Politics in business 'hampers Kelantan's development'

Kelantan's chief minister Ahmad Yakob (left) and his deputy Mohd Amar Abdullah are directors of key GLCs in the Malaysian state.
Kelantan's chief minister Ahmad Yakob (left) and his deputy Mohd Amar Abdullah are directors of key GLCs in the Malaysian state.PHOTOS: BERNAMA, THE STAR/ASIA NEWS NETWORK

Report says extensive political patronage of state-owned companies could be a problem

Parti Islam SeMalaysia (PAS) is being investigated by the anti-corruption agency over claims that it received RM90 million (S$30 million) from former ruling party Umno to cooperate in last year's general election, with the probe also casting a spotlight on its leaders' penchant for driving luxury cars on home ground Kelantan, one of the poorest states in the country.

Kelantan's economic woes are often attributed to its status as an opposition-run state neglected by the central government.

But the north-eastern state of 1.8 million people has been receiving the lion's share of federal aid - RM913 million - in the last five years. Meanwhile, a report by local think-thank Ideas last August showed that extensive political patronage of state-owned companies could be part of the problem.

Kelantan has been governed by PAS since 1990, and has the lowest gross domestic product (GDP) per capita growth of the country's 13 states. In 2017, Kelantan's GDP per capita stood at RM13,593, under one-third of the national level figure of RM42,228.

While the state administration prioritises religious principles - separate queues for men and women in supermarkets, for example - it has no issue with politicians engaging in state business.

"There is a particularly high level of political presence on the boards of directors of GLCs (government-linked corporations), comprising state assemblymen, MPs, former politicians and local division leaders from the governing party, PAS," the Institute for Democracy and Economic Affairs said in its report, Government in Business: Diverse Forms of Intervention, published last August. "This suggests extensive patronage at work involving high-ranked politicians and local-level leaders."

To be fair, richer states such as Selangor and Perak, run by the ruling Pakatan Harapan coalition, adopt a similar practice: Selangor's chief minister, for example, heads Menteri Besar Incorporated and several of its subsidiaries.

TOO MANY

We found that in Kelantan, such a large number of politicians had been appointed to a large number of GLCs. There were just too many.

PROFESSOR TERENCE GOMEZ, lead author of the Ideas report and a professor of political economy at Universiti Malaya.

But Kelantan's numbers surpass these, with some 33 politicians appointed to boards of 19 state-owned companies.

The lead author of the Ideas report, Universiti Malaya's professor of political economy Terence Gomez, said: "We found that in Kelantan, such a large number of politicians had been appointed to a large number of GLCs. There were just too many."

What is peculiar to Kelantan is that the deputy chief minister holds more directorships than the chief minister.

Kelantan's chief minister Ahmad Yakob and his deputy Mohd Amar Abdullah are directors of key GLCs, with Datuk Amar in the lead with directorships in nine firms.

Mr Amar said his appointments were approved by Datuk Ahmad Yakob. "Maybe he wants to focus on managing the state," he told The Straits Times.

"PAS is first and foremost a political party, albeit with a religious tinge and bent, and it is therefore not immune to the necessity for political patronage in exchange for support," said Mr Oh Ei Sun, a senior fellow at the Singapore Institute of International Affairs.

Kelantan's state-owned companies have fared particularly poorly.

According to the Auditor-General's report in 2017, a total of 21 Kelantan state-owned subsidiaries were loss-making, outnumbering the 16 which recorded profits.

Perbadanan Menteri Besar Kelantan - set up to generate investment and corporate growth - and Perbadanan Pembangunan Ladang Rakyat Negeri Kelantan, which helps local farmers, saw losses in 2017 of RM3.2 million and RM7.85 million, respectively.

Mismanagement and poor planning were flagged by the Auditor-General as reasons for these losses.

"One would have expected that a party which prides itself on Islamic values and always claiming higher moral ground on issues would not have endorsed patronage politics in the first place," said Mr Amir Fareed Rahim, an analyst at political risk consultancy KRA Group.

Chief minister Ahmad Yakob told The Straits Times the political appointments were justified. "Though they are politicians, they are also professionals," he said, adding that the directorships were given according to the "suitability" of the individual's strengths.

Mr Amar, who is a PAS vice-president, is a theology graduate and a former lecturer at an Islamic university in Selangor. Mr Ahmad is the party's deputy spiritual leader and an Islamic law graduate who worked as a school teacher before becoming a politician.

Mr Amar acknowledged issues with poorly-run state companies but said little about preventive steps to address them. "Only with the audit, we would know the problems. If there's no audit, how can we know if there's anything wrong within a company?" he said.

Separately, the Finance Ministry has named and shamed several states, including Kelantan, for poor financial management, revealing last October that the state government had requested federal funds to pay its civil servants.

Kelantan state officials have defended the administration, saying that its governance has improved and it has reduced its deficit in the annual state budget.

Mr Ahmad also said much of Kelantan's RM1.4 billion federal debt is for projects to improve the state's water supply.

A version of this article appeared in the print edition of The Straits Times on February 28, 2019, with the headline 'Politics in business 'hampers Kelantan's development''. Print Edition | Subscribe