DAP calls for a Parliamentary Commission to review the operations for all statutory corporations and public enterprises in the last ten years

Speech by Parliamentary Opposition Leader, DAP Secretary-General and MP for Petaling, Lim Kit Siang, in the Dewan Rakyat on Monday, 8th June 1981

DAP calls for a Parliamentary Commission to review the operations for all statutory corporations and public enterprises in the last ten years to check on their performance and accountability to Parliament and public to prevent the creation of ‘a government within a government’.

I rise to move:

“In view of the $11,110 million of public investment in the private sector through statutory corporations, public enterprises and government companies from 1970 – 1980, and another $5,433 million earmarked for the same purpose under the Fourth Malaysia Plan, which represent an immense portion of public expenditure, the House resolves to establish a Parliamentary Commission to review the operation of all statutory corporations, public enterprises and government companies in the last ten years to check their performance and accountability to the public and Parliament.”

The last decade saw the phenomenal increase and proliferation of statutory corporations, public enterprises and government companies and the magnitude and variety of these public enterprises could be gauged by the vast sums of public money the government is using as private sector investment in commerce and industry in pursuance of the objectives of the New Economic Policy, through these public enterprises.

Thus in the decade from 1971 to 1980, out of a total public development expenditure amounting to $34,730 million, $11,100 million was spent on transfers to the private sector as ‘disguised’ private investment. For the Fourth Malaysia Plan, $5,433 million of development expenditure would be used in the private sector for the same purpose.

For instance, during the 10-year period, PERNAS created and acquired equity capital of over $500 million through its subsidiaries and other interests in mining, construction, trading and plantation industries. MARA held in trust equity shares during this period some $200 million on share capital.

The SEDCs undertook industrial and commercial ventures either on their own or in joint-ventures with the private sector, and they hold a total of $438 million in share capital as at the end of 1980.

Under the Fourth Malaysia Plan, Pernas would get another $200 million, MARA another $495 million, SEDC $1,131 million and UDA another $570 million in addition to $469 million allocated to it from 1971 – 1980.

Petronas has become a class by itself, having become a gargantuan Multi-Billion Dollar conglomerate.

But with such vast sums of money in their hands, these statutory corporations, public enterprises and government companies behave as if thery are a low unto itself, a ‘government within a government’ for there is very little control over them, and vast losses whether arising from bad debts, mismanagements, inefficiency, abuses of power or downright corruption have succeeded in avoiding the glare of public scrutiny and accountability.

The main exception has been the Bank Rakyat case, which came to light because of political power struggle in the top UMNO leadership. But how many other similar Bank Rakyat scandals are there to be found in the other statutory corporations, public enterprises and government companies?

I have moved this motion mainly to reassert Parliamentary responsibility and the accountability of statutory corporations, public enterprises and government companies to Parliament, as it is Parliament which had been responsible for creating them and in approving government grants and loans for their operations.

I believe all MPs, regardless of party, share in my feeling that statutory corporations, public enterprises and government companies have become a ‘runaway’ sector, with nobody really in real charge or control over them. The theoretical Parliamentary control over these bodies, which are accountable to Parliament, are in reality virtually nil.

In fact, I do not think there is a single MP, including the Minister of Public Enterprises, the Finance Minister and the Prime Minister, who really know how many public enterprises there are in the country at the moment. By ‘public enterprises’, we mean in it broadest sense not only statutory corporations created by statute like UDA or wholly-owned government companies established under the Companies Act 1965 like Petronas and Pernas, but also all industrial, financial, agricultural and commercial concerns which are wholly or partially owned and controlled by the government, whether as subsidiaries of statutory corporations or government companies, or through joint ventures with private companies.

I understand the task of taking stock of all public corporations had defied all efforts so far, that attempts by various bodies like the National Institute of Public Administration, the Faculty of Economic and Administration in the Unniversity of Malaya, Socio-Economic and General Planning Unit, the Malaysian Centre for Development Studies, and most recently, the Implementation Co-ordination Unit, have not succeeded in producing a comprehensive list.

It is estimated that there are over 700 public corporations in Malaysia of which some 600 are subsidiary corporations registered as companies.

When nobody knows or has a full list of the public corporations in the country, it is impossible for anyone to exercise control over them, and the principle of accountability is even more remote.

Whether at the Federal or State level, the record of performance, efficiency, effectiveness has not been a very impressive one, except for a few high-capitalised corporations working in virtually monopolistic conditions.

Many statutory corporations could not even ready their annual reposts as required by law. The LPN, for instance, had not published its reports since 1973, and I have not been able to find th any annual report of Majuikan.

Corporations which submit annual reports do so in so scanty a manner that the reports appeared to be designed to conceal rather than to impart information.

At present, these public enterprises, virtually freed from the discipline of competition or effective parliamentary accountability, have been able to hide colossal losses under the huge public financing year after year.

Large number of these corporate nightmares would have gone into bankruptcy and liquidation long ago if they had operated as private companies.

The State Development Corporations, for instance, is a generally sorry tale of inefficiency, ineffectiveness, waste, extravagance and even corruption.

Almost every State Development Corporation did not comply with the legal requirement of promptly producing their annual reports.

The Malacca State Development Corruption, for instance, did not produce its annual report until 1976 after repeated DAP pressure – when in one shot, it produced the annual reports of the five years from 1971-75. But after that, the Malacca SEDC succumbed to its inertia and inefficiency and is now again five years behind in its annual reporting to the State Assembly.

From 1972 – 1979, the Central Government granted to the Malacca SEDC $3.5 million in loans, but in the same period, the Malacca SEDC succeeded in losing over $2 million.

What is surprising is that UMNO state leaders, and others, could through SEDC make big personal profits while the SEDC could only make big losses.

When I mentioned this fact recently, the Malacca Chief Minister, Adib Adam, was very angry, but he could not deny the facts. Recently, the Malacca Chief Minister even suggested that the Federal government take over the Malacca SEDC, hoping that in the process the Central Government would absorb the losses. In fact, I gather the impression that the Malacca Chief Minister has virtually given up the SEDC as a viable concern, and is more interested in trying to develop the Yayasan Islam Melaka to replace the Malacca SEDC.

The last SEDC report in 1975 revealed that the Malacca SEDC was involved in 10 subsidiary companies in the form of joint ventures. Only one of the 10 subsidiary companies had made profit. The total losses incurred in the other 9 companies amounted to $3.7 million. In fact, three out of the nine companies were faring so badly that they were in the process of being wound up.

Until end of 1979, a total of six joint ventures involving the Malacca SEDC had gone bankrupt.

The position of the other state SEDCS are equally bad. Negri Sembilan SEDC for instance, which received $46.6 million of loans from the Federal Government from 1972 – 1979, reported a meager profits position of $3 million for the same period. The Negri Sembilan SEDC was involved in eight subsidiaries and joint-venture companies which incur a total loss of $60 million!

For the eight years from 1972 – 1979, the Perak SEDC received $43 million of Federal government loans and reported $8 million profit for the same period, the KEDAH SEDC received $79 million of Federal government loans and reported a pitiable $1 million of profit for the period; the Trengganu SEDC received $100 million of Federal government loan and reported $11 million of losses; Kelantan SEDC received $44 million of Federal government loans and reported a profit of $2 million for the period; and Sabah SEDC received $158 million of Federal loans and reported $15 million losses; and Sarawak SEDC received $51 million of Federal government loans and reported a $16 million loss during the same period; Penang received $59 million of Federal loan and reported a profit of $27 million; Johore received $87 million of Federal loan and reported a profit of $30 million.

The State SEDCs have become not only the political instruments of the State government, but of the Chief Minister or Mentri Besar himself, who are invariable the Chairman of the respective SEDCs.

The recent amendments to the Incorporation (State Legislatures Competency) Act barring the Chief Minister from being the Chief Executive of the SEDC is not going to alter the power-relationship as no Chief Executive, who is a civil servant, will set himself against the will or wishes of his political master.

The position of government companies established under the Companies Act is even more frightening in terms of lack of control and accountability despite their deployment of public funds and resources, like Petronas, Pernas, MAS, MISC, Bank Bumiputera, Bank Petanian, and Bank Rakyat.

The Bank Rakyat scandal, costing $155 million of losses of public funds, should have opened the eyes of all concerned to what could happen when government corporations are allowed to be run without proper control or accountability. The Price Waterhouse Report on the Bank Rakyat gave the picture of a multi-million dollar banking concern which did not really know what shares or assents it posses, did not know what subsidiaries companies it owned in the form of joint ventures, and wholesale waste, extravagance, inefficiency and corruption.

While government companies are set up to give them a greater degree of managerial freedom and flexibility in their commercial operations, their final responsibility and accountability to the public through Parliament must never be lost sight of.

The United Nations 1974 study on “Organisation, Management and Supervision of Public Enterprises in Developing Countries”, made the pertinent point: (Page 98)

“It is incorrect to assume that parliamentary control, like control by government department, represents a total negation of the autonomy of public enterprises, for both parliamentary control and enterprise autonomy are indispensable for the efficacious performance of public enterprises and could be compatible with each other, if properly devised.”

Thus, it is an appropriate juncture, ten years after the phenomenal increase of public enterprises, for Parliament to establish a Parliamentary Commission to review the whole question of the operations and accountability of the statutory corporations as well as government companies, so that there is no ‘government within a government’.

Apart from accountability, the time has also come to review and assess the performances of the public enterprises, for the massive injection of public funds has succeeded in covering up various major losses running into millions of dollars each, as highlighted by the Bank Rakyat affair.

It is timely for criteria to be worked out to assess the performance of the public enterprises, with regard to effectiveness, profitability, efficiency, productivity, propriety.

Public enterprises should therefore be subject, not only to financial audit, but also to performance audit, and they should all be brought within the purview of the Auditor-General’s Department, which must greatly expanded to cope with the expansion of duties.

It is only in this way that the public enterprises could be held accountable for results while giving them sufficient autonomy to make day-to-day decisions. For instance, it has been suggested that a quantifiable criterion should be set down for the selection of investment projects, e.g. that all investment projects should bring an expected rate of return of at least 8% on investment. Special case will have to be made for projects which are desirable even through not likely to earn any profit – which will enable public enterprises to be properly held accountable.

The entire field of public enterprises have grown so gargantuan that it has virtually gone out of control and accountability to Parliament, and we as Parliamentarians must do our duty to reassert Parliamentary control over these public enterprises.