WHILE statutory bodies are established to operate with the agility of private sector companies, they should, in no way, ever be regarded as private enterprises.
Consequently, regardless of any legislative intent or the desire for financial independence, the sole beneficiary of any accrued profits or dividends derived from these bodies must be the government itself, not the statutory bodies.
This raises an important question: why are some statutory bodies adopting a misplaced notion, behaving like private entities, fixated on revenue generation and the accumulation of surplus funds solely for their own use?
As entities established by law to serve the public, statutory bodies must recognise their obligation to manage funds with the same accountability and transparency expected of any public resource, regardless of their financial independence.
It is vital to emphasise that, regardless of how the revenue is generated by a statutory body, these amounts – no matter the label attached – remain public funds.
When the Malaysian Aviation Commission (Mavcom) announced its plan in 2016 to become a self-funded regulator, it was seen as a positive move to reduce the government’s financial burden.
The RM1 Regulatory Service Charge imposed on each flight ticket provided sufficient funds for the regulator’s operations, generating RM46 million in 2019 alone.
According to its 2021 annual report, Mavcom accumulated surplus funds of RM40 million despite the lingering effects of the Covid-19 pandemic. However, without any public reports available beyond 2021, it is unclear how much surplus Mavcom has since accumulated, which could have been contributed to the Federal Consolidated Fund.
As Mavcom transitions to the Civil Aviation Authority of Malaysia (CAAM), another potential issue may arise. Under section 17 of the Civil Aviation Authority of Malaysia Act 2017, CAAM has the authority to impose fees, costs, and other charges at its discretion.
What is particularly concerning is that the revenue generated from these charges flows directly into CAAM’s reserves, with no legal obligation whatsoever to channel excess funds into the Federal Consolidated Fund.
This raises a fundamental issue: rather than serving the broader public interest, the primary beneficiary of any potential surplus funds appears to be CAAM itself.
The current legislative framework seems to effectively incentivise CAAM to raise its fees or charges, fully aware that it will solely reap the benefits of the resulting revenue.
While CAAM maintains the prerogative to determine the scale of these fees, it is important to note that substantial increases in charges imposed on businesses in the aviation sector will inevitably be passed on to consumers, potentially resulting in higher airfares – all while keeping CAAM financially pleased.
In a troubling realisation of these concerns, CAAM announced last year its plans not only to introduce new fees in 2025 but also to revise existing charges, resulting in increases of up to 1,100%.
While CAAM may seek to justify these fee hikes as essential for funding its operations, the transparency of its financial practices remains clouded in secrecy from the public.
As of this writing, the public is unable to scrutinise its annual reports, as only those from 2018 and 2019 have been uploaded, and access to them is restricted by password protection.
As for the Malaysia Competition Commission (MyCC), it has not yet fully exercised its power to impose charges or fees as a consistent source of revenue, as there is currently no legislative opportunity to do so.
However, this is set to change with the upcoming proposed amendments to the Competition Act 2010, which will grant MyCC the authority to regulate mergers and acquisitions in the country.
According to MyCC’s Consultation Paper, a hybrid regime will be introduced, mandating notification and assessment for anticipated mergers exceeding a specified combined turnover of the merger parties while allowing voluntary notification for those that fall below it.
In line with the practice of competition authorities in other jurisdictions, MyCC will have the right to impose merger fees to cover the costs of reviewing and regulating mergers and acquisitions.
Although MyCC has yet to disclose the likely charges, such fees can be significant based on practices in other regions. For example, depending on the combined turnover of the merging parties, the Competition and Consumer Commission of Singapore (CCCS) imposes merger fees of up to SG$100,000, while the UK’s Competition and Markets Authority (CMA) charges up to £160,000.
Despite the sizable amount of these fees, not all proceeds are retained by these authorities.
In Singapore, CCCS is required to contribute any excess funds from these fees to the national Consolidated Fund.
In contrast, in the UK, all merger fees collected by the CMA are directed entirely to the National Consolidated Fund.
On the other hand, MyCC is expected to retain all merger fees for its own use, with no obligation to contribute any surplus funds to the Federal Consolidated Fund.
While oversight of mergers is crucial for preserving competition and protecting consumer interests, this situation raises concerns that the fees could be set or altered arbitrarily, influenced by MyCC’s financial interests as the sole beneficiary.
Given these risks, such fees should be carefully calibrated to serve their regulatory purpose rather than financially benefiting the authority itself.
While these examples highlight concerns regarding the financial structures of these statutory bodies, a more pressing issue arises when statutory bodies in general are allowed to accumulate excess funds.
In the absence of mandatory requirements to contribute to the Federal Consolidated Fund, significant apprehension develops when statutory bodies unilaterally raise their fees or introduce new charges.
This situation prompts a critical question: what justification can be offered for these new fees or increases when these bodies consistently report surplus funds or profitability?
Such a lack of accountability not only undermines their financial stewardship but also casts doubt on the true motives behind these fee hikes and introductions.
Ultimately, these charges function as quasi-taxes that, instead of serving the public interest, are potentially used to further the interests and benefits of the statutory bodies themselves.
The practice of directing surplus funds to a Consolidated Fund is a well-established concept in several jurisdictions. However, with numerous specific statutes governing statutory bodies in Malaysia, amending each one individually could be a lengthy and ultimately futile process.
The solution? Implementing a superseding law to address the issue effectively, as Singapore did in 1989.
That year, Singapore introduced the Statutory Corporations (Contributions to Consolidated Fund) Act 1989, a succinct piece of legislation spanning no more than four pages. This act, which supersedes existing and future legal provisions, effectively grants the finance minister the authority to mandate that statutory bodies contribute either their entire surplus or any portion of their revenue deemed unnecessary for their operations.
The result? A review of annual reports from Singapore’s statutory bodies consistently reveals contributions to the Consolidated Fund whenever surplus funds are recorded, thereby ensuring these bodies remain accountable for the funds they hold.
This brings us to why a similar law is needed in Malaysia.
While granting statutory bodies greater financial independence to alleviate the government’s burden is a positive step, it does not mean that all funds they collect should remain under their control. Allowing these bodies to retain surplus funds over an extended period may, in fact, ultimately do more harm than good.
Large cash reserves can entice financial mismanagement, such as overspending on non-essential programs and trips, inflated salaries, or poor investment decisions.
(For example, it was disclosed that the then-executive chairman of Mavcom was receiving a monthly salary of RM85,000 while other statutory body chairpersons were reported by the media to be earning between RM150,000 and RM180,000 monthly)
Since each statutory body manages its own finances, these inefficiencies can be hidden behind the recurring presentation of surplus profits year after year, sustained by the consistent income from statutory fees. This steady inflow may create the illusion of strong financial health, even when proper oversight is absent.
As the accumulation of significant cash reserves heightens the risk of financial mismanagement, it is crucial to divert these surpluses to the Federal Consolidated Fund. This allows the government to manage public resources more effectively, reducing the likelihood of such mismanagement.
Further, it ensures that these funds are available for pressing national priorities rather than remaining unused or accruing interest solely for the benefit of the statutory body.
By requiring the transfer of excess funds, we ensure that resources are reinvested in areas of greatest public need rather than being hoarded for potential misuse. After all, the funds generated by statutory bodies are, ultimately, public funds.
As such, ensuring that surplus funds are returned to the Consolidated Fund promotes accountability and transparency by requiring statutory bodies to justify their financial decisions and adhere to established guidelines. This process also ensures that statutory bodies retain only what is necessary for their operations, avoiding underfunding while discouraging the accumulation of excessive reserves.
It also effectively preserves the integrity of public financial management. – March 21, 2025
Suren Rajah is a practicing lawyer. This is a shortened and edited version of an article which appeared in the Current Law Journal.