Malaysian procurement system riddled with corruption, says US cable

The Malaysian Insider
Sep 09, 2011

KUALA LUMPUR, Sept 9 — The seedy and allegedly corrupt side of Malaysia’s defence procurement has been laid bare in a US embassy cable, with startling revelations on how Umno politicians, agents, civil servants and military officials receive 30 per cent “commission” on deals.

In a note on the opaque procurement system here revealed by whistleblower site Wikileaks, the US embassy noted that American companies operating here had three main complaints about the system: the lack of transparency, outright corruption, and Bumiputera requirements.

The undated cable sent during the Abdullah administration between 2004 and 2009 also noted that many government tenders do not follow procurement rules.

A US aerospace executive told the US embassy here defence deals were done through shadowy agreements with no tendering process. For example, the then-Prime Minister Tun Abdullah Ahmad Badawi’s (picture) sister-in-law arranged a US$400 million (RM1.2 billion) contract to buy military cargo aircraft from Airbus.

The deal was announced following Abdullah’s return from a trip to France.

“The US executive asserted that PM Abdullah’s brother told him this deal was ‘done for political and other reasons, such as commission’,” noted the US embassy cable made public through Wikileaks.

Similar scenarios were described for the procurement of T91 Polish tanks and SU-30 Russian aircraft, noted the executive, who also said that once someone purporting to work for then-Deputy Prime Minister Datuk Seri Najib Razak approached him about a deal and suggested “you will get a part of it.”

The US embassy noted that Malaysian political parties including Umno rely on “money politics” for much of their operating funds.

“Projects or tenders often are awarded as political patronage with a cut of funds circulating back to the party through different channels,” noted the embassy.

These revelations come at a time when there has been some scrutiny surrounding the deal to buy Scorpene submarine. More than RM500 million was allegedly paid to a local consulting company Perimekar and the opposition has pointed fingers at Najib who was the defence minister when the deal was inked.

Pakatan Rakyat (PR) politicians have also questioned the inflated costs of several new defence deals announced by current Defence Minister Datuk Zahid Hamidi.

The US embassy noted that lack of transparency was also evident when it came to awarding contracts in the information communication technology (ICT) sector. A manager at a US ICT firm pointed out that it was shortlisted for a tender with Telekom Malaysia Bhd but lost to another company that did not even bid for the contract.

Though the cable was sent during the Abdullah administration, there is little evidence that the procurement system has improved. Anecdotal evidence suggests that lip service is paid to open tender system with the preferred choice being direct negotiation.

This trend is especially true for large contracts and concessions where politically-connected companies are involved.

The Malaysian Insider reported yesterday that a consortium led by 1MDB and Puncak Niaga have been given the greenlight by the government to buy IWK for RM1. The consortium will assume the debts of RM1.5 billion but will obtain a concession for 60 years.

  1. #1 by pulau_sibu on Friday, 9 September 2011 - 10:27 am


    Dr M repeats conspiracies, says Arabs not capable of planning 9/11
    By Clara Chooi
    September 08, 2011

    KUALA LUMPUR, Sept 8 — Tun Dr Mahathir Mohamad continued today to back a conspiracy theory that the US government was responsible for the 9/11 attacks on its own soil, even as Americans prepared to mark the 10th anniversary of their nation’s worst-ever terrorist attack.

    He added that he could not believe Arab Muslims were capable of the planning required to launch such attacks against the United States.

  2. #2 by yhsiew on Friday, 9 September 2011 - 11:31 am

    ///For example, the then-Prime Minister Tun Abdullah Ahmad Badawi’s (picture) sister-in-law arranged a US$400 million (RM1.2 billion) contract to buy military cargo aircraft from Airbus.

    The deal was announced following Abdullah’s return from a trip to France.///

    Did not Abdullah promise to wipe out corruption when he assumed the PM post?

  3. #3 by Bigjoe on Friday, 9 September 2011 - 11:41 am

    This is news? I think the issue is how come WE, ourselves, the rakyat, have no means to proof and hold our govt for it? We know this to be true for a long time now. We know the problem is bad. The issue is why is it we don’t do anything about it..

  4. #4 by Godfather on Friday, 9 September 2011 - 11:43 am

    While Sleepy Head was romping with the housemaid in Putrajaya, his relatives and cronies plundered what they could.

  5. #5 by undertaker888 on Friday, 9 September 2011 - 12:08 pm

    No need for the US govt to tell us. Any layman on the streets can tell you this. But of course if big brother speaks it will add more weight to it.

    Hmmm.itu mr clean sebenarnya pun mr kotor. Kalau itu mr clean paling clean di umno, maka semuanya kotor lah.

  6. #6 by DAP man on Friday, 9 September 2011 - 1:12 pm

    What?? Malaysian procurement system riddled with corruption??

    I would say the whole of Malaysia is riddled with corruption – right from the PM, UMNO down to the lowly police constable.

    Isn’t corruption, UMNO’s staple food???
    Isn’t corruption UMNO’s life blood?

  7. #7 by k1980 on Friday, 9 September 2011 - 1:24 pm

    No wonder the hubby so sangat sayang his wifey who lays golden telur

  8. #8 by sheriff singh on Friday, 9 September 2011 - 4:16 pm

    And they all lived happily ever after – if they are not caught.

  9. #9 by dagen on Friday, 9 September 2011 - 4:21 pm

    Yeah. What is new? What is news? Nuthin’ man. The leak spoke of those activities as corruption. Obviously that observation is obsolete. Corruption no longer exist in this country. Here corruption has been elevated from under the counter to over the counter. Agreements were signed to enforce their performance. And payments made under the agreements are typically known as commission. So these are not to be regarded as corruption. Suppliers openly state the grossly inflated figures in their invoices. No problem. The only problem is tax. They cannot be taxed on the amount of profit they gained. And that is why umnoputras are never pursued for unpaid taxes. You see the whole thing has been developed to the point that it has now acquired the special status of ketuanan right.

    Jib Jib Boleh.

  10. #10 by Loh on Friday, 9 September 2011 - 4:37 pm

    All those easy money through military contracts could not have taken place if not for NEP which protected UMNOputras. How much of the money have gone to the rural Malays who are said to be still in need of NEP?

  11. #11 by cemerlang on Friday, 9 September 2011 - 4:59 pm

    All these thou shalt have if thou shalt bow down and worship s

  12. #12 by Kedahan-Malaysian in Japan on Sunday, 11 September 2011 - 12:48 pm

    Now, can we ever expect a response from the government on such a revelation? Accountability, anyone?

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