Summary of Speech by Lim Guan Eng at the Transparency International Occasional Talk in Corus Hotel, Kuala Lumpur on Thursday, 11th September 2008: 

Reinventing Penang State Administration   

A good government that works better and costs less

1. The need for effective and good governance has led to calls for reinventing government, which reduced to simple terms is a government that works better and costs less. The mechanism of a public-private partnership or PPP would help to reinvent government to improve the lives of the people.

2. More so when faced with the last 10 years of neglect, mismanagement and misrule by the Barisan Nasional coalition led by Gerakan. This call for change and reinvention has come from none other than the electorate itself in the recent elections who gave an overwhelming mandate to the DAP-led Pakatan Rakyat state government.

3. Penang which was once a leading state in Malaysia with an international presence and outlook has suffered an alarming drop in its position within Malaysia. Penang’s FDI’s dropped from RM 3.9 billion in 2006 or No.2 amongst states in Malaysia to RM 3.1 billion in 2007 or No. 5 amongst states such as Johor RM 6.7 billion, Kedah with RM 6.1 billion, Selangor RM 4.2 billion, Terengganu RM 3.3 billion.

4. Apart from the economic lethargy, there was also a sense of drift in the political leadership when the BN government appeared to be held hostage by a few extremist and racist UMNO politicians. Do not forget that the current actors in the “Chinese are squatters and therefore do not deserve equal rights” controversy, were also the same as those who destabilized the previous Gerakan-led BN government with threats and demonstrations.

5. Not only was the previous state government not decisive, this was translated to economic policy when rules could be arbitrarily overturned and procedures manipulated. Exposes uncovered included the infamous secret rezoning of the RM 25 billion Penang Global City Centre project that allowed an instant revaluation profit of RM 1.5 billion and the hundred million ringgit land scams. Despite denials by the previous state government, the new state government was vindicated when the land scams were validated by the 2007 Auditor-General’s Report.

6. This political gridlock and economic malaise was best exemplified by the massive daily traffic jams in the Penang Bridge, which was only somewhat but not completely alleviated when the new government boldly took the step to ban heavy vehicles from using the bridge during peak hours.

7. Malaysians are therefore indelibly shaped by the political tsunami March 8 2008 whose awesome force cleansed the nation of its political decay by recording a series of “firsts”. For the first time, Malays, Chinese and Indians voted strongly for the opposition parties and across ethnic lines, thereby denying BN a two-thirds majority. For the first time, the Pakatan Rakyat is governing five states in the country. In Penang specifically, it is the first time an Indian in the country has been appointed as a Deputy Chief Minister. The first Malay has been appointed as Chairman of InvestPenang and there is a strong commitment by all quarters towards a multi-racial agenda with an emphasis of solving real problems faced by real people for public interest and not for private interest for the few.

8. For instance, I can never understand why in 50 years of Merdeka, Penang can still allow hard-core poverty where 500 families, nearly all Malays, have a monthly household income of less than RM 400. My new government is committed to wiping out hard-core poverty in Penang in 1 year what BN can not do in 50 years.

9. Some may say that an effective and good governance can be achieved with small government whereby a government governs best which governs least. I do not quite agree because there are many areas of public policy that requires active governance but I do hold to the view that the business of government is to get out of business.

Increasing costs of Federal and State Government bureaucracy

10. Reinventing government to make a government that works is therefore necessary to improve our lives. Despite the explosion in size and cost in the civil service, public perception is that there is no corresponding and commensurate increase in quality and efficiency of service. The increasing size of our government bureaucracy ballooning from 850,000 civil service and a RM 68 billion annual budget in 1998 to 1.3 million civil service and a RM 207 billion 2009 budget is a case in point. In per head terms, the cost doubled from RM80,000 each in 1998 to RM 159,230. A similar case in point is the Penang civil service that rose from less than RM 14,000 per employee in 1998 to RM 27,000 per employee in 2009. But do we get value for money?

11. For instance, the GNP of Penang in 2007 comprises of services 56.9% manufacturing 39.5%, construction 2.6% agriculture 0.8% and mining 0.1%. And yet we spend nearly 5% of our annual budget on agriculture when it comprises only 0.8%. Is this a case of misplaced priorities?

12. There can be a positive synergy between citizen participation and governmental effectiveness. This is why planners place so much attention on citizen participation. Planners make more policy decisions. They put more social and economic institutions into motion. Some even do more regulating. Rather than hiring more public employees, they make sure other institutions are delivering services and meeting community's needs. This is how we wish to plan Penang such as our determination to eradicate the shame of hard-core poverty in Penang in one year what BN can not do in 50 years.

13. The Penang Government does not have a choice but to adopt CAT principles. While Penang may be among the wealthier states in Malaysia, the state derives its revenue strictly from land related transactions, and given its size, it's annual budget is limited to less than RM350 million per annum. That is a fraction of the average RM8 billion budget for each Ministry at the Federal Government level.

14. The small budget is amplified by the misallocation of resources through abuse and incompetence which has resulted in significant losses for the state government. A RM30,000 project for example may only deliver RM10,000 in value.

15. Therefore, by strictly adopting CAT principles, we hope instead to punch above our weight by doing the reverse of what the previous administration did, that is to deliver RM30,000 in value for every RM10,000 spent. It is no easy task, but we are certainly hell-bent on achieving this objective. We want to create a Government which works better but costs much less.

16. In executing our CAT principles, we fully recognise the limitations of the Government and the role it should play. We believe that the Government's role is to create a conducive and efficiently regulated business environment for the private sector to take the lead, and then let business do what it does best – make profits without social disruption and environmental degradation. Competition will hence be promoted fairly, without government created distortions, to ensure that standards are raised, and the best quality products and services are delivered.


17. Penang has become the first state to implement the e-tender system of requiring government procurement and contracts to be carried out through the internet. For the first time in Malaysia, contractors can participate in the open tender process and also review the successful contractors and if they are not satisfied, online objections can be registered via the Internet. Unlike the past when political cables are need to secure government projects, all we need now is not political cables but computer cables.

18. We have also issued a new directive whereby all administrators and state excos of the government are not allowed to make any new land applications. We have removed unnecessary ad-hoc committees to bring about faster approvals of development and initiated much needed reforms such as allowing for leasehold lands to be converted to freehold status.

19. The savings from replacing corruption with transparency can be immense as exemplified by the famous remark by a United States financial research house Morgan Stanley in Asiaweek in 2004 that Malaysia suffered losses of as much as USD 100 billion over the last 2 decades.


20. Accountability in accordance with democratic principles allows voters to maintain a strict check and balance with the people they voted into power. Accountability will be assured through a continuous consultation process amongst various stakeholders in society, on relevant issues.

21. For example, Penang is again the first state to invite professionals to participate in our decision-making process by appointing them to the Penang State Appeals Board and establishing a Working Professional Committee comprising of professionals from 5 different professional bodies to improve land procedures. I would consider our initiative of inviting social and civil participation in decision making a very important plank of reinventing government.

22. Reinventing government therefore encompasses the establishment of a civil society. Put in the point that in a civil society that we envisaged we hope to allow both professionals and the citizenry to have a say in decisions which affect their lives unlike the present system now where someone make a decision completely divorced from the public.


23. Competency is the most important aspect of good governance. There is no point being transparent or being accountable if you are not competent and can not deliver. We believe that in every servant, he wants to be the best achiever– no one wants to be the worst. We intend to introduce a system of benchmarking to allow him/her room to perform and measure delivery. We will even consider of pursuit of businesslike practices in government without sacrificing democratic accountability.
24. Reinventing government must be built on giving managers clear goals, allow them wide discretion in achieving those goals, but hold them strictly accountable through sound performance measures. The central goal is efficiency; the central strategy is to stimulate competition through market like processes, such as contracting out, and to measure results through benchmarking and key performance indicators.
25. As such, one of the initiatives the Penang State Government is to be the first fully wired island in two years’ time for both wifi and wimax. We presently have 126 hotspots throughout the state, but the vision is for WIFI broadband to be accessible anywhere in Penang, 24 hours, 7 days a week.

26. I envision great things for the State: to make it the first wifi state, the first Green State, the first state to wipe out hard-core poverty. I envision Penang as an International City that is a location of choice for investors, a destination of choice for tourists and a habitat of choice for locals who desire sustainable living. To that purpose we need to resolve the 3Cs problem of Cleanliness, Crime and traffic congestion to improving the public transportation system, health and public order.

27. We believe that having a CAT government not sufficient, the government must also have a soul. As government are made up of men and women who have souls, so must a people-oriented government. I would characterise a government with a soul as one that adopts an ethical and moral leadership that professes and gives faith, hope and love; where the people must have faith that the government is there to help and not harm them; the government must give hope to the young that there is a bright future with equal opportunities, level playing field and social justice; and that the government must show love for the people based on human dignity, compassion and a caring society.

28. As a competent government, we must focus on Penang's inherent economic strengths to ensure a dynamic and vibrant economy. We believe that a CAT government can exceed last year’s FDI and may even match the record RM 3.9 billion of FDIs in 2006. This vision can only be achieved with a public-private sector partnership(PPP) where there is co-operation between all parties as partners, co-ordination as allies and even healthy competition amongst friends.

29. Reinventing government to ensure a government that works better and cost less is necessary if Penang is to succeed in transforming itself into an international city. This transformation of Penang requires a PPP that includes an excellent civil service that reaches out to the private sector as partners and treats the people as friends.

* Lim Guan Eng, Penang Chief Minister Penang & DAP Secretary-General