Opening Speech by Penang Chief Minister Lim Guan Eng at “Government Audit: Formality or Accountability?” Forum on 23rd January 2015 (8.00 pm)
Good Evening and Salam Sejahtera,
I am pleased to be here this evening to officiate this forum jointly organised by the Penang Institute and the Centre to Combat Corruption and Cronyism (C4) entitled, “Government Audit: Formality or Accountability?”
Although this is the Penang Institute’s maiden event on the annual Auditor-General’s Report, it is a wholly familiar issue with the Malaysian public. The Penang state government firmly believes that the public deserves a clean, effective and transparent governance, this event is a great opportunity to shed some light onto the findings of the latest Auditor-General’s Report 2013.
Penang’s Stellar Report Card
Ladies and Gentleman,
The Penang state government with the CAT principles of Competency, Accountability and Transparency at our core, fully supports the national audit process. We believe that checks and balances are vital in the promotion of good governance and we commend the National Audit Department and Auditor-General’s commitment in carrying out this sacrosanct duty professionally. However the National Audit Department should not be reactive in detecting weaknesses that causes wastage, inefficiency or malpractices and even corruption. It should be pro-active by conducting audits on the first sign of trouble in government agencies before losses are suffered.
We are also proud of the Penang Pakatan Rakyat state government’s record with regards to the Auditor-General’s Report since forming government in 2008. In stark contrast to the usually abysmal findings in the audit of federal ministries and other states, Penang has maintained a stellar record. Commendations have been accorded to the state government for its clean, efficient and transparent governance – and not only by the Auditor-General’s Report but also by international watchdogs such as Transparency International. We are proud to be lauded as amongst the best managed and most efficient state administrators in Malaysia yearly since 2008.
In the latest 2013 report, Penang saw its revenue collection rise by 27.4%, as compared to the federal government’s 2.6%. This growth in revenue collection (in percentage) is observed to be the highest in the nation. Even the Prime Minister’s home state of Pahang saw a decrease in revenue collection by 2.2%.
In 2013, Penang also managed to achieve a budget surplus of RM1.3 million despite tabling a deficit budget of RM262 million, continuing PR’s record of a budget surplus, every year since we took over in 2008. From 2008 -2013, budget surpluses amounts to RM453 million, with the largest surplus in Penang’s history of RM138.31 million recorded for the year 2011 alone. In this period (2008-2013), Penang’s accumulated budget surpluses amounting to RM453 million is comparable to a total surplus of RM373.6 million recorded over the years until year end 2007.
Every year Penang’s finances grows stronger. In 2013, our Consolidated Fund reached RM1.29 billion, after an increase of RM99.85 million or 8.4%. This is an increase of more than RM 445 million or more than 53% since RM 847 million in 2007.
As far as our state departments and agencies are concerned, 8 or 53.3% were rated as excellent while the other 7 or 46.7% were rated as good. In other words, not a single department or agency reviewed was rated as anything less than good. The State Treasury Department and the Penang Development Corporation was rated Excellent for six years straight from 2008 to 2013.
It is also interesting to note that while the AG report 2013 mentioned that, as of 31 December 2013, only 58.3% of an approved allocation of RM363.39 million was spent, Penang has managed to complete 98.4% from a total of 3,516 planned projects. This indicates that the state government has actually spent less but achieved a lot more. This translates as financial prudence complemented by effective delivery and a reliance of the open competitive tender system that promotes transparency and competence.
The Federal Government: Business as Usual?
Ladies and Gentleman,
In contrast, the AG Report 2013 has pinpointed multiple failings in the federal government’s financial management, especially in the area of implementation. According to Auditor-General Tan Sri Ambrin Buang, in terms of implementation, 91.1% of the programmes, activities and projects encountered issues of inefficiency, non-compliance of regulations such as non-compliance of specification, work that was not of quality, unreasonable delays, poor acquisition, management of contract and maintenance of government assets.
Furthermore, the financial performance of federal departments was rated by the AG report 2013 as “not encouraging”. There is actually a decline in performance in 2013 as only 21 out of 45 Departments (46.7%) were rated as excellent as compared to 53.9% in 2012 and 50% of the departments audited in 2011.
Unlike the Penang state government that opted for an open competitive tender system, the AG Report 2013 revealed that some federal government projects were still dispensed via “direct negotiations”, which is often associated with cronyism and wastage of public funds. For example, the RM343.55 million Paya Peda Dam Development Project in Besut, Terengganu, a project by Ministry of Agriculture. Not only was it awarded through direct negotiations, but as of July 2013, it was found to be 18.49% behind schedule. Problems of non-compliance, substandard contractors and improper payments have emerged.
There is also the case of scandal-ridden entities with dubious and alleged massive liabilities that were overlooked by the AG report. An obvious example is the strategic development fund 1MDB that is at present wholly owned by the government, according to its website. Raking up to RM42 billion in debt, together with its failure to repay a RM2 billion loan that was initially due last December, it is perplexing to see that the Auditor General is still refusing to open the books of 1MDB. This is one area that the AG can remedy and save the nation from suffering horrendous losses. In other words preventing another scandal that is three times the Port Klang FTZ scandal (RM 13 billion)
AG Report: Formality or Accountability?
Ladies and gentleman,
The question all Malaysians are asking is: with leakages after leakages and scandals after scandals that have been revealed by the AG Reports, is the audit process itself effective to curb weak and often disingenuous fiscal management of the government, or is it a mere formality? This forum must attempt to address that, especially with the presence of our honoured guests from the Public Accounts Committee (PAC) and the Malaysian Anti-Corruption Commission (MACC).
The fact is that there is a lack of political will from the federal government to plug these leakages of public funds or to recoup the losses. Structural weaknesses in fiscal and project management have not been corrected and conducts bordering on abuse of power and corruption are left unaddressed. The BN Federal government is not hungry to expose corruption but appears to be hungry for more corruption. We hope to see a white knight in the AG to slay the “vampire” of corruption before these vampires suck the nation’s finances dry. As for MACC, many are still wondering when is MACC going to step up and be like Hong Kong’s ICAC instead of being a mere shadow of its self. Not just the excesses exposed in the AG’s Reports, but the MACC has failed to answer serious issues of public accountability on scandals ranging from the extraordinary wealth of former Sarawak Chief Minister’s family, the 1MDB and PKFZ saga or the RM 1.4 trillion of illicit funds flowing out of our country from 2003-2013. This sum, RM 1.4 trillion has cost each Malaysian citizen RM 50,000. Are we going to lose another RM 50,000 each before MACC acts?
Culprits are often able to escape with impunity. Out of the 175 civil servants implicated in financial wrongdoings by the AG report 2012, only one was sacked even though 85 were found guilty, according to the Chief Secretary of the Government. A number of them were referred for further disciplinary action but it would appear that such actions have not deterred further excesses and abuses from happening. What about KLIA2 which ballooned from an initial cost of RM 1.6 billion to RM 4 billion? Why not press for public declaration of assets of government leaders as practised by the Penang state government, which s a norm in many corrupt-free countries? The MACC is certainly in a better position than me to respond to such concerns.
Ladies and gentleman,
Good and effective management of public finance is vital, as a clean and transparent government will provide a fair and enabling environment for businesses to thrive, while safeguarding the interests and welfare of the rakyat. For instance, open competitive tenders allows government not only to save funds at the initial capital expenditure but also at the operating expenditure when carrying out regular maintenance. The initial capital expenditure selected by open tender at the best price and best quality would have a double bonus of reducing maintenance costs when it is done well at the beginning. Shoddy construction invariably leads to higher maintenance cost.
On the other hand, a government facing massive public funds leakages will instead enable crony capitalism, inefficient service delivery, reduced investment in public goods and widespread corruption. In such conditions, poverty and inequality will rise as those with political connections and vested interests are more likely to succeed. Businesses will be deprived of fair-play condition while funds earmarked for social services are siphoned for other purposes, either through legal or illegal means.
For example, the Penang State Government has demonstrated that prudent management of state coffers does not lead to deprivation of public goods and social welfare, but instead enables the funding of it, as can be seen by the state’s success in providing free Rapid Penang bus services in the city area and across the Penang Bridge as well as our golden welfare programmes in the form of cash aid for senior citizens, single mothers, housewives, the disabled, university students, trishaw pullers, fishermen and students. In addition to that, we have also instituted the Agenda Ekonomi Saksama (AES) scheme to ensure there are no households in Penang that earn less than RM790 a month by topping up the difference every month. To date, the state government has spent RM 287 million and is allocating another RM 117 million this year for cash and directly to the public or nearly 12% of our annual Budget.
All this has only been made possible due to the “anti-corruption dividends” that we earned by practising Competency, Accountability and Transparency. This is why the AG’s Report must not be treated as a formality, but instead be given due attention in order to improve governance for the rakyat.
Without further ado, I hereby formally announce the opening of this forum. Thank you very much and have a pleasant evening.
LIM GUAN ENG
不像槟州政府推行采购公开招标那样，2013年总稽查报告揭露一些联邦政府还是通过“直接洽谈”发放出去，这些项目通常与朋党、浪费公帑有关。例如，农业部在登嘉楼价值3亿4355万令吉的Paya Peda 水坝发展计划。不只是它通过“直接洽谈”颁布，到了2013年7月，它还处于18.49% 延期。这项工程也出现不符合规格、二级承包商及不当付款的问题。