousting for what was beyond me, and too pushy. They said I did not have the authority, and was just being impertinent.
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The problem could perhaps be summarised in one sentence: “Bureaucratic routine had robbed senior officials of energy and initiative,” as Lord Curzon, Viceroy of India (1899-1905) put it to Queen Victoria.
David Gilmour highlights this kind of “laggards, the languid and the lethargic” that Lord Curzon found in India in the early 1900s during his viceroyalty. This is contained in Gilmour’s impressive biography of Lord Curzon (David Gilmour, Curzon, Macmillan’s General Books, London, 1994).
Fortunately for me, the clean government we had then, under the leadership of then Prime Minister Hussein Onn, agreed to buy the building for HK$212m. The sale and purchase agreement was signed on 14 February 1980.
I was the sole negotiator for this purchase. Two colleagues stood by me as confidantes during the tense days in the second week of February 1980, when I was involved in negotiating this purchase. They were Jaafar Abdul Manaf and Teh Hock Keat.
BMF’s suspected strategy
At one stage the BMF chaps had convinced us the vendor of the property was asking for HK$264m. They had a good reason for this, but I did not know the basis of that reason then. They kept upping the price to a high of HK$308m.
Their reason, I suspect, was that the higher the price, it was less likely the government would commit to buying Lap Heng House. Then there would been a greater prospect of their flogging two floors of Gammon House to our government. After all, the corrupt-to-the-core BMF chaps were working in cahoots with George Tan.
The then secretary general of the Ministry of Finance, Thong Yaw Hong, in a letter dated 7 May 1980, commended me for arranging the purchase of the building and saving the government a lot of money (telah “menyelamat dan menjimatkan wang yang besar”).
Dr Teh Yik Koon in her well-researched and forthright book From BMF to 1MDB (2018) and Ian Robinson in The Joker’s Downfall (2014) provide an excellent insight into the lapse of conduct of BMF officials. Chooi Mun Sou also highlights such lapses in his memoir Malaysia My Home (2022).
I have relied on them for the following information on the first big loan granted by BMF.
On 19 December 1979 the BMF board approved a facility of US$292m to Plessey Investments, a company controlled by George Tan. That loan was used to buy Gammon House, one of Hong Kong’s most iconic buildings then, for HK$998m in early January 1980.
When George Tan’s purchase became public knowledge, most people were impressed. Tan became recognised as somewhat of a phenomenon.
In August 1980 Hong Kong was somewhat bedazzled again by fresh news that Gammon House had a new buyer for HK$1.68bn. It was a scam by George Tan, which involved transferring it to another of his companies.
At that time, however, a HK$700m profit in eight months on a billion-HK dollar investment seemed spectacular. BMF officials were complicit in this scam.
About three weeks before this startling news of the Gammon House purchase surfaced, in mid-December 1979 the then finance minister, Tengku Razaleigh Hamzah, visited Hong Kong en route to the US.
While in Hong Kong, he attended a grand reception to celebrate the third anniversary of the opening of the BMF office there. Prior to his departure at Kai Tak Airport, at the VIP lounge, he mentioned to me that a certain building was available for purchase.
At that point, I did not know the name or location of the building. When this information was intimated to me, Ibrahim Jaafar, the then general manager of BMF Hong Kong was also present.
After seeing off Tengku Razaleigh, when I returned to my office in Permanent Comfort Building, Ibrahim called and asked me if I could provide him with a letter to authorise him to look into this purchase.
I politely informed him I could not do so.
A week after Tengku Razaleigh’s visit, our office received word that a team from Kuala Lumpur would be visiting Hong Kong to look into the prospective purchase of Lap Heng House, which was located on 47-50 Gloucester Road in Wanchai.
After receiving this news, I contacted the BMF office to alert them of this impending visit.
We were promptly informed that no one from the BMF office would be available to help the team. Their senior people had prior bookings to leave Hong Kong for their well-deserved year-end holidays. It was also intimated to me that the vendor of Lap Heng House wanted a private low-profile sale, and there was already a firm offer from a buyer for HK$264m.
This preference for a private low-profile sale and the firm offer of HK$264m turned out to be blatant lies, which had been manufactured to dissuade the team from Kuala Lumpur from visiting Hongkong.
Fiction of Gammon
At that specific time, BMF was, it would seem, somewhat confident that two floors of Gammon House could be flogged off to the Malaysian government for an astronomical sum on the basis that property prices were soaring.
Or the BMF fellows were in a bind. They had provided a US$292m facility to George Tan on 19 December and obviously wanted to show that it was a sound bankable proposition.
It was claimed that if the Malaysian government bought the two floors of Gammon House, the new owners would rename the building Malaysia House. That would give Malaysia much prestige. Gammon, being a pork product, was offensive to Malay Muslims. Hence, it was explained the name change was necessary. This was the corridor talk at the time.
With the clout they thought they possessed with the then respected Cambridge-educated Lorrain Esme Osman as their chairman, they must have been certain they could pull off this deal with the acquiescence of the then finance minister Tengku Razaleigh.
They did not expect that a fledging first secretary from the Malaysian Consulate-General had the courage, confidence and connectivity to approach the finance minister directly or indirectly with his own proposal.
This approach to the finance minister came about in rather fortuitous circumstances. Wednesday, 30 January 1980, was a working day in Hong Kong. Our commission, however, was closed as it was Prophet Muhammad’s birthday.
I had on that day this great craving to have mee mamak. So I contacted my good friend, the grand chef Abdul Aziz Kassim, and asked him if he would oblige. I then invited him for lunch.
After lunch, both of us went to the market in Happy Valley. After I had parked my car, we walked to the market and bought the mee mamak ingredients. As we were returning to my parked car, a sudden downpour forced us to take shelter somewhere.
I spotted the Dolfra Furniture Hire company and popped in there to wait for the rain to stop. There I met Gwen Roden, the managing director of Dolfra. She offered us tea and we chatted.
In the course of our conversation, she asked me if the Malaysian government would be interested in buying a property in Hong Kong.
I replied we had explored such a possibility in December, but nothing had come of it.
Five days later, I received a call from a Christopher Palmer of Richard Ellis & Co informing me a building was available.
I went with this information to my boss, but he was not interested.
On 5 February 1980 I met Christopher Palmer at the Talk of The Town in the Excelsior Hotel in Causeway Bay at 6pm.
At this meeting, Palmer informed me that Lap Heng House was for sale for HK$247m.
I was somewhat sceptical because my BMF friends had earlier told me the vendor had a firm offer for HK$264m. Rather impetuously, I took a position, as a negotiating gambit, that my government would not pay more than HK$200m. I added my government would not be interested if the price quoted was too high. I maintained this position consistently.
When I went to meet the managing director of Lap Heng Company with Palmer a few days later, I maintained this HK$200m offer. At my first meeting with John Chuang, the managing director of Lap Heng Company, he indicated to me that their offer price had come down to HK$232m.
I enquired if they had done a valuation on the property.
Chuang indicated one had been done three months before our meeting. In October-November 1979 Lap Heng House had been assessed at HK$223m by Jones Lang Wootton.
In the upbeat property market of Hong Kong then, it might logically have been worth more in February 1980. But I did not budge from my HK$200m figure.
Chuang proposed to me that since he had a valuation for HK$223m and my offer was for HK$200m, could we agree on the midpoint figure of HK$212m?
I asked for time to take this up with Kuala Lumpur.
The Ministry of Finance agreed to the purchase price of HK$212m within a few days and remitted HK$5m to be paid as ‘earnest money’.
After prior consultation with KC Vohrah, our treasury solicitor, I engaged through Helen Kong who was then (she is still there now as managing partner) working for Hastings & Co to handle this transaction. I met the partners of Hastings and handed over our draft for HK$5m.
On 14 February 1980 the sale and purchase agreement was signed, and on 1 June 1980 we took possession of the building.
Work started on the fitting out and furnishing of the top four floors of the building in August. That work was not completed satisfactorily even in March the following year.
The remaining 20 floors of the building have since 1980 earned the Malaysian government rentals amounting to billions of HK dollars.
With the benefit of hindsight, it must be realised that by finalising the sale and purchase agreement with the help of certain senior officials (Mohd Salleh Ahmad, Yahya Baba, KC Vohrah, Fong Keh Chong and Sundaram), I had prevented the BMF chaps from having any role in the negotiation and purchase of Lap Heng House.
From the grapevine, I heard that a very senior BMF man had expressed unhappiness with the purchase, describing the building as being in the vicinity of brothels.
Needless to say, almost all the BMF chaps did jail time in Hong Kong in the 1980s.
There used to be the assumption that public service officials were indolent, incapable and gutless. I think I proved the opposite in 1980, in spite of my relatively junior status and standing within the Foreign Service.
That, however, did not help my career although it benefited my country’s finances immensely.
Dato’ M Santhananaban was the first secretary at the Malaysian Consultate-General in Hong Kong from November 1978 to July 1981