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Speech by Lim Guan Eng at the "Bank Negara Forex Scandal - When Government Becomes Speculator" Forum on Saturday, 2nd June 2012: To enjoy development as freedom requires Malaysia to be free from corruption In his book, "Development as Freedom", the great economist for the poor and Nobel laureate Amartya Sen wrote that development is a process of expanding real freedoms. He identified 5 instrumental freedoms that contribute towards the general capability of a person to live more freely:-
Political freedoms encompass basic human rights and freedoms ranging from freedom of expression to freedom of the press and information; democratic elections at all levels including local government and respect for rule of law. Economic facilities refer to opportunities to utilize economic resources. Social opportunities refer to education, health and other arrangements that influence an individual freedom to live better. Transparency guarantees gives the freedom to deal with one another under full disclosure to prevent corruption and malpractices. Protective security is needed to provide social safety net to prevent deprivation and poverty by providing social assistance and disaster relief. There is no doubt that based on Amartya's parameters of economic and political freedom, Malaysia has failed to fulfill our Merdeka promise of basic human rights and freedom, political equality, equal economic opportunity, shared prosperity and socio-economic justice as well as integrity in leadership. In contrast we believe that the Penang state government have fulfilled these parameters. We have passed the Freedom of Information Act, Penang Local Government Elections to restore the 3rd vote, publicly declare the personal assets of all EXCO members including the Chief Minister, wiped out hard-core poverty with a RM600 minimum income for all households and by 2015 will be the first state to wipe out poverty in Malaysia, implemented open tenders, provided free wifi in public places as well as increased cash assistance to the people. All these achievements were done with growing budget surpluses annually and a record 95% reduction in state debts from RM630 million to RM30 million. We are also addressing traffic congestion by investing in infrastructure n providing affordable housing by building 18000 units throughout the state with the private sector contributing around 20000 units. This has engendered public and investor confidence resulting in Pg being the top investment location for 2 years 2010-2011 with 30% of Msia FDI and Pg as the most liveable city for 2011-2012. I would like to suggest that to enjoy development as freedom under Armatya Sen we need to be free from corruption scandals. Scandals are fast becoming synonymous with Malaysia. Hardly a few months go by that a new financial scandal does not erupt. To list them all would be a never-ending task, but some examples include the RM10.5 billion Renong bailout, the RM12.5 billion Port Klang Free Zone (PKFZ) fiasco, the RM52 billion Bumi share scandal, the half a billion ringgit "commission" for the purchase of two Scorpene submarines, and not to mention the recent RM250 million NFC "cows and condos" case. These scandals and many more have led Malaysia to become one of the top five countries in the world in terms of highest illicit capital flight. The situation has become so bad that the most recent report by Washington-based financial watchdog Global Financial Integrity (GFI) has revealed that more than RM1 trillion of illicit funds - money from unrecorded capital leakages like bribery, theft, kickbacks and tax evasion - had been illegally siphoned out of our country in the decade from 2000 to 2009. Malaysia has truly suffered a "lost decade of corruption". As a result, the latest Corruption Perception Index ranking by Transparency International has seen Malaysia slide to number 60 out of 183 countries this year. Nine years ago in 2003, we were ranked 37th in the world. In announcing the results, the deputy president of Transparency International Malaysia, Mohammad Ali, noted that our ranking continues to decline due to the prevalence of "elements of state" that facilitate "grand corruption". In other words, most financial scandals in Malaysia are directly or indirectly linked to the government. Ladies and gentlemen, While some of these scandals may have been forgotten, the impact they leave behind continues to haunt us. I am not only referring to the tens of billions in financial losses that we may never be able to recover from, but worse, the precedence and perception that it leaves behind - that if you are part of the powerful ruling elite, nothing happens to you no matter how much damage or loss you have caused to taxpayer's money. This has encouraged and continues to encourage those in the BN leadership to abuse their power for financial gain. The fact that the authorities such as the judiciary, police and MACC continue to let those responsible off the hook will mean that the robber barons will continue to rob and pillage the country. Today we revisit another black episode in our country's history. In the early nineties, Bank Negara, at the behest of a few powerful individuals, began engaging in massive speculation in the volatile foreign exchange market, or forex. Until today, we are still unsure about the exact amount of the loss suffered by Bank Negara. Some estimate the figure at anywhere between RM10 billion to RM30 billion, but the fact is that foul-play and irresponsible forex speculation had exposed Bank Negara to maximum losses of as high as RM270 billion, which is three times our country's GDP and more than five times our foreign reserves at the time. The government then had stiffly denied any wrongdoings, even though Tun Daim Zainuddin himself was quoted as saying, "central banks must not play with fire by venturing into speculative money markets where the risks and losses are high." He said this even though it was under his own tenure as Finance Minister from 1984 to 1991 that Bank Negara began dabbling in irregular forex speculation. In fact, as far as back as 1989, Bank Negara had already been criticised for speculating on the yen and the US dollar. In 1991, a Reuters news agency report described Bank Negara as a "dominant force on the foreign exchange scene", and proceeded to detail Bank Negara's modus operandi, which is to trade in massive lots and hitting banks on the run. By the time the losses were discovered in 1994, the then-Finance Minister Datuk Seri Anwar Ibrahim ordered a stop to Bank Negara's wild forex games. We are very fortunate that we have Datuk Seri himself here today to explain what really happened, and we look forward to listening to his side of the story. Bank Negara, as our country's central bank, is supposed to be a financial regulatory body. It is responsible for maintaining confidence in our banking and monetary system, both domestically and internationally. By getting involved in what can only be described as gambling activities, Bank Negara has not only incurred colossal financial losses but also undermined the trust in our banking system. This has had far-reaching impact both internally and externally. As I said, until today, Malaysians are still in the dark. We are still unsure as to the exact extent of the damage. Worse, 20 years on, we are still waiting for action to be taken. In fact, some of the key players involved in the scandal are still around and, believe it or not, still managing our economy! Malaysia has become the black money capital of the world, and we have rewarded the robber barons by keeping them in office. Ladies and gentlemen, If anything, this scandal, as with all the other scandals that Malaysia has seen, should serve as a reminder to all Malaysians of the grave consequences of the lack of competency, accountability and transparency. Without good and clean governance, we open ourselves to corruption and abuse of power by robber barons who treat our national treasury as their own personal kitty. This is why in Penang, we strongly advocate a CAT government, where competency, accountability and transparency is not merely a slogan but a policy to safeguard the public interest. Finally, I wish to congratulate Penang Institute for hosting this very timely and important discussion. It is critical that we do not forget the sins of the past, so that we do not repeat them in the future. Thank you. *Lim Guan Eng, Penang Chief Minister
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