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Sakmongkol ak 47

ariff.sabri@gmail.com

Friday, 21 August 2009

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 19th 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!


16 comments:

Anonymous,  21 August 2009 at 10:36  

Franky have done quite well directly and indirectly working with the Pahang GLCs...
Any similar Bumi companies hv benefited as much?

justice4otk 21 August 2009 at 10:44  

New Blog here called Justice for Ong Tee Keat .

PM 21 August 2009 at 10:52  

An interesting write up..but crossed my mind why an ex Adun. With your caliber are you in the wrong camp or is there such thing as fighting from inside?

On GLC, I do have a problem with them, not the main but the subsidiary that cannot perform to my full expection... Reason funding.

Later I realised that this GLC sub com do not get any funding from the main holding...reason each sub com holds on to their profit and treat it like their own.
As such the main holding has no funds to provide to its sub com.

What amazes me is the infighting and jealousy affecting the company that I am dealing with. As a chinese I could see all these clearly, but what can I do??

This com I am dealing with has all the expertise and is doing very well ..and I am proud of that...but restricted in their performance by idiotic thoughs.

Where do I go from here...sue or not to sue. If I kick out this company there are 40 malays would loose their job....and I am close to them, friends now..you can say, but I am not getting paid.

Sheesh its difficult to make a decision.

GreenBug 21 August 2009 at 13:17  

If the country wish to go down the path of free enterprise, GLCs are the contrary. GLCs are part of a centrally-planned economy, not laiisez faire.

It is one thing to keep electricity and water and EPF under the government care but everything else should be dismantled. GLCs also stifle competition from the truly enterprising orivate sectors thus leading to inefficient allocation of resources and wasrages.

Anonymous,  21 August 2009 at 15:05  

Dear Dato'
Now I understand why you did not get reelected in the DUN.

Anonymous,  21 August 2009 at 22:14  

GLCs?

Ah, take a look at the national carrier.

It took Tajudin to bring the carrier to a fantastic new level. Every year - reporting losses, when the fuel price was not crazy yet.

Then it was taken back - and we were told about Widespread Asset Unbundling...You all know what it means?

Profits were reported...in exchange of key assets transferred to a newly created company : Penerbangan Malaysia Berhad.

But later the airline started to bleed again.

Someone from an oil company came in to plug the bleeding.

It did not last long...This year the GLC is making operational losses. Of course, after including some non-operational financial info, the final result is a profit of around 130 million ringgit for 6 months.

But is that how the business should be run?

If the core business is not profitable, how long can non-operational gains prop the profits of a company?

Its like Petronas making losses in its oil business, but making profits from investment in share markets.

And is that a benchmark business approach for other GLCs to emulate as well?

Why not...Here its Malaysia Boleh!

CHAIRMAN KAGA 21 August 2009 at 23:50  

SIAPA YG ADA TERNAMPAK KES PARPUKARI DIMINTA MENGHUBUNGI TERUS CHAIRMAN KAGA DI CHAIRKAN KAGA, FACEBUKU (LETAK DALAM SEARCH BOX) ATAUPUN PEJABAT PERHILITAN YG TERDEKAT (BUKAN YG MKN DUIT DAN KELUARKAN LESEN KEPADA PENEMBAK HARAM)
BERKHIDMAT UNTUK KAO ORANG

DARI MEJA CHAIRMAN KAGA

Ex Technokarat,  22 August 2009 at 07:02  

Let me relate my personal observation and experience on GLCs. Most of the guys calling the shots in GLCs are accountants, MBAs and some ex PTDs. The real workhorse (gurkhas) are the engineers, architects, surveyors, geologist and the likes who slogs in the back office.
Basically the tops guys just fill in the blanks in their spreadsheet with the " nett profit" already set at the end of the spredsheet.
Along the way of filling the blanks, if the "nett profit"shows red,they can simply adjust or tweak the inputs in between the column and rows of the spreadsheets.
These inputs mainly come from the reports and datas from the engineers, architects ,valuers or quantity surveyors.
This is when the intregrity of the back office professional is being compromised, to tweak or not, so my boss can show the world the project is viable and profitable.
The Ministers, bankers and the wheeler dealers would easily succumbed to the rosy pictures of the spreadsheet.
So whenever a project is successful who gets the accolades? But when a bridge collapse who will be hounded?

Anonymous,  22 August 2009 at 17:18  

its simply that we have substandard managers...the rot started when azman mokhtar is picked to head khazanah..he has zero operating experience...and he recruited the same type of dumbos..khalib.wahid,pardas.etc..who will sing in tune with him.And together they created a culture of "modern bureaucracy" that stifles decision making,punish actions and produces tons of reports.It becomes a fertile ground for consultants.Over last eight years senior mgmt pay hv increase by 600%..whilst executive pay increases only 30%.

Khazanah hv destroyed watever values TDM and earlier PMs have built.They created NOTHING but acted as genius for merely "care taking" wat was developed by others earlier...and yet they reward themselves like Founder-Owners.

The state GLCs fail cos of similar reasons i.e the MB populate the mgmt with ppl he is comfortable with...not ppl who will challenge him.

The cure >> kick out the current heads..decentralise GLCs away from khazanah..differentiate asset managers from business developers GLCs..differentiate social from business..as often failure is blamed on social obligations thus masking solutions..

Idris,Azman,Khalib hv to be sacked NOW.

Patriot 22 August 2009 at 17:30  

Why are you still in UMNO? Follow Zaid?

Anonymous,  22 August 2009 at 20:53  

Dato, do you remember that at the last UMNO general assembly one delegate stood up to demand that UMNO loyalists should be made CEOs of GLCs. Doesn't matter if they are chekai SRP dropout, the criteria to be CEO of a GLC is that they must be UMNO loyalists which is in my books those ball lickers sycophants.UMNO Malays talk about being proud of their race and deluded sense of greatness, but their actions show they are nothing but low grade material who cannot compete without the help of the government.these UMNO malays tarnish the image of all those malays that are really highly qualified and capable in their fields of professions.These UMNO malays have no shame and hide under religion and play the race card whenever they are exposed for what they are- low grade members of society. You dato stands out like a shining beacon in comparison but alas, those who stand up against the excesses of UMNO politicians are then bypassed when they are the ones who should be given the task of managing the GLCs and thus rescue the nation from further sliding down the road to destruction. These rotten apples have spoilt the whole basket so much so that whenever genuine malay professionals succeed in the business world on their own merit, they are lumped together with these rotten elemenst of UMNO. Your suggestion that GLCs should be dismantled is timely if all GLCs do is to hide behind the government to plunder the nation's coffers.

HH 22 August 2009 at 23:00  

Saudara,

We have not met, neither, it would seem, do we know of each other. A brief introduction from me about myself. I have a blog 'steadyaku47' which I have only really started to focus on about two months ago. I am computer challenged - which basically means that every time I do any work on my PC - my son has to be close by to make sure that I am on the right path.

This evening while working on my blog I came across 'Sakmongkol' a number of times and followed its lead to your blog. I did a quick read of what was there and I felt that while I will come back later to spend more time in reading what was there, i wanted to send you this email to ask if we could write to each other. One because I think of Pahang with great affection having spent time in Lipis and Kuantan and some schooling at SABS - and two, because i would like to write to you and see what we can make of each other's experiences in life and our thoughts on all things Malaysian.

You might have read some of what I write and I do write from a distance in Adelaide. I enjoy my own company too much to seek others in Adelaide - what more other Malaysians - so what I write is from my own perspective of things. Right or wrong it is just me. Maybe having another blogger to throw my thoughts against might be useful to me and give more depth to what I write. Whether you are PKR or Barisan is immaterial to me. If anything I do enjoy Keroncong and CCR.

I think I have said enough for now. Camna?

Salam and regards.

HH
steadyaku47

p.s could get through to your e mail.

HH 22 August 2009 at 23:01  

You can reach me at husseinhamid@y7mail.com

regards

HH
steadyaku47

Anonymous,  24 August 2009 at 03:09  

Sakmongkol,

You hit the nail right on UMNO/BN's forehead.


I wish the UMNO/BN goons can think vividly like you do.


How can the thoughts outlined in your article be drummed into their thick skulls? Pretty hard....is it not?

If only you are the Minister of Education, you will be able to elevate the literacy level in Malaysia?

Look at the spoken English in KL? I once asked a guy for direction to go to to the central market. He said I have to walk here n there and then, turn left/right after seeing a Mos-Q. Mos-Q? I asked him. He spelt it for me ..then, I realised he meant mosque.

Please do something ......
The country is tumbling down....like a fat humpty-dumpty.

Thanks.

Anonymous,  25 August 2009 at 13:25  

Khazanah compensation was built on the simple premise..u pay peanuts u get monkeys.
That being the basis..they brought in 1st class honors grads from the big name universities..and begin to pay huge sums/salaries to paper pushers like pardas,khalib,wahid etc..to give meat to this mantra.

But the fact remains..business is meant to be operated hands on by business savvy ppl NOT by bureaucrats.Meanwhile,they have BLOATED pay scales to ridiculous levels amongst the UPPER mgmt echelons.

Its ridiculous that a CFO earns almost a million bucks for a basic CFO job or a PR person earns 600k per annum...
And the amount of money spent on consultants is staggering...

Someone hv to take stock and rein in the greed.If goes unchecked.it will destroy the good values built previously.

Go back to the era of CEOs earning 25 to 40 k per month..if the current monkeys can't accept them..get new ppl in.
And lets see where and who would want to pay the current CEO that much money for doing NOTHING..just paper pushing.

Someone needs to get cracking on this ROT cos its stinking all over

Anonymous,  25 August 2009 at 14:16  

Direct Nego Contracts awarded>>

Gamuda/MMC Double tracking> 12.4b
Ircon --ditto-- > 3.5 b
Penang Bridge (China n UEM)> 4.5 b
Eastern Dispersal JB (MRCB) > 1.0 b
IBS..Ibuzawa n others > 1.0 b

The above plus some other 100m nego jobs means govt awarded myb Rm 25 billion of DIRECT NEGO contracts to maybe 40 companies.

Issues>> profits of 20 to 30 % instead of 10 % on competitive biddinf so country loses at least Rm 5b
>>no spin off..could hv given 1m contracts to 25,000 contractors OR 100k contracts to 250,000 contractors INSTEAD only 40 enjoyed RM 6 to 7 Billion PROFITS

Now...in all his infinite wisdom..PM expects ALL contractors to compete in open tenders.But why allow the BIG people to enjoy the spoils and ask SMALL ppl incl Bumis to struggle to make living?

Its like increase bus fares by 50% and giving discounts to TOLL users,

Its no fun being poor in this 1Malaysia..rakyat di dahulukan but at expense of small guys.

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