The Nausea of Reading The Edge on Ethos’s Rohana and Omar Ong

Assuming Dato Seri Najib Tun Abdul Razak come out unscathed from the barrage of accusations laid upon him and winning the post of UMNO, he should be Malaysia’s next Prime Minister in March 2009.

The concern in many circles is: If everything falls into place as planned and Najib takeover the premiership, will there be another Tingkat 4 group?

The suspicion is Omar Ong and Ethos will be the new Zaki Zahid and ECM Libra. The signs from the PM's announcement of Eurocopter purchase, the swiftness it turn into a controversy and immediate PACC formation points to Najib being forced to accept many things he does not want and being pin for it.

Omar Ong and Ethos could be another.

Not Another Tingkat 4

Najib should not make the same mistake of creating another team of West Wing-type Tingkat 4 group of young advisers. Though claimed to be smart by virtue of getting tertiary education from British top Universities, they lacked the wisdom, foresight and most importantly the sensitivity.

They have no appreciation the impact their policy rearrangement, template policy formulation, and recommendations to our clueless Prime Minister have on the lives of the rakyat, and the constitutionally and socially relevant, socio-engineering programs.

Since the arrival of this group of claimed young geniuses into the political and corporate scene, seasoned politicians and statesmen like Tun Musa Hitam got taken in by the “wunderboy” genius hype of Khairy Jamaluddin and the Tingkat 4.

Musa went to the point of claiming Malays are ready to live without affirmative action with the presence of these “boys” in his defense to remove NEP policies within the Iskandar Malaysia economic corridor.

Malaysian became enthralled with Oxford and love or loath one of its alumni.

The wunderboy Khairy have yet to have a decent career other than as The Economist's cub reporter sent to Afghanistan to get blown up and subeditor checking on spellings and grammars, and a short talk show serie on NTV7. But, boy genius became the talk of the nation, questioned on his mysterious background, and dubbed by Lim Kit Siang as the richest unemployed.

The hype to equate Oxford or Ivy League with genius made Malaysia a laughing stock as though Malaysia had only come around to know of these prestigious Universities. All through the years, even since before Independence, hundreds, if not thousands of Malaysian already graduated from such Universities.

Ethos in the News

In two previous postings, it was revealed that Omar Ong, a principal of Ethos & Co. and an important player of Tingkat 4 team of charade, has been parking himself at Najib’s office aiming the position of Principal Secretary of the next Prime Minister.

In private, he and his associate at Ethos Consulting, Rohana Mahmood has been trying to disassociate themselves from Khairy and Tingkat 4 for the past year or two. But till to date, they have yet to publicly disavow their association with Khairy and Tingkat 4. The reason that can be deduced is simple. They are birds of the same feathers that flock together.

Ethos Consulting was in the news in the last week’s Oct 13th issue of The Edge magazine in an article entitled “Tapping private equity amid credit crunch” (the full article below).

The whole local financial circle should be aware of this article by now but they are generally driven by self interest and few morally corrupt to concede to the sense of nausea emanating from the article. Since The Edge only made available the article on-line this week, the whole blogosphere totally missed this significant "proclamation".

Rohana Mahmood, chairman and partner of Ethos Capital was promoting a new offshoot of Ethos Consulting, Ethos Capital. Ethos Capital will be pursuing the private equity (PE) funds business. Obviously the article is filled with snake oil claims but her sheer lack of any iota of humility leaves anyone reading stunned.

"People are going to invest in Ethos because of who we know …,” claimed Rohana.

With the subtlety of a battering ram roaming in a room of crystals, she made no reservation to reveal her General Partner, Omar Mustapha Ong’s close relation with the Deputy Prime Minister and Finance Minister Datuk Seri Najib Razak by virtue of his job as former Special Assistant to Najib, or more precisely Speech Writer.

Omar has been spotted in few Ministry of Finance meetings, supposedly representing the Ministry in the capacity as Adviser.

Myth of Ethos Claims

Omar was an equally brawny ram himself as he was quoted saying, “I make no apologies for that (being well connected), … there must be professionalism ability to execute…”

The claim of being professional and having distanced themselves from Khairy and Tingkat 4 are seriously doubtful.


Ethos Consulting was involved in the National Automotive Policy that resulted in the abuse of APs to few individuals associated to Khairy, depleted Proton’s financial reserves and development plans, and the mysterious sales of MV Augusta for a bowl curry mee at Time Square’s Laksa House.

Ethos was responsible to draw the blueprint to emulate the Temasik model for Khazanah for the sheer thrill of investing abroad and conforming to globalisation.

This resulted in a significantly reduced role of GLCs in affirmative programs and local investment, which compounded the heavy pruning of human resource and expertise. Not by coincidence, the much trained and experienced human capital is replaced by friends of young “geniuses” friends of Ethos and Tingkat 4.

It is for all to see that Ethos has equity (responsibility) in the widespread abuse of GLCs as unfair competitor to other local corporations seeking for Government contracts and its dubious role as conduit for channeling contracts to Khairy’s political cronies in his bid to buy influence to be future Ketua Pemuda UMNO.

To claim they have distance themselves from Tingkat 4 is ludicrous, Ethos continue to secure advisory works on NCER, ECER, and Sabah Development Corridor, SDC.

The Economic Corridors are old regionalisation ideas from Tunku Abdul Rahman days. It is suspiciously another conduit to channel the additional RM36 billion additional budget for the second half of RMK9 budget and the annual additional RM13 billion budgets extracted from ordinary people’s oil subsidy.

The Chairman of Synergy Drive should seriously reconsider his previous praises. These revelation proves that the young, confident, competitive, cosmopolitan and global thinking, professional Malay geniuses praised by Musa Hitam are pure shams.

They are still dependent on Government contracts!

The money they claim raised last March launch is still Government money!

The bulk of the 60% local portion of the RM250 million fund they secured came from Mavcap, a Government agency. Mavcap is currently embroiled in an investment scam by a claimed American company.

Be Scared, Be Very Scared, People

With much talk of the association of Khairy and the Tingkat 4 (and also Anwar Ibrahim) with Neo-cons and Singaporean interest, it would do no good to Najib’s image and reputation to have claimed advisers of his make dangerous claims of association with such insidious groups.

Rohana was quoted by The Edge as saying, “… I make no apologies about knowing who I know, like the Carlyle and Blackstones of the world, but at the end of the day, these guys deliver value. Full stop."

The Carlyle Groups is a beneficiary of the War on Terror on the nation and people of Iraq, Afghanistan and soon Iran. This PE group has the involvement of high powered Neo-Con political figures, such as former US President George H. W. Bush and former US Secretary of State James A. Baker III.

They generated controversies stemming from allegations of conflicts of interest. (Read Wikipedia here on Carlyle Group).

Whilst, not as controversial as Carlyle, the Blackstone Group is another PE group. PE could potentially be another controversial financial instrument like LBO or Option Trading or Hedge fund of the past for the new Millenium.

Rohana was described by The Edge as “energetic, aggressive and always in a hurry. She talks fast and moves fast, and gets the job done.” However, one should be wary of someone openly declaring her obducary in the most refine of words. As quoted “… you can kill me, you can bribe me, but I will not do this.”

With Rohana setting her eyes on the prize bull EPF’s RM300 billion fund to manage, every concerned citizen should be wary of the management of their hard earned pension savings..

How many market crashes have she experienced to make all sort of claims? Bulls get slaughtered during market crash. And, this current financial turmoil is not merely a market crash but the collapse of the capitalist system.

Be scared of wet-behind-the-ears giving advise and claiming to know the market well. Be very scared.

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The Edge 13 Oct 2008

Tapping private equity amid credit crunch

By Anna Taing

For private equity (PE) funds, crisis means opportunity. Indeed, history has shown that a private equity boom starts within 12 to 24 months from the end of economic downturns.

Ask Rohana Mahmood, chairman and partner of Ethos Capital, the industry's newest kid on the block, who is ready to start shopping for bargains.

"I think this is a good time, the timing couldn't be better for us, all we have to do is hunker down, wait a little longer, and we can pick and choose our deals… we are beginning to see some of the deals; some companies are already being taken private, and this must be an indication," Rohana tells The Edge in an interview.

The domestic private equity industry hasn't quite taken off in a big way, despite the fact that it has been around for more than a decade now. While the industry has flourished in Indonesia after the 1997 Asian financial crisis, private equity did not make a big imprint here probably because the Malaysian corporate sector wasn't as badly hit, and many had turned to the Corporate Debt Restructuring Corp (CDRC) for help.

The private equity industry has its roots in bank-backed funds that served to complement internal loan portfolios and manage debt-to-equity conversions. The industry evolved further when the government provided seed funds for selected sectors, ICT and biotechnology in particular.

In recent years, more than a dozen standalone PE funds have sprung up, but most have remained small. The biggest and most successful is Navis Capital Partners, a regional PE firm based in Kuala Lumpur founded by a group of former Boston Consulting executives. Navis, according to news reports, had recently liquidated its first fund, recording an internal rate of return of some 40%.

A watershed year

For the longest time, the PE industry has remained anaemic but Rohana believes with the latest crisis, PE is set to take off in a big way. "This is a watershed, a turning point for the PE industry in Malaysia," she enthuses.

Indeed, Ethos Capital, a smallish fund that is a spin-off of Ethos & Co, a boutique advisory outfit that was set up six years ago, has already set new benchmarks for the industry.

In less than a year, it managed to close its first fund in March with an investment size of RM250 million, 40% of which are from overseas investors — not bad at all for a young industry upstart that has no track record at all. Rohana, the chief fundraiser, says she would have gotten more investors if she hadn't stopped. It is easy to see why.

The lady is energetic, aggressive and always in a hurry. She talks fast and moves fast, and gets the job done. The fact that the key members of the founding group are perceived as being very well connected politically helps.

Rohana's general partner, Omar Mustapha, is said to be close to Deputy Prime Minister and Finance Minister Datuk Seri Najib Razak. Indeed, Omar is a former special assistant to Najib.

Both Rohana and Omar, however, while acknowledging that connections do help, stress that professionalism and the ability to execute are just as important.

"I make no apologies for that (being well connected), I think as in anywhere in the world, if you know people, it will help, but what is important is that there must be professionalism, ability to execute. Gone are the days when network alone was important. Frankly, in our business, we need networks regionally, and also a clear plan for value creation, because people will not give money based on network alone," says Omar, who is also managing principal and director of Ethos & Co.

Rohana echoes this sentiment. "People are going to invest in Ethos because of who we know, and also because of what we can do, because I don't compromise integrity and shareholder value, that is something I will not do, you can kill me, you can bribe me, but I will not do this... so, yes, I make no apologies about knowing who I know, like the Carlyle and Blackstones of the world, but at the end of the day, these guys deliver value. Full stop."

She stresses that Ethos would not have gotten the kind of support it did if the investors did not appreciate the track record of the firm's partners.

Opportunities aplenty

Barely six months after Ethos Capital closed the first fund, Ethos Capital One, the US subprime crisis that has been festering since 2006, took a turn for the worse, and the world is today facing a credit crunch.

Rohana says Ethos Capital's timing has been impeccable. "The gods are smiling on us, and we still have RM200 million to invest, we should be in good shape, even our co-investors are all in very strong positions to invest," she says.

She believes that "under the current global economic crisis, private equity can do well, because we are looking at distressed companies, looking at those that need capital injection and those who are unable to grow because they are unable to get funding, so the alternative form of funding, naturally, is private equity fund."

Rohana thinks a recovery will not take place any time soon. "It is uncertain if the US economy has seen the worst of times. I think economic recovery will take longer than we think, anything between 12 to 18 months.

"As far as the PE industry and Ethos Capital is concerned, we see value not just in Malaysia but in the region, in fact we are doing this, we are just waiting things out," she says, adding that Ethos has recently made an investment, paying a valuation that is less than one time price to book. "It was a very good deal… this is a credit crunch, banks are not lending, all we have to do is identify the good deals," Rohana adds.

The heightening crisis has prompted Ethos Capital to expand its mandate. While before it wanted to focus on value creation and growing smaller companies for an eventual listing, it will now also look at distressed companies in the wake of the financial crisis.

"Yes, we will go into distressed companies, in fact, even if some companies go private, we will look at that. You can see some big funds in the US — Blackstone, Carlyle, KKR — they are already looking at buying stakes in big financial institutions, but for small funds like us, if there are opportunities to participate in a bailout form, we will look at them — be it distressed or companies going private — we will not walk away… but we will keep to our main objective, which is adding value to companies and then growing the business, and then either a straight sale or an IPO."

One of Ethos Capital's investments is in Masterskill, a nursing and allied health college in Malaysia that has been making profits exceeding RM40 million in the last three years. "We saw the potential for expansion… it can go to India, the Middle East, Indonesia," says Rohana. Ethos has put in RM12.88 million, and had targeted for exit this year when Masterskill goes for a listing.

If the IPO goes through this year, it will have been the largest, with a value of more than RM1 billion. However, given current crisis market conditions, market observers say the listing will most likely be deferred.

Rohana is already looking to start raising money for Ethos Capital's second fund end of next year, and this time, the goal for the fund size is lofty — she hopes to raise more than RM500 million. "I am looking at the Middle East, not just for the funding, but also at how we can add value to the various sectors of the economy there, like healthcare and education," says Rohana.

"I am very confident this is an opportunity for the Malaysian private equity fund industry to add value to the economy at large," she says.

In this regard, Rohana believes that there are many ways PE firms can play a role. One is investing in non-core assets of government-linked companies, and in the process, free these GLCs to concentrate on their core business. "The problem with the PE industry in Malaysia, there is a lack of deal flow — even if it is non-core assets; some companies, like the GLCs, hang on to them. If they can do better by divesting themselves of their non-core assets, why not? This is something we have to change," she elaborates, stressing that to bring this change will need government support.

Additionally, she thinks that local pension funds, like the Employees Provident Fund, can also tap PE firms for an alternative investment source, like what the pension and endowment funds in the US and Europe have done. "The EPF, for example, has some RM300 billion… in my honest opinion, we can do so much more with so much money," she says.

The PE industry is still relatively undeveloped in Malaysia but with the financial crisis still unfolding and banks reluctant to lend, PE firms that are agile and equipped with the right expertise will have a bigger role to play.

* Updated and edited on 21/10/2008, 23/10/2008