By Chandra Muzaffar
The Public Accounts Committee’s (PAC) report on 1Malaysia Development Berhad (1MDB) released on April 7, 2016 answers a number of critical questions about the operations of the state investment company raised by a segment of society in the last two years. It exposes gross weaknesses in the management of the company and shows how it had violated sound principles of corporate governance. The PAC has also made some important recommendations aimed at rectifying the situation.
It has asked that 1MDB’s former Chief Executive Officer (CEO) Shahrol Azral Ibrahim Halmi “be held responsible for weaknesses in the company’s management, and be investigated together with other relevant management officials by the enforcement authority.” It has also suggested that the advisory board, chaired by Prime Minister Najib Razak be abolished and all 1MDB assets and subsidiary companies be handed over to the Minister of Finance Incorporated.
The government should implement all three proposals. It would demonstrate that the government takes seriously the recommendations of that one bipartisan parliamentary committee entrusted with the task of enhancing accountability which is the essence of good governance. It would also boost the government’s credibility and reduce the yawning ‘trust gap’ that has developed between the government and the people.
Of the PAC’s recommendations, it is the investigation of 1MDB’s former CEO that carries the most significance. A comprehensive, unbiased investigation may throw some light on issues such as why the 1MDB management acted without approval from the board of directors on several occasions or why it did not adhere to directives from the board. Perhaps a forensic analysis of the decision-making process may reveal aspects of 1MDB governance which hitherto have not surfaced.
The public would also like to know why a state-owned company chose a business model which relied almost totally upon debts to finance its investments. As a result, 1MDB accumulated massive debts to the tune of 50 billion ringgit as at January 2016. Though assets were marginally higher, it was an unsustainable model in which, as the PAC noted, “the level of debts and interest is too high compared to the cash flow of the company.”
It was not just unsustainable as reflected in its debt burden. One wonders why the government had to establish another strategic investment company when there is Khazanah. This is why the link between the precursor to 1MDB, the Terengganu Investment Authority (TIA), and 1MDB should have been subjected to a deeper probe in the PAC report. Such a probe may have told us quite a bit about the personalities that have shaped 1MDB.
One hopes that all these issues and a number of other related concerns will be debated by the Malaysian Parliament when it reconvenes in May 2016. If the debate is to benefit the people, it should go beyond the PAC report proper and also focus upon the Auditor-General’s submission to the PAC which had played a major role in determining the content and thrust of the PAC report. What this means is that the Auditor-General’s submission should no longer be classified under the Official Secrets Act (OSA). It should be declassified immediately and made available to the public. Since it appears to be an audit that is as honest and as comprehensive as it can be, it should be revealed to the people in its entirety. Once again, declassifying the Auditor-General’s submission to the PAC will show the nation and the world that the government is not afraid to be truly transparent and accountable.
From a larger perspective, public debate and discussion on 1MDB, the PAC report and the Auditor-General’s submission should compel us as a people to evaluate more critically government linked companies and other entities such as Bank Negara and also banks in general. It is vital that all these institutions uphold the principles and practices that they are duty-bound to protect and promote under all circumstances. It is loyalty to these principles and practices that should take precedence over everything else.
It is when such loyalty is subverted by some misguided notion of preserving the position of a power-holder at all costs, that integrity is undermined and the nation loses its moral compass. It will only be a matter of time before such a nation joins the ranks of doomed states that have betrayed the people — and their own future.
Dr Chandra Muzaffar has been writing on Malaysian society for more than four decades.
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