Letter: Penang ‘bribed’ Motorola to stay

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5 March 2008

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Highly-confidential correspondence confirms that the Penang state government had asked the federal government to offer a RM1 billion project to Motorola in a desperate attempt to stop the American telecommunications giant from pulling out of the state.

If this wasn’t done, the Gerakan-led state government warned Prime Minister Abdullah Ahmad Badawi that its “catastrophic impact” would be “politically very detrimental” especially in the run-up to the general elections on March 8.

pak lah and koh tsu koon and motorola factoryThe three-page letter, signed by outgoing Penang chief minister Dr Koh Tsu Koon, was addressed to Abdullah and dated Dec 3 last year. Malaysiakini has seen a copy of the letter.

According to the letter, the government would offer a RM1 billion project to Motorola involving the upgrading of the police force’s radio network in exchange for the multinational staying put in Penang and pump in an additional investment of RM350 million over the next five years.

Motorola, which has a manufacturing facility at Penang’s Bayan Lepas Industrial Zone, announced its RM350 million investment in the state on Tuesday.

The stunning revelation comes as the opposition intensifies its attacks on the Gerakan state government over its poor performance in reviving the island’s economy.

Koh, who appeared to be on the defensive, has repeatedly denied such claims.

The state’s sluggish economy has topped voters’ concern and is likely to be an influential factor when votes are cast on Saturday.

In the letter to Abdullah, Koh - who is also Gerakan acting president - began by stating that he was “very concerned” over disclosures that Motorola was on the verge of announcing that they would be “pulling out their entire operations in Malaysia”.

Koh however stressed that Motorola’s pending decision “was not a threat for a bigger and new contract” but a “necessary business strategic response” to the perceived lack of support from the Malaysian government.

The government had earlier decided not to extend Motorola’s contract to supply and expand the existing radio network of the police force and the project - dubbed the Government Integrated Radio Network - had been given to another consortium.

Three ‘dire consequences’

The letter further stated that Abdullah had earlier promised Motorola executives during a meeting in February last year that the company would continue its work on expanding and upgrading the police’s radio network, which has been put in place by the American giant in 1992.

motorola factoryKoh, in the letter, went on at length to impress on Abdullah the importance of Motorola continuing to invest in the state. This included the company setting up its worldwide headquarters in Penang for certain products.

The outgoing chief minister told Abdullah that Motorola “will have no choice” but to move their product headquarters and related operations to another country, most probably China which Koh said had been “wooing Motorola very aggressively”.

Motorola needed to make a decision whether to accept the offer to relocate to China by early this year, he added.

Koh also listed out “three dire consequences” should Motorola decide to pull out:

* It would cause a total of 10,000 jobs to be lost of which 4,000 are direct jobs in the Motorola facility in Penang and the remaining 6,000 jobs among Motorola suppliers and vendors in the country.

* It would be a “bombshell” on the electrical and electronics industry in the country and the decision will trigger a highly probable domino effect with other multinational companies pulling out.

* It will be “politically very detrimental” especially in the run-up to the general elections.

Koh, who has been Penang chief minister for 18 years, appealed to Abdullah and the federal government to reconsider its decision not to award Motorola a new project “in this special case”.

However, he pressed the case for Motorola’s existing contract to be extended.

“From what I gather, the retention and expansion of the existing communication system for the Royal Malaysian Police radio network will cost less than RM1 billion for 10 years, and not more than RM4 billion as was erroneously conveyed,” Koh stated.

He added that the cost will cover an upgrading of “an existing communication system already in full operation” over a 10-year period and he will try his best to convince Motorola to further reduce the offer price.

Koh ‘arm-twisting’

Koh also stressed that Motorola has invested an accumulated amount of RM5 billion in Malaysia over the past 35 years and that it has “contributed significantly” to the nation’s economic development.

He cited Motorola’s move to make an additional investment of RM350 million in research and development and manufacturing over the next five years to back his argument.

“I sincerely trust YAB Dato Seri (Abdullah) will assist Penang, and Malaysia, to retain a major investor, avoiding the catastrophic impact of a pull-out and also to allow the police to continue with expanding a tested and trusted radio network,” pleaded Koh.

The controversial deal was first hinted at by opposition PKR leaders in Penang on Thursday, but without providing any documentary proof to substantiate their claim.

jeffooi pkr pc allegations 010308 pic1PKR Penang chief Zahrain Mohamed Hashim - who is contesting the Bayan Baru parliamentary seat and who said he had read the letter - described it as Koh ‘arm-twisting’ Abdullah.

Koh, when quizzed on the matter by reporters on Friday refused to respond apart from saying the question was ‘vague’.

Five days earlier, Motorola had announced its latest deal to invest RM350 million in Penang over the next five years. It is no clear whether the multinational had been awarded a government contract in return for its decision.

Coincidently, the announcement served as a lifeline to Koh who was caught in a whirlpool of opposition claims that Penang had lost its shine due the relocation of many multinational companies to other countries.

Launching the Penang Progress Report 2008 on Wednesday, a visibly relieved Koh had said: “The announcement by Motorola that it would be investing RM350 million more for its operations in Penang yesterday proves that the state is still competitive.”

“The DAP is trying to run down everything but refuses to see the progress,” Koh was reported to have said.

By: Beh Lih Yi

Source: Malaysiakini