analysis Asia
Governance failures, alleged misuse of funds at Malaysian government agency HRD Corp add urgency to labour reforms
Labour is big business in Malaysia and has long been steeped in the country’s murky patronage politics. The probe into HRD Corp, the agency in charge of reskilling workers, shows reforms are badly needed.
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KUALA LUMPUR: Damning findings by a parliamentary oversight watchdog of management abuses and financial shortcomings at the government agency responsible for manpower development have sparked a heated debate and fired up demands for Prime Minister Anwar Ibrahim’s administration to carry out urgent reforms in its troubled labour sector.
A report on July 4 by the Public Accounts Committee, which comprises a select number of elected representatives in the lower house, is currently being debated in Parliament. It has revealed contractual shortcomings, lapses in corporate governance and alleged financial misappropriation at the Human Resource Development Corporation (HRD Corp).
The litany of alleged abuses in the PAC report has led the Malaysian Anti-Corruption Commission (MACC) to initiate a probe into HRD Corp’s affairs, while senior government politicians from Mr Anwar’s Parti Keadilan Rakyat (PKR), which is part of the Pakatan Harapan (PH) coalition government, are demanding the immediate suspension of the company’s chief executive Shahul Hameed Dawood.
Mr William Leong, who is the PKR Member of Parliament for Selayang constituency in Selangor, has urged the government to immediately suspend HRD Corp’s authority to collect levies from employers, and allow companies to carry out their own training programmes for employees.
“The objective for this levy is to provide training for employees, not to make investments. This has created opportunities for leakage and corruption,” he said in Parliament on Jul 9.
BESTINET ALSO UNDER FIRE
The PAC report also took aim at Bestinet Sdn Bhd, a company that has sole rights to operate an IT system used by the country’s Immigration Department for visa applications from foreign workers since 2013.
The report stated that Bestinet had been operating for the last six years without a formal contract, a finding that has caused an uproar over the government's recent decision to grant the company a three-year extension to operate the IT system.
The PAC report also found that the government could terminate its IT system contract with Bestinet only with the agreement of both parties, putting it in a challenging situation.
The Centre to Combat Corruption and Cronyism (C4), a prominent local anti-graft watchdog, said that the government’s continued reliance on Bestinet’s Foreign Workers Centralised Management System (FWCMS) raised serious questions and reflected poorly on the Home Ministry.
“Absurdly, on 24 June, Home Minister Saifuddin Nasution Ismail announced that the government had decided to extend Bestinet’s contract to run the FWCMS for another three years, despite there being no contract to begin with. In light of the numerous instances of misgovernance, how did this decision by the government even come to pass?” C4 said in a statement.
How the Anwar administration moves to bring reform to the country’s troubled labour sector, which is central to injecting fresh dynamism to a sluggish economy, is being watched closely.
“The current government, which was in the opposition before, knows the problems," said Mr Charles Santiago, a former elected MP who is part of a government-private sector working committee involved in bringing change to the country’s migrant labour recruitment system.
"A sweeping overhaul to our labour sector should be at the central plank of the government’s form agenda because the abuses and misconduct have for a long time been a strain on the economy because of our dependence on cheap foreign labour and little attention to upskilling our workforce,” he said.
LABOUR IS BIG BUSINESS
Labour is big business in Malaysia and has long been steeped in the country’s murky patronage politics.
The country’s decades-old addiction to cheap labour has spawned a multi-billion commercial complex packed with companies offering training in small batches or in much wider settings, through conferences and seminars.
Separately, the migrant labour recruitment system has created opportunities for labour brokers working with countries exporting manpower, agents representing local employers and also so-called “runners” who are typically individuals or companies that help iron out wrinkles in the approval process with government agencies.
In these segments of the economy, HRD Corp and Bestinet enjoy unrivalled dominance.
Because of the large sums of money involved, labour activists have long maintained that the entire system of upskilling and foreign recruitment is riddled with corruption, mismanagement and human rights abuses, and has been propped up by politicians and powerful business enterprises.
“The (alleged) abuses at HRD Corp and Bestinet have been going on for a long time, particularly with funding politically-linked groups and doing things outside its purview of skills development for workers,” Mr N Gopal Kishnam, who heads the Labour Law Reform Coalition, a group of unions and non-governmental organisations, told CNA.
HRD Corp was set up as a state-owned entity in 1993, when the domestic economy was in the throes of a manufacturing boom, with the sole purpose of funding and upskilling employees because the government felt that companies were not doing enough to develop human capital.
Legislation was approved allowing HRD Corp to collect a 1-per-cent levy on the monthly wages on Malaysian employees across various economic sectors.
The management lapses at HRD Corp deepened with the country’s rocky politics following the fall in 2018 of the long-established National Front (Barisan Nasional) coalition government headed by now-jailed former premier Najib Razak.
The new government headed by Dr Mahathir Mohamad, who became premier for the second time following his earlier retirement from politics in November 2003 after 22 years in power, lasted less than two years. Infighting in the wobbly new coalition government undermined reform initiatives, particularly in the labour sector.
RISKY VENTURES
The latest PAC report, which reviewed the affairs at HRD Corp over four years from 2019, offers a rare peek into the internal workings of both companies and the shortcomings of previous administrations in the handling of labour issues.
Levies collected by HRD Corp jumped from RM475 million (US$102 million) in 2020, before ballooning to RM1.81 billion in 2022 and RM2.13 billion in 2023, according to findings by the PAC. At the end of 2022, cash and bank balances in HRD Corp stood at RM2.3 billion.
Against a backdrop of rising collections and a flush financial position, HRD Corp became the target of opportunistic groups made up of politicians and businesses.
Much of it began under the administration headed by former premier Muhyiddin Yassin, who took over from Dr Mahathir in March 2022 and appointed Mr M Saravanan, a politician from the country’s oldest ethnic Indian political party, the Malaysian Indian Congress (MIC), as Human Resources Minister.
Mr Saravanan initiated changes at HRD Corp and appointed a new management team headed by Mr Shahul.
The PAC’s findings reveal, among other things, that HRD Corp entered into "suspicious" training programmes valued at close to RM53 million with over 200 participants, and purchased buildings and real estate valued at more that RM230 million without proper approval from the company’s board of directors.
HRD Corp officials could not be reached for comment but, in statements to local media, the agency said it had initiated internal reforms to deal with the shortcomings highlighted in the PAC report.
LET MACC INVESTIGATE, SAYS FAHMI
Public outcry over the troubles at HRD Corp and Bestinet have put the Anwar government on the backfoot.
Information Minister Fahmi Fadzil has called on the public to allow the MACC to carry out its investigation. “We need more thorough reviews. MPs should be allowed to debate, and the Human Resources Minister will address the Parliament first. It’s too soon to make any classifications,” Fahmi told the reporters last week.
But there is widespread scepticism that much will change.
Labour activists and union leaders point to the government’s recent failure to rein in Bestinet.
As recently reported in several exclusive dispatches by CNA, the Anwar administration renewed Bestinet’s lucrative concession for another three years amid intense lobbying by the company and its politically powerful patrons, which include members of the Malaysian royalty and political parties in the ruling coalition.
“I hope something will come out of the findings of the PAC report, but going by what has happened in the past, I am a little sceptical,” noted Mr Santiago.
