Just how well is public-private partnership succeeding? To answer this question, StarBizWeek brought together Chief Secretary to the Government Tan Sri Mohd Sidek Hassan, Treasury secretary-general Tan Sri Dr Wan Abdul Aziz Wan Abdullah, Royal Selangor International managing director Tan Sri Yong Poh Kon, Mudajaya chairman Datuk Yusli Yusoff and SMI Association of Malaysia president Chua Tiam Wee to share their views. The roundtable was moderated by The Star managing editor P. Gunasegaram.
SBW: Where do you think are the major areas in which the private and public sector can participate and how do you see the evolution of this process from the time you've been in the civil service?
Sidek: When I joined the service 37-plus years ago in 1974, the mindset then among officials was on the principle of need-to-know. That means to say you only need information on the things you need to know. Other than that, you are not supposed to know. If I came from the international trade division I should concern myself only with international trade issues.
I don't need to hear about issues in the MOF (Finance Ministry), for example. Today that need-to-know mindset has taken on a new meaning, that is you need to know (about things outside your ministry), and if you don't know, you're in trouble.
Can you identify when this started to change?
Sidek: Miti (International Trade and Industry Ministry) started this long ago through its Miti dialogues, and so did MOF with the budget dialogue. The Domestic Trade, Cooperatives and Consumerism Ministry also did that.
The public sector must know what the private sector is doing, and likewise the private sector must know what the Government is doing. Beyond that, the public sector must know what it takes to move the country forward together with the private sector. And beyond the corporate sector is cooperation with NGOs, civil society and the rest.
Was that a big hindrance to the public private partnerships (PPP) at the time?
Sidek: Now, you should take care to keep abreast with various policies. You should know about all those things that you should know about, except for certain things you should not know.
Tell us a little about Pemudah and what were its achievements as a private sector participant?
Yong: Pemudah started in 2007, but even before the Feb 7 launch, Sidek, on his own accord sent invitations to a few people in the private sector to meet. We started informal discussions with the Prime Minister and after he announced it, we began officially. It was a talkfest at first. At the first meeting we were taken aback by the openness of the Chief Secretary and the top civil servants. We finalised the vision and values of Pemudah at the first meeting and it has become a guiding post for us.
Our vision is as follows: to achieve a globally benchmarked, customer-centric, innovative, entrepreneurial and proactive public and private sector delivery service in support of a vibrant, resilient and competitive economy and society, driven by the following values:
A sense of urgency;
Proactive public-private sector collaboration;
Facilitation, not hampering;
No more regulation than necessary; and
Zero tolerance for corruption.
Let's move to Chua now to get a sense of what the private sector thinks about the Government and how it can improve its processes.
Chua: First of all, we must say that Pemudah has done a lot in terms of increasing the efficiency of the government system. But some also feel we're at the tip of the iceberg, because we still have to change a lot of regulations. What is needed most is the attitudinal change of government servants. This is the most difficult part because a lot of the feedback is about how the Government is too bureaucratic, the "little Napoleons", lack of transparency, and in general things are not so business-friendly. These are the problems SMEs face, even at the local authority level.
With licence for example, they give us the run-around for many processes. What we need is for civil servants to change their attitude. It is not just government and private sector collaboration, but the whole nation needs to change. We need political will, and this has to start at the educational level. We need to build good work ethics.
Have you seen any improvements over the years? Which areas need more improvement?
Chua: We have seen improvements in licensing, e-government, passport renewals, but these are system-driven. Certain departmentss like the EPF are friendly because they provide frontline service, but the local authorities, we need more intervention from the Government.
Datuk Yusli, can you give your experience in terms of the big corporations?
Yusli: Generally, corporates will acknowledge that there has been significant improvement in the level of delivery in the public sector. As Sidek mentioned, it is really a question of the leadership within each organisation. You can get your passport done in a matter of hours. Not many countries can claim that.
Having said that, many corporates are always in a hurry. What we must acknowledge is that Malaysia is fairly unique in trying to implement this Malaysia Inc model, with such agencies as Pemandu and Pemudah. If we are compared with developing countries, then we are probably ahead. The issue is always execution. In this case our execution may be patchy, it is good in some areas, not so good in others. We have more bureaucracy than necessary. So, it's a continuous challenge for the public sector to deal with. And we are in this day and age where people can compare our standards with more developed nations. More people are travelling abroad and businessmen deal with government agencies in other countries. If you compare us with more efficient countries then we have room for improvement. If you compare us with less efficient countries, then we look good. Depending on which businessman you speak to, those who are doing business closer to home more or less think our public sector as relatively good, whereas those involved in the developed jurisdictions feel otherwise. A case in point is Mudajaya which does work in India and we face challenges there. We are trying to be a developed country, and we aspire to have a developed country level of service. So far, Pemandu has done a good job of getting us there.
Tan Sri Wan Aziz, as the head of one of the most powerful ministries in government, how do you deal with the private sector and what are you doing to improve the situation?
Wan Aziz: Our partnership with the private sector has gone a long way. Every year we invite private sector participants to be involved in the formulation of the budget. We receive feedback from the private sector through focus groups where they share their experiences and provide suggestions and recommendations for us to consider. And, of course, the private sector is very forthcoming and willing to listen to us. Much more can be done to improve our cooperation with the private sector. We consider them our partner, but the main complaint is bureaucracy. We are good at planning, not so much at execution. So on that front, we really have to take steps to strengthen our execution, to make sure what we promise will be delivered.
Yong: This is true for both SMEs and big businesses. Right from the beginning, it used to take months to get a work permit. We need an attitudinal change. We need talent from all over the world. This was four years ago, before TalentCorp existed. We can't do things slowly, we need all the brains we can get. In the past, the Immigration Department met once a month, so if you miss that meeting it'll be one or two months later before anything gets done. Then they started meeting every week, and now everyday. That's why you get your work permit within seven days. These are some of the things, though small, that represents attitudinal change when you need the best talents.
It used to be that registering property used to take months. The Chief Secretary said 144 days is not good enough, 41 days is not good enough, and two days would not do either, now we got it down to one day. Now if you get your papers in order, you can register your property within one day.
The big companies grapple with FIC (Foreign Investor Committee) rules. Almost every foreign investor complains about this when they come for meetings. They say the FIC rules are so overbearing where it asks for a share of every company. We were quite pleased when we presented it to the PM, and he said give me until the end of the year and we'll solve it. So we removed it.
Bit by bit we chip away at it, even discussions with the judiciary about commercial courts. Nowhere in the world can you be promised a resolution to your commercial case within nine months. In the past it took six to eight years. All this I think will start to add to our world ranking (World Bank's Doing Business report). That is how we benchmark.
Problems still arise from the many different approvals required by different departments, i.e. local authorities. How much can you do in those areas and what have you done?
Sidek: I think the most lasting change we brought is that of mindset. I like to joke that I'm a very lazy person. This means we don't want to do things we don't have to do. There's no reason therefore to create unnecessary regulation. We ask ourselves: "Is it neccesary?" If it isn't, don't do it. And two, can we not simplify the existing regulation so that we, being lazy people, don't have to give ourselves unnecessary work.
Lastly, our customers who are also very lazy to come and see us don't have to.
That's why we announced that if you lose your MyKad, driver's licence, birth certificate, you no longer have to report it to the police. You relieve the police of the millions of reports they have to churn out.
At the same time it relieves our clients (the public) of having to see us. The two areas we can improve on is PBT (Pihak Berkuasa Tempatan) or local councils and the land office.
In terms of buildings there are a lot of complaints about the differing approvals needed.
Sidek: We try to address that using the one-stop centre launched in 2007. These are issues of implementation. They say there's an attitude problem, but tell me which PBTs are giving you trouble and we promise you that we'll deal with that person.
Chua: Civil servants have ways to go about that. Because when applications are submitted, it can only be complete when all of it is digitised. Sometimes documents go missing and they ask for it again - this is how they bide their time.
Sidek: Maybe its easier to change from the top. The issue is how we can drill this down to the 1.4 million civil servants. What we can say is that we promise you a certain thing and we will strive to keep it. For instance, our policy is to make payments in 14 days. How do you assure the over RM200bil announced during Budget 2012 is paid within 14 days? In the PM's department, I know because I monitor everything, and for the other ministries every month. If you don't get paid within 14 days, you let me know and within 24 hours we will pay you.
I want to say that we are proud of our service. Not only will we benchmark against Singapore, but in a few years, they will benchmark against us. And I do know, in some areas, for example passport registration and renewal, it is not only Singapore but also other countries that are benchmarking against us.
Chua, do you sometimes get the sense that delays in the civil service are deliberately done?
Chua: Sometimes, if you go to consultants things get done faster. One way to improve this situation could be to make the processes more transparent. The SME Corp grant for example was started in 2009, but the SMEs don't know why it is frozen. Is it because there are not enough staff, as the CEO says?
These are the things that get SMEs frustrated if there's no news for one year or so, and files go missing.
Could it be a situation where the policy is fine but there is a lack of understanding or opposition?
Wan Aziz: Perhaps those on the lower level are not on the same page. I don't know where it goes wrong, perhaps it is when it comes to translating the main policy decisions, there's a block there. When it comes to budget for ministries, MOF has given the mandate to all secretaries-general and controlling officers to decide on their own and manage the budget, to decide the priorities for the ministry.
And in the event there are problems, they come to MOF for advice. Now we believe managers should manage, and they don't always have to come to MOF. It may take a longer time, and time is of the essence here, but you are given that mandate to decide and manage the budget.
Sidek: I wish I'd known Chua longer and perhaps we should discuss it after this. I'm surprised when you say the loans and grants are slow and take over a year. For one, it is a long standing government position, at least since I became Chief Secretary, that you must always have a deadline.
I would expect to answer you within one day or thereabouts. If for any reason they can't do that, they must explain why and not keep people in limbo. If you're not being served, that's not right. I take it as a favour when you let us know. But obviously people are scared to complain. You shouldn't be. If you want us to change, then you yourself must always step up and make changes, and make your grouses known.
Is there a way for the Government to pass the message down the line?
Yong: Chua is alluding to corruption. But corruption is a matter of the times. So one of the important things is to speed up the time of the approval, if it is fast there's no need for runners and the middleman. I know there is one committee to half the number of licenses that exist in the country.
If there are fewer licences to apply for, the opportunities for corruption is greatly reduced.
Have the number of licences been reduced over the years?
Yong: Yes, there have been some preliminary announcements and I think there will be more announcements in due time. In some ministries, between 50% to 60% of licences have been reduced. This will lighten the load of people trying to apply for various licences.
Perhaps it is possible to remove the discretionary aspects of a licence. Are you moving in that direction?
Sidek: Even senior civil servants themselves don't want these licences. This is where it may be necessary to have a sunset clause, meaning to say after a certain period, this particular policy will come to an end.
The other thing that has come up in the PPP is the distributional goals in the New Economic Policy (NEP), particularly in the 30% ownership. How is that going? Is that a major hindrance going forward?
Chua: For the SMEs, it is sometimes a dis-incentive especially when they want to grow big, because that is where they face some of these conditions. With the rise of China for instance, now there are better incentives and less business regulations elsewhere. So the SMEs have a choice. We need to be more competitive so that more of our SMEs will want to invest further. In fact for some sectors, it is not even a 30% ownership. It is 50% before you can get in. So this are some of the things that they SMEs cannot understand. It is right there, but they cannot participate easily.
Wan Aziz: Under Budget 2012, one of the things mentioned was the liberalisation of 17 business sectors. This will be part of the further liberalisation happening in Malaysia.
Just maybe it is the bigger corporations that are benefiting from this. The smaller ones are not large enough to ask for approvals, and still have to go through the counter service and clerks. It could be an approval to set up a restaurant business to get all the necessary licences ... where sometimes you have to give the officers some sort of gratification before they allow you to set up your premise.
Sidek: We have a mindset change even in the PBT, which is under the state government. Zero tolerance in corruption should be practised by all. MACC should practise zero tolerance. Do not give.
If you ask me, I won't give. I would not ask, and I would not take.
We are moving now to where we don't need consultants. In Miti and Mida, where do we have consultants? With that grey book of regulations, you can do things yourself. The Government is trying to make things easy. And if there are people who ask (for inducement), then you don't give. And please report them.
Yusli: The reality is that we are very far from zero. What we hear is that things are getting worse. I am not sure what the reason is, but businessmen and entrepreneurs are always looking for an edge over competition. So, if they can get away with making their premises larger, putting more tables on the sidewalk, especially more than the restaurant next door, they will try to do that. The issue comes down to enforcement. Malaysia has enough rules. More rules than most places. So we don't need any more rules. Cutting down rules would perhaps be the best thing that could happen.
Having said that, whatever rules we have, we need to enforce. And this is the problem with Malaysia. This is where a lot of people complain a lot. This is because sometimes when you play by the rules, you are at a disadvantage. Your competitor may not be playing by the rules and getting away with it. The problem is both sides. On one side you have very competitive businessmen who want to get ahead of the competition and on the other side, we have lack of enforcement.
Yong: I would like to add to that. It is not only among businessmen that people break the rules. Even the man on the street. Only last month, Pemudah had an engagement with DBKL (KL City Hall). And there was a lot of discussion on the traffic situation in Kuala Lumpur. At around 4.30pm, gridlock starts in many corners of KL. They say that in many of these yellow box junctions, where you are not supposed to drive in, everybody tries to take advantage, and go into it, when it is turning red just to be ready to continue on that journey. So, it is a question then of enforcement. As you know, there are so many traffic junctions in KL.
The police do not have enough personnel to send around. However, DBKL has more than 2,000 enforcers in different forms. So, a decision was made at that meeting to empower some of these enforcers as yellow box wardens with the power to issue on the spot summonses. With decisions like this, the public must also be prepared, that if I am caught in that yellow box, then I must receive my summons. And the guy behind who sees that will think: Hey I better not do that.
So it is an all-round effort.
But sometimes, strangely it is the politicians who are the ones who are most opposed to this, for example the "saman ekor" thing.
Sidek: Can you please champion zero tolerance of corruption to everyone? Sometimes I like to play golf with Tan Sri Yong because I have known him for a very long time. But we take turns to pay for golf. You know why? I don't want people to think that he has the Chief Secretary in his pocket. I may not earn as much as he, but I have zero tolerance for corruption. When I retire, please take me to golf.
But don't you think that human reality is such that if you don't punish corruption, it will become a common?
Yusli: Probably the best way to do this is to get some big fish. Somehow we never have cases that are significant. That's why I say that Malaysia has a special system. People lower down will not be afraid unless they see something big happen.
Anecdotally speaking, a lot of people are still paying policemen so as not to get summonses. And actually, we have a system that does not need policemen to issue summonses. A person who commits an offence, you can photograph and send him the "saman ekor". What is the need for policemen to continually stop people and harass them?
Sidek: Actually, we are introducing the Automatic Summoning System.
Yusli: It is disturbing when your kids come home, and they say things like, "My friend says that it's OK to drive fast on our road because all you have to do is to pay the officer if you get caught". Kids talking like this. It's sad. What's happening?
A lot of small people still complain that it is difficult to get their approvals through. It can be for a small thing like housing, like an extension to the kitchen, and unless you employ a consultant who does it for you, its difficult to do it on your own.
When you hire the consultant, you don't see it and you're not part of it. That guy will get the approval for you. But the question is how does he get the approval for you. And why is it so difficult when you yourself want to do it? Sometimes it could just be the local authorities. So how do you get down to where the action actually happens?
Yusli: If you make things much more transparent and do things online, reduce the human interaction, then this will reduce the probability of these things happening. Little Napoleans will always be there. Tan Sri, you said we are all lazy people. If I can pay a consultant to stand in the line for me and get my approval, I will do it of course. So if we can automate, this will reduce those things happening. One day we may have robots, and hopefully robots won't be corruptible.
What is the Government trying to do to make the private sector the engine of growth? Right now the stimulus is largely from the Government.
Yusli: Now we have big GLCs in the market. The issue of crowding out has been discussed a lot in recent years. This country needs to strike a good balance. On one hand, we want a very facilitative government framework, and we also want a very dynamic private sector. The private sector needs to be encouraged and people need to feel there is a level playing field and not always feel that they will always be second best. Our entrepreneurs are not short of opportunities. Some of them may have made a lot of fortune here. When the going gets tougher here, they may say, "Why bother? I can build another empire in one of the neighbouring countries." We are already seeing some of that happening. So, the environment needs to be one that is very conducive. There has been a lot of questions as to why there is not so much reinvestment going on. Hopefully this is not because of the crowding-out effect.
Some of the wealth that has been made has been because of government largesse. Sometimes, it's because of government projects, or sometimes it's because of government allocating certain land to certain people. How much of true blue entrepreneurship is due to people really seeing opportunities in the market?
Yong: I think it is true that in the last so many years, the impact of GLCs is quite strong. It was only a month ago ... there was a dialogue on the provision of education services. They said they didn't mind liberalisation and didn't mind foreign players coming in, but it must be on a level playing field. They cannot just team up with a GLC which provides the land and, more importantly, the students for the school. Once it's opened up, the support must be there.
I think the best way for these businessman not to depend on these government largesse is the move that the Government is having now, which is to sign up more free trade agreements (FTAs). With the FTAs, you add a competitive edge for your businessmen to trade, invest and co-invest with your trading partners. This is especially so with the transpartnership agreement which is in the midst of negotiation. Every time a country signs an FTA, you will see a jump or a spike in investment and trade between the two countries. So, this is very important. However to do that, we must also put our house in order. They will insist on, for example, things like the Competition Act which we already have. They will also insist on access to government procurement. So, those steps to put our house in order are worth taking. This is another way to bring dynamism into the economy.
Chua: I agree that the current effect of the GLC-centric businesses has come to play. And this does not just happen in the distribution trade, but also in the hypermarket-centric way of doing things. Many of the SMEs are in the distribution and trade business, in fact 40% of them. With the advent of hypermarkets, this has changed the business scene in the country. The hypermarkets have become too dominant. Not only do they make money from consumers, but from suppliers as well. That is one of the challenges faced by the SMEs.
Some of the GLCs are competing not just with the private sector, but also with small businesses like travel agencies. Why do they need to run a travel agency?
With the advent of ICT and globalisation, the trend is not towards big companies. SMEs are the ones that can be located anywhere as long as they are more competitive. At the same time, they are more agile. Big companies are sometimes slower to react. I think the Government must take note of this in the Economic Transformation Programme.
The private sector made a huge leap after the 1985 recession. However, after 1998 that did not seem to happen. And it has not materialised until now. If you look at the ETP figures, it does show that the private sector is going to lead all this, but till now we haven't seen that.
Wan Aziz: Yes you are right. Post crisis, the Government needed to spearhead growth and provide financing as well. As part of the counter-cyclical measures that we introduced, the private sector has taken a back seat. However, recently under the ETP, the private sector has to resume its former role as the driver of growth by over 90%, which is unbelievable.
This is a massive role and a big challenge for the private sector to come in. Recently there have been many announcements of projects that are to be undertaken by the private sector, which will contribute to this growth.
There are a few things to consider for the private sector. First is on the research and development (R&D). The Government has put in so much money on R&D. The private sector needs to complement the Government in terms of expenditure for R&D. In this instance, the private sector can collaborate with the universities and research institutions to optimise some of the research findings that are ready to be commercialised.
Second is on training. The private sector should play a prominent role with the public sector. Training is an investment in human capital. Of course we can share our training facilities and equipment, as the Government has quite a lot.
Third is on wages. This is a bit tricky. Going forward, in becoming a high-income nation, we also hope the private sector will provide decent wages, taking into account the rising cost of living.
Sidek: May I add one last point there. When Tun Mahathir was prime minister, maybe he drove the industrialisation of the country based on cheap labour, cheap land, cheap everything. Two years ago I was moderating him. People could not understand him, so he gave a very simple example. He said that the French handbag made by expensive French hands are not only sold to high-income nations like France and Japan but also to countries like Malaysia. People queue up to buy the French handbag, not just in Paris, but also in Malaysia. You know why? Because people don't mind paying for that thing. Then he went on to say that the expensive German car, built by expensive German hands, is also sold in low-cost Malaysia. Now, why can't we use our little bit more expensive Malaysian hands to produce not so expensive Malaysian handbags? Or cars for that matter?
While Tun Mahathir is not agreeable to pay more, I think we need to pay more. The days where we pay RM150 for the Indonesian maid is over. The days where we pay someone RM150 to work in the estates are over. People need to earn a living.
However, isn't the issue also of productivity?
Sidek: That is the point that Tun Mahathir said. It doesn't matter because people are willing to pay for the expensive handbag.
Even though the German car is expensive, with their expensive labour and material, they produce it even cheaper there than when we produce it here. The Mercedes here is produced at a higher cost than it is there.
Sidek: That is why Datuk Seri Najib, during the budget, said the civil servants (who got so much during the budget) said that it's OK to give them more, but they must produce more than what we can get. That is called productivity driven. That is why you must have zero tolerance not just for corruption, but also for lousy work. When they don't give you what you are supposed to get, you demand from them.
We have come to the end of our discussion. Perhaps each person will have a minute to say what they think is the most important point during this discussion.
Yong: This process is never ending. I am glad we ended on that note of productivity because key to it is the education of our workforce and children. If we have the systems right and we teach them right, then they have the full capacity to earn more and compete with the world's best.
Yusli: I think we should be very proud that Malaysia has produced many good and big companies. I think the private sector and the public sector should work together to see how these companies can grow even bigger outside of Malaysia. The real opportunities are not just here. Its been a good starting point for many businesses. We have some big multinationals today that we can be proud of. The next frontier now is outside of Malaysia and I would like to see how this partnership can make it even better. There are many opportunities outside. And it would be good to see how Malaysia Inc can work with the private sector to get more market share out there.
Chua: I think that the key to Malaysia's success is how the policies are aligned both for the Government and the private sector, for example unity of purpose and vision and how to get there. I believe also that there must be movements on the ground right from school age to develop good habits and the right way of doing things. So that when this new batch of students enters the workforce, they will be highly productive. We must realise that other similar economies also have similar objectives. It is not just us saying we want to be a high income economy. Thus we need to compete. It is a race.
Yusli: The way for Malaysia to earn more money is to earn more money abroad. If the French handbag manufacturer only sold in France, how much money can they make? The market is now also with Japan and China which brings more profit to France, and hence France pays their people more money.
Wan Aziz: I totally agree. We are into this today. We have to work together as a team and be on the same page. There is only one Malaysia.
Sidek: When we started Pemudah, our objective was to improve the public service delivery and make our country competitive. As we move over the years, and now it's the fifth year, we realise that making the public service delivery improve alone is not enough. To make Malaysia competitive, everybody must come in. Pemudah is also looking at how the private sector can improve. The key thing is that we are all on this together and we are all on the same page.
Yusli: The key to achieving high levels of performance is to open up the competition. The more barriers we put up, the less competitive we will be. In some areas, Malaysia needs to move faster. For many reasons, we have put up barriers here and there. Not just to foreigners, but to Malaysians also. Thus, if we want to have our cake and eat it too, we really have to think hard on that.
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