We in G25 fervently hope that the high-profile court cases involving award of contracts in the procurements for government ministries and departments will serve as a salutary reminder to cabinet ministers and civil servants that they have to follow the proper procedures in making decisions, as non-compliances will have financial implications to the government and on the economy. And consequentially the individuals responsible may have to face penal consequences.
As a rule, government procurements should be by way of tender procedure. Although the Treasury Instructions and Treasury Circulars under the Financial Procedures Act 1957 (Revised 1972) do allow for exceptions to be made on competitive bidding in government purchases, there must be a very strong reason to justify the need for direct negotiation. The reasons for departing from the tender procedure of competitive open bidding must be properly documented by the officers in charge so as to facilitate the Audit Department’s inspection and reporting to the Public Accounts Committee (PAC).
Civil servants must be reminded not to carry out instructions from their ministers without ensuring that such instructions are in accordance with the Financial Procedure Act, Government Contract Act 1949 and Treasury Instructions. This is because if there is an audit finding that the ministry has not followed the proper procedures, the Secretary General of the ministry, together with any other subordinate officer that carried out the unlawful instruction, will be held accountable for breach of procedures. The Secretary General is the designated controlling officer of the ministry budget. Both he and the officer concerned can be surcharged under the Financial Procedure Act for causing the government to spend an unnecessarily higher amount in the purchase of the supplies or in the construction of the government facility. Knowingly or recklessly carrying out unlawful instructions of a superior is no defence under the law.
The Prime Minister should take note that procurements through direct negotiations will almost certainly open the doors wide for favouritism, nepotism and corruption involving not only the ministers but also their wives, sons, and daughters. The lobby professionals will approach them for favours and access to their minister husbands and fathers. The gate keepers at the ministry that is to say, the personal assistants and secretaries at the minister’s office will also jump at the opportunity to get a share of the money. All these are the “rent collectors” as mentioned by a former advisor in the Ministry of Finance in his book about the culture of corruption in Malaysia. He was under the Harvard - Ford Foundation Advisory Service. The World Bank has also noted in their reporting, that while Malaysia has done well in developing the economy, there has also been much wastage, mismanagement, and unethical practices in government expenditures.
Malaysia was badly affected by the 1997/98 East Asia financial crisis. International agencies and many economists blamed the severity of the crisis on internal weaknesses among Southeast Asian countries in their system of checks and balance. It was the system’s weaknesses which gave the currency speculators the confidence that they could make money by attacking the SEA currencies. The bitter experience led to Malaysia’s central bank (BNM) making reforms in the financial and banking sector. The Securities Commission also introduced new guidelines on corporate governance to ban politically connected persons to sit as directors on the boards of public listed companies. A GLC Transformation Programme was introduced to promote good governance practices in their management systems.
Unfortunately, in the government ministries, there are no reforms to introduce checks and balance on the powers of the ministers as seen in the IMDB and LCS scandals.
G25, therefore calls on the government to introduce immediate reforms on the financial management in the Ministry of Finance and in the operating ministries. In this regard, G25 supports the call by IDEAS that the government proceed earnestly towards enacting the proposed Government Procurement Act (GPA) that was promised as part of the National Anti-Corruption Procurement (NACP) plan that was launched in 2019. Such a law if based on ideal models, such as the UNCITRAL Model Law on Public Procurement, will improve the current procurement rules, much needed to address long-standing issues in government procurements such as the rampant use of direct negotiation. The GPA will also help improve transparency in procurements.
The basic principle in best government practices is a system of checks and balance not only within the ministry but also with parliamentary control over government expenditure programmes like in the advanced democracies.
At the same time, the government should demonstrate political courage by getting itself out of business and divesting the less strategic GLCs to the private sector. A government that distances itself from active involvement in commercial activities is less likely to attract the kind of suspicions that local and foreign investors have on the integrity of our cabinet ministers. With less GLC involvement in the commercial sectors of the economy, the investment climate will improve to make Malaysia a favourite choice as a business location for the best multinational corporations in the world.
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