THE previous government used “contracts” to circumvent the public procurement process and hide the actual costs of certain projects, said Damansara MP Tony Pua.

Under the guise of public-private partnerships (PPP), these projects had pushed up the sum of the government’s guarantees from about RM120 billion to RM238 billion now, said Pua.

“The government guarantees are now 18% of GDP (gross domestic product), up from 12% previously,” said Pua, who has been appointed special officer to Finance Minister Lim Guan Eng.

“If the guarantees were given for companies that can repay its loans, such as Khazanah Nasional Bhd or Tenaga Bhd, to reduce the cost of borrowings, that’s fine.

“But it’s clear that Pembinaan BLT will not be able to pay these loans and the government will ultimately be responsible for repaying the loans,” said Pua at the launch of the report “Procurement as part of good governance in new Malaysia: Challenges & Recommendations”, in Kuala Lumpur today.

The report was prepared by Centre to Combat Corruption and Cronyism (C4).

Pembinaan BLT Sdn Bhd, said Pua, was set up under Finance Ministry Inc in 2011 to construct police quarters on the “build, lease and transfer” model.

Instead of working under the government budget, the company issued around RM10 billion worth of government-backed Sukuk bonds to construct the 72 police quarters. 

For that, the government made periodical payments to PBLT.

“By borrowing this way, the debt is not reflected in the government budget but contingent liability is increased,” said Pua. 

Pua said soon enough, the public began noticing the high contingent liabilities.

“That’s when they (the govenrment) began having PPP contracts for development (projects).”

He said the government would sign a contract with a company which then took the contract to the banks to obtain financing.

After the work is complete, the government would pay for it over 25 years or so, said Pua.

Although not strictly wrong, the contracts would be lopsided whereupon the amount to be paid became higher than necessary.

“This was designed to circumvent the procurement process and debt to GDP ratio. There would be maintenance charges and other incidentals that inflated the prices, usually at much higher amounts than if the project was done via the government procurement process,” said Pua. 

He explained that was how the LRT3 project went from RM9 billion when it was tabled in the budget to RM31 billion after taking into account the non-construction costs. – August 28, 2018.