Tuesday, September 20, 2011

Bumis ‘typically’ sold government contracts for cars, houses, leaked study reveals

(The Malaysian Insider) - KUALA LUMPUR, Sept 20 — An unpublished Works Ministry study found that Bumiputera contractors as a rule sold their government contracts to buy luxury cars and houses apart from misusing payments received from the Treasury, according to a leaked US diplomatic cable.

The cable, revealed by whistleblower website WikiLeaks, comes just after Putrajaya agreed to allocate RM8 billion worth of contracts in the country’s most expensive infrastructure project, the Klang Valley Mass Rapid Transit (MRT), which initially set strict rules for its contractors.

The US diplomatic cable quoted a Works Ministry source as saying the “Study on Bumiputera Contractor Leakage” was the result of feedback from various industry sources on failed and successful projects. The report was used by then-Prime Minister Tun Abdullah Ahmad Badawi to castigate failing Bumiputera businessmen in February 2007.

“The current system of awarding lucrative government contracts to Bumis provides them with a strong economic incentive to simply act as agents, turning over as many projects as possible and taking a cut before handing each one off to a competent non-Bumi implementer.

“This ‘Bumi agent’ system is firmly entrenched in Malaysia. Any effort to make reforms is likely to be resisted not only by well-established Bumis, but also by the non-Bumi implementers who have built up a network of well-oiled agent partnership,” the US Embassy concluded in the report published by the Malaysia-Today news portal.

The US and European Union have called for more transparency and equality in government procurement by Malaysia as part of the free trade agreement talks which have yet to be concluded.

In the leaked cable, the US embassy reported: “The source said the study, which has not been released to the public, revealed that many Bumi contractors typically sold off their tenders for quick money, often to finance expensive cars and houses. The report also found Bumiputera contractors had misused payments received from the government to pay off creditors and that they often sought additional government tenders prior to completing the ones already awarded to them.”

“The official said contractors were irresponsible and had abused the trust given to them by the government which was meant to help Bumiputeras progress,” it added.

The US cable noted that then-Finance Ministry secretary-general Tan Sri Izzudin Dali had disclosed new regulations that Bumiputera contractors seeking government tenders will soon be required to sign an official declaration promising not to sell or subcontract their tender to other races.

“Violators will have their contracts and registrations terminated. Izzudin added that under the new rules contractors undertaking public infrastructure contracts will now be awarded only one project at a time and that projects will be distributed evenly among contractors in the same area or district,” the cable said, quoting Izzudin’s speech on February 16, 2007.