DAP proposes that National Trust Fund Bill he referred to Select Committee


Speech by Parliamentary Opposition Leader, DAP Secretary-General and MP for Tanjung, Lim Kit Siang, in the Dewan Rakyat on Monday, 19.10.1987 referring the National Trust Fund Bill to Select Committee and on the 16 amendments proposed by DAP MPs to the Bill in Committee Stage.

DAP proposes that National Trust Fund Bill he referred to Select Committee as government has not convinced MPs, both Opposition as well as Barisan Nasional, that there could not be massive abuses, breach of trust or corruption as happened in Maminco, EPF-Makuwasa, UMBC, BMF and North-South Highway scandals in the administration of the National Trust Fund which will be a multi-billion dollar Trust Fund.

I propose, under Standing Order 54(2), that the National Trust Fund Bill be referred to a Select Committee, for the following reasons:

Firstly, Deputy Finance Minister, Senator Mohamed Farid Ariffin, has failed to convince Members of Parliament, whether Opposition or Barisan Nasional, that there could not be massive abuses, breach of trust or corruption as happened in Maminco, EPF-Makuwasa, UMBC, BMF and North-South Highway scandals in the administration of the National Trust Fund which will be a multi-billion dollar Trust Fund;

Secondly, Deputy Finance Minister, Senator Mohamed Farid Ariffin, completely evaded giving satisfactorily explanation as to the government’s failure to account satisfactorily to Parliament and the nation with regard to the previous financial scandals, like Maminco, EPF-Makuwasa, UMBC, BMF and NSH scandals, pleading that these instances are irrelevant as none of them fall under anyone of the Trust Funds established under the Financial Procedure Act 1957; which is a very lame procedural excuse, for the issue here is whether the government had proved that it deserve the confidence of the people to be entrusted with the administration of more public funds, whether falling inside or outside the Second Schedule of the Financial Procedure Act 1957;

Thirdly, in view of the failure and fear to answer the queries about the previous financial scandals, Parliament has a duty to write into National Trust Fund Bill stringent safeguards to ensure the highest integrity of management and administration, as well as the strictest control, supervision by and accountability to Parliament, such as the Parliamentary Committee on the National Trust Fund;

Fourthly, for Parliament to understand the detailed workings of the proposed National Trust Fund, in view of the fact that it could quickly become a multi-billion Trust Fund although it would start with a $100 million contribution by Petronas;

Fifthly, to enable the Malaysian public and interested organisations to have the opportunity to make representations and give views with regard to the function, operations and objectives of the National Trust Fund, and

Sixthly, to demand the appearance of the Financial Minister, Daim Zainuddin, to appear before Parliament or the Select Committee on such an important Bill, which should not be left to a mere Deputy Minister and to register the protest of the House that he has the highest rate of absence from the House to explain and account for his stewardship of the nation’s financial policies, whether during question time, debate on Bills or other government financial motions.

Finally, there is the seventh reason. The petro-billions of Petronas had been used, illegally at the time, to bail out the Bank Bumiputre and Bumiputra Malaysia Financial Bhd. In the $2.5 billion BMF scandal. Parliament must be satisfied that the National Trust Fund will not become a super-bail out institution for inefficient, failed or corrupt institutions.

Amendment to Clause 2 : Government must set nationalistic example of putting finds to promote local economic development instead of investing overseas just for profit.

I will propose the deletion of ‘OECD’ from the definition clause in Clause 2 of the Bill, because all the funds from the National Trust Fund should be invested locally to help promote Malaysia’s development, and not invested overseas to help other countries achieve a more rapid rate of growth.

If the Malaysian government sets the bad example of putting public funds aboard for investment just for more profits, how could the Malaysian Government blame Malaysians who take their moneis overseas for investment, whether because of greater or surer profits?
Government leaders had in the past accused these Malaysians, who take their money out of the country to invest aboard, as disloyal. If this is the case, then the government is being disloyal to Malaysia in providing for funds from the National Trust Fund to be invested overseas, whether OECD or otherwise.

Government cannot expect Malaysian to behave in a nationalistic fashion, putting national interest above self-interest, if the government acts in so un-nationalistic a fashion itself!

The monies in the National Trust Fund is not going to be a small sum, although the Deputy Financial Minister said that it would start with a $100 million contribution from Petronas. In October 1985, in reply to my question, the then Minister in the Prime Minister’s Department, Datuk James Ongkili, said that Petronas had agreed to the initial contribution of $200 million to such a national trust fund. Farid Ariffin has not explained why this $200 million contribution promised by Petronas has been reduced to $100 million.

Be that as it may, I have no doubt that the National Trust Fund will within a few years become a multi-billion dollar Trust Fund, whose movement of funds, like Petronas funds at present, can hold the key to the liquidity of the banking system, the Kuala Lumpur stock market and the Malaysian economy as well.

This is why it is important we make it clear right from the beginning that funds of National Trust Fund should be invested only locally, and not like the Petro-dollars of Petronas from 1980 to 1984, 30 to 50 per cent of Petronas deposits were placed overseas.

Bank Negara is no more the rock-like and undoubted institution with unerring judgement on financial institution and affairs.
I am proposing the addition of a new provision in Clause 3 to provide that Bank Negara, which is to have day-to-day administration and management of the National Trust Fund, shall be accountable to a Parliamentary Committee on National Trust Fund set up by Dewan Rakyat for this purpose.

Bank Negara is no more the rock-like and undoubted institution with unerring judgement on other financial institutions and financial affairs as previously. Its reputation was seriously tarnished in the BMF scandal, for it is partly because of its failure to discharge its statutory duties and functions to monitor and supervise banks which resulted in the $2.5 billion BMF scandal. I had spoken at length on this in the parliamentary debated on the BMF scandal in the previous session of Parliament, and I do not propose to repeat myself.

The scandals in other banks, like UMBC, UAB, Perwira Habib, the Co-operative Central Bank; its failure to take preventive measures to avoid the $1.5 billion Co-operative Financial Scandal causing the great suffering of $588,000 co-operative depositors, although it had been given adequate warning of the impending co-operative crisis, had seriously challenged the image of Bank Negara with its rock-like character and unerring financial judgement.

Three weeks ago, Bank Negara announced that it has assumed control of Supreme Finance Bhd., although two, three years ago, during the many runs on the Supreme Finance, Bank Negara assured depositors of the finance company of the soundness of Supreme Finance. Although Bank Negara has assured depositors on its take-over that the finance company can meet al its deposit liabilities, the question is why with Bank Negara’s close supervision and monitoring of Supreme Finance, things should have worsened to the extent that Bank Negara had to take over Supreme Finance itself?

These scandals and incidents show that bank Negara also have feet of clay, subject to the weaknesses and failings of common kind, and should be equally under a higher control, monitoring and supervision. It is for this reason that I propose the establishment of a Parliamentary Committee on National Trust Fund to exercise this supervisory function over the Bank Negara in its day-to-day administration and management of the National Trust Fund.

Contribution to the National Trust Fund should be confined to savings from depleting resources like petroleum, tin and other minerals and not from the general government funds.

In his reply to me in October 1985, the then Minister in the Prime Minister’s Department, Datuk Ongkili said that the proposed National Trust Fund aimed at saving up funds from volatile and fluctuating industries that are based on depleting natural resources such as petroleum, tin and other minerals. If this is the case, then Clause 5(1)(a) should be deleted, because the government’s consolidated fund should not contribute to the National Trust Fund.

Petronas contributions to National Trust Fund should not exceed three per cent of its annual net profits, without authorisation of Parliament.

The Bill provides that Petronas may make such contributions to the Fund, and the Deputy Finance Minister said that this will start with $100 million a year contribution for Petronas.

I believe that the intention is to have large amounts of Petronas funds transferred to the National Trust Fund.

At present, Petronas makes vast profits every year, as shown from the following profit after-tax figures for the last seven years:

Profit After-Tax
1980 $2.2 billion
1981 $2.3 billion
1982 $2.3 billion
1983 $2.4 billion
1984 $2.9 billion
1985 $3.8 billion
1986 $3.85 billion
Total $19.75 billion

From Petronas current profits, $100 million a year works out to about three per cent of its annual profits. I am therefore suggesting that this percentage be written into the Bill, so that any upward revision of this percentage contribution be made with new authorisation of Parliament. This will ensure that Parliament can exercise greater accountability over the running of the National Trust Fund.
Contributions to National Trust Fund should be made without any breach of the law.

I am proposing the deletion of Clause 5(2) which authorise Petronas, the State Governments and public corporations to make contributions to the National Trust Fund against the law. Why is such an a sub-section necessary, and unless the Deputy Finance Minister can justify the need for the inclusion of such a provision in the Bill to enable Petronas, State Governments and public corporations to act against the law, this sub-clause must be struck out.

National Trust Fund should not act as a Santa Claus and give out loans to any public authority or corporation.
I am proposing the deletion of Clause 7(1)(e), which empowers the National Trust Fund to apply its funds by giving loans to public authorities or corporations in which the Federal Government has an interest, for the National Trust Fund should not act as a Santa Claus to these public authorities or corporations.

Form the latest Report of the Auditor-General on Federal Government Accounts for 1984, we find that there had not only been delays and failures in the settlement of Federal loans, the arrears of loan instalments due to the Government continued to increase in 1984.

By the end of 1984, the balance of Federal loans outstanding from State Government, statutory bodies, public companies, local authorities and others had increased from $16.1 billion to $18.5 billion from the previous year.

According to the Accountant-General’s Report in 1986, the total Federal loans to State Governments, statutory bodies, public companies, local authorities and others had increased further, and stands at $40.3 billion at the end of 1986.

It would be most unwise for the National Trust Fund to get involved in the bottomless pit of lending money to State Governments, statutory bodies, public companies, local authorities which could not be repaid, with arrears piling up into a mountain of debts and which would have to be eventually written off as bad debts!

The National Trust Fund should only give out loans to the Federal Government at remunerative terms, and it is for the Federal Government to sub-loan the money to State Government, statutory bodies, public companies and local authorities. In this way, the National Trust Fund would be spared the problem of default payments and administrative problems of supervising loan repayment by a multiplicity of government bodies or corporations.

Finance Minister must give his authorisation in writing to avoid the attempt to validate illegal investments by retrospective oral authorisation as happened in the illegal investment in non-trustee stocks by EPF.
DAP National Chairman, Dr. Chen Man Hin, is proposing that Clause 7(1)(i) which gives the Finance Minister the blanket power to authorise any investment of National Trust Fund monies be deleted.

Should this amendment be defeated, I am proposing amendment of Clause 7(2) to provide that any authorisation given by the Minister under this section should be reported to parliament at the next available meeting, stating the terms and conditions imposed.

In legislating wide discretionary powers to be exercised by the Finance Minister, we must always be conscious of the dangers of their abuse. Yesterday, my colleague the MP for Ipoh, Sdr. P. Patto, had argued that with the incumbent Finance Minister, who seemed to be involved in so many conflict-of-interest situations in numerous financial and economic decision and deals, Parliament must be particularly zealous in not giving the Finance Minister powers which could result in more future conflict-of-interest situations.

The speaker, Tan Sri Zahir, commented that there may be a new Finance Minister tomorrow, and we must think of the Finance Minister as an office, and not the person occupying it at present. I respectfully disagree, for we must think of the Finance Minister in our laws in both context.

When we give any Minister wide discretionary powers, we must also envisage the consequences if such discretion is abused either for party political or personal advantage. And when there are present examples of such Ministerial abuses of wide discretionary powers, then it is all the more pertinent whether such blanket discretionary powers should continue to be given in new legislation, or whether we should stop granting such unhampered Ministerial discretion powers until Parliament can be assured that the real and present danger of their abuse and the creation of conflict-of-interest situations had receded into a mere hypothetical possibility, instead of being a real likelihood!

The present Finance Minister, Daim Zainuddin, seemed to be involved in conflict-of-interest situations in the two UMBC share transactions, the EPF-Makuwasa share transactions, the Fleet-Group/Peremba deals and the Bank of Commerce affair.
We cannot pretend that these conflict-of-interest problems do not exist, and go on legislating wide discretionary powers, for MPs will then be failing in their parliamentary oath of office.

Or put it bluntly, the proposal by Dr. Chen that Clause 7(1)(i) giving the Finance Minister the discretionary power to give blanket authorisation to National Trust Fund to make investment not specified in the Act is because large majority of Malaysians have no confidence that this will not be abused by the Finance Minister to lead to conflict-of-interest situations.

If this amendment is defeated, I am proposing that whenever the Finance Minister gives such authorisation, it should be reported to Parliament at the next meeting, so as to act as a reminder to the Finance Minister that his every act is under the closest parliamentary and public scrutiny. This will help to keep the Finance Minister within the straight and narrow path of propriety and legality.

In fact, I would suggest that if this amendment by Dr. Chen is defeated, the government should agree to amend Clause 7(1)(i) to ensure
that every authorisation by the Minister will be in writing.

The intention is to ensure that there would not be unauthorised investment by the National Trust Fund, which are later justified and validated o the ground that there was ‘oral’ authorisation from the Minister.

I am raising this issue not because I am too creative or imaginative to think of improbable scenarios, but because it had happened already with the exercise of similar discretionary powers vested with the Finance Minister in the investment of public funds.

I will give one instance.

Unlawful investment of $51 million of EPF funds in non-trustee stocks.

In the 1985 EPF Report and Accounts, the Auditor-General pointed out that EPF had violated Section 4(2)(b) of the EPF Act 1951 in investing $50.79 million in non-trustee stock of which $18.86 million was made through the EPF Investment Panel and $31.93 million through its portforlio managers.

In defence of its action, the government and EPF had resorted to section 4(2) (e) which empowers the EPF monies to be invested “in such other securities and investment as the Minister of Finance may approve”.

It is arguable whether the Finance Minister can approve EPF investment in shares in utter disregard of specific limitations of the Act, but this is not the point here. The fact is that the Finance Minister had not given any authorisation or approval in writing so the EPF investment Panel to invest $18.86 million in non-trustee stocks, such as Bousteadco S’pore Ltd., first Allied Corporation Bhd. (FACB), Faber Merlin Malaysia Berhad, BTR, Parkway, Amalgamated Steel Mill and Federal Cables; nor any approval in writing to the EPF portforlio managers to invest $31.95 million in non-trustee stocks such as Dayapi Industries (M) Bhd, Sitt Tatt Bhd., Kian Joo Can Factory Bhd., Pilecon Engineering Bhd., Metroplex Bhd., Hongkong Tin Bhd., British American (M) Insurance Bhd.

Can the claim that there was oral approval by the Finance Minister to invest in non-trustee stock be sufficient to retrospectively validate illegal investment of EPF funds? Similarly, in the National Trust Fund case, can the Panel subsequently claim that there was oral Ministerial authorisation to retrospectively validate illegal investments of National Trust Fund monies?

Parliament scrutiny over National Trust Fund must be meaningful and effective.

The Deputy Finance Minister has claimed that Clause 12 and 13 which require the annual report and annual audited accounts of the National Trust Fund be laid before Parliament is proof of parliamentary accountability. I do not agree. Such parliamentary accountability must be meaningful and effective if they are to play their role to check on the management of the National Trust Fund.

We have instances where reports which had statutorily to be laid before Parliament are not done until 10 years later, which make them utterly irrelevant and meaningless. This is why I am moving an amendment to require these reports and account to be laid before the House within one month of receipt by the Minister.

In this connection, the contention by the MP for Pasir Mas, Ibrahim Ali, that provisions in Clause 12 and 13 are adequate parliamentary control over the National Trust Fund, and therefore there is no need or reason why DAP should propose a Parliamentary Committee on National Trust Fund, shows his lack of understanding of the parliamentary process.

A Parliamentary Committee on National Trust Fund would be able to call up the administrators and managers and even Panel members of the National Trust Fund to demand more information than the bare details in the report and accounts, and to seek information on excesses and abuses, mismanagement and other failing. Reports and accounts often conceal and not reveal the truth, and this is why a Parliamentary Committee must go behind the report and accounts to seek to truth.

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