|Brother, can you spare a dime?|| |
|Posted by Raja Petra|
|Thursday, 27 March 2008|
When speculation and a false sense of security broke the back of stock markets and brought on the on October 24, 1929, America was essentially bankrupt, leaving 25% of Americans unemployed.
I refer to Zaid Ibrahim�s recent statements regarding getting rid of ancient laws. Before he delves into the discretionary powers of the Executive and Monarchy, perhaps he should focus or more mundane matters as to how a Deputy Registrar could dish out a Judgment in Default involving a multi-million ringgit suit without the defendants being nowhere in the court. Perhaps he should also look into laws that affect entrepreneurs, the impact of these laws on our economy and the country�s antiquated bankruptcy laws which belong very much to the Stone Age and are now in real danger of hindering the economic progress of this country in a globalised economy.
There used to be a time when entrepreneurs in this country who borrowed but subsequently failed and could not repay bank loans, just went to another state or branch and borrowed again and made a comeback, albeit, much stronger in view of the experience they had gained the first time round. But of course this is now not possible as a result of the wired banking systems and credit referencing agencies. Today, there is no second chance.
If the definition of success is absolutely dependent on the presence of failure, then in the Malaysian system, you must succeed in the first instance for failure would mean a life of ruin with no comeback. This cannot bode well for a young and inexperienced economy such as ours as no individual, no matter how creative and intelligent, would want to take risks anymore. In a world economy that is now closely interlinked, businesses are very much interdependent and no amount of calculated risks will guarantee anyone success. With no one wanting to take the risk of doing business for fear of failure and eventual bankruptcy,will have to depend only on established blue chip companies, GLC�s and FDIs.
When the economic crisis hit this country in 1997, many businesses were ruined. The government came to the rescue of the banks but not to individuals. In a porous legal infrastructure system such as ours where laws are heavily stacked in favour of banks, it is very easy for a business or an individual to be bankrupted when economic uncertainty strikes. Failure to pay rentals on time can result in a distress order being issued and the premises sealed or auctioned off. An individual who owes more then RM30,000 to anyone or a lending institution can have a bankruptcy notice served on him by substituted service without the individual even knowing about it. Even if he/she knows about it, it is likely they may not be able to afford counsel and still have a judgment in default taken against them. Even multi-million dollar businesses with numerous staff can be wound up by an unsecured creditor. Our bankruptcy laws are definitely not pro-business which doesn�t augur well for our economy.
When thecame to the rescue of the Northern Rock during the recent sub-prime mortgage financial crisis, there were initially many criticisms. However, the Bank�s Governor, , stood his ground and probably saved thousands of home owners from loosing their homes and possibly be bankrupted. Did Northern Rock behave irresponsibly? No. It�s problems arose from difficulties the bank faced in raising funds in the money markets, caused by the subprime crisis out in another country, the United States. In the United State, businesses can seek refuge in Chapter 11 of their bankruptcy laws from creditors, so that businesses can put their house in order and make a come back. That is how you save jobs, learn from your mistakes and grow. used to have a similar enactment called Section 186, but this fizzled out after claims were made that it was being abused.
When the government wanted to create an entrepreneur driven society under the New Economic Policy, it encouraged many Bumiputra�s to enter business without changing our bankruptcy laws to suit the times and protect new businesses. One of the pitfalls of new businesses apart from inexperience is poor financial management. Banks generally lent and that was it. There was little guidance. Most banks took the easy way out when businesses got into trouble by taking away that proverbial umbrella and shooting out legal letters of demand and following-up with winding up and bankruptcy petitions. New entrepreneurs were just sitting ducks if they defaulted on loan repayments as a result of poor business management or due to economic uncertainties resulting from economic crises elsewhere around the world. Even though entrepreneurs may be good in what they do, but this alone wasn�t enough to run a successful business. Bumiputra entrepreneurs are now known to be averse to taking risks and some now just do a Ali Baba deal and let others take risks for life could indeed be doomed if you are a bankrupt in.
Apart from the social stigma, you cannot open a bank account. You cannot run a business and international travel is restricted. Everything you own can be taken away and attempts by the Official Assignee, if they have the time of day for you, to discharge you in court, are inevitably blocked by your creditors. There are only three options. Live the life of a bankrupt till you die as there is no automatic discharge, leave the country or consider suicide which some bankrupts actually commit when you hear some of the cases that are brought up to the Credit Counseling and Debt Management Agency at Bank Negara. Bankruptcy is economic death and for some, especially if it is a dead end with no means of coming back, death itself is less painful.
The Insolvency Department that came previously under Datuk Kayveas at the Prime Minister�s Department must advise and make recommendations to parliament regarding the financial realities of a global economy and ensure that bankrupts in this country make a come back quickly. Incarcerating bankrupts who may hold a wealth of experience may be a greater loss to the nation. Our bankruptcy laws must change in keeping with the times. Making anyone a bankrupt should be made very difficult and if they are made bankrupt, automatic discharge within six to twelve months should be mandatory. The aim should be to get bankrupts to be useful to society again rapidly and contribute to its economy instead of burying them deeper in red tape.
When speculation and a false sense of security broke the back of stock markets and brought on theon October 24, 1929, America was essentially bankrupt, leaving 25% of Americans unemployed. Factories closed; mills and mines were abandoned. Many lost everything they had: their businesses, jobs, investments, homes, and self-respect. Many more were starving. That era was reflected well in one of America�s most enduring songs, "Brother, Can You Spare a Dime".
The average American just couldn�t understand how despite toiling for the land, he had to stand in a bread line. But it took the guile and genius of President Franklin D. Roosevelt who came out with his �� and quoted �The only thing we have to fear is fear itself�. He pointed out that economic laws are not made by nature but by human beings and no President can look on while men and women are starving, promptly putting Americans back to work. He created several new federal agencies which gave jobs to thousands of unemployed in everything from construction to the arts. must put its bankrupts back on their feet and to work quickly. Not condemn them to a life of despondency and hopelessness. In bankruptcy no one gains. Both debtor and creditor loose, with the tax payer ultimately having to fork out the bills.
Daripada Abu Umarah iaitu al-Bara' bin 'Azib radhiallahu anhuma, katanya: "Kita semua diperintah oleh Rasulullah s.a.w. untuk melakukan tujuh perkara, iaitu meninjau orang sakit, mengikuti janazah, menentasymitkan orang yang bersin, menolong orang yang lemah, membantu orang yang teraniaya, meratakan salam dan melaksanakan sumpah."