Datuk Seri Akhbar Satar
Malaysia Association of Certified Fraud Examiners
The Organisation for Economic Co-operation and Development (OECD) is concerned on the outbreak of Covid-19 which would create opportunity for many integrity violations and could intensify fraud and corruption, especially in the public procurement, public organizations and economic stimulus packages.
Many governments due to the Covid-19 outbreak effects have allocated billions through the stimulus package for emergency pandemic response to address the economic problem such as unemployment, assist social-welfare programs and for urgent health needs and procuring the most critical medical supplies. At the same time, rakyat are looking to the government for very economic survival.
In the first stimulus package which the Malaysian government introduced, it was valued at US$4.8 billion and aimed to counter the immediate impact of the outbreak on the country’s most vulnerable sectors and households. Prior to this, Former Prime Minister Tun Dr Mahathir Mohamad committed RM150 million to purchase the relevant equipment, medical and consumables in the effort to contain the Covid-19 outbreak.
In the second stimulus package, the government allocated another stimulus comprising special allowances for healthcare providers, one-off cash aid and microcredit scheme for small-and medium-size enterprises (SMEs), among others.
Of the total, RM128 billion will be spent on public welfare, RM100 billion will be used to support businesses, RM2 billion will be used to strengthen the country’s economy.
Procurement fraud is a common issue in every stage of a product or service procurement process especially during this Covid-19 pandemic and crisis.
Transparency International (TI) stated that unfortunately, corruption often thrives during times of crisis, particularly when institutions and oversight are weak, and public trust is low. It happened in past global health emergencies, like during the Ebola virus and Swine flu, that even in times of crisis, there are those who aim to profit from others’ misfortune.
According to Robert Klitgaard’s formula: C = M + D – A.
Corruption equals monopoly plus discretion minus accountability. One will tend to find corruption happens when an organization or person has monopoly power over a good or service, has the discretion to decide who will receive it and how much that person will get, and is not accountable. Combating corruption is such a difficult task and sensitive issue that many national political leaders who support such efforts in principle are hesitant to undertake them in practice.
There is consensus agreement among economists that this Covid-19 pandemic has ravaged and severe negative impact on global economy. It will definitely create a monopoly-supplier spontaneously.
In the present situation, U4 Anti-Corruption Resource Centre, stressed that in many countries, responses to Covid-19 have seen breaches of anti-corruption standards such as cutting corners in procurement processes, or persons in power are taking advantages of the crisis to increase their private benefits.
Therefore, it is quite normal for countries responded to the Covid-19 pandemic by loosening the procurement procedures and checks and balance. During this crisis, they invoked emergency legislations by awarding tenders through direct negotiation instead of the open tenders.
This crisis can create environments, where many loopholes leaches that are ripe for corruption and fraud in procurement process such as conflict of interest, embezzlement and tender manipulation or award directly to cronies “with all sorts of reasons being given” to justify the awards.
Subsequently, con artists including corrupt politicians and public officials, who have been exploiting every trick see this as a goldmine and opportunity to defraud and for making easy money.
Identifying these corruption risks before they happen can help strengthen our response and get the best value for money and the right contractors, vendors or suppliers.
Government transparency of contracts is fundamental in ensuring the proper management of contracts, has clear, robust internal accountability arrangements, strengthening accountability, reducing corruption and enhancing good governance. Without transparency, openness and transparent information there can be no accountability. Bear in mind that the public wants to see even during this crisis whether they are getting their money’s worth from government contracts.
Contracts should be awarded to contractors with evidence of reliability, capability, responsibility, and with a good track record of both technically and financially. If possible, it is good to conduct an honest due diligence on the contractors before awarding the contracts since nowadays getting information via the internet is easily especially on the market price.
Even the World Economic Forum agreed that transparency and accountability must not be lost in the haste to respond to Covid-19 and putting the sound processes and accountability into place is an opportunity not just to avoid corruption, but to rebuilt trust.
The government’s process of acquiring goods and services is diverse, complex and huge. It ranges from papers to commercial and complex projects. Prior to this, the Malaysian government spent RM40 billion annually to purchase assets and RM35 billion in the service sector.
Based on complaints received by the MACC between 2013 through 2018, wrongdoings involving procurement was approximately 43 % which topped the list of sectors prone to corruption. This is duly expected as it’s the public sector that has the power that is exchangeable with money.
Prior to new normal, Tan Sri Ambrin Buang, the former auditor-general predicted that up to 30 percent of Malaysia’s public projects’ value was lost owing to mismanagement and corruption. Consider the amount of savings the government would have obtained if it paid 30% less for goods and services the contractors and vendors provided. If left unchecked, the present crisis may develop into a worst case scenario.
Past high profile prosecution cases should be a lesson to all on accountability and an impetus to carry out his or her duties with responsibility and integrity. Being a public servant, even though nobody can prevent politicians from trying to interfere, they can exercise their right to ignore them, especially when the request is made not in accordance with the law.
In the absence of a culture of accountability and organizational integrity no one will bear the responsibility or feel embarrassed by their wrongdoings while corruption would get further aggravated. But one must remember that penalty for corruption cases is severe and costs to families’ ripple effect through generations to come.
Corruption during this Covid-19 crisis is a threat to good governance, political stability and socio-economic development of a nation.
Datuk Seri Akhbar Satar is the president of the Malaysia Association of Certified Fraud Examiners which provides training in preventing and investigating cases of corporate fraud in Malaysia.