By C4 Center
On 18 October, the Supply (Budget) Bill 2025 was tabled in Parliament and notably, was the largest budget ever tabled in Malaysian history.
Overall, the items in the Budget suggest a positive shift by the government towards improving accountability in public service delivery, as well as an increased investment in programmes that directly improve the lives of the people.
However, certain areas of the Budget still reveal weaknesses in terms of oversight and accountability of government institutions and other government-linked entities.
In light of the government committing to more expenditure than ever before, these must be addressed to prevent corruption and prevent abuse of the system.
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Hence, The Center to Combat Corruption and Cronyism (C4 Center) draws attention to specific areas of the Budget where an application of good governance principles and transparency is especially needed, and makes recommendations for improvement.
Procurement act must be passed as soon as possible
The government has pledged billions of ringgit worth of infrastructure projects, including:
- RM2.1bn for the construction of four new police stations
- RM2bn for the upgrade and maintenance of schools nationwide
- RM7.4bn for the Sabah Sarawak Link Road (SSLR) phase 2 work packages
- RM253m to expand airports in Tawau and Miri
The stated ambition to move away from mega-projects is commendable. But C4 Center raises concerns that without the safeguard of a procurement act, the announced projects will be subject to the same risks that led to the loss of billions of ringgit for previous projects through mismanagement and potential corruption.
This year alone, the auditor general’s report revealed mismanagement involving:
- RM3.9bn from the River of Life Project
- RM384m million in wasted and unusable Navy ship parts
- RM927m for water treatment plants in Sabah, Johor and Kedah
On top of this, the government has increased the value limit for direct negotiation and quotations for all maintenance and minor repair works to RM200,000 and RM1m respectively.
While direct negotiations have specific use cases, they have also historically been employed in many instances of corruption due to their lack of transparency. It is concerning that the government has decided to expand the cost limit of these without first enacting a procurement act, which would place safeguards and mandate reporting for these contracts.
The issues with the present system of public procurement are well documented and extensive.
C4 Center has previously expressed the need for a procurement system that is more transparent. This entails consistent and timely publishing of procurement-related information, both at pre-tender as well as post-tender stage.
In order for these goals to be met, the government procurement system must be free of influence from the executive. This means that ministers and chief ministers should not have a say in how procurement contracts are evaluated. Nor should they be involved in the selection of procurement evaluation board members – especially because many government-linked companies that fall under ministries are substantial beneficiaries of government contracts, particularly in the case of contracts that have massive budgets.
Therefore, C4 Center calls for the government to expedite the legislation of the procurement act.
Management of government-linked investment companies must be reformed to safeguard Malaysia’s investments
The Budget announcement mentioned the recently launched government-linked enterprises activation and reform programme, a plan to “structurally reform” the economy.
Phase one of the programme involves the expansion of direct domestic investments by six government-linked investment companies:
- Khazanah Nasional Berhad
- Employees Provident Fund (EPF)
- Kumpulan Wang Persaraan (Kwap)
- Permodalan Nasional Berhad (PNB)
- Lembaga Tabung Haji (LTH)
- Lembaga Tabung Angkatan Tentera (LTAT)
Within the next five years, these companies have pledged to invest RM120bn in domestic direct investments, with an initial RM25bn injection lined-up for next year.
As part of this multifaceted investment programme, the government announced Kwap’s RM6bn investment in “domestic private markets” through private equity, infrastructure and real estate classes through the Pemacu Fund.
Although, principally, C4 Center welcomes the government’s attempts to revitalise the country’s economy, a number of doubts hang tenuously above this activation and reform programme.
For one, there are significant concerns surrounding the independence of these institutions to act within their own best interests. Evidently, there are provisions in the acts of EPF, KWAP, LTH and LTAT that vest a disproportionate amount of control on the ministers-in-charge – even going so far as allowing them to provide directions to the respective boards, which they “shall give effect to”.
With PNB and Khazanah being owned by the Minister of Finance Incorporated (MoF Inc), and Anwar Ibrahim acting as both Prime Minister and Finance Minister, C4 Center is concerned with the lack of accountability measures that regulate undue influence from ministers in the management of these multi-billion-ringgit investments.
Already we have seen the abuse and mismanagement of several government-linked investment companies in the past, with KWAP and EPF being used as funders for the scandalous Pembinaan PFI project – a project exposed by the Public Accounts Committee for the misuse of government land and multi-million investments into subpar projects.
Even in the wake of such scandals, not only has no individual been made directly accountable, but the government has also not yet drawn up any legislation that safeguards these major investment institutions from political influence.
With all this in mind, how can the government pursue such huge investment plans by our government-linked investment companies without adequately restructuring their management?
As such, C4 Center strongly urges the government to immediately undertakesa wide scale reform of the mechanisms of checks and balances present within the management of government-linked companies.
Stronger audit requirements commendable, but performance audits should be considered
C4 Center commends the various announcements pertaining to improving governance and public service delivery.
Through the Public Administration Efficiency Commitment Bill and the consolidation of government entities with overlapping roles, the government has set a clear focus on streamlining the bureaucracy.
The guidelines on the management and governance of federal statutory bodies – introduced earlier this year – now mandate all federal statutory bodies to set up internal audit units.
Combined, these efforts should help raise accountability standards and reduce operational costs and functional redundancies.
C4 Center calls on all state governments to introduce similar guidelines for state statutory bodies, if not yet introduced.
Another major recent development is the amendment to the Audit Act 1957, which expands the scope of the National Audit Department, enabling the agency to audit the accounts of any company that receives financial guarantees from federal or state governments.
Combined with the promised legislation of an ombudsman act, these advances are potentially transformative for public service delivery and bureaucratic culture.
To build on these efforts further, C4 Center proposes the introduction of performance auditing for government agencies and government-linked companies under the National Audit Department.
Presently, Article 106 of the Federal Constitution and the provisions of the Audit Act 1957 focus on the financial auditing role of the auditor general, which only represents a partial view of public administration efficiency.
Financial audits reveal how public money is spent, but may not capture the impact of such expenditure – a key mechanic in accountability for government programmes.
Introducing performance assessments to evaluate the degree of success in accomplishing key performance indicators (KPIs) for government entities would be an important next step towards improving good governance.
Review of 3,000 ‘archaic’ laws must not delay implementation of national anti-corruption strategy legal reforms
C4 Center is paying close attention to the government’s effort to review and revise over 3,000 “archaic” laws, with a stated focus on commercial laws.
While improvements to our legal framework are always encouraged, it is worrying that truly archaic laws such as the Sedition Act 1948, the Official Secrets Act 1972 and numerous provisions of the Penal Code have not been specifically identified for repeal despite years of demands from the public.
Releasing a complete list of the laws to be reassessed would be beneficial for the public to consider the possible implications of this massive exercise.
C4 Center also calls for the government to ensure that this effort does not delay implementation of the national anti-corruption strategy, which has already specified timelines for several key legal reforms.
The increased financial allocations for the Malaysian Anti-Corruption Commission (MACC), the National Audit Department and the legal affairs division of the Prime Minister’s Department are well aligned with the larger responsibilities now placed upon each of these institutions.
With particular regard to the legal affairs division, C4 Center reiterates the call to reestablish a ministry of law. As the main department overseeing legal and institutional reforms, it must have the resources to carry out this important agenda.
At present, the legal affairs division holds a wide range of administrative functions on top of its duty to develop or amend laws placed under its purview.
In 2023-2024 alone, this singular body was responsible for developing the Abolition of Mandatory Death Penalty Act 2023 and the Jurisdictional Immunities of Foreign States Act 2023.
It was also responsible for preparing amendment bills for the Audit Act 1957, the Penal Code, the Criminal Procedure Code, the Evidence Act 1950, the Evidence of Child Witness Act 2007, the Sexual Of fences against Children Act 2017, the Arbitration Act 2005, and the Construction Industry Payment and Adjudication Act 2012.
With the legal affairs division’s duties set to expand significantly starting next year, it is only fitting to restore the division’s status as a ministry to ensure that the reform agenda is fully implemented.
Energy transition efforts welcome, CCUS and rare earths development a concern
C4 Center welcomes the government’s efforts and goals for energy transition. Under the Paris Agreement, Malaysia has established the nationally determined contribution, which aims to reduce carbon emissions by 45% by 2030.
Malaysia is also committed to achieving net-zero emissions by 2050, resulting in a growing transition from oil and gas reliance to renewable energy resources.
In pursuit of this, the government has announced RM300m for the national energy transition facilitation – an increase of RM200m from last year.
However, C4 Center emphasises two areas of concern – the government’s rapid support of carbon capture, utilisation and storage (CCUS) implementation, and its commitments to developing the rare earth elements industry. Unfortunately, meaningful public participation on both matters has been limited.
C4 Center reiterates that CCUS technology remains unproven based on several failed projects worldwide and has posed major environmental risks, which may require additional outlay to resolve.
CCUS technology initiatives are also predicated on importing carbon waste from developed countries, perpetuating carbon colonialism and hindering Malaysia’s commitments to nationally determined contributions.
Worryingly, the CCUS Bill has been developed at a rapid rate, involving little consultation with civil society. Malaysia’s current environmental regulations -such as the Environmental Quality Act 1974 – do not adequately protect the environment, nor are they sufficient for dealing with the climate crisis.
These issues may be exacerbated by rushed renewable energy projects that remain questionable.
Government support for the rare earth elements industry is another cause for concern.
C4 Center reiterates the insufficiency of our existing environmental legislation to safeguard the environment and preserve natural resources.
Without a more holistic and transparent regulatory framework, the accelerated development of rare earths elements poses significant corruption and environmental risks with no apparent plan to address these issues.
Thus, as the government plans to amend the Mineral Development Act 1994 to map out potential rare earth element resources, C4 Center strongly recommends the government to amend the Environmental Quality (Prescribed Activities) (Environmental Impact Assessment) Order 2015 to ensure that all environmental impact assessment reports for all prescribed activities require public display and public comments.
Recommendations
Ultimately, C4 Center acknowledges the positive elements that are present throughout Budget 2025. But doubts remain over the transparency of certain announcements, while massive concern centres over the direction taken in managing the environment.
Therefore, C4 Center strongly recommends the following:
- Expedite the legislation of the procurement act
- Undertake a wide-scale reform of the mechanism of checks and balances present within the management of government-linked investment companies
- All state governments to introduce internal audits for state statutory bodies, if not yet introduced
- Introduce the practice of performance audits on all government agencies and government-linked companies under the National Audit Department
- Publicise a list of all the “archaic” laws which will be reassessed
- Initiate plans to reestablish a ministry of law to increase the capacity to carry out legal and institutional reforms
- Amend the Environmental Quality (Prescribed Activities) (Environmental Impact Assessment) Order 2015 to ensure that all environmental impact assessment reports are made public.
C4 Center
AGENDA RAKYAT - Lima perkara utama
- Tegakkan maruah serta kualiti kehidupan rakyat
- Galakkan pembangunan saksama, lestari serta tangani krisis alam sekitar
- Raikan kerencaman dan keterangkuman
- Selamatkan demokrasi dan angkatkan keluhuran undang-undang
- Lawan rasuah dan kronisme
