Alternatives to 30 percent of govt contracts to bumiputera

QUESTION TIME | Recently, Works Minister Baru Bian (above) was in the limelight over two reports - the first announcing the 30 percent award of government works contracts to bumiputeras for 2020, which is not really new and has been in place for some time, through one mechanism or another.

Almost in the same breath, he said that the Works Ministry will be monitoring more closely the building of the Pan-Borneo Highway after two workers were injured. He also complained about poor workmanship in building the road.

But what Baru and the not-so-new Harapan government don’t realise - or if they do, they are certainly not doing a damn thing about it - is that such quotas and the backdoor way in which the non-bumiputeras are forced to participate in government contracts is abhorrent, and enriches only the rich bumiputeras and does absolutely nothing for the poorer ones.

And because an additional profit is added for the participation of a bumiputera - but mostly in name only - the project becomes more expensive. It was current Prime Minister Dr Mahathir Mohamad who famously pointed out that there are many layers of subcontracting in government jobs.

Thus, the hiring of incompetent contractors without the necessary ability, merely to fulfil that 30 percent quota, leads to “Ali Baba”-style subcontracting out to those who can do the job. But because there is a margin which goes to the sleeping bumiputera partner, the one who does the job cuts back on material and work to do it profitably.

And because the usual practice in cronyism and, yes, let’s say it loud and outright, corruption, is that slipshod work gets approved by those who are supposed to be overseeing the work, the quality of the completed project is low.

So what Bian and Harapan under Mahathir’s leadership should realise is that the 30 percent bumiputera contract in most cases - except for the rare ones where the bumiputera contractor is competent all on his own - leads to corruption, shoddy work, and enriches select bumiputera cronies (previously Umno members) without doing anything meaningful for bumiputera participation in business.

That is why the 30 percent quota must be abolished. Instead, in its place, there must be an uncompromising insistence that all contract work is completed according to international standards, and only qualified companies with a track record should even be allowed into the tender process.

Baru should already know all these, instead of making meaningless noises about how contract work is poor on the Pan-Borneo Highway. Contract works on most government contracts are poor because of the way these contracts are structured.

What is the alternative? One way is to do what Petronas, the national oil corporation, has done under its bumiputera vendor development programme, which has produced good results over decades and resulted in the emergence of genuine bumiputera-owned oil and gas service companies.

What is key to the success of this is to give help to bumiputeras in technical terms so that they can fulfil the terms of the contract without, in any way, compromising standards. Over time, this nurtures bumiputera talent in this area and helps to build it up to become a strong force.

Instead, what has happened over time for government contracts is that they were handed over to connected businesspersons, many of whom were members of Umno, with no thought of whether they had the capability and capacity to undertake them. This capacity and capability were procured by bringing in others, a needless waste of money going to the middlemen.

It is not going to be easy to wean away these well-connected and powerful businesspersons from easy money, and there is bound to be tonnes of resistance. The racial card will be played again and they will claim it is discrimination against them.

It is anything but that. The enrichment of one or a few bumiputeras does nothing for the many poor bumiputeras who do not benefit at all from such a project, but the increase in costs from efficiency loss and old-fashioned corruption is tremendous and will affect government efforts to raise the lot of all bumiputeras.

While the government must do all it can to help the genuine bumiputera contractor, it cannot afford to compromise on quality. One has to just look at the state of our roads and numerous public projects to see how much has been compromised by selecting contractors who can’t do the job.

An alternative to this may be to include a cost advantage to bumiputeras who may not have the scale to compete with the big boys - no more than 5-10 percent. This may help them to overcome cost disadvantages, but this must be a very temporary measure.

At the end of the day, the not-so-new Harapan government and its ministers must realise that the best way to get a job done is to use quality people to do a quality job at the most reasonable price possible.

That benefits the rakyat the most through infrastructure planned and built by competent people, with no corruption involved, and which will stand the test of time and will serve the people’s best interests.

Enriching a bumiputera by giving him a project which he is incapable of undertaking properly will adversely affect the well-being of the rakyat, of whom 67 percent are bumiputeras.

Ironically, that means the bumiputera policy for government projects won’t help most bumiputeras. Which is why it should be done away with.

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P GUNASEGARAM is the editor-in-chief of Focus Malaysia. He says most inter-ethnic distribution of wealth goes to the rich in the disadvantaged community, frustrating distributional goals. - Mkini