1MDB a sign of changing role of government

Last week, many were engrossed with the events surrounding the Prime Minister’s no show at a “nothing-to-hide” forum at which he was supposed to explain what had happened to 1MDB, which is now laden with RM42bn worth of debt.

Jun 10, 2015

Anil Netto

By Anil Netto
Last week, many were engrossed with the events surrounding the Prime Minister’s no show at a “nothing-to-hide” forum at which he was supposed to explain what had happened to 1MDB, which is now laden with RM42bn worth of debt.

Organised by Malaysian Volunteer Lawyers Associaiton (SukaGuam), the forum was due to be held at the Putra World Trade Centre at 10.00am on June 5. Former premier Dr Mahathir Mohamad caused a stir when he, decided to show up about an hour earlier but by then, the IGP had cancelled the meeting.

The Prime Minister did not show up and Mahathir took to the stage instead, to address the 2000-strong crowd. But he was only able to speak for a few minutes before the police moved in and stopped his talk, sparking a buzz over social media, including all manner of jokes.

In many ways, 1MDB is just the tip of the iceberg of the culture of unaccountability that has engulfed us. This lack of public accountability has allowed huge amounts of money to literally disappear from the country. Think of the over RM1 trillion in illicit outflows that have poured out of the country from 2003 to 2012.

This culture of lack of accountability has allowed rampant corruption to flourish and erode public coffers. Cabinet minister Nazri Aziz noted in the Government Transformation Plan (GTP) that “although creating a corruption-free nation will not be easy, it is clear that we can be much more transparent, accountable and action-oriented as a government”.

The GTP concedes that “corruption is inconsistent with the moral, ethical and religious values of the majority of Malaysians. It introduces procedural and financial complexities in the daily lives of the rakyat, contributes to socio-economic imbalances and erodes Malaysia’s value system.”

The GTP write-up also noted that “corruption also robs our nation of its wealth and resources. Pemudah has estimated that corruption could cost Malayisia as much as RM10bn a year, or 1–2 per cent of GDP.”

Others believe that the level of corruption could easily be two to four times that figure. Three years ago, one government minister admitted that corruption costs Malaysia RM26bn every year.

While many have focused on the worrying level of corruption in public life, less noticed over the years has been a shift in the role of government.

In the past, the government imposed income and corporation tax and in return, provided essential services to the people at subsidised or nominal rates.

Over the years, however, it has reduced the corporate and income tax rates and then, not surprisingly, faced a deficit in financing essential services. To balance the budget, the government has had to come up with new ways to cut expenditure or raise revenue: by removing subsidies on essential services, introducing the GST (to raise more money from the rakyat), and privatising essential services to well connected firms and cronies (who impose relatively high tariffs on the people).

No wonder the rakyat are struggling, and the gap between the rich and the poor remains wide. And still the government is unable to balance its books, as can be seen from its persistent fiscal deficits. So it has had to come up with new ways to raise money. Thus, it is not surprising that the government has dabbled in “investments” via an outfit like 1MDB to raise funds.

Originally meant to be a sovereign wealth fund to invest oil revenue in a revenue-generating project, 1MDB soon morphed into a different creature: it took expensive loans to “invest” in investments whose recoverability is now uncertain.

1MDB also entered into property development by buying land cheaply from the governent (which lost billions in potential revenue from land sales or the opportunity to use the land for the public good).

This purchase of prime land at low prices enabled 1MDB to make revaluation surpluses that helped it to paper over its other losses, including amounts reportedly overpaid in acquiring power generation plants from well connected private firms. Why did 1MDB have to dabble in power plants when that should have been handled by Tenaga Nasional, for instance?

Along the way, there was a shift in the role of government, originally entrusted to uplift the lives of ordinary people. Instead, the state appears to have shifted its role by going into business to raise more money (to raise money for the common good — but it hasn’t worked out that way, has it?)

The whole raison d’etre of the State “is the realization of the common good in the temporal order. It also has the duty to protect the rights of all its people, and particularly of its weaker members, the workers, women and children,” as said by Pope John XXII in his 1961 encyclical on Christianity and Social Progress, when he recalled Pope Leo XIII’s Rerum Novarum on the conditions of the working classes.

But in our government’s quest to make more money to cover its fiscal deficits arising from neoliberal policies, it made a serious misjudgement: it strayed away from its original mandate to work for the common good of the people via progressive policies. These policies should have prioritised the provision of genuinely affordable housing, health care, education, public transport and food supplies, all of which have soared in value.

Because the government has taken the neoliberal path instead, the people have been forced into higher and higher debt as a result of having to pay more for all these essential services. By paying much more for these services, the people have inadvertently enriched the corporations providing them, such as the car companies, property developers, private colleges, private hospitals, and agricultural giants. Not only that, financial institutions have profited immensely as they earn interest from loans taken out by the public, who are now heavily burdened by rising household debt. No wonder the gap between the rich and the poor remains wide.

So 1MDB is more than just a question of unaacountability; it is also a symptom of how the role of government has strayed from its original role of serving the common good; in this case, 1MDB has enriched a small group of unknown people — after all, where did a huge chunk of the RM42bn go?

It is time this role of government and its agencies is returned to its original and simple mandate of serving the real interests of the people, especially the poor and the marginalised.

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