THE Public Accounts Committee's (PAC) report on 1MDB answers critical questions about the state investment company. It exposes gross weaknesses in the management of the company and shows how it had violated sound principles of corporate governance. The PAC has also made some important recommendations.
It has asked that 1MDB's former chief executive officer (CEO) Datuk Shahrol Azral Ibrahim Halmi "be held responsible for weaknesses in the company's management, and be investigated together with other relevant management officials". It has suggested that the advisory board, chaired by Prime Minister Datuk Seri Najib Razak, be abolished and all 1MDB assets and subsidiary companies be handed over to Minister of Finance Incorporated.
The government should implement all three proposals. It would demonstrate that the government takes seriously the recommendations of that one bipartisan parliamentary committee entrusted with the task of enhancing accountability which is the essence of good governance. It would also boost the government's credibility and reduce the yawning "trust gap" that has developed between the government and the people.
Of the PAC's recommendations, it is the investigation of 1MDB's former CEO that carries most significance. A comprehensive, unbiased investigation may throw some light on issues such as why the 1MDB management acted without approval from the board of directors on several occasions or why it did not adhere to directives from the board. Perhaps a forensic analysis of the decision-making process may reveal aspects of 1MDB governance which have not surfaced.
The public would also like to know why a state-owned company chose a business model which relied almost totally upon debts to finance its investments. As a result, 1MDB accumulated massive debts to the tune of RM50 billion as at January 2016. Though assets were marginally higher, it was an unsustainable model in which, as the PAC noted, "the level of debts and interest is too high compared to the cash flow of the company".
It was not just unsustainable as reflected in its debt burden. One wonders why the government had to establish another strategic investment company when there is Khazanah. This is why the link between the precursor to 1MDB, the Terengganu Investment Authority, and 1MDB should have been subjected to a deeper investigation in the PAC report. Such an investigation may have told us quite a bit about the personalities that have shaped 1MDB.
One hopes that all these issues and other related concerns will be debated by the Parliament when it reconvenes next month. If the debate is to benefit the people, it should go beyond the PAC report and focus upon the auditor-general's submission to the PAC which had played a major role in determining the content and thrust of the PAC report. What this means is that the auditor-general's submission should no longer be classified under the Official Secrets Act. It should be declassified immediately and made available to the public. Since it appears to be an audit that is as honest and as comprehensive as it can be, it should be revealed to the people in its entirety. Once again, declassifying the submission will show the nation and the world that the government is not afraid to be truly transparent and accountable.
From a larger perspective, public debate and discussion on 1MDB, the PAC report and the auditor-general's submission should compel us to evaluate more critically government-linked companies and other entities such as Bank Negara and banks in general. It is vital that all these institutions uphold the principles and practices that they are duty-bound to protect and promote under all circumstances. It is loyalty to these principles and practices that should take precedence over everything else.
Dr Chandra Muzaffar
Kuala Lumpur
It has asked that 1MDB's former chief executive officer (CEO) Datuk Shahrol Azral Ibrahim Halmi "be held responsible for weaknesses in the company's management, and be investigated together with other relevant management officials". It has suggested that the advisory board, chaired by Prime Minister Datuk Seri Najib Razak, be abolished and all 1MDB assets and subsidiary companies be handed over to Minister of Finance Incorporated.
The government should implement all three proposals. It would demonstrate that the government takes seriously the recommendations of that one bipartisan parliamentary committee entrusted with the task of enhancing accountability which is the essence of good governance. It would also boost the government's credibility and reduce the yawning "trust gap" that has developed between the government and the people.
Of the PAC's recommendations, it is the investigation of 1MDB's former CEO that carries most significance. A comprehensive, unbiased investigation may throw some light on issues such as why the 1MDB management acted without approval from the board of directors on several occasions or why it did not adhere to directives from the board. Perhaps a forensic analysis of the decision-making process may reveal aspects of 1MDB governance which have not surfaced.
The public would also like to know why a state-owned company chose a business model which relied almost totally upon debts to finance its investments. As a result, 1MDB accumulated massive debts to the tune of RM50 billion as at January 2016. Though assets were marginally higher, it was an unsustainable model in which, as the PAC noted, "the level of debts and interest is too high compared to the cash flow of the company".
It was not just unsustainable as reflected in its debt burden. One wonders why the government had to establish another strategic investment company when there is Khazanah. This is why the link between the precursor to 1MDB, the Terengganu Investment Authority, and 1MDB should have been subjected to a deeper investigation in the PAC report. Such an investigation may have told us quite a bit about the personalities that have shaped 1MDB.
One hopes that all these issues and other related concerns will be debated by the Parliament when it reconvenes next month. If the debate is to benefit the people, it should go beyond the PAC report and focus upon the auditor-general's submission to the PAC which had played a major role in determining the content and thrust of the PAC report. What this means is that the auditor-general's submission should no longer be classified under the Official Secrets Act. It should be declassified immediately and made available to the public. Since it appears to be an audit that is as honest and as comprehensive as it can be, it should be revealed to the people in its entirety. Once again, declassifying the submission will show the nation and the world that the government is not afraid to be truly transparent and accountable.
From a larger perspective, public debate and discussion on 1MDB, the PAC report and the auditor-general's submission should compel us to evaluate more critically government-linked companies and other entities such as Bank Negara and banks in general. It is vital that all these institutions uphold the principles and practices that they are duty-bound to protect and promote under all circumstances. It is loyalty to these principles and practices that should take precedence over everything else.
Dr Chandra Muzaffar
Kuala Lumpur