By Sherilyn Goh
The Selangor state assembly has been heated over the past few days over the debate on the operations of an obscure state investment arm known as Darul Ehsan Investment Group (DEIG), a new entity incorporated to manage state investments under the purview of the existing Menteri Besar Incorporated (MBI).
The main reason for the heated debate is that the DEIG is answerable chiefly to its board of directors headed by the Selangor Menteri Besar Azmin Ali. It is not subject to any state enactments and as a result, is not required to table its financial report to the state legislative assembly, raising concerns on whether there is sufficient check-and-balances in place.
The lack of oversight has struck concern among the assemblypersons, as this had come while the controversy surrounding self-styled strategic development company 1Malaysia Development Berhad (1MDB), which had cooked up RM42 billion in debts, is far from over.
Incidentally, 1MDB is also a Finance Ministry-owned company reporting to among others, its board of advisers chaired by Prime Minister Najib Razak who is currently finding himself embroiled in the 1MDB scandal.
The virtually unknown state investment arm to-be (at least up until last month), was quietly established as a private limited company under the Companies Act 1965 from as early as December 4, 2014, just three months after Azmin Ali was appointed Menteri Besar. This was following the ‘Kajang Move’ which saw former Menteri Besar Khalid Ibrahim ousted from office.
Based on findings by the Select Committee on state government-linked companies, the rationale for the establishment of DEIG is to restructure the 74 companies under MBI, to protect MBI from legal proceedings, and to undertake commercial loans which is currently restricted under the MBI Act.
The select committee report which was debated and passed yesterday in the state legislative assembly, urged the Menteri Besar to halt all plans and operations of DEIG until a white paper is prepared to explain the need, management and accountability mechanisms of DEIG.
The state government will now table its response to the recommendations in the next sitting in November.
Meanwhile, here are some questions to ponder:
While the MBI is admittedly flawed in its overseeing of the GLCs under its purview, why is MBI not being restructured first to address these flaws? Proper accountability measures should be first put in place – and the way in which DEIG is established is surely not one of them. The reason given by Azmin that DEIG was put into place because it did not want to operate under the ‘taint’ of his predecessor is also simply not a reason that is well justified, a classic example of form over function.
Also, why is the state government meddling in business undertakings, when its role should be limited to providing an enabling environment allowing businesses to thrive? It puzzles Tiger even more when the Selangor government, through DEIG, is actively involved in seeking for joint ventures with the private sector in property development, an area where there are already many private developers available to undertake the projects.
If these ventures becomes precedent, it seems as though DEIG will be involved in more of such similar ventures in the future. The fact that DEIG is registered under the Companies Commission of Malaysia (CCM) allows for it to undertake commercial loans while not being subject to the National Audit Department and the state legislative assembly, does no favour to the accountability process involved. This is unlike MBI, which in contrast, is restricted by MBI Enactment 1994 from taking up loans or any forms of borrowing.
Tiger cannot help but to smell something fishy here, as the incorporation of DEIG seems to circumvent the MBI Act.
Last but not least, it would seem that control of DEIG is vested on the power on one man, which is the Menteri Besar himself. As Hulu Kelang assemblyperson Shaari Sungib has pointed out: “Our concern is that DEIG is set up by the same person heading the MBI and chaired by the menteri besar.
“We are worried that there might not be sufficient check and balance measures.”
While the Selangor Menteri Besar may equate his ambition for DEIG to become that of sovereign wealth fund Khazanah Nasional Bhd and Singapore’s Temasek Holdings, the loose governance in DEIG provides room for exploitation and is something to be addressed first and foremost.
If the 1MDB debacle had been anything, it is a heavily-priced lesson for Malaysians on the importance of governance and transparency, and how the lack thereof could potentially result in initially lofty ambitions turning into catastrophe and mega debts.
But in this incident, Tiger is just glad that members of the assembly regardless of their political alliance have come together to debate with reason and rationale, and how the legislature’s select committee acted as a check-and-balance to the executive branch, by pushing for more accountability, which other legislatures in this country may still lack very much far behind.
GRRRRR!!!
