‘Pak Lah’s sister-in-law arranged aircraft deal’

A leaked 2006 US cable noted that Abdullah Ahmad Badawi's sister-in-law was involved in the procurement of a US$400 million aircraft deal.

KUALA LUMPUR: A confidential US diplomatic cable from 2006 has claimed that then prime minister Abdullah Ahmad Badawi’s sister-in-law was allegedly involved in the procurement of a US$400 million aircraft deal.

According to the cable, Abdullah’s brother had also suggested that the deal was done in return for a commission, ostensibly for the sister-in-law.

The cable stated that Abdullah made the announcement for the purchase of the cargo aircraft from European makers Airbus after his trip to France.

“Prime Minister Abdullah’s sister-in-law arranged a US$400 million contract to purchase military cargo aircraft from Airbus.

“There had been no indication that the Malaysian military were in the market for a new cargo aircraft prior to this announcement,” said the cable. It did not name the sister-in-law.

The cable quoted a source who said he was informed by Abdullah’s brother that the aircraft was “done for political or other reasons, such as commission”.

This particular deal was pointed out by the US diplomats in their cable to highlight the weakenesses in the Malaysian procurement process.

They said that Malaysia’s procurement process, which plays a large role in the nation’s economy, fell short in three key areas: lack of transparency, outright corruption, and Bumiputera requirements and preferences.

’30% commission’

The cable, sent from the US embassy here to the State Department in Washington, outlined corruption as a significant problem, particularly for larger contracts, and gave examples of the alleged involvement of the then prime minister, his deputy and the ruling party Umno.

In citing another example, the cable said that the sellers – local politicians, agents, civil servants and military personnel – all received a 30% commission from the procurement of T91 Polish tanks and SU-30 Russian aircraft.

The US diplomats also said that their source – an executive at a US aerospace firm – was allegedly approached by someone purporting to work for (the then) Deputy Prime Minister and Defence Minister Najib (Tun Razak) about a deal, suggesting, “you will get a part of it”. The source declined this offer, added the cable.

Other sources had also similarly informed the US diplomats of corruption in the Malaysian procurement process.

The cable stated that political parties, including the ruling Umno, relied on money politics for much of their operating funds.

“Projects or tenders often are awarded as political patronage, with a cut of the funds circulating back to the party through different channels,” stated that cable dated June 6, 2006.

The confidential cable was leaked by whistleblower site WikiLeaks to the Malaysia Today blog run by Raja Petra Kamarudin who posted it today.

Removing protectionist policies

The US cable said that American firms operating in Malaysia had complained that the implementation of the Malaysian procurement rules lacked transparency, and that they found the Bumiputera-favouring policies to be restrictive, if not prohibitive.

“Phasing out Bumiputera preferences may not be feasible, but even achieving transparent, rules- based procurement would make a big difference to US firms,” the cable said, stating that the right forum to raise the issue would be at the ongoing Free Trade Agreement (FTA) talks between the US and Malaysia.

However, the US diplomats conceded that it would be difficult to negotiate the removal or the loosening of the Bumiputera policy

“The Malaysian government’s high sensitivity concerning government procurement is suggested by the repeated efforts of its officials to try to remove this subject from the FTA agenda, despite clear statements from US officials that it must be on the table.

“The Bumiputera preferences will be the most difficult element of these negotiations. Eliminating them, even with a phased-out period, would be an unrealistic objective,” added the cable.

It suggested that a more feasible approach would be to seek a “de minimis” level below which Bumiputera preferences would be allowed to remain, but above which contracts would be open to international competition.

“Even this may be more than the Malaysian government could concede, but merely instilling discipline, transparency and responsiveness in the current system would make a big difference to US firms,” noted the US cable.

The US-Malaysia FTA talks – which started in 2006 – have been held back since July 2008 following the Malaysian government’s reluctance to do away with some of the protectionist policies.

However, in October 2010, the US entered into a regional negotiation with Malaysia and seven other Asia-Pacific nations to achieve a regional trade agreement known as the Trans-Pacific Partnership (TPP) Agreement.