Last week, a call by Datuk Dr Zainal Aznam Mohd Yusof, a member of the National Economic Action Council no less, for a ban on politicians being appointed heads of government-linked companies (GLCs) elicited emotional responses from various quarters.

Zainal was speaking at a forum where he said corruption could be curbed if politicians were not allowed to hold senior positions in the corporate world. In fact, if one were to think about what he said objectively (if that’s possible given the political landscape in this country), it makes a lot of sense at a time when good corporate governance has become one of the cornerstones of a mature and developed economy. 

The aspiration for a clear divide between between government and industry should not be sneered at, given that it ensures the separation of powers and prevents conflicts of interest. The potential for conflicting interests arises where a former head of a government body joins a corporation in a related industry. It is in the corporation’s interest to hire this former government official as it ensures easy access to the government and influential politicians.

It also works in reverse, where a corporate figure is made a high-ranking government official, as was the case when former Goldman Sachs chairman and CEO Henry Paulson was made the secretary of the Treasury during George W Bush’s presidency. In the recent financial crisis, Paulson was criticised for his handling of the AIG bailout, which also benefited Goldman Sachs.

The movement of government officials, lawmakers, politicians and businessmen between the public and private sectors is known as the “revolving door” phenomenon. Given the intimate relationship between politics and business in Malaysia, we have our very own revolving doors which facilitate the movement of individuals from government to the corporate world and vice versa.

“Such a thread, in effect, negates the concept of check and balance”, the 2009 Global Corruption Report noted of Malaysia. 

A recent example in which the combination of politics and business went terribly wrong is the Port Klang Free Zone scandal. Most notably, former transport minister Tun Ling Liong Sik was charged last year with cheating in connection with irregularities in land valuations inside the PKFZ. But other characters who have been linked to this scandal include Bintulu member of parliament (MP) Datuk Sri Tiong King Sing, who is also the CEO of Kuala Dimensi Sdn Bhd, the turnkey contractor for the construction of the PKFZ.

In Japan, the institutionalised practice of rewarding retiring bureaucrats with top positions in the private sector and quasi-government agencies is known as amakudari. The entrenched practice has been recognised as a key reason behind widespread corruption in government. In April 2007, efforts were made to phase out amakudari by introducing laws prohibiting ministers from placing bureaucrats in positions in the private sector and government-linked agencies.

While some viewed the reforms as toothless, it is understood that the efforts are still ongoing.

In the past, when the governments were aggressively corporatising and privatising, having former government officials as heads of corporations may have been the right thing to do to ensure the least disruption to operations and a smooth transition from public to private.

Back then, the belief that the government knows best may have been true, but decades after the wave of corporatisation in the 1980s and 1990s, does this paternalistic view still apply? Considering that the government now wants to pare down its stakes in GLCs, shouldn’t this practice be done away with completely?

When Zainal made his call last week, he was referring to the appointment of the Federal Land Development Authority’s (Felda) new chairman Tan Sri Mohd Isa Abdul Samad, who was suspended for three years by his own party in 2005 for money politics. He went on to win the Bagan Pinang seat in a by-election in 2009.

Isa’s appointment to the development agency is seen as a move by the government to shore up support among Felda settlers, whose votes are critical in the election outcome for 54 parliamentary seats and 92 state seats.

Felda is not alone as a quasi-government body with a politician at the helm. The chairman of the Fisheries Development Authority of Malaysia, Datuk Mohd Jidin Shafee, is also MP for the Setiu constituency in Terengganu.

Then there is Felcra Bhd chairman Datuk Tajuddin Abdul Rahman, who is also MP for Pasir Salak. Felcra is the former Federal Land Consolidation and Rehabilitation Authority, which was corporatised in 1997. The chairman of Keretepi Tanah Melayu, effectively the project manager of the double tracking project, is Datuk Seri Mohd Zin Mohamed, the MP for Sepang.

If we look further, there is no doubt we can find more examples of politicians being appeased by appointments to head statutory bodies.

Is the brain drain so great that there is little alternative but to appoint busy politicians and MPs to head these quasi-government agencies? Clearly, it is a serious problem going all the way up to the highest level of management among corporations in Malaysia, but that is another issue to be discussed in another forum.

Surely, the benefits of having a distinct separation between government and business — which includes promoting transparency, providing for checks and balances and preventing collusion between politicians and businessmen — are positives a nation should aspire to. Furthermore, this ensures the best possible returns for all stakeholders. 

So, what is there not to like about closing the revolving door with the hope of achieving these goals? After more than 50 years of independence, isn’t it time we shut this dastardly door?

This article appeared in Corporate page, The Edge Malaysia, Issue 845, Feb 14-20, 2011