Monday, October 29, 2012

Let’s talk about the AG’s Report

Lo and behold! If you were to listen to what the opposition MPsaid in Parliament last week, you would think that the Auditor General's Report was centered mainly on the leakages and wastages in Barisan Nasional states.

But the truth is stranger than fiction – or so I have found out.

My attempt to level the playing field by speaking up against the mismanagement of Pakatan states was met with thunderous objection in the august house. No less than five opposition MPs stood up to prevent me from finishing my speech. All is well, for Hansard never lies. When chaos got the better of my words, I decided to pen down my analysis in the spirit of informing the public that life in Pakatanstates is not necessarily a bed of roses, too.

Kelantan

Let's take a look at the severe mismanagement of Program Ladang Rakyat by the Kelantan state government. Theprogram is not miniscule by any standards. It involved 19 projects in total, covering massive land area of 81,095 acres (one and a half times the size of Kuala Lumpur no less!).


The project was initially set to help the Kelantan poor by promising (for lack of better worda monthly dividend and salary of RM200 and RM700 respectively. On top of that, the project planned to provide free accommodation and tostimulate the local employment rate. Of course, promises are meant to be broken. All of these promises nevermaterialized. The poor who placed their hopes in this program are now still stuck in status quo.

When two projects under the program failed to meet theirtargetsthe Kelantan state government through Perbadanan Pembangunan Ladang Rakyat Kelantan (PPLRK) - leased out the remaining 17 projects (total land involved is 76,780 acres) to 16 selected companies.

But as the AG's report so aptly pointed out, no specific committee had been set up to evaluate the ability or past performance of the 16 companies. Much worse was whenapparently, the 16 listed were actually suggested by noneother than the CEO of PPLRK himself! Ah, the joys of running you own empire must be intoxicating, I believe.

To compound the problem even further, audit analysis ofthe agreements with the 16 companies showed that the terms were lop-sided and were heavily stacked against the state government's interests.

For example, in the 20-year lease period, the companies areset to gain total net profit of RM1.6 billion. However, theywould only pay Kelantan state government RM421 million in lease payments. The estimated net profit of the 16companies is a staggering RM59 million a year for the next 20 years!

And who are the stakeholders behind Liziz Standaco Sdn.Bhd.? In yet another land controversy in Kelantan, the AG's report took the state government to task for offering 1,000 acres of land to Liziz Standaco in 2003This was supposed to be for a 12-year riverbank development and beautification project.

In consideration thereof, Liziz Standaco must return to the state government assets amounting to RM389.09 million.But as far as the AG's Report is concerned, the Kelantan state government has only received a paltry sum of RM45.7 million to date. The remaining RM343.4 million is still outstanding at the time this analysis is drafted.

Eyebrows were raised in concern when the AG's report also stated that Liziz Standaco had pledged 13.52 acres ofthe land in question as collateral to secure a RM75 millionloan. While it is not immediately clear whether Liziz Standaco had used part of the RM75 million's loan to pay the RM45.7 million to state government, it can in many ways suggest that the company is not in the best financial footing to navigate the project to the shore of success.

Kedah

Now, let's shift our focus to the northern state of Kedah. Incidentally, around the same time the controversial National Feedlot Corporation (NFC) started its cattlebusiness, a wholly owned entity of the Kedah state government, Kedah Corporation Berhad (KCB), entered into a mammoth joint-venture project with an Australia-based company to rear and import cattle from down under.KCB had paid RM1million to its partner of choice shortly after the agreement was signed. Unfortunately, the cattle project - which was mired in controversy from the get-go -never actually got off the ground.

Some might argue that KCB's RM1 million scandal is pale in comparison to that of NFC's that involved RM250 million. But I disagree. Wastage, by any other name, is still a wastage especially so for a small economy like Kedah.

If we still insist to go by figures and statistic, the RM1 million involved in this case tantamount to 0.10% of Kedah's 2011 state budget of RM1 billion. Taken in this perspective, we will also find that the 0.10% is at par with NFC's 0.11% wastage vis-à-vis RM230 billion of the federal budget.

KCB was also frowned upon when it made generous payments on two failed projects. The first involved thepayment of RM4.26 million to a company in Papua New Guinea for a palm oil project which subsequently failed. The second involved a payment of RM1.6 million to a consultant company to "arrange" USD44 million offshoreloan earmarked to fund the same Papua New Guinea'sinvestment.

Apart from failing to raise the USD44 million loan (whichhas since put the project in jeopardy), KCB marched aheadto borrow an additional RM3 million from five local companies. What's appalling is that the borrowing had been done without the approval from its own board!

Meanwhile the AG's Report has ticked off Perbadanan Menteri Besar Kedah for paying a whopping RM1,500 per unit for repair of loose electrical distribution board in low-cost public housing projects. And rightly so, too! The government approved market price is capped at only RM15.45 per unit. The difference per unit in this case is a staggering RM1,484.55.

The Perbadanan Menteri Besar Kedah had also overpaid(by 31 times) for power sockets in its low-cost public housing projects. They actually paid RM1,500 per unitwhen the government-approved market price is only RM50.18 per unit. Simple arithmetic will show that thisconstitutes an overpayment of RM1,449.82 per unit.

Selangor

Last but not least, Selangor. The buzz around the overhyped Skim Tabung Warisan Anak Selangor (TAWAS) died an untimely death when the AG's report pointed out that the scheme was woefully underfunded and had failed to live up to its promise. The promise to give RM100 in form of Simpanan Tetap for every Selangor-born will remain as just another unfulfilled promise.

Since its inception in 2008, 19.4% (60,972) of 313,706 of those who were born in Selangor had applied for the scheme. Out of the 60,972 applications, only 21,918 have been approved.

Selangor has allocated RM13.5 million for TAWAS. But out of that amount, about RM4.5 million was meant for operational costs, setting aside only RM8 million for the actual program itself.

In education sector, Selangor government had incurred losses of RM39.69 million in 2010, and RM13.56 millionthrough Pendidikan Industri YS Sdn Bhd (PIYSB) – the organ that operates UNISEL.

These are only examples of leakages and wastages inPakatan states. If you read the AG's Report withmicroscopic view, you would find much more examples of the same nature.


The road ahead

As the 13th General Election approaches, Pakatan Rakyat has intensified its drive to capture votes in Sabah and Sarawak. It goes without saying that the 56 parliamentary seats in Sabah and Sawarak will be the knight of hope to both Putrajaya's incumbents and aspirants. So, Pakatan has launched a mission to attack and undermine the administration of the two states.

Ironically, the attack on the performance of Sabah and Sarawak has proved to be hollow year after year when the AG's report keeps giving both states top marks in state finance management and fiscal policies.

In its latest report for 2011, the Auditor General accorded the highest commendation ("sangat baik") to only one state: Sarawak. Meanwhile, Sabah has maintained the second best status of "baik" from previous years.

The 2011 Consolidated Fund accounts of Sarawak and Sabah governments are the highest among all states at RM18.5 billion and RM2.66 billion respectively. Selangor, on the other hand, is at third place with RM1.94 billionwhile Penang is at fourth place with RM1.13 billion.

If we look at 2011 state revenue statistics, Sarawak hastopped the list with RM6.6 billion, followed by Sabah at second place with RM4.4 billion. Selangor was at fourth place (RM1.6 billion) and Penang was at seventh position (RM602 million).

This article is not intended to purposely exclude wastages and leakages in Barisan-held states. There are some pretty glaring examples of wastages and leakages in Barisan states, too. But what I intended to do by writing this article was to inform the public that leakages and wastages are not confined only to BN states; PR state governments are equally guilty of the same charge!

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