The Edge: The question of ‘Conflict of Interest’
Recently much has been raised about conflict of Interest in the business world. This was an issue to which the Edge dedicated 6 pages, excluding the front page, to try to decipher. Other writings in the social media have also raised this issue.
I wish to give my 2 sen worth as well. As one who is involved in the corporate world, I hope my writings will shed some light on the issue. I will try to be as objective as I can.
The crux of the issue
The crux of the issue in this article is whether State-run Foundations should get involved in business which would create a “possible” or “potential” conflict of interest. This question goes to the very core of how business is being practiced in Malaysia. Here, the Government is heavily involved directly or indirectly in business through GLCs, GICs and to a lesser extent the State-run Foundations. With the exception of purely capitalist countries, this is something which is not unusual as most countries in the world have State-run Corporations doing business; some of which at international level.
From an objective perspective, for as long as any Government gets involve in business there will a perceived potential conflict of interest irrespective of whether the head or the Chairman is a sitting Minister. Conflict of interest may or may not give rise to corruption. It is merely for avoidance of doubt that the proponents want it eliminated. However, in a real world, conflict of interest can only be minimized not eliminated. Conflict of interest is inevitable for persons in position of power. It is how it is managed that is important.
Conflict of Interest and Corruption
It is undeniable that corruption can and will occur without or without conflict of interest. The Giver or the Taker does not need a vehicle called “conflict of interest” for corruption to rear its ugly head. It boils down to the intent. Even in the US where GLCs, GICs and State-run Foundations hardly exist, big corporations lobby for their interest in the guise of creating jobs and improving economy. Professional lobbyists are hard at work with donations given to the affiliated political parties sometimes in murky and dubious deals lacking in transparency.
Conflict of interest is not synonymous with corruption. It can however lead to corruption in the same way that power can lead to corruption. Hence, it is not exclusive to corruption. Corruption arises if the conflict of interest results in personal gain in benefit or kind. Where is the personal gain in the case of YWP?
The Edge has singled out and focused on State-run Foundations to highlight conflict of interest and corruption in its cover story. It is very odd that the Edge should choose State-run Foundations as an example as the fundamental issue which they should have raised is “should Government be involved in business?”. Then, the question should be which Government entity is deeply involved in business. Without any doubt, it would be the GLCs and GICs. State-run Foundations are miniscule compared to these giants. It is evident from the list of projects where YWP is involved which the Edge published that the project cost is insignificant to the billions of Ringgit that the GLCs and GICs are accustomed to.
Yet, the State-run Foundations are highlighted. If the Edge’s intention is to highlight the incestuous relationship of Government doing business, then it has failed the readers. Why then highlight the least among the “culprits”? Is it because to question the GLCs and GICs would tantamount to questioning the very basis of how business is done in Malaysia and rock the boat. The Edge should be forthcoming in its intention for the good of the country. If it is on the issue of unfair competition with real entrepreneurs, then the Edge should focus on the “big boys”. If the ultimate intention is to push the Government to withdraw from doing business, then it should be explicitly said.
The Edge cited the ongoing court case of Ku Nan to strengthen their argument on conflict of interest but failed to link that to the role of FT Minister as Chairman of YWP. Where is the nexus between the Chairman of YWP and the corruption case of Ku Nan? The Edge acknowledges that the company in the Ku Nan bribery case has not done any business with YWP yet has used it to raise conflict of interest in the role of YWP. If at all, the case clearly confirms that corruption will occur with or without the existence of YWP and that YWP is not the issue as it is made to be.
State-run Foundations have a clear objective outlined in its M&A. These involves charity work and helping the less privileged. Any deviation from this will invite investigation by the SSM. Its accounts can be made available for all to see in the interest of transparency. On the role of YWP in property ventures, tie-ups with Developers can easily be done above board by calling open tenders in the form of Request for Proposals with clear guidelines as to the contribution factor/profit guarantee to YWP which they have to propose. If the Edge acknowledges that political donation is not a crime, how then can profit guarantee be a source of concern when the profit goes to charity work and the less privileged as long as it is accounted for? Isn’t this better than the murky and dubious dealings of lobbyists which lacks transparency.
Pros and Cons of State-run Foundations
The obvious benefit of a State-run Foundation is the ability to do social and charitable work not within the scope of work of DBKL as in the case YWP in a transparent and above-board manner with no anticipation of benefit in return. Altruism at its best. The source of income is traceable and verifiable. As a foundation, the level of administrative and financial governance must pass strict scrutiny. That will allay fears of abuse from detractors. Checks and balances can easily be put in place.
Without State-run Foundations, the opportunity for social work and CSR by DBKL is available only in the form of giving donations and grants. Social work is more than just that. It is then left to the private sector/entities to take up the gauntlet. The Edge suggests other people should do the social work without specifying who they are. Private sector being profit motivated can do it but will still be accused of there being a quid pro quo in the form of tax incentives or kick-backs when they do. Or they will do it when coerced by Government bodies.
In its concluding paragraph, the Edge said the following:
“The ultimate question is, does one right in the name of charity make up for other potential wrongs, such as from conflict, unfair competition and political abuse?”
Actually, the Edge has answered its own question when it uses the word “potential” wrongs for conflict of interest, unfair competition and political abuse. Conflict of interest can be contained with proper safeguards. Unfair competition and political abuse are not exclusive to State-run Foundations. Political abuse can occur even without the existence of GLCs, GICs or State-run Foundations. If the concern is in the Government doing business, then the cover story should reflect that. Then, it challenges the very fabric of how business is administered in Malaysia with its inherent ramification of such a challenge.
• The writer is a professional engineer with 40 years of experience. Served in the Govt for 12 years before venturing into the private sector. Current position CEO of a highway toll concessionaire. Past 25 years in highway toll concession industry. Involved in setting up 3 toll concessionaires.