Understanding the Problem: Corporate Corruption.

The greatest disservice the government does to Malay economic advancement is the creation of the GLCs. They have only served to crowd out fair competition and as a result, stifle the emergence of robust bumi business people. They run with the Malays hare and hunt with the corporate dogs.

So, if we really understand the problem, the least damaging solution is to dismantle most of the GLCs. That decision will only damage a small number of people but can benefit a lager number.

When I was serving as ADUN in the Pahang state assembly I often spoke about this issue. With all forms of support a typical GLC gets, it can be likened to a thoroughbred horse pulling a milk cart. Why? It does a lot of silly things. Like engaging in small bit businesses. Like developing a 5 acre land. Like riding behind government protection and doing all sorts of joint ventures. Like hiding behind the most overused excuse- we don't have the expertise so we JV.

That same knee-jerk answer can be given by any ordinary Joe who is not a GLC. You have people supposedly with above average intelligence giving answers like an LCE dropout!

My answer to that- if you don't have the expertise, don't do that business. You can't have all the support from the government only to tell legislators and hoodwinking the state's CEO, you can't do this. That would only suggest your bald incompetence.

You don't need a bloody GLC to do all these.

During the last session of the state assembly (it actually turned out to be my last session) I asked a total of 40 questions regarding the state GLCs. Therefore I am not engaging is an orgy of hentam sembrono. My main target was the numero uno of state GLC- the PKNP. I shall not repeat the questions I asked. It's on record in the state assembly proceedings.

My most troubling concern- why haven't the PKNPs of Malaysia, after years of protection and involving themselves in whatever businesses you have under the sun, haven't made the great leap from just a government company into a conglomerate? What's the problem? Yet I and many others see while the company is bleeding, some of its executives are living the lives of tycoons.

Apa sudah jadi sebenarnya? There are two possibilities. One, GLCs suffer from a dearth of corporate leadership of quality. Two, they have been so ravaged by that most insidious of wrongs- corporate corruption. The first breeds a culture of mediocrity; the second eats into health of the GLCs rendering them anaemic.

Sometimes we are misled into believing that corruption, which is understood commonly as the usage of whatever devious methods that allow money to flow out into private hands is just a question of comparing who receives and spends more. The obvious inference is whoever spends more create more chances for pilfering and leakages. That is only the surface of it.

It's not just a question of how much this particular CEO spent over this period compared to how much a later day CEO spent. Let me illustrate. You will remember that Tun Mahathir said he received and therefore spent less amount of money over a longer period than Pak Lah did over a shorter period. That would suggest that Pak Lah lagi takdak guna.

But suppose I compound the outlay that Dr Mahathir received and spent over that period at the current interest rate- maybe what Dr Mahathir spent was bigger than the amount spent by Pak Lah. One Ringgit 25 years ago maybe RM10 now. That is, if we want to go into the bolts and nuts of the argument. That's not the real thing I would be looking out for.

By focussing on nominal money spent, our attention is diverted from a more damaging practice of any GLCs- how tenders were given out. I would like to know for example, what was the value of tenders given by PETRONAS for example, say from 1981 to 2003 compared to the value given out from 2004-2009? And while we are at, can we get a profile of the successful business partners? All GLCs called their contractors business partners.

Apply the same inquiry on the GLCs. How much tender has been given out and to who? Did the GLC manage to pay its contractors? I am deeply annoyed at the inability of our GLCs to pay up contractors. How on earth did they budget for the capex in the first place? It has become the standard modus operandi of GLCs in Pahang when unable to pay up, will contra payments by surrendering state owned lands. Ini bukan bapak hang punya tanah tau?

In more serious cases, the contractor who isn't paid can demand future contracts. There have been so many cases of large areas of land alienated to state GLCs ending up being the property of once chekai contractors. The land in front of the present Universiti Pahang for example ended up belonging to a contractor because the state GLC was unable to pay for the earthworks it carried out. Some land area in Gebeng ended up with contractors because again, the state GLC couldn't pay. Another state GLC with its principal business in oil palm plantation is losing out hundreds of acres of development land because it's wholly owned subsidiary cannot pay the contractor. And the same management team responsible for the 'cessation' of the land in question is now proposing a management buy-out. Yes, I understand the problem, its a scam to may hay while the sun shines.

Let me illustrate further. In Pekan which is the seat of our PM, there is a mega project going on. It's the Tanjung Agas supply base. The whole area affected some 4000 acres belonged to the state government. The custodian of the land vests with PKNP. Terror you!. Who will develop the area so that it becomes attractive for the investors whom the sponsor of this Project has in mind?

I suppose it will be PKNP with the money that the Federal government has advanced- some RM 100 over million. They will do the same things that have been practised before. Give the earthworks and related businesses to a list of contractors. Most probably, they will be the same business partners as in previous projects. Then one day, because of whatever reasons which can be cooked up, the owner of this project which is the state GLC cannot pay these contractors. Senior executives will run to the MB and say- my lord boss, since we cannot pay, we need permission to contra. This way, we save the government from spending more.

The business record of a typical GLC as a rule is aptly described as being Much Thunder, Little Rain.

That's government linked company for you. It started life as company by letter of guarantee. That is, the government guarantees the business dealings of its companies. Since a government can never go bankrupt (it can always print notes), government guarantees are bankable.

Over the years they morphed into a multitude of forms. State owned enterprises, state economic development boards and so on. You legislate into being, a government company doing business in all sorts of dealings. From an economic standpoint a GLC is any company having some equity which belonged to the government. Some have said that to qualify as a GLC, the equity should be around 15%. This is not entirely correct- a GLC is any business enterprise with government equity in any amount sufficient to allow the government to dictate the development of the business. As long as the government rep can call the shots, or even have one veto power, it is a GLC.

But to me the most overlooked feature of a GLC is this. It is a business that enjoys full government protection and immunity from liabilities but enjoys private sector privileges. In other words, make public the liabilities and make the profits private property. Enjoy the profits exclusively, but spread out the poison. That has aided and abated unbridled corruption.

What we have actually condoned and turned a blind eye on, is the fact that we appropriate property belonging to the people and gave them to a bunch of people who make a mess of the trust given. So much so I am inclined to repeat what Proudhon in the 19^th century said:-

Property is theft! (French: La propriété, c'est le vol!) This was a slogan coined by French anarchist Pierre-Joseph Proudhon in his 1840 book What is Property? Or, an Inquiry into the Principle of Right and of Government.

If I were asked to answer the following question: What is slavery? and I should answer in one word, It is murder!, my meaning would be understood at once. No extended argument would be required . . . Why, then, to this other question: What is property? may I not likewise answer, It is robbery!, without the certainty of being misunderstood; the second proposition being no other than a transformation of the first?

Proudhon further explained his use of this phrase:

In my first memorandum, in a frontal assault upon the established order, I said things like, Property is theft! The intention was to lodge a protest, to highlight, so to speak, the inanity of our institutions.

I hope we shall not have to categorise our GLCs as being the subject of the above disapproval. And we have only understood half of the problem!