BY 1981, government-linked fund management company Permodalan Nasional Berhad (PNB) had accumulated substantial funds and was looking for opportunities to build its portfolio. Grabbing the chance to help return national assets back into Malaysian hands, it chose one of the biggest British-controlled plantation groups in the country, Guthrie Corporation Ltd.
Universiti Malaya business historian Prof Shakila Yacob, who co-authored the research paper, “The ‘Unfinished Business’ of Malaysia’s Decolonisation: The Origins of the Guthrie Dawn Raid”, says that one of the many reasons behind the raid, aside from regaining economic control of local assets, was in response to patronising treatment by former colonial parties.
Although PNB had a 25% stake in Guthrie, Guthrie did not consult nor give due respect to its Malaysian shareholder when making major corporate decisions, she says.
Prof Shakila adds that it wasn’t unusual for British-owned businesses to be condescending to Malaysian overtures at the time, and similar attitudes were displayed during other attempts at takeovers.
“[Malaysian-owned] Sime Darby tried to take over Guthrie and the bid was narrowly unsuccessful. That was a lesson learned for Malaysians at the time, and for [former Bank Negara governor and then-PNB chairman] Tun Ismail Mohamad Ali as well: if you want to acquire a company, you have to do it quietly. It’s the China Wall principle, every move must be kept a secret,” she explains.
The main personalities orchestrating the Dawn Raid were Ismail, PNB chief investment officer Tan Sri Khalid Ibrahim, and the Prime Minister’s economic advisor Raja Tun Mohar Raja Badiozaman. Two notable figures were British – financier Sir Evelyn de Rothschild and his deputy Jock Green-Armytage – who played an advisory role.
Other key figures who helped shape the policies for gaining economic independence at the time preceding the Dawn Raid were Tan Sri Tengku Razaleigh Hamzah (former Bank Bumiputra chairman), Tun Tan Siew Sin (finance minister from 1959 to 1974) and Thong Yaw Hong (director-general of the Economic Planning Unit from 1971 to 1978).
Khalid as chief operator on the team was essential. Having worked for London-based merchant bank Barings, financial advisors to Guthrie, he was experienced in takeovers and was pivotal in ensuring the success of the raid.
After receiving the green light, and with substantial funding from Petronas, it still took more than a year and another four months of intensive planning to ensure everything was executed perfectly.
“They raided the LSE [London Stock Excange] when the bell rang. They used the services of a large London brokerage firm called Rowe and Pitman, which had 50 traders on the trading floor. So can you imagine, 50 to 60 traders calling all shareholders and asking, ‘Are you willing to sell? We are paying £9’. They managed to snap up quite a bit within that half an hour, but it still wasn’t enough,” Prof Shakila explains.
Only a little bit more was needed to reach the 50% goal, and when efforts to convince OCBC Bank to sell its 3% stake failed, a last-ditch attempt was made.
“Khalid Ibrahim called the Kuwait Investment Office and managed to convince them to sell [their 5% stake]. They said it was because of Muslim brotherhood. That saved the day,” says Prof Shakila.
The impact of the Guthrie Dawn raid was not just financial – it was also a moment of pride and a symbol of economic independence.The aftermath
According to Tun Dr Mahathir Mohamed, the plan was kept covert with only a handful of people in the know; even he as Prime Minister then was not privy to specific details but had put his trust in Ismail and Raja Mohar.
It wasn’t long after securing the purchase when Dr Mahathir was told of the news – “I was elated,” he tells Sunday Star.
“I was very happy because this would mean that we would be able to regain most of the estates. Of course after that, to acquire more estates. At that time a lot of the foreign companies tended to be bought over by Malaysian companies. We encouraged that.”
Until today, Dr Mahathir maintains that the Dawn Raid was not “back door nationalisation”, as claimed by the Financial Times and other British parties.
“In the first place they should be selling their shares openly to anybody, but they refused to sell their companies to Malaysians who were capable of buying. That is the condition that they put. Against that, we can seize the assets and everything in an open nationalisation, but we want to do it according to the market. So we went in to buy shares like everybody else. Except that we coordinated the purchases,” he says.
“When people are not adhering to normal practice, we need to think of other ways. There were ways of getting around some of the conditions that they imposed. So we had to be smart in the stock market,” says Dr Mahathir, who adds that dawn raids are no longer necessary today as markets are more open.
The British were up in arms over the way in which the purchase was orchestrated and two months later, new rules were introduced at the LSE to prevent a repeat of such an incident. Among them was that after 15%, buyers had to wait seven days to acquire another 5%.Strained relations
The Dawn Raid happened during a tense juncture between Britain and Malaysia. Among the issues at the time was the hike in tuition fees in the United Kingdom for foreign students from selected countries, which included Malaysian students. European students, on the other hand, continued to enjoy tuition subsidies. Then, the United Kingdom flew a supersonic Concorde plane into Malaysian airspace without permission. In retaliation, and barely a month after the Dawn Raid, Dr Mahathir imposed the Buy British Last Campaign.
“We thought that they were taking us too much for granted, as if they could do anything although we were now an independent country.
“So in order to remind them that we are independent, that if you do something that hurts us, we are going to do something that will hurt you, we decided that we should Buy British Last,” says Dr Mahathir.
“This hurt the British in some way – I don’t know how much because our trade at that time was small – but nevertheless, it affected their trade with Malaysia and as we found, [then-British Prime Minister] Margaret Thatcher decided that to compensate Britain should give more scholarships to Malaysia.
“So that was a way of compensation and there was a request to meet me. So I put in the condition that I will meet her, but I will meet her at the Malaysian High Commission and not go to 10 Downing Street.”
All’s well that ends well, as the meeting in 1983 concluded on good terms with Dr Mahathir withdrawing the Buy British Last policy and relationships mended. Nevertheless, the early years of Dr Mahathir’s premiership marked a watershed moment in Malaysia’s foreign policy. Instead of relying heavily on Britain, Malaysia began looking elsewhere – for example the United States, South Korea, and Japan– to diversify its trade and diplomatic relations.
Sunday Star made several attempts to reach out to Tan Sri Khalid Ibrahim for this article.