In the present business environment, all business leaders throughout the world are faced daily with ethical issues at work environment, and sometimes they are uncertain on how to deal with the problem. According to Abuznaid (2009) some of the issues being faced by the business leaders include bribery, quality control issues, stealing, lying, fraud, conflict of interest, discrimination, nepotism, falsification of information, …show more content…
The company was reported to suffer losses of more than RM2.9 billion and the 1998 Auditor General’s report stated that Perwaja had been the biggest loan defaulter by not paying up federal loans of RM893 million this is based on News Straits Times (21 July 2000). The Perwaja Steel scandal has resulted in the country losing billions and billions of ringgit.
Perwaja Steel started in 1982 as a joint venture between the government-owned Heavy Industries Corporation and the Japanese company Nippon Steel Corporation. This was supposed to be a exhibit project in Mahathir’s push for industrial development. A steel plant costing RM1 billion was built in Terengganu to supply the domestic needs for steel products.
Nevertheless, Perwaja experienced production problems and was burdened with substantial liabilities. Considering the borrowings were in yen which were appreciated highly during the time, the interest payments were increased. In 1987 Nippon Steel pulled out of from the project. A year after, Mahathir brought in his friend Eric Chia to handle and operate Perwaja hoping to turn it around. He was given full authority to do what was appropriate to inverse Perwaja’s performance and reported directly to Mahathir. More funding was given to Perwaja using the government funding and loans from Bank Bumiputra and EPF. New facilities were built in Terengganu and in Kedah. …show more content…
Eric Chia was finally charged on authorizing inappropriate (not pocketing) a contract payment of RM76 million in 2004 after he escaped many years and of inaction by the ACA and the police. This only happened after Mahathir stepped down as Prime Monister and Badawi took over. At the end, in year 2007 Eric Chia was released by the courts.
In conclusion, The Perwaja Steel case did not only indicate political patronisation of the government, but it also by neglect, suggest the earnestness of capitalism by the various groups of professionals (i.e. accountants and lawyers) and regulators.
Although the case indicates serious misconduct of the company, its collapse cannot be easily understood without paying attention to the broader social, economic and political contexts of the case. It is unimaginable to accept that serious fraud within any organisations could take place without involvement of powerful and knowledgeable individuals such as political elites, regulators, and