Chandra Muzaffar on Penang’s Disclosure: Only Half The Story Is Being Told

Chandra Muzaffar on Penang’s Disclosure: Only Half The Story Is Being Told

Penang’s executive council has declared a nearly four-year-old promise met: They have released a list of their individually-held assets, and, in part, the loans that accompany some of those assets. The reason that this disclosure took years, instead of weeks or months, has ranged from “needing proper forms from the federal government” (even Pakatan-friendly blogs were confused by this one) to needing an outside accounting firm (who usually work in weeks and months, not years), to … no answer at all.

Nevertheless, late is better than never, and today we have a listing of Penang’s exco members’ assets, audited by accounting mega-firm KPMG. While not strictly necessary for good governance — many developed democracies across the globe do not require this level of disclosure for local or national elections — the Rakyat in Penang must be pleased to see delivery on this promise, albeit three and more years after its due date.

Dr. Chandra Muzaffar, Chairman of the Board of Trustees of Yayasan 1Malaysia, released a statement praising this disclosure, and calling for more, in the name of good governance.

Yet while Penang’s Pakatan government is crowing about disclosure of assets as an accomplishment of unparalleled proportions, there is more needed, argues Dr Muzaffair.

As Dr. Muzaffar notes, only half the story is being told.

“The declaration of assets should also be accompanied by disclosure of liabilities,” according to Dr Muzaffar. “The assets and liabilities of spouse and children above 21 years of age should also be made known to the public. There are standard rules pertaining to this practice observed in countries such as Sweden and New Zealand for decades that can serve as guidelines.”

A balance sheet is a balance of assets and liabilities; the assets should equal negative of the liabilities. Thus, merely identifying one’s assets tells the half the story of one’s wealth; without disclosing one’s liabilities — loans, debts, etc. — the story is incomplete. While the exco identified its cash in fixed deposits (counter-intuitively, a liability), and disclosed some of the loans on some of those assets, the total information released is a fraction of what Penang’s PR promised in 2008.

It is also an incomplete promise because while it tells the voters how much one has, it does not tell the voters to whom one is indebted. One’s wealth does not say much about one’s ability to govern; however, one’s creditors may have a direct impact on one’s governance, especially how one governs one’s creditors.

If the goal of this exercise is to produce more disclosure and transparency, instead of mere populism, then after four years, Chief Minister Lim Guan Eng and his exco are still behind.

Also the idea of name-dropping KPMG for its “audit” of the asset disclosures sounds very good, but it is ultimately irrelevant. Audited financials only matter when the principal makes his assets and his liabilities, his cash flow and his payments, available to the auditors for disclosure.

Here, KPMG’s “audit” of the assets is like having a doctor certify a patient fit to run a marathon on the basis of clearing him of asthma. Without knowing the patient’s heart health and muscle endurance, the diagnosis is a sham. Similarly, an audit of the exco without reviewing and disclosing its members’ liabilities is a waste of a perfectly good press release.

Guan Eng’s promise rests on the conceit that the voters are like investors, and the Penang government like a publicly traded company. The DAP Chief Minister should consider, before going any farther, that no investor in the world would invest in a company that only disclosed its assets.