FORMER prime minister Dr Mahathir Mohamad received with indifference the news that the central bank had lost RM30 billion in forex trading in late-1993, said a former senior Finance Ministry official. 

“I had expected him to be outraged instead he looked quite normal,” former Finance Ministry Treasury second deputy secretary-general Clifford Francis Herbert told the Royal Commission of Inquiry (RCI) today. 

Herbert said he had only learnt of the losses himself, also in late-1993, when he was instructed by former finance minister Anwar Ibrahim to look into the matter. 

Herbert, however, said he could not recall the year Bank Negara Malaysia (BNM) incurred the losses
 
BNM referred to forex losses, reported at RM9.3 billion, in its 1994 annual report. 

Herbert said pursuant to Anwar’s orders, he had asked the secretary of the BNM board of directors, whose name he couldn’t recall, to provide him with the “relevant information”.

“I was provided certain documents by BNM and I did my own calculations and reported to Dato’ Seri Anwar Ibrahim by way of a note that the Bank suffered losses in forex transactions amounting to about RM30 billion but I can’t remember the losses were for which years.”

Herbert said he and Anwar both went to meet Dr Mahathir Mohamad in “late 1993”. 

“We briefed Tun Dr Mahathir Mohamad about the losses suffered by Bank Negara Malaysia amounting to RM30 billion and Tun Mahathir responded after being briefed with, “Sometimes we make profits and sometimes we make losses.”

When prompted by a conducting officer, Herbert described Mahathir as being indifferent to the losses. 

Herbert said Anwar was responsible for “defending Bank Negara Malaysia in Parliament”.

Herbert could not recall the first secretary-general at the time, believing him to be either Ramli Wajib or Ali Abul Hassan.

He said BNM was not required to report to the Finance Ministry, unless the latter requested it.

He recalled, however, speaking with the late governor Jaffar Hussein regarding the forex losses.

“At any point in time I did discuss with (Jaafar) to prepare a note for (Anwar) to reply in Parliament. (Jaafar) told me that most of the central banks at the time made losses on forex transactions because the forex market was very volatile.

Herbert said, “as far as he can remember” either former BNM assistant governors Abdul Murad Khalid or Awang Adek Hussin briefed Anwar on a plane back from Hawaii. 

During the trip, which time was not supplied, Herbert said, “We advised (Anwar) that he should ask Tan Sri Nor Mohamed Yakcop to resign because (Nor Mohamed), to my knowledge, was the person responsible for the losses suffered by BNM.

“(Anwar) agreed with us. On reaching Hawaii, I called up the secretary to the board of BNM to inform that (Anwar) had agreed that (Nor Mohamed) should resign from (BNM).”

He added that in “late-1993 or early-1994”, Lin met him at his office and told him that “BNM was basically insolvent largely due to the forex losses.”

“We discussed how to solve this problem and agreed that the Ministry of Finance would transfer its holdings of TNB (Tenaga Nasional Bhd) and Telekom shares to (BNM) at nominal price,” he said, adding that the central bank would then revalue the shares on a market-to-market basis in its balance sheet. 

Herbert said Anwar agreed to the transfers. 

Earlier in his statement, Herbert said he was not aware of a letter from the central bank written deputy governor Lin See Yan to Anwar, dated April 11 as he was was first secretary-general at the time. 

He added that he was not aware of another letter from the audito-general to Anwar, referred to as Audit(S)322/39(87)  

Herbert denied any knowledge of the forex losses suffered by the central bank prior to late-1993.” – August 30, 2017.