Malaysia Starts to Count the Cost of Corruption

The 93-year-old Mahathir Mohamad, who heads Malaysia’s reform coalition Pakatan Harapan, has lost no time in knuckling down to work. A week after he assumed office in the wake of the political earthquake of the country’s May 9 general election, he terminated the contracts of 17,000 political appointees as a drain on public expenditure.

The move was hailed by a public taken aback by the numbers of people involved, although some are concerned that the shock and awe of Mahathir’s move would generate the same kind of guerilla underground that cropped up when Paul Bremer, the American proconsul in Iraq, disbanded the army and civil service in 2003. That played a major role in the eventual creation of the Islamic State which has terrorized Syria and Iraq for the past several years.

Nonetheless, the sackings are looked upon by Malaysia’s 31 million people as just the start of the cleanup of decades of appalling corruption. Police seized 72 bags alone of loot from deposed Prime Minister Najib Razak’s residence in the days after the May 9 election, of which 35 contained RM114 million (US$28.6 million) in cash in 26 different currencies. Another 35 bags contained jewelry and watches, and 284 boxes were filled with designer handbags including Ellen Birkin bags by Hermes that can cost upwards of US$200,000. The former premier is not likely to go hungry. He is believed to have hundreds of millions more stashed overseas. Famously, in 2013 US$681 million appeared in his personal account at Ambank in Kuala Lumpur and almost immediately was moved overseas.

The biggest mess, of course, is the state-backed development fund 1Malaysia Development Bhd., from which US$4.5 billion is said by the US Justice Department to have disappeared in corruption and mismanagement. Mahathir has said the scale of corruption is even greater and has demanded a full explanation. The finance ministry, now under Lim Guan Eng of the Democratic Action Party, says Malaysia’s total government debt and liabilities exceed RM1 trillion (US$250.7 billion).

The number of no-bid contracts awarded to crony companies and government-linked companies – now termed by many to be government-linked crookedry – is overwhelming.

Mahathir for instance cancelled a high-speed rail contract from Kuala Lumpur to Singapore that cost RM70 billion which, with other government commitments including operating expenses over 20 years ran the total to RM110 billion. “Estimates are that in a proper open tender, the project could have been done for a maximum of RM25 billion,” said a well-placed business source in Kuala Lumpur.

Equally questionable is a contract for Malaysia’s Eastern Corridor Rail Line, awarded to a Chinese company at RM67 billion. The payment was time-based, not on a completion basis. As such, 40 percent of the total payment has been made while only 7 percent of the work has been completed. The project cost is widely believed to have been a subterfuge for Chinese help in paying off 1MDB’s massive debt.

Next is the Sarawak and Sabah gas pipeline, again awarded on time-based payments with 87 percent of RM9 billion paid and only 13 percent of the work completed.

Contracts such as these are rife. The gadfly website Sarawak Report reported on June 10 that a car rental company headed by an official with a Barisan-aligned party in Sarawak received a RM1.25 billion no-bid contract to install solar energy facilities for 369 Sarawak schools. The three-year contract, allegedly steered by Najib himself, has been underway for 18 months. Not a single solar power unit has ever been installed.

But beyond that, dozens of government-linked companies have been found to be paying exorbitant salaries to their executives. Malaysia has the fifth highest number of GLCs in the world, for which Mahathir himself must share the blame, since many came into existence during the 22 years he headed the government from 1981 to 2003.

Many are household names – the national car project Proton, now peddled to China's car company Geely; the national energy company Petronas, the electrical utility Tenaga Nasional, the electric utility Telekom Malaysia, the Tabung Haji Pilgrimage Fund, the Federal Land Development Authority, Malaysian Airlines, The Majlis Amanah Rakyat (Malay People's Trust Council), the Sime Darby plantation and property conglomerate.

Publicly traded GLCs currently comprise 36 percent the market capitalization of Bursa Malaysia and 54 percent of the benchmark Kuala Lumpur Composite Index according to a study by the thinktank Institute for Democracy and Economic Affairs. They employ 5 percent of the national workforce. According to the study, government bailouts of GLCs have “resulted in a huge drain on the public purse.” They include RM1.5 billion for Proton in 2016 and RM 6 billion for Malaysia Airlines in 2014.

”One estimate suggests that around RM85.51 billion has been used to bail out GLCs over the past 36 years,” according to the report putting pressure on commercial interest rates as a result of recurring budget deficits that “may have been a separate factor operating to crowd out private investment, at the margin.”

As an example of exorbitant salaries, the Transport Minister, Anthony Loke, told reporters that the executive chairman of the Aviation Commission (MAVCOM), retired Gen. Abdullah Ahmad, drew a monthly salary of RM85,000 (US$21,325). The figure is over four times the basic recorded salary of the Malaysian prime minister and is similar to the salary of millionaire CEOs of successful private enterprises.

Veteran journalist, R Nadeswaran, formerly of The Sun Daily, reported that his investigations into MAVCOM, an independent body established in 2015 to regulate economic and commercial matters relating to civil aviation, revealed that RM570,000 had been paid in directors' fees, and a further RM770,000 on directors’ travel and accommodation.

More revelations have followed. One "former minister turned adviser" in Najib's Prime Minister's Office received a monthly wage of RM200,000 (US$50,177), which is about 10 times Najib's official salary. Other “advisers” were paid from RM70,000 upwards per month in a country where per capita income on a PPP basis is RM26,900 annually.

Other ministries, together with the newly-revitalized Malaysian Anti-Corruption Commission (MACC), have been directed to investigate the various GLCs and political appointees Apart from the allegations of huge bonuses and exorbitant salaries, it has also been alleged that officials of various GLCs collaborated with contractors to submit false claims for maintenance work. The MACC is investigating.

The almost daily revelations of cronyism and large-scale corruption have been described by one Malaysian as akin to "Chinese water torture," when water is slowly dripped onto a person's forehead and drives the restrained victim insane.

Loke's disclosure also prompted the veteran MP, Lim Kit Siang, Mahathir’s onetime adversary turned ally, to demand transparency and public accountability in the wages of the heads of the GLCs. He proposed the implementation of a public website showing the perks, salaries and remuneration of all GLC heads and members.

Lim wanted to know how many of the heads of the GLCs are political appointees and how many of the UMNO/Barisan Nasional appointees have resigned since Najib lost power.

Malaysians responded swiftly to Loke's report. One person multiplied Loke's figure by the number of existing GLCs and was astounded by the money which taxpayers had to fork out for GLC directors' fees. Who approved the salaries of the board members in this public regulatory body?

Surprisingly, the revelations over the GLCs are in contrast to those by newly released and pardoned former Opposition leader, Anwar Ibrahim, the PM-in-waiting, who told a crowd in Perak that chief ministers should not rush to take action against GLCs, and to refrain from being vengeful.

"I have no problem with GLCs, if their performance is good and the menteri besar (Chief minister) thinks it’s appropriate to continue, we accept (the continuance)," unless, he added, "that it was proven at the federal level, there was wasteful overlapping and excessive payment of allowances to political figures."

Malaysians demanding intense scrutiny of GLCs wonder what to make of the PM-designate's remarks and actions.

Mariam Mokhtar is a Malaysia-based reporter and regular contributor to Asia Sentinel.