Category Archives: Investigative Journalism

Stories that someone important do not want them to be published.

Top Malaysian Politicians Use Offshore Secrecy

This is an international joint investigation project between Malaysiakini.com and the International Consortium of Investigative Journalists (ICIJ) on secret offshore accounts in 2013. I was part of the 4-member team from Malaysiakini. Digging deep into a leaked database obtained by ICIJ, we found that government officials including a cabinet minister and their families and associates (the son of former prime minister) in Malaysia have embraced the use of covert companies and bank accounts.

Read the full story here.

Undercover Reporting: Vote-buying caught on video

During a by-election held in April 2011 for the Malaysian parliamentary constituency of Batu Sapi in Sabah state, I went undercover to report on vote buying by the ruling coalition, and caught the illegal act on video.

It was an impromptu incident.  While covering an opposition campaign event in the town, I was chatting with a local resident who told me he just came over from another campaign activity organized by the ruling coalition where attendants were given cash money. I went to the venue and pretended to be a local voter, and, cha-ching! I received RM20 (US$6) from the campaigners and the best part was, I secretly recorded the process with my mobile phone.

After making sure I have collected all the necessary evidence, I revealed my identity and confronted a federal minister who was in-charge of that activity. She was surprised while her supporters became panic and started to surround me, threatening to do “naughty” things. I recorded the conversation between me and the conversation and left the scene before it turned ugly.

Unrelated to this incident, the minister, who was the top leader of the women wing of the largest ruling party, resigned from the government in 2012 after her family was accused of misusing public fund in the ‘Cowgate‘ scandal.

The original story was published here (paywall).

 

RM20 for workers… or voters?

4:21PM Apr 9, 2011

By Kuek Ser Kuang Keng

At an Umno Wanita community dinner function in Batu Sapi last night, RM20 was distributed to individuals who had registered their particulars with the organisers.

batu sapi bn vote buying photo 6 bn functionThis was video-recorded by Malaysiakini after receiving a tip-off from locals in the area that money was changing hands at a 40-table dinner function in SMK Agama Sandakan located in Taman Mawar, Batu Sapi.

Majlis Ramah Mesra, which was hosted by Wanita chief Shahrizat Abdul Jalil, was packed with BN supporters clad in party colours of blue, red and white sporting the familiar scale symbol and the Umno logo.

batu sapi bn vote buying photo 1Just before the event kicked off, however, individuals had queued up at a registration table to have their names, contact details and party affiliations recorded before getting ‘redeemed’ RM20 in cash.

Though the stage backdrop at the dinner stated that it was organised for members of Wanita Umno machinery, many of those in attendence were middle-aged Chinese men and women.

When asked as to why those queuing were in line, those interviewed – including one ‘aunty’ who said she is a voter – said they wanted to “collect money”.

“It is for voters. You need just to show your MyKad to prove that you are a voter in order to get the money,” said the lady.

‘Remember to vote for BN’

batu sapi bn vote buying photo 7 lining upIt was observed that many of those who had queued at the registration table left right after collecting the cash while those clad in BN uniforms found themselves seats at the table.

Some said they were being reimbursed for their “transportation expenses”. They declined, however, to say how much they were given each.

After recording his details at the table, even a Malaysiakinijournalist received RM20 without being questioned or even producing his MyKad. He was informed at the registration desk that everyone was given the same amount.

“Remember to vote for BN!” said one woman who was near the registration table to the journalist.

‘Don’t be naughty. They’re not voters’

When approached, Umno Wanita chief Shahrizat claimed that the RM20 was given as allowance for party campaigners.

batu sapi bn vote buying photo 3 giving moneyShahrizat, who was accompanied by Karambunai state assemblyperson Jainab Ahmad Ayid, told Malaysiakinithat she was unaware of the registration table, but later said that it was probably set up just to record the attendance of those at the function.

“I don’t know about that. I think this one must be for the registration,” she said.

Asked about the cash that was given away, Jainab interrupted and said curtly that the money was meant for “transportation”.

Below is a short transcript of the conversation, edited for clarity:

NONEShahrizat (left): Because these are jentera (party machinery). They are not the voters. They are from all over (the place).

Jainab: (Yes, they are) machinery… so we give them transportation (allowance).

Shahrizat: I know they from Kota Kinabalu, Kalabakan (and) all over. Tonight I (am) meeting (them), as you can see [pointing at the stage backdrop], (this function is for) the machinery. They are the ones going down (campaigning).

Shahrizat: I must make this clear (that) this is not vote-buying… You are (from) Malaysiakini? Please don’t do that to us because these women they come from all over Sabah.

They are the jentera. This is not… I didn’t even know about that.

Jainab: We are not voters. For your information, none of us are voters. We are here to work. So this is our machinery (and the money is) for transportation, that’s all!

Shahrizat: Don’t you naughty… if you say something like that we’ll do something like that also!

Rural vote under grip of money, intimidation

This analysis/investigative report was produced during the 2011 state election of Sarawak, the largest state in Malaysia that has been governed by the same chief minister for 33 years (1981-2014). Abdul Taib Mahmud, 77, often described by his critics as the “richest man in Malaysia”, stepped down in February 2014 as the chief minister and assumed the position of Head of State (the ruler in a constitutional monarchy), continuing to assert his influence over the state.  His family business empire controls over 400 companies in every sector in Malaysia and holds overseas assets more than US$250 million in four countries. The 2011 state election saw a historic breakthrough by the opposition, winning 15 out of 71 seats in the state legislative assembly. The opposition (PKR, DAP and PAS) made significant inroads in urban constituencies but rural areas remained a stronghold of the ruling  coalition (BN) mainly due to extensive money politics and political intimidation.

I was stationed in several rural constituencies for almost one month to cover the campaign and investigate the degree and impacts of vote buying and political patronage culture.

The original story was published here (paywall).

Rural vote under grip of money, intimidation

5:05PM Oct 31, 2010

By Kuek Ser Kuang Keng

While DAP ceramah in urban centres are magnets for thousands, indicating a possible clean sweep of all seats there, in contrast, the PKR campaigners in rural constituencies are struggling hard to turn traditional BN supporters against the politics of development, money and fear.

Pervasive poverty has made rural voters very vulnerable to financial enticement compared to the urbanite. Most families in the interior earn between RM100 to RM500 per month and a significant number of longhouses and villages are still without treated water and power supply.

The opposition often complains that their hard work in the constituency is destroyed by BN’s last-minute ‘money assault’.

NONEA ‘kapitan’ – an official Chinese community leader appointed by the state government who declined to be named for fear of reprisal by the authorities – explained in detail to Malaysiakinion the working of money politics in the interior.

“For instance, the BN candidate here had promised to give RM500 to every family in exchange for their support. We (kapitan) will pass the word to every family that we oversee,” he said when met recently at his house.

“If the candidate does not fulfil the promise, I afraid the voters will not vote for him. In the last few days, they’ve been asking me about the money,” he added.

“For white areas (BN strongholds), the money may be handed out before polling day. However, for black areas (where BN lost in last election), the money may be withheld until after polling day to make sure they vote for the BN.”

Where cash is king

He also revealed that the diaspora which returns to vote can claim RM60 transportation fee from the BN, distributed by the kapitan.

Money politics peaks on the night before polling day, he said, when all in Iban longhouses stay up throughout the night waiting for BN’s last-minute cash handouts.

“BN will send its agent to visit pintu by pintu (individual lots in a longhouse) to distribute cash, ranging from RM50 to RM300.

“Last time when I was campaigning for BN candidate, we had to travel from one longhouse to another from midnight until dawn, distributing the money,” he added.

ulu niah 5 iban longhouse sarawak 011007 welcomesMalaysiakini also witnessed a BN candidate handing out cash when greeting Iban folks in the longhouse during his nightly campaign. He passed the cash when shaking hands with them.

Although the opposition has called on voters “take the BN’s money but vote for the opposition”, which had been proven effective in the peninsula, it does not seem to work with the Iban cultural and traditional emphasis on gratitude and appreciation.

“When they receive money from you, they feel that they owe you something so they will repay your kindness the next day (polling day),” said an Iban PKR campaigner when met at Engkilili, an Iban-majority rural seat contested by the party.

The more financially well-off candidates would fully exploit this characteristic by throwing parties and dishing out free meals in the longhouses, coupled with crates of beers, which is an all-time favourite drink of the Ibans.

Minds boxed in by superstition

There had also been cases of those distributing the cash asking their recipients to swear loyalty to the BN, some even made to drink water said to be cursed.

“This is a psychological tactic to intimidate voters. They will vote for the person who gave money because the fear of tulah(curse),” claimed another PKR campaign coordinator in Saribas.

NONEThe situation is compounded by the shallow political awareness among the people. Most of the time they think that the funds given by BN MP or assemblyperson under the minor rural projects (MRP) allocation is from the latter’s own pocket.

MRP is the state government’s annual allocation for every Sarawak BN representative of over RM1 million. The representatives then distribute funds in the form of cheques to the development and security committees (JKKK) of longhouses and villages, and other local associations.

Similar to the political patronage culture in the peninsula, rural voters here often openly ask for funds when their representative calls on them.

When Malaysiakini followed the campaign of BN’s Lubuk Antu MP William Nyalau Badak to a longhouse at Mepi Pasir in his constituency where the chairperson of the JKKK’s women bureau went on stage to ask for RM5,000, which William gracefully promised in his speech later.

Largesse distribution, opposition poor second

Not only BN candidates, their opposition counterparts are also said to be giving cash handouts to voters during their campaign, but the amount, of course, cannot match their wealthier rival.

Apart from money, development politics and a surveillance network are important elements for the regime to maintain its rural region hegemony.

Unlike peninsular politics where politicians avoid offending the voters, Sarawak government leaders often hold them to ransom by threatening to withhold development allocations should they lose support.

“Let’s say, if a seat falls to the opposition but the state and country are still under the BN, what’s going to happen? How would the constituents go to the government and ask for something?” said Tasik Biru incumbent and assistant minister of environment Peter Nansian Ngusie, according to a report inBorneo Post last week.

NONE“Not that we would not take care of the people but those who vote for the government would be given higher priority. That’s just being practical,” he said, adding that the people who vote for the opposition should look to them for help.

Supp deputy secretary-general Wong Soon Koh (above) who is also the second finance minister and Minister of Environment and Public Health concurred.

Fear very effective control tool

The Bawang Assan candidate had openly sounded the warning that Sibu voters would lose their only minister and be denied development allocations should the seat fall to the opposition.

At the lower level, voters were told of horror stories of children being expelled from schools, civil servants sacked, villagers deprived of fertiliser and other government assistance, to the collapse of government, should they vote for the opposition.

NONEHence it is not surprising that opposition candidates, such as Abang Zulkilfi Abang Engkeh from the PKR, who contested the marginal seat of Saribas, has to repeatedly tell the villagers during ceramah that three of his children were able to enrol into public universities despite his active involvement in the opposition.

The atmosphere of political fear and intimidation is ratcheted further by the extensive network of community leaders appointed by the state government to serve as its eyes, ears and guards.

At the divisional level, a community leader from each ethnic – Malay, Chinese and Iban – is appointed as temenggung, the paramount leader of that particular ethnic community.

This is followed by the appointment of ‘pemancar’ at the district level and ‘penghulu’, ‘kapitan’, ‘ketua kampung’ and ‘tuai rumah’ at the lower level.

A community is overseen by a ‘tuai rumah’ can be as small as 20-lot longhouse.

Public funds’ role propping up

These key posts are recommended by BN elected representatives and appointed by the government for a four-year term with a monthly allowance of RM450, raised to RM800 earlier this year.

“If we find out that certain areas did not vote for BN, the ‘kapitan’ overseeing that area would warn the people there that their government assistance could be terminated. The same goes to longhouses,” said the kapitan interviewed by Malaysiakini.

NONEPeople in the interior are mostly involved in agriculture, relying heavily on government agency’s aid which includes the provision of fertiliser, seedling and herbicide.

Tuai rumah were alsotold by BN leadersthat they have the right to chase away opposition from campaigning in their areas. However, not many are willing to do so because of the Iban’s inherent friendly nature.

“If the kapitan or tuai rumah are found supporting the opposition, they would be sacked,” he added.

So, it is extremely difficult for opposition to secure victory in the interior under such circumstances unless other existing factors could overcome these hurdles, including the selection of unpopular candidate at Linggan and Pelagus, and pressing local issues such as the impact from the construction of dams in Bengoh and Belaga.

Special Report: Letting in sunshine on weapons deals

I’m always interested in the defense spending of the Malaysian government, especially after the brutal murder (using military-grade explosive) of a Mongolian woman who was linked to a multi-million submarine deal between the Malaysian government and a French supplier, and one of the suspects (he was acquitted later) was an aid to the current prime minister.

In the first of this 3-part series, I analyzed the expenditure of defense ministry since 1987 to investigate the trends, and reviewed all the major controversies surrounding defense procurement in recent years.

The second part examined the check-and-balance mechanism in monitoring the defense spending and identified the weaknesses in the current system. I also explored the phenomenon of the “revolving door” in which senior defense officers to move from government agencies to the business sector after retirement. Several high-ranking officers were identified and named in the report.

In the last part, I presented the best practices suggested by international transparency organizations and policies implemented by other countries to increase the transparency and accountability of defense expenditure.

This investigative reporting project opened my eyes to one of the most secretive ministries and industries in Malaysia. Rather than uncovering wrongdoings or new information, this series acted more as a compilation and analysis of the different facets and weaknesses of the defense procurement system. More investigation is needed to examine the issue.

The original series was published here (paywall): Part I, Part II, Part III.

RM180bil defence bill: Little bang for the buck

2:22PM Jul 26, 2010

By Kuek Ser Kuang Keng

SPECIAL REPORT Over the last 23 years, Malaysia’s defence spending has taken a whopping RM180 billion from the national coffers.

azlanThe average annual defence spending each year is close to 2.5 percent of the nation’s GDP from 1987-2004, which should turn Malaysia into a country with decent defence capability, according to a defence analyst.

However, Malaysia’s defence forces is in a sorry state which can only deal with ‘military operations other than war’ (MOOTW).

This is not surprising as allegations of corruption and mismanagement relating to defence procurement  continually crop up.

Defence expenditure has been the second-largest item in the national budget until the global financial crisis hit Malaysia in 2008, resulting in other items overtaking it in the 2009 budget.

Defence Ministry expenditure has grown more than five times, from RM2.09 billion in 1987 to RM11.013 billion in 2010.

The total expenditure during this period was RM178.989 billion – the equivalent of building six Putrajayas or 60,000 primary schools.

The defence allocation ranges from 1.6-3.2 percent of the nation’s GDP. According to Lam Choong Wah, editor of defence portal KL Security Review, this is moderate compared to the international average of 2 percent.

He pointed out that this level of spending should give Malaysia an appropriate level of military capacity but the reality shows the opposite.

But with so many obsolete weapons and equipment in hand, the defence system can only face low levels of military conflict and perform MOOTW such as peacekeeping, he said.

azlanJustifying this disturbing fact with the lavish military spending begs questions.

Expenditure on big-ticket items should always come with strict monitoring and high accountability. Unfortunately doubtful defence procurement, sometimes reaching scandalous proportions, is said to be a common phenomenon in the Defence Ministry.

In this three-part special report,Malaysiakini attempts to uncover the root causes of suspicious procurements and ways to enhance the current check-and-balance mechanism.

It begins with a list of questionable defence deals in recent years, compiled from media reports. These involved RM26.8 billion and were completed under the watch of Najib Abdul Razak who helmed the Defence Ministry from 2000-2009.

Questions raised about most of the transactions have been left unanswered. Although some were investigated and elements of corruption and mismanagement were found, no senior official has ever been held accountable.

Submarines in global spotlight

The Defence Ministry signed a contract with France’s DCNS and Spain’s Navantia in 2002 to purchase two Scorpene submarines. The deal is expected to cost RM7.3 billion including maintenance and other services.

What has raised eyebrows is the payment of 114 million euros (RM510 million) to a local company called Perimekar. The sum was alleged to be a commission but the ministry has insisted it was for ‘coordination and support services’ involving the submarine deal.

abdul razak baginda najib altantuya murder 201108Perimekar is wholly owned by another company, KS Ombak Laut Sdn Bhd, which in turn is controlled by Abdul Razak Baginda, a close confidante of Najib.

The deal turned into a scandal when Abdul Razak was charged with abetting two of Najib’s bodyguards in the murder of Mongolian interpreter Altantuya Shaariibuu, who was shot in the head on Oct 19, 2006, and then blown up with C4 explosives available only to the military.

According to testimony revealed in court, Altantuya was apparently blackmailing her then-lover Abdul Razak for US$500,000 for reasons unknown. She accompanied Abdul Razak to Paris when the ministry was negotiating the submarine deal.

The case attracted international attention when judges in the Paris Prosecution Office prompted a preliminary police inquiry after two French lawyers filed the case on behalf of Malaysia’s human rights organisation Suaram.

The scandal escalated when private detective P Balasubramaniam, hired by Abdul Razak to protect him from a furious Altantuya, filed a statutory declaration after the trial indicating that Najib had actually been the victim’s lover and had passed her on to Abdul Razak.

azlanHowever he retracted the allegations the next day and went into hiding before taking up residence in India.

He later claimed that he had been offered RM5 million by a businessman close to Najib’s wife to retract the allegations and leave the country.

He further alleged that he had met Najib’s younger brother Nazim regarding the case.

Balasubramaniam recently met French investigators, and also delivered written replies on July 22 to questions from the Malaysian Anti-Corruption Commission which is investigating his allegations.

In a twist to the sorry tale, the first submarine KD Tunku Abdul Rahman, which arrived in Malaysia last September, could not dive due to technical problems, but repairs left it fully operational in February this year.

Meanwhile, DCNS faces other allegations relating to submarine sales in Taiwan and Pakistan.

Jet engines ‘fly’ to Uruguay

Two Northrop F-5E jet engines from the Royal Malaysian Air Force (RMAF) were found to be missing in May 2008, sparking allegations of the involvement of corrupt officials.

The engines were reportedly taken from a military air base in 2007 and sold on the black market to a South American company. The authority later traced the engines to Uruguay and brought these back in June this year.

Defence Minister Ahmad Zahid Hamidi initially said the engines cost RM50 million each but later clarified that the correct figure is RM303,570.

The ministry claimed that no senior air force officers were involved in the theft. The same answer was given by Parliament’s Public Accounts Committee (PAC) after investigations.

azlanFormer RMAF sergeant N Tharmendran, 42, has been charged with a company director in relation to the case. They have claimed trial in the Petaling Jaya Sessions Court.

Tharmendran has since revealed that he had been tortured by military intelligence officers into confessing while under detention during an internal probe.

No testing of Eurocopter

In October 2008, two letters from Capt (rtd) Zahar Hashim, chairperson of Mentari Services Sdn Bhd – a local company representing a foreign defence company – alleged that the Defence Ministry had overpaid RM1.419 billion to buy 12 Eurocopter Cougar EC 725 helicopters to replace the armed forces’ aging and accident-prone fleet of Nuri choppers.

helicopter military eurocopter cougor ec 725 troop transporterHe claimed that the ministry intended to pay RM2.317 billion for the deal although another company had offered RM898 million for similar choppers.

The letters, written to Najib, outlined  several other discrepancies while also accusing him of hastily signing the Letter of Intent dated Sept 15, two days before he moved on to Finance Ministry.

The allegations sparked an uproar and led to the investigation by the PAC, which eventually found ‘no procedural abuse’ in the tender process.

However, the PAC confirmed that there had been no physical examination of the 12 helicopters prior to purchase.

The ministry finally sealed the deal on March 8 this year at a cost of RM1.542 billion.

Sukhoi jet deal

The Defence Ministry paid RM3.2 billion to buy 18 Sukhoi-30MKM jets from Russian state-owned company Rosboronexport in May 2003. This was to replace 14 US-made F-5Es, which have been in service for two decades.

military malaysia fighter plane sukhoi su 30 mkm 290507 02The deal was made through local agent IMT Defence Sdn Bhd, owned by former Umno minister and Malacca chief minister Mohd Adib Adam.

Controvesy broke in 2005 when Mohamad Zainuri Mohamad Idrus, a former director of IMT Defence, lodged a police report and filed a legal suit against Mohd Adib.

He claimed that Mohd Adib had secretly registered a new company in Labuan with a name similar to IMT Defence, in order to channel the RM380 million in commission from the deal to the new company. No action has been taken against Mohd Adib.

The ministry defended the purchase, saying that Rosboronexport had wanted to make the deal with the aid of a local firm.

Naval patrol boats scandal

The Auditor-General’s (AG) Report 2006 tabled in Parliament on Sept 7, 2007 revealed that a contract given to PSC-Naval Dockyard, owned by an Umno associate Amin Shah Omar Shah, to build six naval vessels for the navy had ballooned from RM5.35 billion to RM6.75 billion and was a near failure.

amin shah omar sshah and malaysia naval shipsThe company was contracted to deliver the patrol boats in 2004 and to complete delivery by April 2008. However only two patrol boats had been delivered by mid-2006, and these could not be fully optimised due to defects.

In all, 298 complaints were lodged on the operation of the vessels. One boat was also found to have 100 incomplete works, while the other had 383.

The report found that the ministry had paid out RM4.26 billion to PSC up to December 2006 although only RM2.87 billion of work had been done, an overpayment of RM1.39 billion.

It said the government had released a big proportion of the RM4.26 billion upon ‘confirmation of order’ for equipment and systems, rather than upon delivery.

Another shocking revelation was that 14 progress payments amounting to RM943.46 million to the company between December 1999 and January 2002 could not be audited as the payment vouchers and supporting documents were missing from the Defence Ministry’s records.

The AG further estimated that the government could claim at least RM214 million in penalties for the late delivery but the cabinet decided to waive payment at the request of the shipyard.

The report noted the abnormally generous payment of RM1.07 billion as deposit, which amounts to 20 percent of the contract price upon signing the agreement.

najib first sixth pm speech 040409The AG was also dissatisfied with the quality of monitoring by the project steering committee – led by Najib.

He urged both the finance and defence ministries to give “serious concern” to implementation in order to avoid the weaknesses being repeated in the remaining vessels, and urged that a joint committee comprising both ministries be set up.

The company was later bought over by Boustead Holdings Bhd which revived the project and Amin Shah, once touted as ‘Malaysia’s Onassis’ was declared bankrupt in October 2007.

Poser over RM8 billion APCs

In April this year, DAP Petaling Jaya Utara MP Tony Pua accused the Defence Ministry of intending to buy 257 armoured personnel carriers (APC) for a total of RM8 billion – which he claimed was far above the market price.

azlanIt was reported that ministry had signed a Letter of Intent worth RM8 billion with Deftech Sdn Bhd for the APCs, during the Defence Service Asia 2010 exhibition in Kuala Lumpur.

However the ministry responded that the decision on the pricing of APCs had not been made. It  also defended the planned purchase as a necessity to developing the defence system to international standards.

But the ministry confirmed that a Letter of Intent had been sent to Deftec for thorough study of the APCs to see if these conform to the ministry’s standards.

15-year lease of ACMI

In January this year, blogger Raja Petra Kamarudin claimed on his website Malaysia Today that Najib, while he was the defence minister in 2007, had approved the lease of the Aircraft Combat Manoeuvring Instrument from Aerotree Sdn Bhd at a cost of RM21 million per year, for 15 years.

The lease was to provide training for RMAF personnel. Formerly the training was done in Korat, Thailand, at a cost of RM2 million per year. Hence the cost of the lease was alleged to be more than 10 times what the RMAF had been paying.

Raja Petra furnished apparently official documents that indicate Najib had approved the contract based on direct negotiation without open tender. He claimed that the negotiated contract was not conducted according to procedure.

Sub-standard combat uniforms

The 2006 Auditor-General’s Report released in September 2007 found that combat uniforms, leather boots and ballistic helmets worth RM101.75 million supplied from 2004-2006 did not meet the army’s specifications.

military malaysia army tentera 131106 trainingAmong others, the report revealed that 5,000 units of ballistic helmets – costing from RM481 to RM484 each – were found to have serious “delamination and trauma effects”, but had still been distributed to the army.

The helmets were supplied by Seri Mukali Sdn Bhd which had been given a RM19.83 million contract from 2004-2006.

Other items that failed to meet the specifications were combat uniforms, webbing sets and leather boots.

The report also pointed out that four suppliers, who were late with delivery, were not fined despite a provision for this in the contract.

Police reports against Airod

Three police reports on alleged corruption were lodged in 2005 against Ahmad Johan, president of Airod Sdn Bhd, which held major contracts with the air force.

airodHe was alleged to have set up a company, Quality Ranch, with his son Edron Hayata to siphon  RM5.7 million of commission.

The payments were said to for ‘consultancy work’ involving extensions on two C130 aircraft owned by the air force and contracted out to Airod.

However PKR deputy president Syed Husin Ali, who lodged the report, claimed that the actual consultancy work was carried out by United States-based Lockheed Martin.

He added that the consultancy contract was given to Quality Ranch even though the company did not have any experience in the field of aviation.

Tomorrow: Factors behind questionable procurements

Note: Malaysiakini is interested in hearing from readers with verifiable information on suspect defence procurements. Please email information and your contact details toeditor@malaysiakini.com

 

Defence contracts: Evading public scrutiny

2:50PM Jul 27, 2010

By Kuek Ser Kuang Keng

SPECIAL REPORT Three major factors restrict scrutiny of Malaysia’s defence transactions which have amounted to some RM180 billion over the last 23 years:

1. Information is not disclosed on the basis of ‘defence secrets’ and ‘national security’.

2. Price-related information is limited in the defence market and involves many technical issues and specifications that complicate the process of evaluation and comparison.

3. Although the Defence Ministry has regulations and an internal mechanism to prevent irregularities, there is no external independent scrutiny.

NONEDefence researcher Lam Choong Wah(left) said procurement is carried out in one of three ways currently – through direct negotiation, open tender and quotation.

A former journalist who specialised in defence issues, Lam is now editor of defence portal KL Security Review. His first book tentatively titled ‘Uncovering Malaysia’s Defence’ is scheduled to be launched next month.

A Finance Ministry circular issued in 2007 stipulates that a tender must be called for all government procurements priced above RM500,000.

azlanDirect negotiation is the least transparent method of the three, but the number of procurements completed via this process has increased in recent years.

Lam explained that direct negotiation is allowed under specific circumstances: when only one company can provide the equipment or service; to standardise the specifications of equipment; emergency needs; and due to strategy and political considerations, such as bilateral relationships between countries.

According to a parliamentary written reply by the Defence Ministry in March last year, the number had almost doubled from 52 in 2006 to 100 in 2009, going up in value from RM2.1 billion to RM4.4 billion over the period.

Best management practices

Auditor-general Ambrin Buang stressed that the Defence Ministry is obliged to adhere to the objective of public procurement which is “to ensure all procurements are best managed (efficient and effective, enhancing access, competition and fairness) to get the best value for money”.

In an email interview, he listed how this objective is to be achieved:

  • Government officials are responsible for their actions and decisions in relation to procurement and for the resulting outcomes, and thus are answerable for such activity.
  • To promote transparency, the Treasury has issued ‘Guidelines on Evaluating Tenders’ which are easily accessible to the public on its web portal.
  • When streamlining the process and procedures on procurement through direct negotiations, Controlling Officers are required to sign a Letter of Undertaking that the agreed price is reasonable and offers the best value for money.
  • Tender/quotation/e-bidding documents are required to include four new paragraphs to remind bidders that corruption is a criminal offence under the Malaysian Anti-Corruption Commission Act 2009.
  • The Finance Ministry has launched a procurement information centre portal – MyProcurement – to step up transparency and to disseminate information to the public.
  • All bidders for government contracts are required to sign an Integrity Pact by way of a Bidder Declaration Letter asserting that no bribe was offered to influence public officials in evaluating the bid. The successful bidder is required to sign another declaration that his successful bid was not due to bribery.
  • The government recently decided that procurements exceeding RM100 million are subject to scrutiny by an independent review panel to be set up by the Economic Planning Unit.
  • Each ministry is required to set up an Internal Audit Unit. The Defence Ministry has an Internal Audit and Public Investigation Division with a total of 110 personnel. The division reports to ministry secretary-general.

‘No external monitoring’

A long-standing complaint is that it is extremely difficult to scrutinise direct negotiated deals in a system that classifies such details as ‘official secrets’ almost all of the time.

sibu forum penang 260510 liew chin tongDAP Bukit Bendera MP Liew Chin Tong (left), who has been tracking defence issues, pointed out that the Defence Ministry’s reluctance to divulge information has prevented MPs on both sides from arriving at a consensus on the defence policy.

Such a consensus would have enabled them to debate related matters based on a mutually-acceptable benchmark.

“We don’t even know what weapons meet the requirements of our defence policy, so how can we monitor the procurements effectively?” he asked.

“So we hentam (criticise) everything. When they buy something expensive, we tend to think there is some hanky-panky.”

Asked if there is an external monitoring mechanism, Lam shot back: “Absolutely none”.

The parliamentary Public Accounts Committee (PAC) only investigates a transaction if an element of fraud is suspected.

Lam noted that it is impossible for the media and civil society to monitor all defence transactions because the authorities keep a tight grip on information.

He cited the acquisition of a Czech-made VERA-E passive surveillance radar in 2007.

dr abdul latiff ahmadAlthough a defence magazine later reported the purchase, the government refused to comment on this until Deputy Defence Minister Abdul Latiff Ahmad (right) confirmed in the Dewan Negara last week that the acquisition cost Euro 17.6 million (RM73.7 million).

It took some three years for this to be revealed.

The National Audit Department (NAD), which audits large purchases and publishes the findings in its annual report, conceded that it cannot audit all defence transactions.

ambrin buang“The Defence Ministry has hundreds of procurement transactions in any one year, covering goods or services including consultancies and professional services, construction, maintenance and material supply contracts…,” Ambrin (left) pointed out.

“… We also carry out other types of audit… the NAD normally conducts a maximum of six performance audits a year. In addition to our normal workload, we undertake special audits if there are requests from the Finance Ministry and PAC.”

Lam said defence procurements not like “buying vegetables in the market” where one can compare prices and quality from different vendors. Weapons manufacturers only reveal their price and specifications when a buyer approaches them.

Also, there are no identical defence procurement packages as “a minor change in specification could lead to a huge difference in price”.

“Some weapons-exporting countries quote their price based on political factors. So it is very hard to do price comparisons,” explained Lam.

‘Priority vendors’

One factor that has drawn considerable flak is the role of the local agent, often suspected of being paid an enormous commission to facilitate defence transactions and thereby inflating the cost of procurement.

Lam said the ministry has claimed that this enables technology transfer, nurtures local enterprise and helps to monitor foreign companies operating in Malaysia.

pkfz port klang ong tee keat lee hwa beng paul low seng kuan pc 100609 02However Transparency International-Malaysia president Paul Low (right)begged to differ with the practice.

“Why do we need a middle man? If supplier wants to provide service, it is for them to set up operations here. It can be 100 percent owned by them, not a joint-venture company,” he argued.

Also criticised is the practice of hiring retired top ministry officials as directors or senior managers of companies involved in defence-based business.

Lam claimed that the ministry gives priority to companies owned by former personnel when making purchases.

“This policy has its advantages because veterans are familiar with the requirements of the armed forces, but it also gives rise to allegations of cronyism and nepotism,” he said.

Low said the existence of the “revolving door”, which enables senior officers to move from government agencies to the business sector, could build an unhealthy relationship even before they retire.

“These persons are responsible for evaluating tender (documents). The company could hold out an offer of a job (at such a time that) they retire, in order to win the tender,” he cautioned.

“We can’t stop (the officials). They have the right to look for a job (on) retirement. It is hard to stop this practice.”

Who’s who in companies

A number of high-profile retired defence officials have been recruited by several companies that have extensive business links with the Defence Ministry. Those named here are in no way implicated in any wrongdoing in relation to information in this three-part series.

Subhan Jasmon, former Defence Ministry secretary-general

NONEHe was appointed chairperson of Sapura-LTAT Communications Technologies Sdn Bhd when he retired. The company had won a RM500 million contract to supply 3,000 communication sets to the armed forces while Subhan was still the Defence Ministry secretary-general.

He is also the non-executive chairperson of MTU Services (Malaysia) Sdn Bhd. It bagged a RM537 million contract in February 2009 to supply spare parts, services and training to the Royal Malaysian Navy for five years.

Zahidi Zainuddin, former chief of defence forces

NONEHe was was appointed a director of DRB-Hicom Bhd on June 1, 2005, one month after he retired. A subsidiary of the company – Deftech Sdh Bhd – received a government Letter of Intent to acquire 257 armoured personnel carriers for RM8 billion. An opposition MP later claimed that this was far above the market price.

Ramlan Mohamed Ali, former navy chief

NONEHe is the director of Boustead Yachts Sdn Bhd, a company under Boustead Holdings Bhd which is one of the largest defence companies in Malaysia.

It is a government-linked company with the Armed Forces Fund Board, a statutory body, as its major shareholder.

Ramli Mohd Nor, former navy chief

NONEHe is the managing director of Boustead Naval Shipyard and executive deputy chairperson/group managing director of Boustead Heavy Industries Corporation Bhd. Both companies are under Boustead Holdings Bhd.

Mohd Shahrom Nordin, former army chief

NONEHe is the executive director of SME Ordnance Sdn Bhd, the rifle supplier to the army.

The company is a subsidiary of National Aerospace and Defence Industries Sdn Bhd.

Ismail Nik Mohamed, former air force chief

NONEHe is consultant to Zetro Aerospace Corporation Sdn Bhd. The company manages three government contracts.

Among these are the maintenance and repair of aircraft radios, airborne radar, air traffic control and air defence communications, radar and navigational aids.

Tomorrow: What can we learn from others?

Part 1: RM180bil defence bill: Little bang for the buck

Note: Malaysiakini is interested in hearing from readers with verifiable information on suspect defence procurements. Please email information and your contact details toeditor@malaysiakini.com

 

Letting in sunshine on weapons deals

12:47PM Jul 28, 2010

By Kuek Ser Kuang Keng

SPECIAL REPORT Defence procurements rate as a top secret in every country. Yet, progressive governments have taken the step of striking a balance between the competing needs of national security and transparency in handling transactions.

NONETheir measures have enabled at least limited discussion and audit of arms purchases, in the interest of protecting tax dollars.

In Malaysia, however, suggestions to bring in similar policies have thus far fallen on deaf ears, said DAP Bukit Bendera MP Liew Chin Tong(right) who outlined two approaches.

First is the regular release of a Defence White Paper by the government to explain defence policy and general strategy.

Liew said all MPs need to understand the defence direction and priorities in order to arrive at a consensus on policy. Such consensus would further enable them to scrutinise and debate procurements, as to whether these are in line with the policy.

The second suggestion is to set up a parliamentary bipartisan select committee on defence. This could train a group of MPs to specialise on defence issues.

Some countries like Australia regularly brief lawmakers on defence issues, even providing classified information on condition they sign a non-disclosure agreement.

“Such measures are useful as they allow for indirect accountability to the people. After all, Parliament represents the people,” he explained.

azlanLiew said he had privately suggested to Defence Ministry that it holds briefings for lawmakers, while the parliamentary Public Account Committee had proposed that the government sets up an independent review panel to monitor big-ticket purchases. There have been no takers.

Defence researcher Lam Choong Wah said the US – which has the world’s largest defence budget – offers two versions of its defence policy report.

One is accessible to the public but the other restricted to members of the bipartisan Armed Service Committee, which oversees almost all matters related to defence policy in the House of Representatives and the senate respectively.

The influential committees are empowered to hold public inquiries into alleged irregularities and to summon government officials to testify.

They also have power to approve candidates for senior posts, including that of secretary of defence and commander-in-chief, upon nomination by the president.

NONESouth Korea is another country that allocates a huge part of its budget to defence. Following a series of allegations about purchases, the government made a bold decision in 2006 to merge eight government agencies, including the Defence Ministry’s acquisition offices.

A single organisation named the Defence Acquisition Programme Administration was created to reduce corruption and improve transparency in weapons deals. This introduced integrity-building measures such as an Ombudsman’s Office to oversee purchases.

The office is led by three ombudsmen recommended by civil society and has the power to investigate complaints and instigate audit on defence contracts, should defects be discovered.

The Ombudsman received 41 civil complaints from 2006 to October 2008, of which 29 have been investigated and 12 are pending investigation. An audit was requested into one case.

Civil society role

Apart from creating mechanisms at legislative and executive level, there is a key role for civil society involvement in monitoring procurements.

Lam noted that there are more than 2,000 non-government military analysis institutions in the US that publish reports regularly and monitor defence purchases.

He is of the view that specialised NGOs or think-tanks could do a lot to simplify and disseminate information to Malaysians, so that public discussion is stimulated.

NONELam (left) himself started up defence portal KL Security Review for this purpose. And his first book tentatively titled ‘Uncovering Malaysia’s Defence’ is intended to decipher complex issues for the layperson.

Transparency International (TI) has published a handbook, ‘Building Integrity and Reducing Corruption Risk in Defence Establishments’.
It suggests that, apart from voluntarily disclosure of defence information, the government and Defence Ministry should engage civil society in drafting defence policy and procurements.

This will not only reduce corruption and increase transparency, but also enhance public confidence in the Defence Ministry.

In 2007, TI had hosted a roundtable event in Zagreb, Croatia, with participation of senior defence and government officials, members of international organisations including Nato and the European Union, and representatives of defence companies, academia, civil society and the media.

The meeting initially focused on a major procurement of armoured vehicles, but ended up publishing Croatia’s defence procurement needs and the full defence budget for the next 10 years.

Another example cited in the handbook is the South African defence policy, which was reformulated when the apartheid system collapsed.

“South Africa quickly embraced the concept of civil society participation in the development of security policy, developing White Papers on various facets of defence policy,” the handbook says.

The consultation was done with interest groups and NGOs on issues like transparency and freedom of information, military professionalism, regional security, budgetary considerations, control of movement of defence equipment, and the defence industry.

Structural reform ‘not necessary’

On the home front, though, auditor-general Ambrin Buang maintained that Malaysia does not need structural reform to reduce irregularities and mismanagement in government.

This is because there are sufficient laws and regulations to enable the government to act against wrongdoers, he argued.

mohd sidek hassan“The government has set up a task force headed by Chief Secretary Mohd Sidek Hassan (right) to review the 2008 Auditor-General’s Report and take action against those responsible for the financial irregularities revealed therein,” Ambrin said in an email interview.

He revealed that the government has acted against at least 70 officers, including those who have retired, officers from government-linked companies, police personnel and several companies found to be involved in financial irregularities and malpractices.

“Among actions (against individuals) are termination of employment, a fine equivalent to two or four days’ emolument, surcharge, warning and civil action. For companies, actions include blacklisting them or suspending membership in their professions,” he said.

Ambrin is also of the view that any system or mechanism is only as good as the people running it.

ambrin buang“It is very important for everyone involved in procurements to exhibit competency, diligence and integrity when making decisions…,” he said.

“Also there must be stern action by the respective secretaries-general against those who flout the law and really enforce the penalty provisions in contracts.”

He conceded that public procurement is often vulnerable to conflicts of interest and corruption but is confident that the government is committed to improving this aspect.

“The government’s stance is reflected in the inclusion of (ways to reduce) leakage of funds in procurements as one of the focus areas of the National Key Result Areas on fighting corruption,” he added.

Given the lucrative returns to be derived from defence procurements in a ‘close-one-eye’ environment, cynical taxpayers are likely to counter that ‘improvements’ will only drive malpractice deeper underground.

Related stories

Part 1: RM180bil defence bill: Little bang for the buck

Part 2: Defence contracts: Evading public scrutiny