The reality of ruling from Putrajaya

  • Business
  • Saturday, 13 Jul 2019

AFTER 14 months at the helm, the reality of ruling by the rule of law is haunting the Pakatan Harapan government. From ensuring political stability to unravelling contracts awarded by the previous government, it is not so simple anymore.

Everybody thought that the political transition from Prime Minister Tun Dr Mahathir Mohamad to his designated successor would be a smooth process. However, as the political game of chess within the Pakatan Harapan coalition picks up pace, it is not such a simple matter anymore.

In the corporate world, one would learn that it is not the end of the world when high-profile contracts are terminated, even by the Cabinet.

The decision can be reversed as seen in the reinstatement of a joint venture between Dhaya Maju Infrastructure (Asia) Sdn Bhd and Lembaga Tabung Angkatan Tentera as contractors for the second phase of the Klang Valley double track (KVDT2) job.

The Cabinet initially terminated the contract that had been awarded by the previous administration in April last year. The contract that was initially priced at RM5.23bil was awarded just two days before Parliament was dissolved. The timing of the award raised questions on the validity of the contract.

However, it is obvious that the sanctity of upholding all contracts irrespective of which administration had signed them holds an advantage. This is especially so when the question of whether the termination of such contracts would withstand a legal suit comes into play.

Not to mention the compensation cost. Even though the job was terminated in September last year, just five months after the award, this played a decisive role. The minister stated that the compensation to the contractors could go as high as RM2.5bil on the original contract of RM5.23bil, which came as a surprise.

When Pakatan Harapan shockingly swept into power in May last year, almost all contracts were put on hold pending a review and a few were terminated. Expectations were running high that many of the government jobs would be put up for re-tender.

Now, almost all mega-projects have resumed at a reduced cost. It only reaffirms the fact that in the previous regime, government contracts were grossly inflated.

Among the mega-contracts, only one notable mandate has been terminated and put up for re-tender. The Home Ministry is seeking new proposals for the job to design and manage a new border-control system for the Immigration Department.

Prestariang Bhd, the company that had originally been awarded the job, has taken legal action claiming RM732.6mil from the government for terminating the job. It is not known if there were any negotiations between the company and the government even after the project was terminated to salvage the situation, like in the case of the KVDT2 project.

But so far, the move to rock the boat by reviewing and even terminating government projects when Pakatan Harapan came into power in May last year has paid off. The mega-projects have resumed, but at a lower cost.

Was the move to suspend all contracts in the first few months of office a calculated strategy by Pakatan Harapan? Or the decision to resume projects at a reduced cost a political pushback after it was championed by individuals in the new government?

Or were the awards honoured to really uphold the rule of law in respecting the sanctity of contracts?

The answer is likely a combination of all three possibilities.

The move to review all contracts is to be expected of any new government. However, the decision to continue some projects at a reduced cost seems like a major political pushback, engineered by influential forces within Pakatan Harapan.

The outcome is that some Pakatan Harapan leaders would now know that ruling the government from Putrajaya is not so easy, especially in the face of strong lobbying from corporate Malaysia.

Businessmen are businessmen. Relentless lobbying will continue irrespective of who is in power – whether Barisan Nasional or Pakatan Harapan.

In an environment where there are only a few government jobs, the corporates cannot afford to let government jobs go so easily. Hence, prices were dropped almost immediately. Even contracts that were terminated and seen as good as going for a re-tender are not being given up on so easily.

In the process, ministers who were so bullish in their stance and seemingly insulated from the strong corporate lobbying may have a dent in their credibility.

On the brighter side, there should be less anxiety and more stability in the corporate world when the next leadership change takes place.

Corporates need not worry about their contracts coming under review when Dr Mahathir hands over the reins to his successor. They have already gone through a change in government. A change in leadership would be less disruptive.

Even if there are disruptions, they should know that when the government shakes the tree, they have to hang on up there and not give up on the contracts. The turmoil on the ground will fizzle out.

That is the reality of doing business under the new regime.

The views expressed by the writer is solely that of his own.

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