PETALING JAYA (July 23): Former prime minister Tun Dr Mahathir Mohamad has again sought to dispel the notion that Malaysia had indulged in "tin cartel operations" after being asked about the matter in a recent interview.
Expressing surprise over the question by a "friendly Malaysian interviewer", Dr Mahathir said he had already explained Malaysia's tin trading in his memoirs but noted that many Malaysians still believed Western media reports that Malaysia had cornered the tin market soon after he became the prime minister in 1981.
He said there was certainly no proof that the Malaysian government was a member of any association with anyone to fix tin price. "All we did was to appoint a Swiss firm, Mark Rich, to do the trading for us," he said on his blog chedet.cc on Monday.
In his book "Malaysian Maverick", veteran journalist Barry Wain had introduced Marc Rich & Company as a commodity broker represented by an Egyptian metal trader, David Zaidner.
According to Wain, Indonesia had rejected Zaidner's services but he subsequently found a "more receptive audience" in Malaysia, leading to Marc Rich's appointment as a tin-trading agent for Malaysia Mining Corporation (MMC) Berhad.
In his latest blog post, Dr Mahathir said that "shadowy" tin traders were at the time selling tin repeatedly in the London Metal Exchange (LME) in a move to depress tin prices. He explained that these traders had no tin, but as with short-selling shares, the tin they sold was not in their possession.
"When the price has gone down, the seller then buys the tin to deliver to buyers who had earlier bought at a higher price." Dr Mahathir said as a big exporter of tin, Malaysia knew the amount of tin being traded in the market was far bigger than physical tin and due to the low prices, the country had a big stock of tin.
"We also knew that the sellers would need physical tin to deliver when they have to fulfil their contracts," he said. "And when that time comes they would have to buy the tin from us and we could then name the price."
"We stood to make a good profit as the tin price in the market would go up. This would help us regain our earnings, which we lost through the low prices caused by the short-selling operations of the market players." Wain, however, told a slightly different story.
He said that MMC executives had incorporated a local company, Maminco Sdn Bhd, as the government's "secret vehicle" to carry out the tin-buying plan.
However, the London Metal Exchange (LME) later ruled that the sellers did not have to deliver. It permitted short-sellers to pay a fine and avoid having to purchase tin at steep premiums.
As a result, Malaysia suffered severe losses, as the tin that it had contracted to buy was not delivered plus it was carrying a lot of stock that it could not sell.
"The LME justified their ruling by saying we had formed a cartel to fix the price of tin," Dr Mahathir said.
"There was no hearing of our side of the story. And certainly there was no proof of any association or cartel formed by us." "I was annoyed.
The episode influenced my decision to buy British last and not to give contracts to British firms," he added.