MAY 23 — It used to be when friends asked me what shares to buy, I would recommend a few solid blue-chips like Perlis Plantations (PPB), Public Bank (PBB) and Sime Darby.

I have also told them to buy and keep these shares long-term. In fact, I myself have gained quite a lot from the appreciation of these shares over the years. PPB and PBB are both selling over double digits per share now. Over the years, they have given out bonus issues as well as attractive dividends and people who have bought them even five to 10 years back would have made a tonne of money and those who have bought in the 80s, much more.

Financial people used to say that if you want to know about the Malaysian economy and its future prospects, just look at the conglomerate Sime Darby Bhd. It has wide-ranging businesses: retail, trading, plantations, industries, constructions, cars, real estates, healthcare, energy and so on. Those who bought Sime Darby’s shares before would have made quite a bit, too.

Many of the management in Sime rose through the ranks over the years and they have inherited the culture of being careful, conservative and prudent, since many of the companies in Sime’s stable like Dunlop Malaysia, Tractors, Guthrie, Golden Hope (formerly Harrison and Crosfield) and so on were formerly run by the British.

The British, despite the colonial power that it was, did many good things to Malaysia. Unfortunately, many of these we have squandered in the name of nationalism. Of course, there were some not too good things left behind, too; one of the most glaring being the racial divide that was a direct result of the British system of divide-and-rule. Despite that, we cannot deny that there were many good things that were left for us.

Among the good things left behind were good roads and communication, fair and independent judicial system, good healthcare, and a relatively good education system. Besides the road system that still remains good, all the other systems have turned from good to mediocre, and from mediocre to bad.

One of the legacies left behind by the departing British was the civil service, which was fair, efficient, and most importantly, it operated according to the rules and laws of the land. I would not want to use that to compare with the present civil service, since this is outside the topic I am discussing today, and I leave it to you to assess for yourself.

Another legacy was, of course, good business practices in many former British companies which had been taken over by Malaysians since our independence.

For those who have worked in these companies and rose to managerial positions, they have inherited a sense of openness, fairness and, most importantly, accountability.

But over the years, as the political and economic landscape changes in Malaysia, we can see a slow but definite change in business practices, too.

It is no longer how good a person run his business that determines the success or failure of that company. It is who that person is and whom that person knows that determine the success of his businesses.

Those who have connections and pull the right strings get all the lucrative projects, and not only that, slowly and surely a culture of cronyism and kickback started. To get business means that you must know the right people, but you must also be prepared to offer “commissions” for these “right” people to get the business you want.

Once the culture of cronyism sets in, the whole philosophy of how to do business in Malaysia changes. It is no longer about who has the best to offer the country, but rather who has the best to offer the decision-makers, both in public or private sectors.

We all know that once a culture has taken root, it is a mammoth task to change that culture. In this case, the roots are so deep that even a tsunami may not uproot the whole culture of cronyism and ways of doing business.

Not too long ago, in 2007, we had the Transmile debacle, in which accounting fraud covered up a multi-million loss and turned that loss into multi-million paper gain — to the tune of a whopping overstatement of hundreds of millions.

The share price of that company dropped steeply after this was made known and hundreds of minor shareholders, which could have been you and me, suffered losses because of the fraud.

Sime is no Transmile. It was a profitable company. It used to be very well-run and most fund managers and many private investors would invest in it as a form of “fixed deposits”;  as a hedge against violent share price movement, since as a blue-chip, even during a bear market, its price would hold relatively well compared to many other companies.

So the news of cost overruns and losses to the tune of a billion ringgit in this company is shocking news. How could that have happened?

Tun Dr Mahathir Mohamad has written in his blog that the company knew about the losses three years ago, but why wasn’t the public told of these? As a public-listed company, it has an obligation to reveal all these not only to its shareholders, but the public as well, since everyone of us could be a potential investor in that company.

What went wrong? Was it due to genuine mistakes, and bad business decisions? Was there any misappropriation? Was there any fraud?

These are the questions that need to be answered, and answer quickly, since as a company that prides itself as the cream of Malaysian economy, a loss of confidence in that company by investors, whether local or foreign, would have far reaching consequences.

If investors cannot even trust a blue-chip company like Sime Darby, what is there to invest in anymore?

* The views expressed here are the personal opinion of the columnist.