Guthrie Dawn Raid: Malaysia’s “The Italian Job”

Guthrie Dawn Raid was considered as one of the big momentum in Malaysia history because for the first time, the Malaysian government was successfully takeover on British company, Guthrie only in one day and without breaking a sweat. Source: David Gn in Flickr.

It’s unusual for me to publish a new blog on the weekday and not in the weekend because today is a special occasion to commemorate this event. For the last three weeks, I was watching videos from YouTube on Mahathir Mohamad and Anwar Ibrahim video blogs (vlogs) such as their speeches and debates in the Parliament, seminars, public discussion, meetings, constituency visits and etc. And one day, when I was searching another video on Tun M (nickname for Tun Dr. Mahathir Mohamad), I found one video about the Guthrie Dawn Raid which it was happen during his premiership on 7 September 1981. The video was in Malay language which obviously I can’t understand because I’m Indonesian (although Indonesian language was originated from Malay, but the words can be misinterpreted and confused me, only older peoples who were born before pre-1945 independence that can understand the Malay language), but fortunately, I can catch the explanation from that video about how dramatic was the Guthrie Dawn Raid which become one of the successful event in Malaysia history until today and still many people doesn’t know about it.

So, why the Guthrie Dawn Raid become the big momentum in national history of Malaysia and what was the impact for Malaysia? In order to find the answer, we had to look back on the national history of Malaysia especially during British colonialization in Southeast Asia in 19th and 20th century. Malay peninsula was under the British rule and the British saw that the peninsula had an enormous potential such as Singapore’s strategic place which could be the trade hub in Southeast Asia and new lands for plantations. Along with that, the British were established a trading company named Guthrie Company Limited (Malay: Kumpulan Guthrie Berhad) which was founded on 1821 in Singapore by Sir Alexander Guthrie. Guthrie Company Limited was contributing to introduced the new commodities in Malay region which is oil palm and rubber — now currently become the main export commodities of Malaysia — in 1896 and 1924. Guthrie become the second largest plantations company in Malay peninsula and Kalimantan island after Harrisons and Crosfield (H&C).

After the Malaysia independence in 1957, the British influence still exist including the Guthrie Company in the national economy. In the early days of Malaysia, the British companies were still controlling the Malaysian main commodities such as oil palm, rubber, tea and tin mines which supposedly after the independence was handed over to Malaysian people. The British control on Malaysian commodities become a main problem for the government, however the first Prime Minister of Malaysia, Tunku Abdul Rahman was reluctant to address this issue because he was afraid if the foreign companies in Malaysia especially the commodities companies was to be nationalized, those foreign investors will withdraw from Malaysia and it will bring the catastrophic on national economy. This is the reason why Prime Minister Tunku Abdul Rahman was allowing the foreign investors to control Malaysia main commodities in order to maintaining their confidence to Malaysia as part of to implement his nationalistic economy policy with the support from powerful Malayan/Malaysian-Chinese entrepreneurs.

Prime Minister Tunku Abdul Rahman was reluctant towards British companies who was controlling the Malaysian economy including Guthrie. Source: Malaysiakini.my

Until the late of 1970s, 60% of Malaysian corporate assets were still in the hands of British companies which shows the inability of Malaysian government to nationalize the commodities companies which become the vital sector in national economy. Guthrie Company Limited were become more enlarged on their businesses as the plantation they acquired was doubled from 175,000 acres in the beginning of 1970s to 194,000 acres in early 1980s with some new addition to the plantation such as cocoa. The strong foreign control on Malaysia commodities company was making the idea to takeover those companies become more difficult, partly was because the “colonial culture” that still existed inside Guthrie — this was also happen in other British companies in Malaysia at that time — which they were reluctantly to give the equal rights such as job positions to the Malaysian people and company shareholders although they were allowing only small percentages of Malaysian to held the position in Guthrie and become the shareholders as part of appeasing the Malaysian people.

The other issue of Guthrie was that the company were dodging with the Malaysian government when it comes to their cooperation such as helping the Malaysian farmers and rubber tappers to increase their production. Guthrie’s dodging maneuver was continued every time when they were approached by the Malaysian government and it was come to the point when Malaysian central bank, Bank Negara was pushing Guthrie to formed a new subsidiary company in order to accommodating the Malaysian plantation businesses through Guthrie-Ropel which was formed on 1966. This strategy was taken by Guthrie in order to appeasing the Malaysian government and their nationalistic economic policy. The new subsidiary company were owning 17% of the land shares in the entire country of Malaysia and Guthrie-Ropel company was offering 40% shares for Malaysian people to buy the land through Kuala Lumpur Stock Exchange (KLSE). However, as it turns out, Guthrie were deceiving the Malaysian people by giving them the lands which was unsuitable for plantation or agriculture activities such as the hilly lands.

Guthrie Company Limited (Malay: Kumpulan Guthrie Berhad) has monopolize the land shares in Malaysia and also dodging with the Malaysian government on their cooperation to resolving the issue. Source: Wikipedia of logos.

The deception of Guthrie was creating the frustration in the Malaysian government including the Malaysian people after the Guthrie-Ropel were cheating on the land shares issue. If we look on the Guthrie-Ropel shareholders, 60% of the shares were owned by British while 40% were owned by Malaysian which the 40% was still diversified with 30% owned by bumiputera (Malayans) while 10% were owned by Malaysian other ethnics which to be considered as the unfair percentages. The Guthrie issue was remained ignored throughout 1970s by the Malaysian government under Abdul Razak Hussein and Hussein Onn. However, after Mahathir Mohamad were assumed the office as Prime Minister of Malaysia on 16 July 1981, the Malaysian government had rapidly change their policy and began to pay attention to the Guthrie issue.

Before Mahathir Mohamad was taking the prime minister seat, there was an attempt to takeover Guthrie in 1979 when Sime Darby, former British agency house company by then were under the control of state-owned enterprises known as Permodalan Nasional Berhad/PNB (National Trading Corporation). Although it was unsuccessful due to the opposition from the Guthrie, but Sime Darby was successfully take over near of 30% shares of the company. Then, Prime Minister Mahathir Mohamad was begin to planning the takeover of Guthrie Limited Company by selecting several peoples who become the key players in the Guthrie Dawn Raid. Before we get to know deep how Guthrie Dawn Raid was planned, we need to understand the definition of “dawn raid”. For reminder, the definition of “dawn raid” is not a takeover a company using force like in heist movies such as The Italian Job, Ocean’s Eleven or Money Heist (La Casa de Papel). The definition of “dawn raid” in investment world means the practice of buying up a large amount of shares right at the open of the day’s trading with the goal is to amass a large number shares in a target company by one company to influence a potential takeover of the target.

Prime Minister Mahathir Mohamad was orchestrated the Guthrie Dawn Raid on 7 September 1981. Source: The Malaysian Reserve.

Mahathir Mohamad is known as the first Malaysian prime minister who came from the ordinary people, just not like his predecessors who studying abroad to Britain also and had a exclusive lifestyle such as golfing. He is known for a aggressive view towards Western countries especially against the United Kingdom which almost led to the fragile diplomatic relations between the two countries in 1980s. Mahathir’s aggressive attack towards the United Kingdom was began during the early days of his administration such as “Buy British Last” policy which creating the loss for British shareholders companies in Malaysia. The British government were also making a counterattack on Malaysia as well such as stopping the subsidies of the Malaysian students in the U.K. and raised the tuition fees for foreign students — limited to few countries including Malaysia — which was received with dissatisfaction especially from European countries. Mahathir gave the warning to the British government that if they continue this path, it will causes the loss in the long run especially it will jeopardized the British education high-standard reputation. Another move by the British government was to reject the Malaysia’s landing rights proposal for national carrier airline, Malaysia Airlines (MAS) in Heathrow Airport.

Since then, Prime Minister Mahathir Mohamad was began to counter British government actions towards the Malaysian government and give them the big blow attack and that’s when Mahathir was thinking about taking over on British company. His plan was originated one year before Mahathir step up as Prime Minister when he and Tengku Razaleigh Hamzah was held a position as Minister of Trade and Minister of Finance. Mahathir and Tengku Razaleigh were invited to a meeting held by Governor of Bank Negara, Tun Ismail Ali who were Mahathir’s brother-in-law to discuss the surprise takeover of Guthrie shares by buying them through large companies. Four months before the attack, PNB chief Khalid Ibrahim was given a task to prepare for Guthrie Dawn Raid plan and the strategies to ensure the plan was run smoothly. Khalid expertise on preparing Dawn Raid plan was came from his previous work experience in Barings which was one of the financial advisory firm for Guthrie along with NM Rothschild & Sons Ltd. Bank (now Rothschild & Co.) which he was asking help to takeover Guthrie during the Dawn Raid. He was obtained the vital information from Barings about Guthrie and large companies who owns Guthrie shares which could be used as the potential target during the Dawn Raid.

The Guthrie Dawn Raid plan was originated from Governor of Bank Negara Malaysia, Tun Ismail Ali and then the plan was passed on to Minister of Finance, Tengku Razaleigh Hamzah and Permodalan Nasional Berhad (PNB) chief, Khalid Ibrahim. Source: Personal documentation.

Then, the plan was began with finding the weak spot on the British investment law that were under London Stock Exchange Act and trying to exploit it to enable the Guthrie Dawn Raid. Under the permission from Prime Minister Mahathir, the state fund was allowed to be taken through three different state-owned companies such as Petronas, PNB and Amanah Saham Nasional Berhad (ASNB) with the amount of £282 million and was channeled through the bank account in Switzerland in order to facilitate the share purchasing — under the recommendation by NM Rothschild & Sons — and as fund hub during the attack. Several companies was listed as targets by PNB — using the information from Barings — in order to convincing them to sell their Guthrie shares to the Malaysian government. Those companies that were targeted by PNB are Genting Berhad, Bank Simpanan Nasional (BSN), OCBC and Kuwait Investment Corporation.

After Khalid was gathered the Malaysian companies who had Guthrie shares, it was concluded that there were 25% shares on Guthrie, so the Malaysian government was need only 15% shares to become the major shareholder in the company. The idea for the Guthrie Dawn Raid only can be achieved if the share purchasing were conducted simultaneously either in Malaysia and abroad and also without the knowledge of Guthrie’s management. During the early hours of Guthrie Dawn Raid, Khalid Ibrahim was tasked to approach BSN and Genting and told them to prepared for buying Guthrie’s shares and selling it to the Malaysian government while Tun Ismail Ali went to Singapore to met with OCBC to convinced them to selling Guthrie shares on 3.30 pm before the London market opens, however the meetings between Tun Ismail Ali and OCBC went bad due to rejection to selling the shares. Then, Tun Ismail Ali was calling Khalid Ibrahim in Kuala Lumpur to report the OCBC rejection and Khalid was responded with improvising the plan without OCBC and replacing them by approaching Kuwait Investment Corporation (KIC), then KIC was approved to sell their Guthrie shares to Malaysia. After the London Stock Exchange was opened on 9am (4pm in Kuala Lumpur), two broker companies was appointed by NM Rothschild & Sons on behalf of the Malaysian government to make transaction on Guthrie shares during the Dawn Raid. Those broker companies are Rowe & Pitman and M&G Investments.

Several Malaysian companies either state-owned or private enterprises such as Genting Berhad, Bank Simpanan Nasional (BSN), Amanah Saham Nasional Berhad (ASNB), Permodalan Nasional Berhad (PNB); Kuwait company, Kuwait Investment Corporation; and British companies such as NM Rothschild & Sons (now Rothschild & Co), Rowe & Pitman (not in the picture) and M&G Investments were contributed in the Guthrie Dawn Raid on 7 September 1981. Source: Personal documentation.

After receiving the green light from Malaysian government, on September 7, 1981, the attack was began with NM Rothschild & Sons was ordering M&G and Rowe & Pitman to purchasing Guthrie shares which M&G selling 11% out of 17% Guthrie shares to Malaysia while Rowe & Pitman were selling 5% shares to the Malaysia which it was purchased through numbers of British small investors. In 4 hours, the Malaysian government was acquiring 8 million shares of Guthrie with accumulated 50,41% company shares and Guthrie still to be kept in dark about the Malaysia attack. On the afternoon in London before the closing session, the Malaysian government has successfully taken over Guthrie from the British. Guthrie’s CEO, Mark Gent was reacting speechless after he was receiving the news from the media that Guthrie was taken by the Malaysian government on 7 September 1981.

The British government under Prime Minister Margaret Thatcher was responded regarding the Guthrie Dawn Raid by tightening the London Stock Exchange Act and other investment laws in order to avoid another dawn raid. British media was making the headlines by lambasting the Malaysia’s attack maneuver as “back-door nationalization”. Three months after the Dawn Raid, Guthrie shares were gradually owned by the Malaysian government and Tun Ismail Ali went to London to proceeds the handover of Guthrie management and moving it to Kuala Lumpur. In the end of 1981, Guthrie were 100% controlled by the Malaysia government. This event makes me remember with The Italian Job movie when Charlie Crooker and his friends stole all the Balinese dance golds at safe from his enemy in such of short time with the precising plan.

After the Guthrie Dawn Raid, several British largest plantation companies in Malaysia were began to selling their company rights to the Malaysian government such as Highlands & Lowlands, Barlows and Harrisons & Crosfield (H&C). The Guthrie Dawn Raid was caused tensions on Malaysia-United Kingdom diplomatic relations. However, leaders from both countries were able to restore their relationship during Mahathir’s state visit in United Kingdom in 1983. The British government was promised to Prime Minister Mahathir that they will offered the financial aid with the amount £160 million as part of subsidies for the Malaysian students who were studying in U.K. and the Malaysian Airlines (MAS) landing rights proposal was approved and now they able to landing in Heathrow Airport.

Malaysian Prime Minister Mahathir Mohamad & British Prime Minister Margaret Thatcher. Both countries were almost went into tensions after the Guthrie Dawn Raid, however after reaching an understanding, Malaysia-United Kingdom relations were improved ever since. Source: Time.com

The Guthrie Dawn Raid become the prove that the Malaysian government was able to takeover the British companies in Malaysia which supposed to be owned by Malaysian people and action for national self-reliance economy to pursue the national development of Malaysia which also become the visions of Prime Minister Mahathir Mohamad throughout his premiership from 1981 until 2003. Malaysia has proved themselves capable, brave and willing to take over something which supposed to be their rights and this is become a lesson for other countries in the world in order to improve their country development.

Mahathir Mohamad government action on Guthrie Dawn Raid becomes the inspiration for the policy makers either in the government either in the economy or financial sectors. In order to make a development for the country, sometimes we need to take a bold move/bold actions and sometimes using “out of the box” plan to make that move. Mahathir was understand that his action will received the backlash and it will be controversial, however he was implementing that action on behalf of the Malaysian people to give it back the rights of the plantation companies which supposedly owned by Malaysians, not the British. We can understand that the country needs a foreign investment in order to improve the national economy and implementing the national development programs, but there is a limitation between investing and exploitation which supposedly giving the equal rights and share to the host country. They had a responsibilities such as to absorb the local labor and not to exploiting them, but teach and advise them on how to run the company which gonna be a lesson for them that one day they could take over the company and enable that country to develop themselves.

Well, this is just my Thoughts from the Closet.

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Personal view on the world issues by Timothy Tatendang

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Thoughts from the Closet

Thoughts from the Closet

Personal view on the world issues by Timothy Tatendang

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