Combatting public sector corruption in terms of procurement

By Jason Loh


THE public sector or civil service plays an indispensable, vital and critical role in every nation – as front-liners as well as seated behind the desks. As it is, the civil servant is part of the administrative machinery of government under the executive branch that fulfils the needs for policy formulation and policy execution, respectively.

Corruption in the public sector is, therefore, as enervating and debilitating as corruption practiced by the executive decision-makers and connected politicians, not to mention as equally heinous and reprehensible.

One of the main issues of corruption in the public sector involves the procurement process – whereby taxpayers’ money (the financial resources) are deployed for purchasing of goods and services from other government-related bodies (eg government-linked companies) or the private sector.

By right (in the absolute sense, morally) there should be no “wrong door”, to quote from the title of the former Chief Secretary to the Government, Tan Sri Sidek Hassan’s biography, No Wrong Door: The Story of Sidek Hassan.

Also, following former Assistant Auditor-General (retired in 1992) and now member of the Malaysian Institute of Integrity (IIM), Kanason Pothinker, who is eminently suited and well-placed to speak on the subject of corruption in the public sector due to his longstanding professional experience.

Kanason has said that corruption is the “elephant in the room” and expresses public opinion when he says that “besides COVID-19, it’s the second most discussed topic in all [public] forums”.

According to him, more than 60% of corruption cases have been attributed to the public sector. High-ranking civil servants and bureaucrats should be at the forefront in combatting the evil and scourge of corruption and, therefore, there should be no “wrong door” for reporting and whistleblowing of corrupt practices within the public sector.

As highlighted by Kanason, the Auditor-General’s Report for 2019 has catalogued many breaches of financial regulations with consequential losses of millions in public funds. The number of audit observations that remain unresolved total over 350!

The report also highlighted serious gaps in compliance – by indicating that senior officers continue to enjoy anonymity in procedural decisions, particularly on financial matters”.

Reading the report, we can see that, for example, the quotation (sebut harga) for the supply and delivery of uniforms – RM47,418 for 100 pieces – for the Maritime Transport Training Institute (Matrain) of the Marine Department of Malaysia did not meet the contractual specifications.

On the supply and delivery of spare-parts for removal of oil spillages estimated at RM187,160, it’s found that these mechanisms were not sent to the appropriate location as determined in the contract as well as late arrival.

Another example is the maintenance work contracts by the Royal Malaysian Air Force (RMAF/TUDM) wherein the report discovered that a total of RM6.07 mil worth was subject to late completion. This corresponded to a sum of RM651,650 of liquidated damages (or late penalty/fine for breach of specific contractual performance) that was forgone.

Kanason is, of course, among the growing number of conscientious Malaysians from all walks of life who are very concerned about corruption as a way of life in our beloved nation.

Meanwhile, #Rasuah Busters is a campaign and movement initiated by Datuk Hussamuddin Yaacub, founder and chairman of Karangkraf Group (a leading publisher and media industry player) that includes the Malay daily, Sinar Harian.   

#Rasuah Busters seeks to empower local communities to “say no to corruption”. In a statement publicising establishment of the campaign and movement on Feb 15, Hussamuddin stated that, “[w]e must know that while society can create institutions, legal frameworks, rules and laws to deter corruption, the last line of defence lies squarely on the individual, on you and I”. 

Indeed, the #Rasuah Busters campaign and movement is a powerful avenue to combat corruption in the public sector – by equipping the public and society with the requisite knowledge and tools so that everyone can play their part in promoting the noble cause and continuously bringing such issues to the fore and constantly highlighting malpractices, negligence and abuse of power in the form of corruption.

In addition, along the lines proposed by Kanason and others, best practices from the corporate sector as mandated under the Sarbanes-Oxley (or the Public Company Accounting Reform and Investor Protection) Act (2002) in the US following the accounting scandals involving most prominently Enron and WorldCom such as individual compliance certifications that applies to all in the procurement process should be adopted by our public sector.

This is to take place before the initiation of all tenders and awards as well as for progress/periodic payments, variations and cancellations which comes under internal review, audit and control procedures with external supervision as second line of defence.

Other recommendations include the controlling officers concerned (ie, those tasked with planning, preparing, directing, coordinating and monitoring the financial resources allocated for procurement) obligated to prepare and submit to the Secretary-General of the Treasury (Ministry of Finance/MOF) a financial management report.

This report has to be aligned to corporate governance requirements in accordance with the Malaysian Financial Reporting Standards (MFRSs) which are a part of Bursa Malaysia’s and the Malaysian Accounting Standard Board’s (MASB) requirements as per the Financial Reporting Act (1997) and benchmarked against best international practices, no less.

Under the National Anti-Corruption Plan/NACP (2019-2023), use of technology to automate procurement and payment processes to make the process to be more transparent and reduce the risk of corruption is highlighted.

Strategy 3 – “Increasing the Efficiency and Transparency in Public Procurement” mentions the introduction of the ‘e-Work’ system in project management monitoring and enhancing the technology-based procurement system (e-Perolehan) in order to reduce physical interface between parties.

Going forward, blockchain/distributed ledger technology (DLT) would play a critical and effective role in promoting greater transparency and checks-and-balances within the overall procurement process.

Cryptographic methods of keying information based on consensus is driven by a hybrid of permissioned and permissionless network system, according to the World Economic Forum’s (WEF) “Exploring Blockchain Technology for Government Transparency: Blockchain-Based Public Procurement to Reduce Corruption”,

This strikes the right balance between project sensitivity and the blockchain technology’s scalability and anonymity on the one hand with auditability, transparency, procedural integrity and public accountability on the other.

Blockchain will also promote the creation of “smart contracts” (as self-executing algorithms within the blockchain nodes), information ownership (freedom of information) as well as the reduction of centralised authority consistent with the characteristics of an “open data” government – which are vital in the fight against corruption.

The same document also provides a model smart contract as embodied in the Request for Proposal (RFP) that’s aligned with blockchain technology and compatible with the InterPlanetary File System (IPFS), as a peer-to-peer networking, for Ethereum as the recommended platform by WEF.

In the final analysis, technology such as blockchain can enhance measures to reduce and eradicate corruption in the public sector with particular focus on public procurement at the “grassroots” level (de-centralisation of anti-corruption initiatives resulting in the concomitant of their democratisation).

In summary, the battle against corruption can be reduced to the individual, process and technology. – March 11, 2021

Jason Loh Seong Wei is Head of Social, Law & Human Rights at EMIR Research, an independent think tank focussed on strategic policy recommendations based on rigorous research.

The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.



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