LET us look at multi-billion-ringgit projects by government-controlled entities – with reputable and seasoned personalities sitting on the board of directors, entrusted with government funds and government-backed loans – which have attracted attention.

A former Boustead Naval Shipyard Sdn Bhd (BNS) senior officer has been charged for criminal breach of trust in the Littoral Combat Ship (LCS) project.

The Public Accounts Committee (PAC) reported not a single ship had been completed, although RM6 billion of a total RM9 billion for the project had already been paid.

Payments were not entirely used for the project, resulting in cost overruns.

The navy’s views on the project were ignored, including when the contractor changed the design.

The government failed in its duty to carry out due diligence on BNS’s financial problems when an advance payment went against a Treasury circular.

The contract was also unfavourable, where payments were based on activity and not actual progress.

These issues surfaced in the 2019 Auditor-General’s Report as well as in the governance, procurement and finance investigation committee report.

“Bulk orders” had to be made to ensure cost savings in construction, but the ship’s design had yet to be finalised, causing the continuous release of variation orders (VOs).

Money spent went to warehoused equipment, installed big-ticket equipment and on “overhead, project management, financing costs, insurance, electricity, infrastructure and construction”.

By the way, Egypt ordered four Gowind-class ships in 2013 and the first was commissioned in 2017. Malaysia signed a contract in 2014 and has not received a single boat.

More countries, including the US, are also looking at the sigma (modular design) as the way forward in constructing modern navies.

Here, even Defence Minister Hishammuddin Hussein accepted there were many weaknesses with the project and felt disappointed.

Next is 1Malaysia Development Berhad (1MDB), controversial since inception for lack of transparency.

In 2015, the then PAC chairman said senior management and auditors of 1MDB should be blamed for the firm’s muddled financial state.

In 2016, the Finance Ministry insisted that there was no misappropriation but only administrative weakness. The PAC found irregularities and recommended the fund’s advisory board, chaired by the then PM, be disbanded. Both denied any wrongdoing.

However, The Guardian was calling 1MDB ‘a scandal meriting the world’s attention’.

In 2017, PAC found the management failed to abide by board decisions or acted without approval from the board. Several important investments were executed without detailed evaluation.

There was lack of diligence by the board and even the advisory board failed to adhere to good corporate governance practices.

There were traces of embezzlement, bribery, false declarations and bond mispricing relating to extensive borrowing with a global network of shell companies and individuals.

Also, governance was weak, there were poor internal controls within banks, and watchdog and enforcement bodies failed to take the necessary action partly due to political control and the lack of political will.

In a few instances, the management presented incomplete and inaccurate information to the board before important decisions made, including taking action without board’s approval.

The filing and records for 1MDB were not systematic and not satisfactory.

Even the Rulers’ statement in 2015 that there must be a comprehensive and transparent report as soon as possible was ignored.

In the meantime, BSI Bank in Singapore closed following widespread control failures and an unacceptable risk culture, with blatant disregard for compliance and control requirements – all in relation to 1MDB.

Transactions were based purely on faith of client representations despite deficient documentation and concerns raised by bank’s compliance officers.

The third case is SRC International. The Auditor-General’s report stated the board approved a coalmine investment in Mongolia without carrying out a feasibility study. SRC’s financial report made no reference to the project, in conflict with that of Deloitte.

A report in the Mongolian Coal Review 2012 by Patersons, showed the area where SRC invested is too remote and it will be some time before rail networks are developed. Producers are not able to reach seaborne market.

The fourth case is the KVMRT project cost.

In 2017, Najib announced that the Sungai Buloh-Kajang (SBK) line cost only RM21 billion. However, the New Straits Times (NST) on July 2, 2014, reported RM23 billion for systems and construction costs, while RM7 billion for consultant fees and reimbursables.

The Putrajaya Line construction cost is expected to be RM31 billion.

The issue is why consultants and project management fees, financing and other costs are not included to give a true picture of total project cost.

Five years into operations, the audited accounts of MRT Corp as of December 31, 2021, accumulated losses of RM56.7 billion, excluding the above other costs, while the Putrajaya Line was still non-operational.

Based on the above mega projects, controls are lacking and risk analysis does not seem to be the norm.

It is to be expected that such high-value investments and highly geared government entities should be transparently managed by a team of qualified persons of integrity and responsibility.

Or were their hands being tied since, as alleged by the former 1MDB CEO, there was “no wrongdoing during his watch”?

Our trust is now in the MACC and the Attorney General’s Chambers (AGC) to initiate charges, if any, without fear or favour.

The civil service should also be seen to be working towards professionalism, transparency and practice good governance.

“Every one of you is a shepherd and every one of you is answerable with regard to his folk” – Prophet Muhammad (pbuh).

In our march towards becoming a high-income nation, professionalism, integrity and accountability are the key.

What say you…? – August 18, 2022.

* Saleh Mohammed reads The Malaysian Insight.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.