PERAK NANGIS

RM28 billion lost is real! — Rafizi Ramli

February 04, 2011
FEB 4 — Pakatan Rakyat’s “Buku Jingga” has been a centre of much debate since its unveiling in December. Ironically, the immediate response by Barisan Nasional’s top leadership has added weight to its instant fame, not least when the prime minister himself promised to present to the nation a point-by-point rebuttal of the reforms outlined. While the nation is still waiting for the point-by-point rebuttal from the prime minister (either in the form of published article or through a live debate with the leader of opposition), Umno’s Youth chief has kindly set out a basis for an exchange of arguments on the merits of Pakatan Rakyat’s “Buku Jingga”.
I must commend him for the effort, although he only commented on three points out of the 10-point reform programme. There was no response whatsoever on the commitment to restore the independence and integrity of the key national institutions of the nation such as the judiciary, Royal Malaysian Police and A-G’s Chambers. Nor was there any mention of our promise to abolish ISA.
I would understand why he was silent on our commitment to make water a public asset of the rakyat and the pledge to guarantee availability of free wi-fi Internet service to all urban and semi-urban areas; because Pakatan states are already striving to achieve this since taking over. Nevertheless, he could at least share with the rakyat why he thought it is not possible to set up a royal commission to decidedly resolve the problems of immigration and citizenship in Sabah; or what has been stopping BN’s federal government from raising the royalty for hydrocarbon extraction to states to 20 per cent?
Irrespective of my personal feeling of the incompleteness of the response, I shall present Pakatan Rakyat’s arguments on the key issues raised by him.
He questioned the accuracy of the RM28 billion estimate of the public monies lost each year due to leakages, corruption and shoddy procurement practices, on the basis that it was not specifically reported in the Auditor-General’s Report. My good colleague must understand the nature of audit and how audits are conducted. Having spent a good portion of my professional life as a chartered accountant and an auditor, I must impress on the public that audits are carried out on the basis of sampling. We test samples of transactions to estimate the extent and nature of the financial and operational positions.
The RM28 billion exact figure may not be reported explicitly in the A-G’s Report, but the results of the audit clearly point to leakages of that proportion based on the extent of over-pricing and over-spending of individual items; as well as losses due to mismanagement detected during field audits.
One only has to peruse up to the quarter of the A-G’s Report to understand the magnitude of the leakages. Let me give a few easy examples.
In the 2008 A-G’s Report, it was revealed that the federal government had to bear an estimated loss of RM1.14 billion due to the mismanagement of the electrified double-tracking project between Rawang and Ipoh. Another RM500 million of taxpayers’ money was used to set off the accumulated losses of government’s investment in the US-based Columbia Aircraft Manufacturing Corp.
We should not forget too easily the shock that the nation had to endure when we discovered that taxpayers’ money paid for a RM42,320 laptop; perhaps the most expensive in the world. Or gasp when we realised government departments paid RM262,256 maintenance cost for a Perdana over a four-year period when a market estimate is only RM15,000.
It feels only yesterday that the A-G rapped the Youth and Sports Ministry for a series of out-of-this-world purchases; including a RM224 screwdriver set, a RM5,700 car jack or a RM8,254 digital camera — when the market price per piece was RM40, RM50 and RM2,990 respectively.
My good friend can argue on technical grounds that the RM28 billion was never reported per se in the A-G’s Report, but his argument is out of touch with the reality on the ground. The excesses and huge leakages due to the mismanagement and BN’s lackadaisical attitude in combating corruption are real.
The examples cited in the A-G’s Report are reflected annually in the overall financial position of the government. The financial indiscipline due to the lack of political will to impose good governance has caused over-spending each year beyond what was approved for the annual spending budget.
Take the 2009 A-G’s Report, for example, released in June 2010 (the latest report available). In 2009, the federal government overspent by a whopping amount of RM4.83 billion above what was approved for its operational expenses. More alarming was the fact that this malpractice of financial indiscipline has persisted over the years —between 2005 and 2009; the federal government’s cumulative overspending on operational expenses was RM19.41 billion.
Over the same period, the federal government’s development expenditure had also exceeded the approved budget for RMK9 by 34 per cent. Forty-two projects listed as RMK9 projects exceeded the approved budget by a total amount of RM3.74 billion; topped by the defence procurement by a ministry previously helmed by the prime minister.
I can go on and list other numbers especially the amount of loans guaranteed or given to GLCs and government bodies; which forms a significant financial risk and liability to the federal government. By the end of 2009, the federal government guaranteed a total of RM84 billion in loans to 20 GLCs and two government bodies. If my good friend finds it difficult to comprehend the magnitude of this, we have to refresh our memories on the PKFZ loan guarantee fiasco which saddled the federal government with billions worth of debts.
Or he can visit my hometown of Kemaman to grapple with the magnitude of public funds that Perwaja has sucked over the years from the rakyat. As at December 31, 2008, Perwaja owed RM3 billion worth of debts that fell due on that date to the federal government. It was not able to pay; in fact it couldn’t even pay the RM319 million instalment due in 2009 that the loan had to be restructured and paid over a longer term. Such was an instance of a series of financial imprudence when public funds are used to subsidise corporate companies. In 2009, 45.7 per cent out of the 70 loans worth billions of ringgit given to corporate companies could not be serviced on time.
I listed all these examples published in the A-G’s Report to provide a glimpse of the extent of leakages, overspending, financial indiscipline and corruption that are rampant in this country. The figures cited are bona fide audited figures presented to Dewan Rakyat by the Auditor-General. These figures on their own, without the need to extrapolate and estimate as alleged by my good friend; already amount to billions of ringgit each year.
So, our basis for estimating that there is a potential saving of RM28 billion if we fix the leakages, mismanagement and corruption has its merits; corroborated by years’ worth of A-G’s Reports. In fact, some quarters even believe that the estimate is conservative.
When Pakatan Rakyat takes over, with a single-mindedness for political and economic reforms, there is a room to return the RM28 billion back to the people in the form of the programmes outlined in “Buku Jingga”.
I have an equally long explanation backed by facts and figures for the other three points raised by the good gentleman on gas subsidies/IPP, GLCs and affordability of the RM500 teaching allowance; but it will have to be in different instalments of my column as the space does not allow it.
But I hope this “point-of-information” (POI, as we often refer to interjections in debating tournaments) is enough to enlighten the public for today. I trust there will be more such debates in the press (through various writings) after this since my good friend has not responded to a debate challenge, so I shall keep the other points for the future!
* Rafizi Ramli is chief executive of the Selangor Economic Advisory Office.