MGG Pillai Commentary View

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In power, but without it – as negotiated contracts continue to drain the Treasury

THE PRIME MINISTER, DATO' Seri Abdullah Ahmad Badawi, is about to eat his own words. He insists all is well, the government is flush with funds, all that is needed to distance himself from his predecessor, Tun Mahathir Mohamed, is to right the excesses of that regime. One is this practice of negotiated contracts worth billions parcelled out to favoured business men and cronies. In this, price was no object, only that they be given the contract, and they in turn charged what they could get away with. When projects are tendered for, it gave the government a choice at a price that was brought down by the need to win it against competition.

But Mahathir years turned this upside down. Whoever proposed a project could name his price, and build it. It did not matter if it was the Petronas Twin Towers, Putra Jaya, the privatised national highways, the Kuala Lumpur international airport. Tenders were rarely called. When completed, it cast a burden on generations yet unborn. But all this was justified on the need to show the world of Malaysia's emergence as an industrialised country by 2020. All this was needed in the name of national honour. When challenged what it cost, we were blithely told the cost did not matter, Malaysia's national honour was more important.

This construction came when Malaysia was flush with cash, and could pay for it. That it could do then. But when extravagance is official policy, even the cash disappeared. This became clear by the end of the Mahathir epoch. The new prime minister must put a rein on this wasteful extravaganza, and bring the system to what it was ante Mahathir. He did. He ordered an end to negotiated contracts, the one that was the largest drain on government funds. Whatever its proponents might argue, these could be postponed to when there are funds to pay for it.

But UMNO, the National Front (BN), the civil service and others on the gravy train are unhappy with it. Pak Lah did not look into all this when he ordered an end to negotiated contracts and a return to tendering for projects. So, try as he might, he cannot get it accepted. For good reason. These contracts are often given to the same nominees, and with most public works projects, given the exclusive right to collect tolls for thirty or forty years, and which rise gradually over the concession period. When the toll payments become a public outcry, the government steps in to reduce it for the consumer, and then compensate the concessionaire for being denied the right to collect them.

If this was done by thorough debate and above board, it would not be as bad as it now is. But the BN government does not bring such major projects to Parliament for debate and approval. When it does, or is forced to, the MPs are given the details a few hours before the debate which is rushed through on certificates of emergency. Even that was reduced in the later years of the Mahathir epoch. Putra Jaya was built without parliamentary approval because it was Petronas, the national oil corporation, that undertook it, and as an off-budget agency its activities were beyond parliamentary oversight. But the officially estimated cost of Phase One is more than the original RM20 billion, and could well double. There is doubt now if Petronas, or Malaysia, could afford the other phases of the administrative capital.

Now, the Cabinet is told of cracks that closed down a 1.7 km flyover along the Middle Ring Road. The works minister, Dato' Seri S. Samy Vellu, is unfazed by it all. He admits cracks on the flyover were "not normal" but "we cannot expect 100 per cent success all the time". He explains it could have happed because of soil or road or other conditions. But given the volume of traffic and use, that it would be heavily used was beyond doubt. That was why the flyover was planned in the first place. The volume of traffic was too high that the cracks could not be monitored. So the flyover had to be shut down.

Who found the cracks? German and Australian consultants. When things go wrong, we rush to the nearest foreign expert for help. But should it not be the responsibility of who built it and their consultants – Bumi Hiway, Sukmin and KKMJB on plans drawn by the engineering firm of Maunsell, Sharma and Zakaria Sdn Bhd? Dato' Seri Samy Vellu tries to excuse this consortium from blame. And let the government be held responsible.

Otherwise, why does he have to inform the Cabinet about it? Should he just not tell the consortium to repair it at its own cost? But then the government is defensive when negotiated contractors fail and demand of those who got the contracts to be held responsible. The problem with these negotiated contracts is that government experts have little or no role in making sure they are completed as required.

But problems like this will come to haunt the government. Especially, when the government hands over first most of the cost of the construction as a long-term loan, which often is never repaid, a fifth of so as a direct grant, with the favoured contractor needing only to find a small sum, about a sixth of the total, in return for a thirty or forty year concession. The Gamuda-MMC consortium is building a 4.2 km storm water and road tunnel costing nearly RM2 billion. It is a negotiated contract. Work on it has started. It fills in with Pak Lah's definition of projects that must be looked at it again. But work has started. Nothing can stop it now, though those in the know say it could have been built, if tenders were called, at half the projected cost.

A contract is signed this week for the Jimah power plant in Negri Sembilan. It should have been stopped, but it is not. One key figure in this project is the MP for Titiwangsa, Dato' Astaman Aziz, an electrical engineer, who had the unusual luck of being given two independent power projects. His foreign partner is the Japanese company, Sumitomo. He was given the Lumut power project, which he promptly sold to a favoured Malaysian company, Malakoff Berhad, for a reputed RM20 million. He was involved in the Tanjong Bin power project in Johore, out of which his share was RM30 million. Those in the know say his latest project will earn him twice that.

He got his first project when the now jailed former deputy prime minister, Dato' Seri Anwar Ibrahim, was finance minister. Though he now denies this link – as anyone now seeking government projects must – many in the Anwar camp at the time remember his mother, the former cabinet minister and UMNO wanita leader, Tan Sri Aishah Ghani, lobbying hard for her son, to even turning up at Dato' Seri Anwar's house to lobby for him. And he lives the part. He is the proud owner of a Yellow Ferrari, which would set him back a million ringgit or so, and a Gold Wing motorcycle another RM70,000. He could still get his wish to be appointed chairman of TNB Berhad, for whom he once worked.

Underlying this rush to projects that has no immediate relevance in an atmosphere of shrinking government funds is this unalloyed fear that this government lurches from crisis to crisis with no thought how to resolve it. The Mahathir epoch had upset too many institutions of government that it requires superhuman effort to bring it back to the straight and narrow, but Pak Lah cannot even take the first steps towards that for he is caught in a bind by his own electoral successes. That he is Prime Minister and UMNO president in his own right should have ensured it, but it has not. So, he cannot wield the axe he must, for fear it would land on his own neck. Things must go worse before it can get any better.

[This is my column in Harakah, the PAS organ, in its latest issue, 15-31 August 2004]

M.G.G. Pillai
pillai@streamyx.com