Continuing : Due to bourhaha over this PKFZ that shakes market confidence and causes MARC to revise and downgrade its bonds ratings because of doubts thrown at government’s procedures, the government quickly took the position that the letters of support were guarantees – this time confirmed by MOF and with AG!

From viewpoints of powers that be, better do it now – ie confirm thje support letters as equivalent to guarantee – because only direct government projects may be justified to be issued letters of guarantee (ie guarantees in legal sense) endorsed by MOF.

Many other projects linked in other ways to govt’s objectives are not necessarily govt projects for which guarantees may be (legally) issued. But it may be speculated that perhaps cronies have an interest in these govt related projects and under our patronage system of politics, MACC or no MACC, helping these govt related/linked entities to raise moneys from the market whether via loans or debts securities (bonds) is one principal way to raise political funds for election and winning them!

What is at stake is that if the market loses confidence in mere letters of support, there will be fewer deals around for cronies’ participation and raising political funs …so it is imperative that letters of support, even though not guarantee, and not even issued to the public, must be viewed by the public to be as good as guarantee…or else there will not be enough of projects to go around since direct govt projects, for which govt guarantees may be issued with MOF’s approval, are very limited.

This kind of approach by ruling coalition is of course not acceptable to Opposition opposed to cronyism and (indirect) funding of not so feasible mega projects from public coffers, because such funds used (belonging to public) will defeat the Opposition in elections that public may support. And this whole method of raising political funds from mega projects will be facilitated if every letter of support may in a public outcry be easily convertible by retrospective ratification to a letter of guarantee to support using public funds an unsupportable project!. If it were that easy, why have guidelines and limits to what govt could guarantee with MOF’s approval in the first place? Letters of Support means Letters of Support – not Letters of Guarantee.
The difference – nuanced but distinct – must be maintained for commercial expedience (whether when dealing with govt or big corporates and people receiving these must be able to accept their different risk stature and act accordingly). Otherwise all hell breaks lose and all letters of support can be conveniently converted to guarantees when project fails, money needs to be raised, the govt wants to continue to flog a dead horse!

What Kit wants to do is to pose this dilemma: if the govt wants to insist support letters were for all intents and purposes guarantee, then prosecute your ex MOT Ministers issuing them unlawfully without MOF’s approval. However if govt says the support letters are not guarantees (and the 2 MOT ministers get off the hook) then the govt will be in trouble and lose market credibility whenever it issues support letters for projects indirectly linked to govt. agenda of dubious viability for which guarantees may not be issued under present standing operational procedures.
Kit is good for posing dilemmas : the other side turns left they get entangled in one thing but if the turn right there is also road block! In other words the other side can’t do any right! Either way they are checkmated!

Oops sorry Typo omission in # 14 – “….They were likely letters of support saying that MOT/Govt was giving full managerial and financial support to PKA – reassuring all that they should NOT have to worry in these respects. ..”

The crux of the problem is that political corruption is (I believe) quite universal (not that I say it should be condoned when it comes to frittering our tax payers moneys.)

The fact is that many (though not all politicians) of whatever political complexions and pretensions have gone and will go into politics to make money, and devise all kinds of ways to camouflage that. It is that part of human nature that we cannot say or deny is not there. Corruption bears resemblance to the other oldest profession (prostitution) Ronald Reagan would say. The fact that to campaign in an election and by election needs money and underlines the imperative of political fund raising. Donations from party members andd supporters outside are not enough. So corporate ventures/projects are resorted to and everywhere money is raised (techically corruption per MACC) but camouflaged. Here one takes the spoils for one political party and part of the spoils for oneself and no one gets you because your party that takes care of everybody is the holy cow and cannot be implicated vicariously with you. Thats the protection!

Some bright spark from one of the ruling party mentioned following the American system. The lobby system there allows money to be raised for campaign funds subject to rules and limits. A politician can get rich under that system. On any issue there are opposing sides and their lobbyists. When one takes a certain position that one side is unhappy of and lobbying against, there is another side, an interest or corporate group lobbying for and is happy to pay you for a position taken that meets its satisfaction.

The difference is that in the Ameruican Capitalist system politicians get rich from (quite frequently) corporate funds lobbying from govt a certain position beneficial to its business objectives.

Here’s there’s no such system: so we end up with mega projects of huge cost overruns especially when so many politicians sometimes from different political parties have to be “taken care” off.

The money squandered will come from tax payers money if not EPF or Petronas moneys which are supposedly a heritage of all Malaysians.

The American system is perhaps different in that political corruption is financed under pretext of political funding from corporates’ and interest groups’ moneys via their lobbying – not necessarily from the ordinary rakyat’s coffers…..

If one cannot rid corruption from politics, if one cannot rid abuse of power from hearts of men/politicians, then at least the American system mitigates to an extent the ordinary men’s plight. Because the greed of politicians that cannot be eliminated it can at least be channelled to and satisfied from corporations and various interest groups’ funds (indirectly one may still argue, ultimately passed on to consumers).

But the point is that a corporation/interest group still has a choice whether to make political contributions for a certain business objective and as a consumer one has also a choice whether to buy the product the political cost of which has been passed on.

Here under our system you don’t have to choice. So maybe what is unavoidable (political corruption) may be redirected through a more sophisticated system akin to the American style of lobbying to raise political funds from corporates than ordinary rakyat bearing the brunt!

The other conclusion to be drawn is that in the interest of accountability in relation to use of public finances, section 14 of the Financial Procedure Act of 1957 (“FPA”) ought to be amended to cover, besides and beyond guarantees to any letters of support, comfort or any form of written assurances the effects and reasonable expectations of which are that the government or any of its agency will incur a financial liability, whether actual or contigent, in respect of public finances. Without such an amendment, Ministry of Finance’s oversight over public finances will be circumvented by all other kinds of written assurances by any minister from any ministry (that are not govt guarantees) but in substance treated by the government as morally binding to incur and honour laibilities as the same way as govt guarantees….

I am referring to the kind of letters of support of the kind (like that issued by former Transport ministers in PKFZ) that by nature or effects and by reasonable expectations of the market, could morally or legally incur, on behalf of the government the same kind of financial obligation or liability as that equivalent to a guarantee, undertaking or indemnity.

The reference to ordinary “Surat Sokongan” in Onlooker’s sense – a declaration made by the signatory (usually Politician or Minister) to the addressee that Mr so & so is a crony of the signatory so that the addressee is hereby requested to give whatever assistance or support to him/her in case he/she does really make a request asking for a favour from the addressee” – is different, by nature and effects, from the kind of Surat Sokongan above explained in the PKFZ’s case ….

I however agree Umnoputras would not require such a hand-roped amendment to Financial Procdure Act.

On the other hand what’s the point of requiring Govt guarantee to be issued only after Treasury approval if any Minister can circumvent this by issuing letter of support that dispenses Treasury approval and yet has the same effect as a guarantee incurring liability on the part of government and public finances?

///Why is that there is so much of argument over the Letters of Support issued by the MOT is indeed a Letter of Guarantee or not ? The AG had stated very loud and clear on this at the PAC Meeting i.e The Letters of Support issued by the MOT is indeed a Letter of Guarantee and from a legal point of view, the Government must honour it as the Minister is an officer and acts on behalf of the Federal Government./// – FY Lim.

AG did not unequivocally say in PAC Meeting that letters of support were legal guarantees. Accoirding to reports, he said they were “tantamount to guarantees”.

Tantamount does not mean it is.

We are entitled to think that this is a play of words – semantics.

But consider this: If they were legal guarantees, then their issuance by former minister of Transport without Treasury/MOF’s prior approval would implicate the minister in an unlawful contravention of section 14 of the Financial Procedure Act of 1957 (“FPA”).

However if letters of support were, by their nature, not legal guarantees, then there was no contravention of FPA and former MOT Minister issuing letter of support is not caught by coverage of FPA and not implicated in breaking any law.

Yet the objective of pumping in more money like throwing salt into sea to keep PKFZ afloat against all wisdom could still be achieved if it takes the position that letters of support, whilst not by their nature letters of guarantee, however share the same effects ie – the government will assume the liability, actual or contingent, reasonably expoected pof it by the market. Whilst the obligation of the govt to pay on a guarantee is a legal obligation, the obligation of the govt to pay on letters of support is a moral one (necessary to maintain govt’s sovereign debt ratings). The difference is that in case of letters of support the govt can still fund and pay on them (just like they were guarantees) and yet keep the former minister harmless from being accused of otherwise issuing guarantees without (Treasury/MOT)’s pior approval. Dual objectives are met instead of one!

Hence a very careful choice of word by AG of letters of support “tantamount to guarantee” rather than letters of support were actually in substance and law letters of guarantees (though described as letters of support).

Onlooker Politics,

Your posting on September 22nd, 2009 22:33 has summarised the “wilful employ of political cunningness” well. Thats their idea – not conceding that the letters of Support were Letters of Guarantee and yet at the same time maintaining that letters of support tantamount in effect to guarantees. It is fundamental to answer and defend against all points raised by YB Kit/Opposition against the various players whether former transport ministers, chief secretary etc.