Lau Zheng Zhou is Research Manager of the Economics and Business Unit at IDEAS. His research interest is in the intersection between markets and institutions, such as government-linked companies (GLCs) and corporate welfarism, and also global value chains, China’s Belt and Road Initiative, and financial sector development. Lau obtained a First-Class Honours in Business Economics from the University of Nottingham and a Master’s degree in Political Science and Political Economy from the London School of Economics. Nur Zulaikha Azmi is a Research Executive in the Economics and Business Unit at IDEAS. She is a JPA scholar and obtained a First-Class Honours in Economics and International Economics from the University of Nottingham Malaysia. Her interests include developmental economics and public economics. * We would like to take this opportunity to thank the following individuals for the effort and expertise that they contribute to reviewing this report. Prof. Terence Gomez, Prof. James Chin, Lee Hwok-Aun, and Tricia Yeoh. We would also like to thank our intern Tay Yi Thong for providing much needed support in data collection ** Cover image download from www.freepik.com, www.parlimen.gov.my, www.mara.gov.my and www.benarnews.org 2 Making sense of complexity in statutory body governance: A case study of MARA Policy Brief NO. 22 Photo by Nour Betar on Unsplash Introduction The recent surge in politicians appointed to head government-linked entities has attracted broad criticism. These appointments are widely seen as political maneuverings by Prime Minister Muhyiddin Yassin to solidify his command of support of Dewan Rakyat members, thus ensuring the survival of the Perikatan Nasional (PN) government which he currently heads. What could the implications of these appointments be to the governance of public entities, especially in the case of statutory bodies? The practice of political appointments in government-linked entities is longstanding, one in which all ruling parties, past and present, have indulged in, with the difference being that the current administration carries it out in a more conspicuous manner. But, in terms of governance, it is not clear that a blanket ban on political appointments is sufficient as an antidote to the financial irregularities and mismanagement that have plagued many of the public sector entities, particularly since there are well-documented cases implicating top managers who were non-politicians too. Compared to government-linked companies (GLCs), there is also an additional question of shifting policies following a regime change which could result in a deviation from the pursuit of the original mandates. So, in order to better align public and private interests in the management of statutory bodies, public governance reform could be a more sensible starting point.1 This Monitor briefly discusses the recent political appointments in statutory bodies from a governance perspective. It then considers changes in the policy orientation of Majlis Amanah Rakyat (MARA) in three separate administrations. 1. According to OECD, public governance refers to the formal and informal arrangements that determine how public decisions are made and how public actions are carried out, from the perspective of maintaining a country’s constitutional values when facing changing problems and environments. www.ideas.org.my 3 Policy Brief NO. 22 Statutory body appointments dominate It is no surprise to find statutory bodies registering a high number of shake-ups in the top positions which counted Chairman and Board members since the PN took power. Table 1 and 2 list appointments of politicians and non-politicians who are not members of the civil service respectively (see Table 1 and 2). Table 1. Appointment of politicians on statutory bodies, by Ministry Ministry Statutory Body Position Name Affiliation Economic Planning Unit (Prime Minister’s Federal Land Development Authority (FELDA) Chairman Idris Jusoh Besut MP (UMNO) Department) Federal Agricultural Marketing Authority (FAMA) Chairman Mohd Fasiah Hj Mohd Fakeh Sabak Bernam MP (Bersatu) Ministry of Agriculture and Food Industries Fisheries Development Authority of Malaysia (LKIM) Chairman Abu Hussin Hafiz Syed Abdul Fasal Bukit Gantang MP (Bersatu) National Higher Education Fund Corporation (PTPTN) Board Member Fathul Bari Mat Jahya Kangar UMNO Deputy Division Chief Ministry of Education Hulu Bernam, Selangor State Assemblyman National Higher Education Fund Corporation (PTPTN) Board Member Rosni Sohar (UMNO) Ministry of Energy and Natural Resources Sustainable Energy Development Authority Malaysia (SEDA) Chairman Lukanisman Awang Sani Sibuti MP (GPS - PBB) Ministry of Human Resources Human Resource Development Fund (HRDF) Chairman Nelson Renganathan Former MIC Youth Chief Malaysian Cocoa Board (LKM) Chairman Anyi Ngau Baram MP (GPS-PDP) Ministry of Plantation Industries and National Kenaf and Tobacco Board (LKTN) Chairman Azman Ibrahim Jabi Terengganu, State Assemblyman (PAS) Commodities Malaysian Palm Oil Board (MPOB) Chairman Ahmad Jazlan Yaakub Machang MP (UMNO) Nik Mohamad Abduh bin Nik Lembaga Kemajuan Kelantan Selatan (KESEDAR) Chairman Bachok MP (PAS) Abdul Aziz Lembaga Kemajuan Terengganu Tengah (KETENGAH) Chairman Senator Razali bin Idris Terengganu Bersatu chairman Lembaga Penyatuan dan Pemulihan Tanah Persekutuan (FELCRA) Chairman Shabudin Yahaya Tasik Gelugor MP (Bersatu) Ministry of Rural Development Chairman Hajah Azizah binti Mohd Dun Beaufort MP (Bersatu) Majlis Amanah Rakyat (MARA) Board Member Zainal Abidin Kidam PAS Central Committee Member Board Member Md Alwi Che Ahmad Kok Lanas, Kelantan State Assemblyman (UMNO) Rubber Industry Smallholders Development Authority (RISDA) Chairman Mohd Salim bin Sharif Jempol MP (UMNO) Port Klang Authority Chairman Chong Sin Woon MCA Secretary General Malacca Port Authority Chairman Koh Chin Han MCA Central Committee Member Ministry of Transport Bintulu Port Authority Chairman Robert Lawson Chuat Betong MP (GPS-PBB) Penang Port Commission Chairman Tan Teik Cheng Penang MCA Chief Ministry of Works Construction Industry Development Board (CIDB) Chairman Yusuf Abd Wahab Tanjong Manis MP (GPS-PBB) Note: The information presented here is as of 10 June 2020. The EPU has taken over the responsibility of the Ministry of Economic Affairs. FELCRA, established as a statutory body in 1966, has become a GLC since 1997. 4 Making sense of complexity in statutory body governance: A case study of MARA www.ideas.org.my 5 Table 2. Appointment of non-politicians (excluding civil servants) on statutory bodies, by Ministry Ministry Statutory Body Position Name Affiliation National Higher Board Ahmad Nazim Former CEO of Ministry of Education Education Fund Member Abd Rahman Pelaburan MARA Corporation (PTPTN) Kamal Board Vice Chancellor of Nasharuddin Member UNITEN Mustapha Ministry of Rural Majlis Amanah Rakyat Mohamed Farid Board Chairman of Development (MARA) Mohamed Member Kowamas Holidays Zawawi Board Jamelah CEO of Kuwait Member Jamaluddin Finance House One interesting observation with regards to the choice of politicians entails the inclusion of not just elected Members of the Parliament (MP), but also state-assemblymen and those holding senior party positions. This could suggest an attempt to promote a wider cementing of interests between the political elites, and also a potential cascading effect in the distribution of resources to party loyalists from the top. The Ministry of Rural Development (MRD) stood out with the highest number of shake-ups which saw five new Chairmen being appointed, all of whom are currently public office holders. State development boards KESEDAR (Kelantan) and KETENGAH (Terengganu) are headed by local MP and state party leader respectively. Intriguingly, the absence of UMNO appointee in these development boards and Bersatu’s leadership in KETENGAH in PAS-controlled Terengganu might suggest an undercurrent of inter-party competition for state resources as well as control for the Malay heartland. The high number of political appointments in statutory bodies raises serious concerns about the qualities of public governance. Most statutory bodies are not as exposed to market forces as the GLCs which could act as an external disciplinary mechanism to the senior management team so that decisions made are better aligned with shareholders’ interests. By comparison, the way in which statutory bodies are governed is less transparent and understood since public participation is more muted. Therefore, it is possible that the obscurity of statutory body governance makes it convenient for politicians to intervene and make major decisions such as appointments of Chairman and Board members. In the next section, a brief comparative study between current governance practices in GLC and statutory body (MARA) will be presented using selected OECD guidelines to highlight gaps in governing statutory bodies. 6 Making sense of complexity in statutory body governance: A case study of MARA Policy Brief NO. 22 SOE governance best practices: Comparing GLCs and statutory bodies A 2018 OECD report provided an overview of national practices to professionalise SOE boards of directors in a sample of OECD countries and other developing economies.2 Based on a self-reported questionnaire that was circulated to participating countries, including Malaysia, the report identified common challenges re- lated to SOE ownership and governance, and also shared good practices and recommendations for effective reform. While the report only included