Home Moral guidelines A common factor in government bailouts of GLCs

A common factor in government bailouts of GLCs

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The financial collapse of SAPURA Energy Bhd, which led to government bailout calls, was the result of moral hazard initiated and continually perpetuated by the government.

A common factor in the government bailouts of companies such as Bank Bumiputra, Perwaja, Perwira Habib Bank, MAS, Proton, Silterra, Felda and Sime Bank, was the disruptive individual wealth accumulation that was evident in all of these companies before their collapse.

Government “rescuing” certain businesses on a “regular basis” by government creates blatant complacency and helps trigger moral hazard issues.

The financial losses resulting from the “collapse” of all these businesses are costly for society as a whole.

If this were to happen in the private sector, lessons would quickly be learned and measures put in place to address it.

But the government seems to ignore this at will. Maintaining a healthy business environment and investor confidence seem alien to the government.

All of this did not happen overnight, by chance or due to unforeseen circumstances. The problems accumulated over the years, culminating in their financial insolvency.

Yes, there are too many factors that contribute to scandals beyond the control of management and therefore it is not possible to eliminate them. But all those responsible for the scandals must be brought to justice. Authorities should in no way protect officials and officials from their role in fueling financial meltdowns.

If no precedent is set for treating those responsible fairly, especially when it comes to public money, it is a recipe for future debacles.

It is necessary to have a system of continuous evaluation and clear guidelines on how to deal effectively with any irregularities. Irregularities will occur from time to time, but the government should formulate and implement appropriate policy responses to recover from scandals as soon as possible, at minimal cost to the public.

There should be no priority for moral hazard.

Restoring trust must be the top priority. It must do so by guaranteeing the highest standards of austerity, efficiency and accountability.

It is mind-boggling to observe the rapid shift from the stubborn racial tendency, rooted in pride in identity, which drove the struggle for racial betterment, to the personal greed and selfish attitude which explained and always explain the waste of the country’s shared resources.

Also, a question that demands an answer is the revelation of the final destinations of the massive plunder of our shared resources.

The graveyard of human enterprise is dotted with beautiful features of failed enterprises.

History keeps repeating itself. Humans never seem to make an effort to change the narrative. A business fails when it becomes willfully unable to attract new equity or debt financing to reverse decline, consequently resulting in a change in ownership, as well as management.

Business failure is an age-old phenomenon that has existed for as long as we can remember. Stakeholders are fully aware of the high failure rates of business activities.

Sapura Energy’s board of directors’ responsibilities spanned four relevant departments – finance and accounting, administrative, corporate banking, and management information system – suggesting a weak internal control system and poor corporate governance. – April 9, 2022.

*FLK reads The Malaysian Insight.

* This is the opinion of the author or publication and does not necessarily represent the views of The Malaysian Insight.