How Tengku Razaleigh saved the construction industry: Practicing the 10 Golden Political Principles

Koon Yew Yin
21st Nov. 2013

The Perak Academy has invited Tengku Razaleigh to give a talk in Ipoh on the 23rd Nov. 2013 and he wishes to talk about ‘The economic reality in Malaysia today’. Many of you will remember that Tengku was here about a year ago to launch my book ‘Malaysia: A Road Map For Achieving Vision 2020’. Previous to this occasion, the Perak Academy also invited him and he talked about his 10 golden political principles on which I wrote and published an article.

Although I am not a politician, I have long been an admirer of Tengku Razaleigh. In the last two years I have tried to draw the attention of the public on several occasions to his stand in Malaysian politics which I believe contains values and principles that are superior to the manifestos and principles of other leading politicians in the country.

Key amongst what are Tengku’s “Ten Golden Political Principles” to ensure the survival and progress of the nation in the difficult years ahead is the need for all political parties to include in their constitutional objectives the equality of citizenship as provided for in the Federal Constitution. He has also emphasized that political parties must not propagate economic or political policies that discriminate against any citizen and called on all parties to include and uphold constitutional democracy and the separation of powers as a fundamental principle.

He has also insisted that it shall be the duty of all political parties to adhere to the objective of public service and to refrain from involvement in business, and to ensure the separation of business from political parties.

To my mind, this is the principle which is being transgressed all the time and which needs all political parties and politicians, especially from the Barisan Nasional side to observe it scrupulously.

It is with respect to this principle of selfless public service and the need for politicians and political parties – while helping the private sector thrive – to stand apart from it that I most remember Tengku, especially since I was privileged to witness him personally practice it

At that time more than 30 years ago Tengku Razaleigh was the Minister of Finance in the late 70’s and early 80s. I was already an established businessman having founded Mudajaya and IJM. I was also the Secretary General of the Malaysian Contractors Association as well as being a member of the Board of Engineers and a member of the SIRIM Committee that was responsible for drafting the Malaysian Standards for Cement and Concrete.

From my key position in the construction industry during that period, I had various meetings with Tengku on emergency issues and developments that affected this important component of the Malaysian economy.

Price fluctuation clause for building materials

Perhaps the most serious challenge to the construction industry occurred during the fuel oil crisis in the early 1980s when the prices of all building materials shot through the roof and contractors were caught in a jam. They all could not fulfill their obligations under the terms of their contracts. Many of the material prices went up more than 100%; for example the price of cement went up from RM 3.50 to Rm 8.50 per bag of 50 kg.

How could contractors complete the contracted work when their original bids were made on the basis of much cheaper priced materials? As a result of this crisis, all schools, hospital, highway and other public construction projects came to a standstill.

When I met the Tengku, I told him that existing construction contracts did not have a provision for material price adjustment. I also pointed out that if clients – such as the Government – were not obliged to reimburse contractors for any additional construction cost arising from the fuel price hike, contractors who could not afford to lose so much money to complete their contracts would simply walk away from the projects.

I told him that the only fair way was to introduce a price fluctuation clause in all the construction contracts. This would ensure that clients and employers were obliged to compensate contractors for the additional cost when the material price went up whilst reductions and adjustments to progress payments could be made when the material prices went down.

I remember vividly that as a result of our meeting, Tengku Razaleigh immediately instructed his top treasury officials to work out the details for the price fluctuation clause and for its immediate implementation.

Tengku’s Character

Not only did this reveal Tengku to be a man of decisive action but there was no hemming and hawing on how difficult it was to introduce the reform.

Neither was there any attempt to extract personal benefit or advantage from it for himself or his party as now appears to be the accepted practice in Malaysia when politicians deal with the construction industry.

Without the introduction of this critical escalation cost clause, I am sure that many contractors such as Yeoh Tiong Lay (presently of YTL fame) as well as I myself would have gone bankrupt.

As a result of Tengku’s decisive action in introducing the price fluctuation clause, our construction industry was able to survive the crisis period of the 1980s in relatively good shape. Since then, the construction industry has grown from strength to strength and has gone global, competing on competitive tenders in other countries including India and China.

I have no doubt that it was Ku Li’s understanding and practice of the economics of moral and material development during the late 70s and 80s that has provided the crucial ground work for the prosperity and affluence that we take for granted today.

The best tribute that we can pay to someone who has the longest record of selfless public service to the nation is to ensure that his Ten Golden Political Principles become the template for our future development.