KUALA LUMPUR, May 21 — Malaysia Airline System Bhd’s (MAS) chronic financial problems are the result of flawed implementation of the Malaysia Incorporated policy in the 1980s, according to observers.

DAP’s Kluang MP Liew Chin Tong said MAS — and by extension taxpayers — have suffered from what he described as former Prime Minister Tun Dr Mahathir Mohamed’s misguided attempts at privatising public enterprises, costing the country billions of ringgit in the process.

Liew said the airline’s decline began when Dr Mahathir brokered a privatisation deal that saw Tan Sri Tajuddin Ramli take out a RM1.79 billion loan in 1994 to buy a 32 per cent majority stake in MAS.

“In a big way, this was one of the key components along with the ‘Look East’ policy, Perwaja Steel, Proton and Plus Highway that made Malaysia Inc, and now all the problems are coming home to roost after 20 years,” the former Penang Institute chief told the Malay Mail Online when contacted.

Malaysia Inc, introduced by Dr Mahathir in 1983, hinged on privatisation in the government’s bid to cut bureaucracy and form closer working relationships between the public and private sectors.

Tajudin, a former MAS executive chairman, was badly affected by the 1997 Asian Financial Crisis and ended up selling his stake in the ailing airline to the government for RM1.79 billion — or RM8 a share —  the same he paid in 2001; the company’s closing share price at the time was RM3.68.

But the flag carrier’s problems did not end there. In the years since, MAS has undergone three business turnarounds at an estimated cost of nearly RM20 billion to the government.

The results? A share price that fell to 15 sen on Monday, the lowest since the 1997-98 crisis, on the back of a Wall Street Journal report that portrayed Prime Minister Datuk Seri Najib Razak as saying it may be too late to rescue the airline from bankruptcy.

“I think Khazanah cannot run from its responsibilities. All this concern about quarterly reports and the politicisation of MAS’s quarterly reports... the whole company is more interested in creative accounting instead of the overall health of the company,” Liew said.

Still, MAS’s dire performance under Khazanah is not an isolated case, as one aviation analyst points out.

Mohsin Aziz, who is attached with the Maybank Investment Bank, said that postal services firm POS Malaysia and national carmaker Proton, both former Khazanah wards, only improved on their performance after both were sold to DRB-Hicom.

“What Khazanah did in the past has not worked, so this time around they have to try to solve the problem in a different way. Whether you want to say it’s a failure or it didn’t work, either way it’s not too far from each other,” he said when contacted.

Mohsin and Barisan Nasional’s Pulai MP Datuk Nur Jazlan Mohamed both proposed that the government seriously consider offloading its stake in MAS and finding a capable private investor to take over the airline’s operations.

Nur Jazlan, who also chairs the parliamentary Public Accounts Committee (PAC), stressed that while bankruptcy is not a final solution to MAS’s problems, it could be a starting point to prime the company for a takeover while at the same time protect public monies from potential bailouts in future.

“Even if it’s by a foreign investor, it is okay. If the government runs out of options, then do that and push aside national pride in order to make MAS a commercial entity so that we minimise the use of taxpayers’ funds,” he said.

Liew argued, however, that selling off MAS would be an abdication of responsibility, especially after the billions in public funds spent over decades to keep the airline afloat.

He proposed that the PAC start a bipartisan committee to pore over MAS’s accounts from the past 20 years and ascertain how best to address the company’s issues.

“A more appropriate short-term measure is to open MAS’s books and allow for a very open inquiry into what went wrong and where all the public funds had been sunk into and, from there, find a way out,” Liew said.

Last week, MAS said the disappearance of Beijing-bound flight MH370 on March 8 with 239 people on board placed added stress on its operations, forcing it to re-examine more urgently its business plan after reporting its biggest quarterly loss since 2011, said a report by business wire Bloomberg.

It posted a net loss of RM443.4 million in the three months ended March 31, compared with RM278.8 million a year earlier, as recovery work continues with no trace of the ill-fated aircraft after nearly three months of searching.

MAS has been struggling with increased competition and higher costs from legacy issues even before the disappearance of the jet as rivals such as AirAsia Bhd flooded the region with planes and drove down fares.

The Subang-based company has lost a total of RM4.57 billion since the start of 2011.

The company missed its target to be profitable last year as rising prices for items including fuel, maintenance and financing wiped out revenue gains, and pointed to an unfavourable foreign exchange rate environment as an additional challenge this year.