The Prime Minister is misleading the people with his FAQ

The Prime Minister issued his latest FAQ which yet again did not answer any of the questions posed to him.

We would have thought that he could at least explain what exactly the cash/paper assets/units fiasco all about since he is also the Finance Minister and the Advisor of 1MDB. But he did not.

In fact, when it is concerning 1MDB, the PM (or maybe his coterie of failed consultants) are desperately spinning the issue further.

He said:

Indeed, some of the allegations that have been made have no grounding in reality, for instance Tun’s claim that I am responsible for a loss of RM42 billon on 1MDB’s balance sheet. This appears to be a deliberate twisting of the facts as 1MDB has not made a loss of this amount. This is the amount of its total debt; debt that is far exceeded by the company’s assets of RM51 billion, as audited and confirmed by Deloitte. Most large companies around the world have high levels of debt, there is nothing unusual about this.

In the first place, Tun never claimed that there was a RM42 billion loss in 1MDB. He said, and every rational people in Malaysia agreed that the RM42 billion loans 1MDB took are unaccounted for and some may have been lost. Disappeared. Vanished.

Surely the Prime Minister must not think that Tun and the rest of fellow Malaysians are too stupid to discern between the words ‘loss’, and ‘unaccounted money lost’?

In Bahasa Malaysia, lost is ‘hilang’, ‘lesap‘. While the word loss means ‘rugi’.

Q: Where is the RM27 billion? A: Sultan Pahang supports me

Q: Where is the RM27 billion?
A: Sultan Pahang supports me

If the Prime Minister’s so called corporate comms team could not grasp this most basic of definition, then no wonder the Prime Minister has an image of a clueless leader.

The fact that the Prime Minister is deliberately trying to mislead the people in his own FAQ while accusing Tun as twisting the facts is so ironic, we just had to smile at this sheer foolishness.

Nobody ever said that 1MDB is suffering a P&L loss of RM42 billion. People were asking, if the assets bought was RM15 billion at cost, while the loans taken was RM42 billion, then where is the balance of RM27 billion?

It does not matter if 1MDB has assets worth RM52 billion. The truth is in the pudding. If 1MDB is having a really strong balance sheet, then why the need to borrow from MOF, nearly RM1 billion in standby credit last March and RM2 billion from a billionaire last February just to pay off its loan interests?

What happened to the often repeated mantra – ‘there is nothing wrong with 1MDB, they have billions of cash and a lot of assets’?

He further added:

He (Tun) also claimed that I do not answer issues surrounding 1MDB, but I have gone beyond thatand instructed the Auditor General to conduct an audit of 1MDB, the results of which will be presented to the bipartisan Public Accounts Committee. This should ensure that the process is transparent, and all questions that have been asked of the company are independently answered by legitimate bodies rather than politically motivated sources.

Enough with the AG report already please. Going beyond answering, but veering the topic by saying you have instructed the AG to audit 1MDB is still not answering the questions!

Why are we, the questioning people, being treated like an idiot by this Prime Minister?

Simple questions like, ‘who is Jho Low?”, or why did 1MDB enter into a JV agreement with Petro Saudi and its contracts signed just within 3 days without any due diligence done before accepting the dubious ‘oil exploration rights’ in exchange for USD1.5 billion in equity?

The Auditor General could never answer these two questions let alone other tougher questions. Yet, the PM is asking people to wait for the report. What can it prove? Just like 1MDB’s external auditor, the AG report might prove nothing. There are so many unscrupulous companies that had obtained good, unqualified audit reports from external auditors throughout history.

And who are these legitimate bodies independently answering questions about 1MDB? Please don’t tell us, it is all those dubious Facebook accounts set up just to defend it? What credibility do they have? Are they the staff of 1MDB? Are they getting paid by the Prime Minister?

1MDB should be answering the questions themselves, on daily basis. This is crisis management 101. But the Prime Minister himself is telling the people that external bodies are answering on behalf of 1MDB. How incompetent!

There is also evidence that the Prime Minister has no clue to what the role of external auditors is all about when on May 18th, he stated:

“Auditors will not sign if even RM1 million is missing. Now it is said that RM42 billion has vanished. How can it vanish? It hasn’t vanished, there are assets, there are liabilities.”

The auditing community had a good laugh when the PM said that. In reality, when auditing  billion ringgit company like 1MDB, the auditors will not even check something relatively miniscule as RM1 million.

Auditors use sampling method, and materiality testing. There is no way auditors can audit anything 100%. Their audit opinion and report even stated that.

And on top of it all, obviously the RM42 billion loans can be seen in 1MDB’s accounts. It is there for all to see in the balance sheet. It’s called historical accounting. But the money is vanished, obviously used up by unknown people (unknown at this point of time). How can we make ourselves clearer to this clueless PM?

This what happens when we have a career politician as a leader, and non-financial people as speech writers. To digress, a career politician is a person who never gained any meaningful experience in other sectors than politics.

It is sad to see how an embattled Prime Minister is desperately trying to hoodwink the people into supporting him. Worse, his efforts to defend himself fall flat on his face due to the incompetent advisors surrounding him.

Perhaps the Prime Minister need to apply the bullshit indicator onto himself first before giving out further FAQs.

#1mdb, #malaysian-corporate-matters, #public-sector

The snapshot on global economy and the local economy

If anyone of the readers here haven’t read the Confessions of an Economic Hitman book, here is a Youtube video where the author summarily describes the content of the book in about 11 minutes.

Locally, our own economy is floundering.

None of the great economic consultants employed by the Prime Minister are able to find the right formula to revitalise the local economy yet. Today, the blogger Darah Tuah wrote a snapshot on the economic position of this country right now particularly the economic relationship between the bumiputera and the non-bumiputera. The blogger gave recommendations as well.

Maybe PEMANDU and other advisers can learn a little bit of something about it too.

Please have a read HERE.

Thank you.

#chinese-supremacy, #malaysian-corporate-matters, #new-economic-model, #public-sector, #reference

Brief Outlook on AG Report 2012

The much awaited Auditor General Report was published recently and the nation is gripped with unearthed stories about mismanagement (again), unrealistic purchases (what’s new?), inefficiencies as well as wastage.

We should really brand the momentous AG announcement as a national transparency day of sorts when discoveries like the ones exposed recently are highlighted for all can see.

What dumbfounded the nation is the fact that these findings are nothing new and had been going on for years but astonishingly, nobody in the audited government agencies learnt anything from past mistakes! Is the AG Report being treated as a insignificant memo by the misbehaving departments? Won’t the junior officers take heed of the mistakes made by their senior management about these gross mismanagement?

Leading the pack for inefficient spending would probably be the Ministry of Education:

Security in schools sees RM2bil go down the tube

The 2012 Auditor-General’s Report has revealed severe mishandling of RM2.051 billion with regard to hiring security contractors for schools between 2010 and 2012.

From poorly prepared contracts to hiring of septuagenarians as security guards, the auditor-general said the management of security services in 35 schools and hostels surveyed was generally unsatisfactory.

The audit, which involved schools in Selangor, Perlis and Sabah, found that the contracts were not uniform and did not state specific requirements set by the Education Ministry.

In some schools, the audit found that contractors had breached the terms of their contracts by hiring security guards who are too old, unfit, dressed inappropriately, ill-equipped and had not been subjected to background checks.

Nineteen of the 35 facilities visited by the audit team did not have anyone guarding the entrances and people were seen entering and exiting freely.

The audit team found that the Education Ministry was not keeping proper tabs on the implementation of the security project and failed to penalise errant contractors.

Now who is the contractor? We would think that those who are manning the tender and the contracts department in the ministry would have been a seasoned disciplinarian by now and is aware that the audit department will be breathing down his/her neck just to ensure that the security contracts are running efficiently. But obviously, we cannot train the civil servants in charge of this important task to be honest and diligent. In the end, payments are duly made without any regard to the delivery of services.

Another governmental arm which wasn’t performing was the police:

Police lose weapons, Customs men lose shoes

The Auditor-General’s 2012 report reveals that the Royal Malaysian Police Force recorded a total of 309 missing items in the form of weapons, handcuffs and cars.

It also reported that the Royal Customs Department wasted a whopping RM600,000 on 7,659 pairs of shoes that were not according to specification and were then badly damaged during prolonged storage.

NONE

The items missing from the police force were recorded between 2010 and 2012, resulting in losses amounting to RM1.33 million.

The auditor-general reports that handcuffs topped the list of missing items at 156, followed by 44 weapons and 29 police vehicles.

Although the amount is small, the fact that weapons can be missing from the police force shows that there is a severe lack of controls in the police department and this doesn’t just involve money but it involves public security issue as well. Where did all the weapons go? How could they have lost it? From now onwards, KDN should really look into their SOP because if from 2010 to 2012 we lost 44 weapons, imagine how many had sifted through the cracks in years before that.

Then there is this incinerator project which not many know of:

Incinerator projects cause millions to go up in smoke

The National Solid Wastes Management Department (JPSPN) spent RM199 million on incinerators over the last four years, and then found there was no expertise to operate such machines in Malaysia.

All four incinerators at tourist spots in the islands of Langkawi, Pangkor and Tioman and in Cameron Highlands saw construction delays of two to three times their original schedules.

And even after completion, the Auditor-General’s 2012 Report says, three of the incinerators were not operated for 223 to 642 days, all because of the lack of expertise.

A fifth incinerator planned for Labuan was scrapped.

So basically RM200 million was spent on something we don’t really know about. On top of that, it was unused for up to two years because the person in-charge do not know how to find ways to operate it. For two years they presumably tried to find people who can make the incinerator worked, but alas the search was futile. Yes they could find people who can build it, but they couldn’t learn or find people who can operate it. Two years.

Bear in mind all this money wasted came from Budget 2012 which was made in 2011. May we suggest the Treasury to look into the numbers again and prepare a much lower budget for the agencies above for Budget 2014? From the lackdaisical attitude and their cavalier approach towards handling other people’s money, surely they should not hold a lot of money to begin with.

Next is the issue on the police force again:

Costly planes, but grounded because no funds

Between June 2008 and December 2010, the Malaysian police purchased five Beechcraft King Air 350 aircraft for a whopping US$58.25 million (RM175.24 million) for their Air Wing.

The planes were supposed to facilitate the upgrading of the nation’s air security.

However, within less than five years of usage, one of the planes had to be grounded for eight months, between September 2011 and April 2012, while another could not be used between June and November 2012.

Furthermore, out of the five, only three aircraft have been delivered so far.

The project was awarded after direct negotiations with Hawker Pacific Airservices Ltd, through its agent  EZ Aviation Sdn Bhd.

5 planes costing RM175 million that means each plane is averaging RM35 million. We could understand if the cost includes maintenance for the next 10 years but if it doesn’t then RM35 million for a twin turboprop aircraft at a base price of USD6 million (according to the plane’s website) is way too much.

But that is not the least of the problem. The fact that two aircrafts have not been delivered until now should ring some alarm bells from the police’s procurement department. But obviously someone was sleeping on the job.

Of course the mother of it all is the fact that some people in RTM thought they could get away with this:

Clocks, scanners and “miscellaneous items” cost RTM RM9m, up to 7,200 times over budget

The Broadcasting Department blew its budget spending RM120,210 on clocks and scanners alone, thus overpaying for these items by thousands of times beyond its actual cost.

Despite budgeting RM100 per unit for a clock and RM200 per unit for an A4-sized document scanner, the Auditor-General found that the Broadcasting Department spent RM3,810 per unit for “branded” wall clocks and RM14,670 per unit for the scanners.

In the 2012 AG Report, it found the department bought 20 branded wall clocks and three scanners for national broadcaster RTM’s offices in three states.

The department paid RM76,200 for the clocks, which was 3,810% above its estimated budget, and RM44,010 for the scanners, which was 7,235 times more than its initial budget.

The department also bought five scanners for A3 sized documents at an inflated price of RM20,630 each, 103,150% more than its estimated budget of RM1,000 each.

Although the ministry had explained on the use of those clocks, they were silent on the RM20,000 scanners. Anyone would be hard pressed to explain what kind of nuclear powered scanner they have bought.

Heads of department should really take leaf on how private companies are saving money. They treat their money like their children’s money. We have known so many stingy CEOs, prudent CFOs, very strict tender committees and a well disciplined procurement department. All in small, medium, and large private companies. Do you think the CFOs in YTL, Hong Leong Group, throw money just like that?

We need to look at ourselves and learn the concept of saving money which doesn’t belong to us.

Lastly is the bonus payouts by the GLCs. Although this is not mismanagement per se, but it is worth mentioning.

Bonus for losses, the GLC way for rewarding employees

Seven government-linked companies (GLCs) rewarded its employees with fat bonuses despite recording a combined loss of close to RM2 billion in 2011.

The Auditor-General Report today stated that Syarikat Prasarana Negara, an infrastructure company which had the highest recorded deficit of RM763 million among the group, gave its employees between one-and-a-half and two months bonus each.

The report also found that MIMOS, the country’s research centre, was the most generous of the group, by giving out between two and three months bonus to its employees, despite making a RM4.6 million loss in 2011.

Meanwhile, employees of KTM received the least with the railway operator distributing ex-gratia payments of a half-month’s salary or a minimum of RM500 in the same year. The company made losses of RM103 million.

The other companies which lavished its employees with bonuses despite making losses were Amanah Raya, Jambatan Kedua, Indah Water Konsortium (IWK) and Cyberview.

Now this is a catch 22 situation. The GLCs which provide services to the people are generally working under the pretext of ‘social responsibility’. Obviously they can’t make enough money otherwise the best possible way to increase the profits is to just charge the customers more.

In other words, IWK will just need to increase their rates, Prasarana and KTM just need to increase their fares. Since customers are a bunch of easily annoyed creatures, the costs were never truly borne by the public (Prasarana for instance have not reviewed fares for more than 10 years).

Realistically, GLCs need to reward staff who are performing really well despite the outcome of the financial accounts otherwise these companies will unable to motivate and retain good workers. They will move elsewhere if their contribution are not recognise.

And as mentioned in the tweets of Prasarana’s CEO, Datuk Shahril Mokhtar (the only CEO so far who took to twitter to briefly explain the AG Report findings) – Prasarana’s financial position is automatically handicapped by depreciation and financial costs amounting to RM700 million annually which greatly contributed to the RM763 million loss. Not surprising since Prasarana is an asset and infrastructure based company.

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No explanation have come forth from IWK, KTM, MIMOS, Jambatan Kedua etc.

The Treasury however, did issue a brief response:

The treasury said these GLCs were not set up for the sake of making huge profits but to fulfill its social responsibility and nation-building objectives.

Hence, it was up to the Ministry of Finance to determine if these companies had achieved its key performance indicators

#malaysian-budget-2012, #malaysian-corporate-matters, #public-sector, #public-transportation

Improving the Malaysian civil service

This is a piece of news from Bernama yesterday:

Applications for civil service employment to be filtered online

December 19, 2012
PUTRAJAYA, Dec 19 — Applications for civil service employment will be filtered online before eligible candidates are called to attend an examination and an interview beginning Jan 1 next year.Public Service Commission (PSC) chairman Tan Sri Mahmood Adam said with the new mechanism, the civil service employment confirmation could be shorten from three years to between one year and six months.

He said the filtration entailed 14 items, including the validity of the Malaysian citizenship and qualifications, criminal records searches and the status of financial position (whether a bankrupt or otherwise) which could be verified within a few hours.

“This is an innovative mechanism. Previously, the background filtration took three years before civil servants were confirmed in their jobs,” he told reporters after chairing a PSC meeting with ministries, departments and state administration here, today.

He said the mechanism proved effective for 24 applicants for the post of engineers in June received job offer letters immediately after their interviews were over.

“This shows a sense of urgency that we want to implement and we have asked all ministries and departments to announce job vacancies at their monthly meeting,” he said. — Bernama

I don’t get it. Does this mean all this while, there is a 3-year probation period for a newly joined civil servant to be confirmed in his post just because it takes 3 years for their human resource department to validate their academic qualifications, financial status, criminal records and other very easy to verify information?
Or, the civil service takes into their employment candidates without even getting their background checked?!
Either way, no wonder the civil service has a dreadful reputation.
It’s already 2012 and yet the civil service is hampered by a problem which should have been eradicated in the 80s. And only now the top bosses of the civil service thought about this solution?
This is why many people (I presume the intelligent ones) are turned off working in the public sector. The industry average for a probation is 6 months. During this short time, an employee is not entitled to a full benefits of their employment until they are confirmed to the job.
Imagine had to wait for 3 years just to get confirmed!
For all the hard work you put through for 36 months and yet you could not apply for a staff loan, full hospitalisation benefit, etc.
Civil service should have first-rate candidates entering their recruitment process. But this seems impossible since the recruitment process itself is a third-rate buffoonery.
But I am crying over spilt milk. Better late than never I suppose.
Merry Christmas everyone!

#public-sector