Corruption and the construction sector

At the’Integrity in the Construction Sector’ forum last week, Malay Contractors Association president Roslan Awang Chik boldly pointed out that money has to be given out at every stage of projects “from licensing, tenders, contract awards and approval of works to endorsement of completion”. 

Prof Khairuddin Abdul Rashid of the International Islamic University said the whole procurement chain needs to be checked, and that policy makers and industry players must correct the weaknesses.

I congratulate them for their courage in speaking out so boldly without fear that they could be victimised.

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When reporters asked, Works Minister S Samy Vellu said: “Report to me and show me the proof of corruption so that I can take action.”

If you ask the ACA, it will give you the same answer. But that is like asking a high-ranking officer who has the power to give out contracts worth millions of ringgit – with or without a tender exercise – to complain that he has been bribed.

Similarly, would the contractor who had to bribe to get a project be likely to lodge a report with the ACA?

No wonder Malaysia was ranked 39th and Singapore 5th by the Transparency International in their 2004 Corruption Index. The Singapore government would never award multi- billion dollar contracts without calling for an open tender – unlike its Malaysian counterpart.

Change bad policies

The present method of giving out Approved Permits (APs) for car imports and awarding contracts worth billions of ringgit without open tenders to bumiputera contractors are examples of bad policies.

How could the AP policy have been in place for so many years? Everyone is willing to bribe his way to get APs, and yet the ACA cannot see it. The government must change the current AP issuance policy, or those Malays who cannot get APs will continue to protest.

The government must realise that non-Malays who cannot get APs are also demoralised as they have diligently struggled to succeed despite the limits they face under the New Economic Policy.

Similarly, the government’s method of producing bumiputera contractors has failed miserably in that it has not fostered efficiency and competitiveness.

Instead, millions of ringgit change hands between officials who give out the contracts and between main contractors and sub-contractors as well as between sub-contractors and suppliers of materials and services.

As Roslan said, contractors have to pay all the way. Any contractor would be willing to give away, say two percent or more of the contract price as a bribe to get a juicy contract. Who would not accept such big bribes?

Impact of corruption

Corruption is ruining our national economy and retarding our progress. Its effect is like driving your car uphill with the hand brake on. That is why the World Bank has not classified Malaysia as a developed nation.

The World Bank has identified corruption as the single greatest obstacle to economic and social development. It undermines development by distorting the rule of law and weakening the institutional foundation on which economic growth depends.

The harmful effects of corruption are severest on the poor, who are hardest hit by economic declines, are most reliant on the provision of public services, and are least capable of paying the extra costs associated with bribery, fraud, and misappropriation of economic privileges.

Corruption sabotages policies and programmes that aim to reduce poverty. As such, attacking corruption is critical to the achievement of the nation’s over-arching mission of poverty reduction.

The Malaysian government must urgently and effectively implement an anti-corruption strategy built on five key elements:

  • Increasing political accountability
  • Strengthening civil society participation
  • Creating a competitive private sector
  • Institutionalising restraints on power
  • Improving public sector management

As a loyal Malaysian, I am very encouraged to often hear Prime Minister Abdullah Ahmad Badawi say that he will fight corruption for as long as he lives.

He must immediately make the ACA a fully independent body so that it can use its initiative to investigate anyone – even ministers – instead of waiting for instructions or for solid evidence of corruption before they move.

If the Transparency International can see corruption in Malaysia from thousands of kilometres away and rate us, surely the ACA should be able to see corruption under its very own nose.

World Bank guidelines

To begin with, the ACA should look at ministers and government directors who have the power to award contracts with or without a tender exercise. Even contracts with open tenders could involve corruption especially when the tender prices are comparatively close.

The contractor who offers the largest bribe to the minister or director holding discretionary power to decide, would usually get the contract. Since the quantum involved is usually too large to hide under their beds, the movement of the money can easily be traced by examining the assets and bank accounts of their wives, mistresses and relatives.

I urge the prime minister, who is also finance minister, to immediately instruct all procurement agencies to strictly follow the World Bank’s guidelines for project implementation. The World Bank has strict guidelines governing the pre-qualifications of consultants and contractors, on open tender systems, public announcements of tender prices, tender adjudications, clarifications and contract awards.

This practice will ensure successful completion of all projects within budget and with minimum excuses for extra money or delays. There will be no need – indeed, no opportunity – for corruption because everything will be transparent.

The tender prices are publicly announced and if someone does not have the cheapest tender, they cannot bribe to secure the contract. Under this system, all projects will be completed within schedule and with the best workmanship according to specifications.

The government must also closely look at the appointment of architects and consultant engineers as their so-called ‘standard fixed’ fees can amount to millions of ringgit for just a few design drawings for any project. I was practising as a consulting engineer before I became a contractor, so I know what I am saying.

In the private sector, the developer always calls for several quotations and invariably bargains with the architect and engineer who submits the lowest tender in order to save some more money for the company. In the public service, the officer would surely bargain to save the money for himself.

Government cheated

When I sat on the Board of Engineers Malaysia about 20 years ago, I was the only representative of the private sector – the others represented the government and the Institutions of Architects and of Engineers respectively.

I was the only one who had opposed the fixing of the engineer’s scale of fees. It was as if there was collusion to set a high scale of fees to cheat the government. This is why the current fixed scale of fees is ridiculously high.

The fixing of fees is actually against an anti-monopoly policy – if we had one- which would encourages price competition for all trades and services.

Without competition, no one will work efficiently and the completion of all development projects will be sub-standard and behind schedule.

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