KUALA LUMPUR: The implementation of the proposed Government Procurement Act (GPA) and Fiscal Responsibility Act (FRA) can help Malaysia meet its fiscal targets.
It can also increase the country's competitiveness and ensure good governance in a variety of ways and forms, according to economists.
"The decision to introduce these acts will help to improve the perception and confidence level of industry players, investors, and the business community," said Putra Business School economic analyst Associate Professor Dr Ahmed Razman Abdul Latiff.
He said enacting both acts would result in a legislative framework to ensure the transparency, fairness, and efficiency of the government's fiscal administration.
The difficulty, according to Ahmed Razman, would be in the implementation and enforcement of these acts, as they will touch numerous parties in both the government and opposition.
Nonetheless, he said there must be a strong will, desire, and commitment from the top to ensure that the acts are fully implemented and executed.
The GPA and the FRA are likely to be introduced before the end of the year to ensure greater transparency and accountable management of the economy, said Prime Minister Datuk Seri Anwar Ibrahim.
Anwar said government procurement must be transparent and open as part of good governance.
Government procurement is one of the areas that the recently launched National Anti-Corruption Procurement (NACP) plans to reform.
The objective is to improve its efficiency and transparency. The plan lays out 16 initiatives; one of them is to "introduce legislation on public procurement" (Initiative 3.1.5).
According to reports, procurement legislation that the government hopes to put in place by 2023 will be able to replace multiple circulars and directives that presently control the practise.
It should also strengthen present procurement procedures in order to address long-standing difficulties in government procurement, such as the widespread use of direct negotiation.
The current government's procurement practises are heavily restricted by a slew of Treasury circulars and directives.
They must also follow the norms established by the Federal Constitution, the Financial Procedures Act of 1957, and the Government Contract Act.
These acts are employed in government procurement because procurement activities use government financial resources and require the government to sign contracts with third parties.
The procurement process, from planning to soliciting supplier involvement to awarding contracts, is governed by the aforementioned circulars and directives.
Ahmed Razman said the GPA can address this.
He said in order to have these effectively done, each of the government-owned companies (GLCs) should be run by appointing a team of professionals.
He said no politician (whether active or inactive) should be allowed on the board of directors of these government-owned businesses.
"These businesses must also comply with the best practises of good governance, including implementing a good internal control system, a risk management system, and an internal whistleblowing policy," he said.
An industry insider echoed Ahmed Razman, adding that GLCs should not be conducted in the manner of a company.
"Public organisations are fundamentally different from private, for-profit corporations. As a result, its leaders may require unique features, talents, and behaviours in order to succeed," he said.
FRA is crucial for ensuring macroeconomic and budgetary stability
Bank Muamalat Malaysia Bhd chief economist and head of social finance Mohd Afzanizam Abdul Rashid said the tabling of the FRA would help improve the government's credibility in managing finances as it would lead to better governance and transparency.
"I suppose there would be some specific target, such as fiscal deficits and debt levels, that would be the guiding principle and would be incorporated into the act.
"(But) the challenge is always the implementation," he told the NST.
Afzanizam said there will be trade-offs, such as subsidy rationalisation and the reintroduction of GST, which can be inflationary in the beginning.
As such, the government would need to make sure the communication with the stakeholder is clear and the implementation of such a policy is smooth and steady, he said.
"In a nutshell, the FRA will boost the government's credibility for responsible fiscal management," he said.
According to the chief economist of a well-known local institution, who spoke on the condition of anonymity, fiscal policy is critical to ensuring macroeconomic stability and solid public finances.
He said an effective fiscal strategy through adjustments in public spending and tax measures is likely to sustain growth momentum and boost the economy's potential output while strengthening government finances.
"The goal of the FRA is to promote fiscal governance, accountability, and transparency in order to ensure fiscal sustainability and support macroeconomic stability.
"I believe the act will send a strong signal to the market while also establishing a good governance framework for public finances. There is a need for legislation to govern how the country spends its money," he said.
IDEAS welcomes GPA
The Institute for Democracy and Economic Affairs (IDEAS) praised the Ministry of Finance for initiating the consultation process for the Act's development.
However, IDEAS also urged the government to make the GPA draft available to the public before it is tabled, allowing stakeholders to submit feedback.
The enactment of the GPA, according to Sri Murniati Yusuf, IDEAS' deputy director, would reflect the government's commitment to greater budgetary prudence and adherence to severe governance standards.
It would also institutionalise the country's current political commitment to improving procurement processes, she said.
She said that the act should include high transparency criteria, diverse procurement procedures that are competitive and address the difficulties of procurement exercises, and a strong domestic review system.
"In terms of scope, we hope the legislation can cover various government entities, including statutory bodies and government-linked companies, as well as government projects that are procured through concessions and public-private partnerships."