Audit reveals direct negotiation option risks public trust

By Lee Wei Lian, Md Izwan and Zurairi Abd Rahman

Malaysian Insider, October 16, 2012

KUALA LUMPUR, Oct 16 — The annual Auditor-General’s Report has revealed several projects that were directly negotiated and were plagued with issues and which could impact the level of trust in government, say analysts.

The most glaring example was the directly negotiated RM12.49 billion Ipoh-Padang Besar double-tracking project which was delayed twice and has incurred an additional RM3.6 billion in costs.

Other examples include 1,000 brochure racks worth RM1.95 million for Visit Malaysia Year 2007 bought through direct negotiation by the Malaysian Tourism Promotion Board without the Finance Ministry’s approval, resulting in a probe by the Malaysian Anti-Corruption Commission (MACC), and the five billboards worth RM3.64 million that it put up in Indonesia via direct negotiation that are also being investigated by anti-graft officials.

In the case of the Ipoh-Padang Besar rail project, the audit report said the implementation was “not satisfactory” apparently because the appointment of the contractor was not done via competitive bidding.

“Appoint contractors through competitive bidding for future projects to get the best value for money and ensure that contract clauses protect government interest,” said the audit team.

Transparency International Malaysia president Datuk Paul Low said the direct negotiation way of awarding contracts could potentially give rise to problems such as corruption and lack of competition.

“Direct negotiation is not a good practice because it only encourages corrupt practices. If we want to avoid corruption, we have to limit this direct negotiation practice,” he told The Malaysian Insider.

“With direct negotiation, there will be no competition and the party given the project in some cases is not effective to finish the project.”

He said that based on past experience, most of the contractors that were given projects through the direct negotiation method were not qualified.

Low said however that for some cases, direct negotiation could be considered such as due to technical considerations and if only there is only one available supplier for the project.

He added that the government has to make sure enforcement is stringent if it wants to continue with direct negotiations.

“The enforcement should be responsive and disciplinary action should be taken against those contractors who have problems,” said Low. “Only with strict enforcement it can create accountability, that’s why we urged all parties to sign the Integrity Pact to avoid corrupt practices.”

Low said that while open tenders were preferable, they would only work well if the award committee was truly independent.

“First we have to make sure the board is free from conflict of interest and most qualified,” he said. “Only this way we can make sure the open tender is really effective.”

RAM Holdings chief economist Yeah Kim Leng said that if large projects were not awarded via open tenders, it could give rise to the perception that the government was not committed to transparency.

He said the Najib administration had started the momentum for greater transparency with the Government Transformation Programme (GTP) and it must accelerate the process to gain greater credibility and trust and convince the public that the transformation programme was gaining traction.

Yeah said that if big projects were not done via competitive bidding it would lead to public scepticism.

Institute of Democracy and Economic Affairs (IDEAS) chief executive Wan Saiful Wan Jan said that direct negotiations would give rise to questions over the transparency of the award.

He also said that penalties for contractors selected via direct negotiations were often too “weak”.

He noted that open tenders on the other hand will ensure qualified vendors and value for money.

“It’s better to eliminate direct negotiations as much as possible rather than having to deal with problems arising from direct negotiations,” he said.

Wan Saiful said however that in some instances, direct negotiations might have to be retained if it involved certain policies such as Bumiputera special privileges.

“But it must be minimised to avoid problems and leakages in government,” he cautioned.

Prime Minister Datuk Seri Najib Razak has pledged his commitment to open tenders, saying at the launch of the Economic Transformation Programme (ETP) in 2010 that competitive tenders for big projects would be the “default” option.

Despite efforts to boost transparency including making corruption one of the National Key Result Areas in the GTP, Malaysia slipped four spots to 60th in Transparency International’s Corruption Perception Index last year.

Ad agency says was asked for bribes to win tourism contract

By Clara Chooi

March 17, 2011

Malaysian Insider

KUALA LUMPUR, March 17 — The advertising agency behind the award-winning “Malaysia, Truly Asia” tourism campaign charged today that it withdrew a bid to renew its contract with the Tourism Ministry after being asked for bribes in exchange for the deal.

Integrated Strategic Communications’ (ISC) complaints against the ministry are already being probed by the Malaysian Anti-Corruption Commission (MACC).

The agency said in a press statement today that it was rebutting Tourism Minister Datuk Seri Dr Ng Yen Yen’s denial of “ambiguity” in the tender process for the advertising and promotions contract, worth a total of RM381 million.

ISC founder and chief executive officer Austen Zecha (picture) alleged that both he and his deputy were jointly approached on January 19 to “offer the client” (the ministry) a 50 per cent “rebate” or an annual share of the firm’s income from the account.

In exchange, he said, ISC would then “re-win” another three-year Tourism Malaysia contract for the Europe, North America and Oceania tender.
“This essentially led ISC to decide to withdraw its tender on Wednesday, January 26,” Zecha said.

He added that ISC’s founders, shareholders, directors and management had unanimously agreed that the incident was a “grave insult” and that it added further suspicion to the ambiguity of the tender process on a whole.

He pointed out that ISC had an “impeccable” record in its work for the “Malaysia, Truly Asia” campaign, which it has handled since 1999 through the terms of four successive tourism ministers — Datuk Leo Michael Toyad, Datuk Seri Tengku Adnan Tengku Mansor, Datuk Seri Azalina Othman and now Datuk Seri Ng Yen Yen.

Zecha also repeated ISC’s earlier allegation that it had been told by the ministry that it could only bill Tourism Malaysia RM3 million both in 2009 and 2010 for its previous three-year contract for Europe, which was actually worth RM18 million annually.

“It is only under this minister’s administration — never ever before, even prior to ISC’s past four contractual three years of service or its two predecessor agencies’ previous three contractual years of service covering the 1970s, 1980s and 1990s — did Tourism Malaysia allow ISC and its two predecessor agencies to bill it only one-sixth of any year’s stipulated contract’s worth, or only about 17 per cent.

“So what happened to the other 83 per cent of each contract year’s worth of the RM18 million in 2009 and 2010, and who authorised and benefited from the standard commissions of the other RM30 million of invoices over the past two years?” he asked.

“And does the government, especially the Treasury, allow for such hidden euphemistically-called ‘Direct Bookings’ to deprive bona fide and Treasury-registered companies to be basically ‘short-changed’ on contracts’ worth, and for which ISC duly paid Treasury the normal stamp duties based on its stipulated contracts’ worth?” said Zecha.

He also called into question Ng’s involvement in the issue, pointing out that the latter’s remarks in Parliament on Tuesday had contradicted her earlier statement that she was unaware of the five companies that were each awarded three-year contracts, totalling RM381 million or RM127 million per year.

“Previously, the minister was quoted in the media as saying she did not even know any of Tourism Malaysia’s five tenders were awarded to any of her ‘friends’ but now she seems to acknowledge knowing at least two of them,” he said.

Ng had been forced to explain the situation to Parliament when she was questioned by the DAP’s Jelutong MP Jeff Ooi if the five contracts had been awarded to crony companies through the use of political connections.

One of the tender winners was Impact Creations Sdn Bhd, which is said to have been selected because Juni Ewe, the managing director of Impact Challenger Sdn Bhd, allegedly related to the first company, is a friend of Ng’s.

Ng denied that the two companies were related.

Ooi had also asked if the award to Naga DDB Sdn Bhd was through a political channel as its founder and executive chairman is Datuk Vincent Lee Fook Long, who is also the executive deputy chairman of the MCA-owned Star Publications (Malaysia) Bhd.

Ng is a vice-president of the MCA, the second largest component party in the ruling Barisan Nasional.
The five recipients of the tenders were Naga DDB for the Asean market with a contract value of RM25 million a year, SMASCOM & Designs Sdn Bhd for East and North Asia (RM25 million), Sen Media Sdn Bhd for South Asia, West Asia and Africa (RM26 million), M&C Saatchi Sdn Bhd for Europe, America, Oceania (RM21 million) and Impact Creations for domestic and events (RM30 million).

Ng was also urged to clarify her denial that her ministry was now under MACC investigation and had its offices raided last Friday.

She explained that she was the one who invited the MACC in order to clear the ministry’s image following ISC’s “lies”.

“We cannot say that just because a company has failed to secure a tender, after getting it for 12 years at a value of more than RM160 million, and now it has raised all kinds of things.

“As a minister, it is my responsibility to ensure that the truth is told, not only the lies,” she was quoted as saying in theSun daily.

But Zecha argued that ISC had not “failed” to secure the tender but had withdrawn itself from the bid on January 26, long before Tourism Malaysia decided on and announced the winners on February 7.

He asked if Ng’s statement meant that the latter had already known even before ISC withdrew its bid who would win the tender.

“Is that why only this time there were no actual agencies’ presentations called for, which, as she has said publicly too, was what Treasury told her ministry to do? This should now receive the MACC’s fullest attention, indeed, because something here does not jive,” said Zecha.

The MACC raided the offices of Impact Creations and the Tourism Ministry last Friday following ISC’s complaints on the tender process.

Zecha also denied a statement by former Culture, Arts and Tourism Minister Tan Sri Abdul Kadir Sheikh Fadzir that the “Malaysia, Truly Asia” slogan was created by him, insisting that the award-winning campaign was its own initiative.

“Indeed, as we had already stated earlier this week, if it had been then-Tourism Minister Datuk Seri Kadir’s idea, why did he have to call us in when in May 1999 ISC was not yet a member of Tourism Malaysia’s panel of agencies?

“If it had been his idea, why not just give the concept or strategy to one of his existing panel of agencies’ members then?” he asked.

Zecha said that to put the matter on record, ISC will be engaging with legal parties, both local and abroad, as well as all participants in its 1999 pitch to Tourism Malaysia, to bear testimony and witness to the fact that the campaign had been its own initiative.

“They will help bear witness to the fact that ISC — led by our then-chairman, co-founder and investor Datuk Mukhriz Mahathir and yours truly — presented our conceived and subsequently developed ‘Malaysia: Truly Asia’ international re-branding for Tourism Malaysia as an unsolicited and requested by and accepted on-the-spot by then-Tourism Minister Datuk Seri Kadir,” he said.

Zecha also urged the MACC to investigate why Abdul Kadir’s statement had only been reported in the MCA-owned The Star newspaper.

“Bizarre or coincidence or collusion, that hopefully is also for the MACC to determine,” he said.

MACC becomes official today

STAR
Tuesday February 24, 2009

By LOURDES CHARLES

PUTRAJAYA: The Malaysian Anti-Corruption Commission (MACC), which came into effect on Jan 1, will be officially unveiled by Datuk Seri Abdullah Ahmad Badawi today.

The event will be the culmination of the Prime Minister’s efforts to reform the Anti-Corruption Agency (ACA) and boost the fight against corruption.

The MACC, modelled after the much respected and feared Independent Commission Against Corruption of Hong Kong, has replaced the 41-year-old ACA.

In its bid to enhance effectiveness, the MACC has also set up the Anti-Corruption Advisory Board, the Special Committee on Corruption and the Complaints Committee. Today’s event will also see the naming of the members who will make up the three bodies.

The seven-member board are appointed by the Yang di-Pertuan Agong on the advice of the Prime Minister.

The members, who will serve a three-year term, are persons of integrity and who had rendered distinguished public services. They will not hold office for over two terms. The board will advise the commission on corruption in Malaysia including its eradication policies and strategies.

The Special Committee will advise the Prime Minister on corruption in the country and its seven members, also appointed by the King, will not be members of the administration but be drawn from the Senate and the House of Representatives.

MACC can target firms

New Straits Times, 2008/12/23

THE Malaysian Anti-Corruption Commission (MACC) is empowered to investigate graft in the private sector, Minister in the Prime Minister's Department Datuk Seri Mohamed Nazri Abdul Aziz told the Dewan Negara yesterday.

"The MACC will investigate complaints of corruption in the private sector and this is provided for in the act. Everyone has talked about corruption of those in the public sector like ministers, members of parliament, menteris besar and executive councillors .

"The perception is that those in the private sector are exempt.

"But this is not the case, and if there is a complaint about a corrupt practice in the private sector, the MACC will investigate it," Nazri said while replying to points raised by senators during the debate on the Malaysian Anti-Corruption Commission Bill 2008.

The bill was passed without any amendments after 14 senators spoke on it.
Apart from giving the MACC more powers to investigate, the bill also provides for the creation of five bodies which will watch over the MACC to ensure its transparency and integrity.

They are the Anti-Corruption Advisory Board; Special Committee on Corruption; Operations Review Panel; Corruption Prevention and Consultative Panel; and a Complaints Committee.

Several senators said the new commissioner of the MACC would be beholden to the prime minister for the appointment and the MACC would not be truly free.

They said although the commissioner would be appointed by the Yang di-Pertuan Agong, this would be done on the advice of the prime minister.

Nazri said there was no running away from the role to be played by the prime minister in the appointment of the commissioner.

"In any system there is bound to be someone who would be involved in the appointment of another person. The prime minister is the right person to make the recommendation as he is elected by the people and commands the majority support of the members in the Dewan Rakyat.

"Moreover, the prime minister has to be careful as the appointment is scrutinised by the public and if the decisions he makes are not popular, he has to face the backlash of the electorate when it is time for the Barisan Nasional to seek a new mandate."

Nazri denied a claim that the Anti-Corruption Agency was not free to investigate and charge the corrupt until the prime minister gave it the green light.

"This is not correct. The ACA is placed under the Prime Minister's Department but this is only for administrative reasons.

"It is free to investigate and charge anyone.

"I believe there have been several cases of ministers and menteris besar who had been charged in the past for corruption.

"This would not have happened if the agency was not free."