Transparency key to National Integrity Plan

The achievement of the National Integrity Plan can be hastened through the immediate implementation of transparency as a core principle at all Government levels.

THE overall objective of the National Integrity Plan (NIP) is to fulfil the fourth challenge of Vision 2020, which is “to establish a fully moral and ethical society whose citizens are strong in religious and spiritual values and imbued with the highest ethical standards.”

The NIP identified for the first five years (2004 – 2008) the following five targets known as Target 2008 to achieve the above stated objective:

Effective reduction of corruption, malpractices and abuse of power;

Increasing efficiency of the public delivery system and overcoming bureaucratic red-tape;

 Enhancing corporate governance and business ethics;

 ·Strengthening the family institution; and

 Improving the quality of life and people’s well-being.

The main obstacle to the achievement of the NIP Target 2008 appears to be the perception that the public sector and the elected and appointed representatives are corrupt and inefficient.

International rankings such as Transparency International’s Corruption Perception Index confirm this affecting Malaysia negatively.

Transparency is an essential precondition for containing corruption, as it renders abuse difficult and increases the likelihood of detection.

Most importantly, through transparency, accountability and economic efficiency is raised. When processes are transparent, lawmakers, regulators and civil servants are made to be accountable for their decisions.

Some compelling trends in Malaysia call for an immediate implementation of transparency as a core principle. Privatisation programmes and Government procurement in Malaysia are conducted through non-transparent processes. Only notifications of tenders are made public.

The criteria for selection and the selection process are secretive. There is also no avenue for arbitration. A greater cause for concern is the fact that concessions agreements are considered “official secrets”.

Compounded with a non-transparent selection process, the concession agreements and Government procurement lead to sub-optimal outcomes from a public policy standpoint. This has also led to allegations of corruption.

For example, the outsourcing of health support services from the public sector to three monopolies has raised the estimated expenditure of the Health Ministry for these services to RM750mil in 2005 from RM220mil in 1994.

The privatisation of water services in Johor, Selangor, Kuala Lumpur and Putrajaya has seen the water tariffs increased at higher rates compared with states where water utilities are managed and operated by the public sector.

The Public Works Department is under siege for the multi-billion ringgit fiascos involving the MRR2, the Matrade Building and the Navy Recruit Training Centre.

The recent upward revision of toll rates in the Klang Valley based on clauses in the concession agreement and not on cost considerations has angered the public. All these contracts were tendered and approved through non–transparent processes.

Malaysia recently achieved top position in a pilot project Reports of the Observance of Standards and Codes (ROSCs) initiated by the IMF/World Bank.

This indicates good governance in the financial sector as the project surveys the adherence to international standards of the domestic financial sector.

The underlying philosophy of the ROSCs is the importance of international standards in enhancing transparency, which in turn strengthens the international financial architecture by identifying weaknesses and fostering market efficiency and discipline that ultimately contribute to a more robust financial system.

At the national level, these international standards provide a benchmark that can help identify vulnerabilities and guides policy reform.

The Water Services Industry Bill passed in 2006 is also a step in the right direction as it includes provisions to ensure full transparency. So too are the publicly known benchmarks for GLCs.

Limiting the use of the Official Secrets Act for matters relating only to national security, defence and international relations, is also an important step in strengthening the institutional framework for an efficient market economy.

The Government can hasten the achievement of the NIP Target 2008 through a single stroke of implementing transparency as a core principle at all levels of Government.

Together with transparent privatisation and Government procurement processes that include civil society participation, transparent, clear and defendable criteria, and making all documentation from these processes publicly available and accessible, will enable Malaysia to conform to international standards and enjoy all the attending benefits.

This article was first published by the Malaysian Institute of Economic Research.

The US-Malaysia FTA – A cautious approach necessary

The Malaysian government must take a cautious approach when negotiating the USMFTA. Furthermore, the government must consult all relevant parties, especially Parliament and the workers before making any decisions.

The Malaysian government is undertaking a series of bilateral negotiations with the United States (U.S.) to conclude what would be a preferential free trade agreement (FTA) with the world’s only superpower. From the U.S. perspective, the U.S. – Malaysia FTA (USMFTA) makes good business sense, as Malaysia is the 10th largest trading partner of the United States and its largest trading partner in ASEAN. The FTA would facilitate further U.S. trade and investment in Malaysia. From the Malaysian government’s perspective, the USMFTA is key in ensuring continued foreign direct investment (FDI), especially from the U.S. and to keep pace with other ASEAN members. The main challenge Malaysia faces is that its comparative advantage as an FDI destination has eroded over the years.

In negotiating the USMFTA and weighing the options between attracting FDI and achieving development goals, the Malaysian government must note one important point. An FTA between a developed and developing country exacerbates existing inequalities between and within the two countries as the FTA “levels the playing field” among unequal partners. The developing country tends to suffer disproportionately. The U.S. economy dwarfs the Malaysian economy, as do U.S. corporations. As an analogy, the Fortune 500 is filled with U.S. multinationals while Petronas is the only Malaysian multinational that has been consistently placed in the Fortune 500. These inequalities are likely to worsen, as FTAs seldom include protection for the losers.

Malaysia must be cognisant of the impact that U.S. FTAs has caused on its partners. In Mexico, 2 million farmers have lost their jobs due to the North American Free Trade Agreement (NAFTA) as subsidised agriculture products from the U.S. flooded the Mexican markets. Similarly, the U.S. Peru FTA has allowed subsidised U.S. agricultural products to flood the Andean Common Market through Peru, causing further hardship in a country where over half of its 27 million citizens live below US$1 a day.

The U.S. – Jordan FTA and the Central American Free Trade Agreement (CAFTA) have made Jordan and the Central American economies locations for producing labour – intensive goods for the U.S. market. Singapore, a close ally of the U.S. saw its trade deficit with the U.S. increase by 200%, a rise of US$2.9 billion in the first year upon signing the FTA. The same effect occurred to Australia too as its trade deficit increased by US$1.7 billion in the first year of its FTA with the U.S.

U.S. trade surplus with Singapore tripled after the first year of the FTA reaching US$4.3 billion. The U.S. experienced phenomenal export growth in certain sectors. Exports in IT equipment grew by 62%, exports in machinery and parts by 24%, accompanied by 86% increase in minerals and fuels, 99% jump in furniture and 84% hike in vehicle and parts. U.S. exports to Chile grew by 33.5% from US$1 billion to US$3.6 billion. U.S. trade surplus with Australia grew by 31.7% and exports to Australia increased by 11.7% in the first quarter of 2005. The CAFTA is expected to reduce the U.S. trade deficit with the region by US$756 million. U.S. farm exports to the region are expected to expand by US$1.5 billion a year while U.S. manufacture exports to the region are expected to increase by US$1 billion.

The U.S. is very keen on the USMFTA. The U.S government, the U.S. Chamber of Commerce – the world largest business federation with over 3 million members, and its partner, the American – Malaysian Chamber of Commerce (AMCHAM) has continually affirmed the need for the USMFTA. The U.S. Chamber of Commerce and AMCHAM know exactly what they want. They have made a 98 page public submission on the USMFTA to the U.S. government. They influence the United States Trade Representative (USTR) to pursue certain key issues that are in direct contention with development objectives and policies that the Malaysian government declares it will not trade away.

The Malaysia government must stand firm. Take for example the protection of workers. Workers will likely suffer the most should the government not include specific reference to implementing International Labour Organisation (ILO) Core Labour Standards in the USMFTA. It would be wise for the Malaysian government to discuss the USMFTA with the Malaysian Trade Union Congress (MTUC), the legitimate representative of the worker movements in Malaysia, to ensure that Malaysian and guest workers in Malaysia benefit from the USMFTA.

In Thailand, South Korea, Central and South America, thousands of citizens have been demonstrating against the FTAs with the U.S. These citizens are against FTAs as they see the FTAs as only meeting the interests of corporate America. The Malaysian government therefore must rally public support including that of the worker movements in favour of the USMFTA, as this will be in the interest of the nation. To achieve this, the Malaysian government should “show the numbers” on how Malaysia and Malaysians will benefit from the USMFTA.

Business groupings such as the Federation of Malaysian Manufactures (FMM) and Government Linked Companies (GLCs) must come out in support of the USMFTA and demonstrate how they will benefit and thrive through with it. The Malaysian government ultimately must also explain its strategy to the Malaysian public on how the so called “spaghetti” of FTAs that Malaysia is getting involved in will benefit Malaysia in the long run.

This article first published by MIER.