THE capital expenditure (capex) of Petroliam Nasional Bhd (Petronas) of RM25bil per annum is easily more than the budget of most ministries in the federal government. Probably, only the Prime Minister’s Department gets a bigger allocation.
Majlis Amanah Rakyat (Mara), the entity that has been set up to help bumiputras better themselves, gets some RM5bil in grants from the government, of which 40% goes towards education and training purposes.
The reason why the appointment of active politicians on the boards of statutory bodies or government-linked companies is frowned upon is because of concerns of abuse in these companies.
These entities spend billions annually on their capex and the fear is that if politicians are allowed to run the show, the money will not be well spent.
These companies and statutory bodies hand out big contracts.
The margins can easily be inflated to the detriment of the company an its stakeholders.
In cases where the companies or statutory bodies are cash-rich, reckless investments tend to happen.
Money is ploughed into assets such as equities, property, plantations and even unit trusts at inflated values.
The classic case of how the cash pile in Felda and FGV Holdings Bhd dwindled just five years after listing is well documented.
Felda had RM6bil in its kitty post-listing in 2012, while FGV had raised RM4.5bil. The boards of both companies were helmed by an active politician.
By 2017, both Felda and FGV needed a complete revamp and restructuring.
The cash pile had been spent on assets that were not yielding the desired returns.
FGV made big provisions and chalked up losses the following year.
Felda’s money went into investments that did not yield returns and it was short of the RM1.5bil needed annually to carry out programmes for the settlers.
Fortunately, in the case of Petronas, there are no active politicians appointed to the board.
The closest was Tun Zaki Azmi, who was appointed when he was still legal adviser to Umno. He resigned in 2007.
In 2009, the appointment of Datuk Omar Mustapha Ong to the board drew some controversy not because he was an active politician, but due to him being an aide of the then serving Prime Minister, Datuk Seri Najib Razak.
Apart from Felda, statutory bodies such as Mara and Felcra had active politicians heading their boards during the Barisan Nasional administration.
It was one form of the prime minister or the minister in charge of the statutory body to reward their supporters.
These statutory bodies have large annual budgets, much bigger than most ministries.
They are mandated to carry out development programmes.
Most of the spending draws little scrutiny and demands for accountability are feeble.
For instance, when Mara first started the Maktab Rendah Sains Mara (MRSM) project, the idea was to have only four such centres of education located in Kota Baru, Kulim, Seremban and Kuantan.
The idea was to have a centre in an urban area to house and school students from rural areas. It was designed to give these students a quality education and exposure.
However, the number of MRSM centres proliferated to 54. It is more than what is required.
The reason is that each MRSM centre generates contracts worth millions. The construction cost is a few hundred million.
Other contracts up for grabs include supplying food to these fully residential schools and providing them with laundry and cleaning services.
Very few political appointments in government-linked organisations have resulted in favourable outcomes.
Usually, the financial resources of the organisation are not well managed, the entities enter into unfavourable contracts or go into investments that do not yield results.
When the tide goes down, the short comings show up and some needs to be rescued.
After the change in government in 2018, the financial distress and mismanagement in the likes of Lembaga Tabung Haji (TH), Felda and Felcra came to light. TH and Felcra needed capital injections.
The government injected RM6.23bil into Felcra, while TH needed to be rescued with a special government fund taking over RM10.3bil of over-valued assets whose market value had dropped significantly compared to the market price.
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