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Friday, February 16, 2007

Getting Rid of the Ali-Baba Syndrome

According to figures of the government about 85% of all contracts awarded to Bumi contractors have been sold off to third parties as the companies awarded the projects could not execute the projects.

Most of the contracts are awarded by the Finance Ministry and now the contractors are required to sign an official declaration that they will not sell their projects.

It is good for Malaysia to develop Bumi entrepreneurs as that will improve the capacity and human capital of the nation and enable more businessmen to venture overseas if they have the capacity.

I suspect the Ali-Baba syndrome has been common knowledge for many years now and perhaps the official admittance is one step to addressing the problem.

What bothers me is that many companies are being awarded contracts even though they do not have the experience, the expertise nor the capital to take on projects and simply signing an official declaration is not going to matter much.

It would also improve the public delivery system if all ministries are authorised to make the final decision on whom to award projects instead of the Finance Ministry who could maintain a current database on standard costing and prices so that comparisons can be made.

To further drive home the message that the government is really serious about getting projects completed with high quality works, I would suggest that the following program be used for the next 5 years.

• 30% of all projects open tender to all provided a non-Bumi company has 30% Bumi executives at management level

• 50% of all projects open tender to Bumi companies with at least 40% Bumi staff

• 20% of projects allocated to Bumi companies.

Capital requirements would also be a necessary criterion to establish eligibility for projects and the minimum paid up capital should be something like 5% to 10% of the project cost within 3 months of the project award.

So if a project is Rm100m the paid up capital of the company should be at least RM5m and this capital would be imposed on the first 2 categories.

The government is spending an extra RM2b on rural schools in East Malaysia and there is an urgent need to prevent the fiasco of collapsing schools from recurring.

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