DAP has called for greater transparency in the running of the new state-owned Development Bank of Sarawak (DBOS), saying a lack of accountability could lead to a 1MDB-like scandal in the future.
Dr Kelvin Yii, special assistant to state DAP chairman Chong Chieng Jen, said there is a worrying lack of disclosure regarding the bank’s formation as well as its operational mechanism.
“Without greater accountability and transparency, there is a potential that DBOS can be the next 1MDB where billions of public funds are allegedly syphoned out of the country to enrich a certain few rather than its intended purpose to benefit the people,” he said.
Chief Minister Abang Johari Openg announced on June 18 that DBOS will be operational from January 2018 onwards and that the bank’s board of governors has already been formed.
Abang Johari told the Sarawak assembly in May that the bank shall be wholly-owned by the Sarawak government and shall be funded principally through deposits by the state and its agencies.
“A major chunk of the funds will be from our state coffers and reserves,” Yii told reporters at the state DAP headquarters in Kuching today.
“With that, it is a safe assumption that the head of the bank will be the chief minister and the other major decision makers will be his self-appointed board of directors,” he added.
Such appointments may present conflict of interest, cronyism and other risks associated with state-owned development banks as they are politically controlled and run by unelected bureaucrats, he said.
Yii also warned of moral hazard associated with unregulated state-owned banks.
“We may see lending by development banks causing multiple sources of credit misallocation, either because they may bail out companies that would otherwise fail, or politicians in power may instead channel funds to maximise their own interest and engage in crony deals with politically connected industrialists,” he said.
Without open tender, companies may be made to fund political campaigns in order to obtain approval for strategic projects.
A poorly regulated bank could also result in money being syphoned out of the state’s reserves under the guise of development loans.
“A politically connected company can obtain a loan, and syphon that money for personal use out without fully utilising it for the intended development project,” Yii said.
Yii also questioned whether DBOS has the authority to take up loans, and whether the repayment will be guaranteed by the state government.
He called for the Sarawak assembly to form a bipartisan select committee that includes opposition members to review DBOS transactions and undertakings.
He also urged the state government to set in place institutional audit and banking governance and for board members and decision makers to be vetted by Bank Negara Malaysia and the Sarawak assembly.
“When 1MDB was first announced in 2009, it also was followed by positive approvals by many quarters. However, due to bad governance and corrupt practices, we are now known as an international kleptocratic nation.”
“We do not want this initiative to be turned into a ‘personal ATM’, not just for those in power, but also for those companies that are highly connected politically at the expense of the interest of the people,” he said.