Abolish Bankruptcy Laws
By GREKO MAXIMUS
“Neither a Lender nor a Borrower be”
It is interesting to note that the government wants to do “something” regarding our bankruptcy regulations. But from media statements, the bills are completely useless unless the other culprits – the bankers – are also equally held responsible. Don’t forget, it was clowns like Freddie Mac and Fannie Mae who started the economic disaster of 2008. The US government had to step in to bail out these mortgage giants but both had by then set off a worldwide financial crisis causing whole countries to go bankrupt.
It’s rather peculiar that investment bankers openly frolic by the Riviera while a factory worker out in Manjung loses his job and is bankrupted because he cannot keep up with his house repayments. This scene is played out not only in the US, Britain and Europe but on a global scale. If the enactment of bankruptcy regulations were established to create an ideal world, that world cannot surely be planet Earth.
Back in Malaysia, why are there so many bankrupts? In all likelihood a failed business venture or perhaps they could have signed a personal guarantee for loans, the lenders of whom were probably our bankers. The majority are bankrupts due to credit card problems, car or housing loans. What happens to genuine businessmen who are made bankrupts? In this country, instead of cultivating the talent, our system would not only make them bankrupt but worse still keep them bankrupt till they drop dead instead of quickly bringing their wealth of experience back into Malaysian buisness. All that knowledge and skill gone to waste.
How many of these people at the prime of their lives suffer this fate and indignation? Our insolvency statistics indicate that there are 218,561 bankrupts in the country, 60 per cent of whom were not even aware that they had been declared bankrupt. Selangor recorded the highest number of bankrupts with 46,251 individuals, followed by the Federal Territories and Johor with 39,867 and 26,118 bankrupts respectively.
But the most frightening statistic is – the majority of bankrupts in the country are those aged between 35-54 years of age. This is the prime age where entrepreneurs can make things happen for a nation. If our massive drop in FDIs are anything to go by, the number of bankrupts in this country could easily hit half a million individuals in two years. And if Malaysia really becomes bankrupt by 2019 as Idris Jala predicts, then the unthinkable could become reality. Yes, with FDIs in free fall, subsidies removed and the Barang Naik policies of this government, Malaysia could wholly become a nation of bankrupts. Is it that easy to become a bankrupt in Malaysia even if its people are industrious and the country full of natural resources? Apparently so.
Imagine, an undersea earthquake rocks the Andamans, and a giant tsunami is heading towards Phuket, Langkawi and Penang. Malaysia’s early warning tsunami system picks up the signals and the government gives only a 15 minute warning to all residents along coastal areas in Tanjong Rhu and Cenang in Langkawi, and in Penang along Kampong Nelayan, Batu Feringghi and even along Gurney drive to evacuate. However the tsunami is devastating. Although only a few lives are lost as a result of the early warning, property damage is massive. Houses and apartments are destroyed like a pack of cards. Almost 20,000 homes are completely damaged and many shops and retail units are also destroyed.
The victims are left homeless and these home owners later discover to further dismay and disgust they are in deeper trouble as the fine print on their loan agreements do not cover natural disasters like earthquakes and tsunamis. Eighty percent of these victims had bought their homes using housing loans in excess of RM50,000. The high-end guys have taken loans amounting to RM200,000 to RM500,000. The government is in shock. It is trying to feed and house the victims. The victims have no jobs as their buisness premises are also lost in the tsunami. But life – and banking – has to go on. The victims don’t realize that a further nightmare is just about to begin.
All the victims default on their housing and property loans. A letter of demand is sent for full repayment by the bank. A writ for recovery of outstanding sums are filed in court. The victims have other things to worry about and they neither have the time, will, nor money, to deal with lawyers and banking demands. Three attempts are made to serve the writ on each victim. Malaysia allows banks to then go for substitute service. An ad is placed in the Sun/Metro Harian newspaper (whichever is cheaper) that these victims did not pay up their loans. A judgment in default is quickly obtained against the victims and executed.
As the judgment sums are more than the stipulated RM30,000 for bankrupting a person, bankruptcy proceedings are taken and bankruptcy orders obtained. The tsunami victims have their bank accounts frozen, whatever little assets they have under their names frozen, their names entered into rogue credit rating agencies like CTOS and CCRIS, and their passports flagged for no exit out of the country. In fact, all also receive a letter from the Insolvency Department to report to the office to surrender their passports. Meaning these victims can’t even go out of the country to look for jobs as maids or construction workers in nearby booming Thailand and Singapore.
You may ask, how come so fast? Malaysian MyKads are their worst enemy. They are truly prisoners of their own device. You are wired, tracked and trapped. In direct contrast, a Bangladeshi or Indonesian, having worked in Malaysia for at least two years, is allowed to borrow for a maximum of one house and one vehicle just by using his passport. If they default, all they do is return to their home country, get a different passport and do the same thing again.
A Malaysian holding a MyKad with a CTOS or bankruptcy problem will just have to look on as a foreigner gets to borrow from a Malaysian bank while he can’t. It bites even worse, when banks collapse because of mismanagement and are bailed out using Malaysian tax payers money as what happened in 1998 but the Malaysian with a CTOS problem is not be allowed to borrow but an Indon from across the Malacca Straits is allowed to borrow because his name or passport number is not flagged by the system.
Although a significant proportion of bankruptcy victims are businessmen who fall victims to poor buisness decisions or to world recessions, currency fallouts or even to the banks themselves messing up their own finances like what happened in 1998 and 2008, a great number of bankruptcy victims are young people due to credit card non-payments. Have you noticed how our bank’s marketing touts get victims to sign on at strategic locations at shopping complexes and even give out expensive gifts to entice prospective card holders to sign on?
But when you sign, you sign your life away. For in Malaysia, only the borrower pays a heavy price. Never the lender. Bankruptcy in Malaysia is a horrific social stigma. No one gives you a job even if you have a double degree and only 28 years old. Without a job there is no way you can pay back the judgment amount and the accrued “Ah Long” interest rate.
Insolvency officers will not have the time of day for you. Apart from their long coffee breaks, they are just loaded with far too many files and none of them have the gall to make discretionary decisions even to let tsunami victims off and get them discharged quickly so that they can start working again. Insolvency officers in Malaysia are generally poorly educated and have no clue how buisness or even the law function. They will just say big brother ‘THE BANK” will object and there is nothing else that can be done.
In a milieu such as Malaysia where our bloated inefficient civil service is such that it only penalizes a bankruptcy victim and further prevents the victim from getting a decent job as a result of the social stigma involved, bankruptcy regulations serve no purpose except render a human being useless to society. Neither borrower nor a lender be they say.
Why is it only the borrower pays by giving up his entire life to economic desolation just because he made a mistake as a teenager or didn’t pay for his education loan on time for a useless degree he got conned into signing up for a fly by night University? Or why should a tsunami, earthquake or flood victim also submit to economic desolation to both our bankers and our incompetent insolvency department officers who both agree that the bankrupt is a victim of an Act of God but decide the victim must pay, not God.
This Malaysian man made sandiwara must be put to an end. If we are to take this stance, then following the Great Depression and Pearl Harbour, Franklin D Roosevelt could just as well have advised all Americans to jump off their office towers or blow their brains out instead of his legendary statements “We must put Americans back to work” or the “Only Thing We Have to Fear Is Fear Itself”.
During the Great Depression, Roosevelt pondered and deduced correctly that America had a resourceful and hard working population; and the country was further endowed with huge natural resources. Then, how did the US become bankrupt? He realized it was because of its “money lenders”. Roosevelt had the vision and courage to term bankers as money lenders who had destroyed America and his government will instead foster creative effort to get America out of trouble.
As long as the banking system in this country are run as money lending institutions and not businesses, and our judicial instruments are run by substandard juveniles, we should not allow bankruptcy legislation at all in this country. Just open the newspapers. Without fail you will see new bungalows, semi-Ds and condos being offered, over and over again. Fresh property bubbles are created even before we can recover from previous ones.
The system is encouraged on one end by these “money lenders” and right on the other end of the scale even more bankrupts are created by these same money lenders with our judiciary just looking on as spectators. This cannot go on. Bank Negara, the cabinet, credit rating agencies and in particular the Ministry of Finance know about all these crooked deals. But they let it happen. Almost a quarter of a million bankrupts and still counting. Where do you think the country is heading? If this goes on, Malaysia will be the victim of Roosevelt’s money lenders conundrum of the 1930s way before 2019.
American bankruptcy laws are known as Chapters – Chapters 10, 11, etc depending on personal or corporate bankruptcy. And their idea and concept? The world’s largest economy believes that economies are like musical chairs. The moment you stop, someone drops out. And to prevent that from happening, they do everything they can to quickly restructure and put a person or corporation on its feet again and back to work. Bankruptcy as we see it in Malaysia doesn’t exist. In fact what we see in Malaysia doesn’t exist anywhere in the world except in Singapore.
Three weeks ago there was this talk show on TV showing some Pengarahs from the Insolvency Department and Bank Negara trying to rationalize that it is all the borrower’s fault and every cent must be paid back to banking institutions before victims are released from their bankruptcy. This is the type of Stone Age thinking that is going to stop entrepreneurs from taking any risks at all in Malaysia. Our banks are clearly bullying our own citizens and the current government is doing nothing to protect them. It ought to just abolish all bankruptcy laws. You will then see our bankers paying more attention to buisness instead of trying to make a quick buck through ATM machines, fraudulent banking charges and from cut throat interest rates gained through dishing out credit cards.
When money is borrowed, the bank is a partner to the deal. It has to evaluate applications and not shove credit cards or buisness loans down the throats of people who don’t want them or have little experience in buisness. Or if the bank think customers have a talent, they then must nurture, monitor and help in the buisness. This is called inculcating Financial Literacy. Entrepreneurs may have the skill but not the skill to manage money.
Malaysia should get off its bankruptcy hang ups and join the world in forging forward in the global economy. America and Japan, the world’s two largest economies are technically bankrupt but they make certain of one thing always – the music must never ever stop. If it does, some one will keep dropping dead until the music stops. And when that happens, the economy is dead. Muhyuddin’s changes have come in too little too late. As FDIs dry up, it is evident now there are hardly any local businesses to rev up our economy. Apart from the overt looting and corruption, Malaysia today is on its knees just like the US in 1929. There is no Malaysian Roosevelt to bail us out.
