MP SPEAKS I read the disturbing news reported by the Wall Street Journal on Saturday that Irwan Serigar Abdullah, the current chief secretary of the Finance Ministry, will be named as the new central bank governor of Malaysia to replace Zeti Akhtar Aziz.
I want to raise some concerns regarding Irwan’s role in multi-billion ringgit debts of Pembinaan PFI Sdn Bhd, a 99 percent Finance Ministry-owned company. Pembinaan PFI first rose to prominence when the 2013 Auditor-General’s Report showed that it had accumulated liabilities of close to RM28 billion at financial year end 2012, putting it only behind Petronas and Khazanah among government-owned entities.
Irwan was appointed to the board of Pembinaan PFI in 2012 when he was the deputy secretary in charge of policy in the Finance Ministry. After he was promoted to chief secretary of the ministry, Irwan remained as a director of Pembinaan PFI.
The Auditor-General’s Report prompted a Parliamentary Accounts Committee (PAC) investigation into Pembinaan PFI. The PAC report was released in March 2015, a copy of which can be downloaded from the parliament’s website .
The testimony of the witnesses, including Irwan, clearly showed the spending incurred by Pembinaan PFI is nothing more than a creative way to hide development expenditure from the official budget and in doing so, artificially keep Malaysia’s debt to GDP ratio at below the 55 percent mark. Pembinaan PFI is not funding expenditure through private finance initiatives (which its name implies) since there is no private money involved in these projects.
Indeed, during the PAC meeting, Irwan admitted as much when he said the following to the chairperson of the PAC:
“ Ini Tuan Pengerusi , your understanding it very clear. That you know this is off-budget. It doesn’t come in to the government so that why you know our debt level and rating and everything we can maintain”
Creative accounting worrying
Irwan’s role in relying on off-budget expenditure items in order to maintain our official debt levels and ratings raises concerns about his responsibilities as the next Bank Negara Malaysia governor.
Will he also rely on creative accounting for other sensitive economic data such as Bank Negara’s official reserves?
Will he paint an unrealistically positive account of the Malaysian economy via Bank Negara’s economic reports and fail to flag areas of concern such as the possibility of a growing fiscal deficit?
When asked by The Edge TV on the specific issue of Pembinaan PFI, Dr Irwan gave a misleading answer. He likened the projects under Pembinaan PFI with the MRT project, stating that the payback period is over a very long horizon while in actual fact, most of the projects under Pembinaan PFI are not capable of revenue generation.
This kind of obfuscation is also worrying especially during these economically challenging times when clarity of thought and explanation are needed in order to assure the jittery markets.
The markets are looking for a steady pair of hands to replace Zeti as the next Bank Negara governor. Any of the three current deputy governors would have sent a strong signal to the markets that the independence of Bank Negara will be maintained.
The appointment of Irwan, if true, does not give any reason for the markets to be assured and in fact raises more questions about the independence of our central bank moving forwards.
ONG KIAN MING is the MP for Serdang.
