Malaysian Customs underutilizing system

Government agency still doing routine tasks manually despite building US$83.3 million IT system to reduce inefficiencies, finds new report.

MALAYSIA--A new study has unveiled that government agency Royal Malaysian Customs (KDRM) is still doing many routine tasks manually, despite having deployed a mega IT system to improve its efficiency.

Released last week, the Auditor-General's Report 2006 rapped the department for not efficiently utilizing its Customs Information System (CIS), which cost some 290.1 million ringgit (US$83.3 million) to build. Dubbed Sistem Maklumat Kastam (SMK) in Malay, the CIS is an internal automated information system consisting of four main sub-systems.

The KDRM is responsible for administrating the country's indirect tax policy, and its key role is to collect tax and help facilitate the expansion of trade and industry.

According to the auditor-general report, many tasks under the government agency such as issuing tax arrears notices, that could have been automated using modules in the CIS were still being done manually.

Reasons for this inefficiency, the report highlighted, were due to the fact that the software was not user-friendly and there was no clear directive from top management to use the software.

The department handles some 340.3 million ringgit (US$97.8 million) in tax arrears, and it needs to make sure the CIS modules were fully utilized so citizens who are late in their payments can be easily traced, the report said.

The KDRM is Malaysia's second-largest earner, pulling in some 111.26 billion ringgit (US$31.96 billion) between 2002 and 2006.

In his report, Auditor-General Ambrin Buang said the system--which initially cost 259.9 million ringgit (US$74.7 million)--was not properly planned and implemented. This inadequacy meant that 10 new contracts, worth an additional 30.2 million ringgit (US$8.7 million), had to be brought in to complete the project.

In fact, implementation work was delayed between 12 and 52 months for each of the three phases that stretched over a seven-year period from 1998 to 2004.

Ambrin revealed that the KDRM is currently in the process of developing a new system to replace the CIS. "Deloitte Consulting Malaysia has been appointed the consultant to develop this system at an estimated cost of 451.3 million ringgit (US$129.7 million), between this year and 2011," he said.

However, the Auditor-General argued that rather than develop a new system, the Customs office should instead work to ensure applications supported by the CIS are fully optimized.

"This is to avoid negative perception by the public that the money spent in developing the application was in vain and wasted," he said.

When contacted by ZDNet Asia, an officer from the KDRM declined to respond to questions concerning the report.

Malaysia's opposition Democratic Action Party (DAP) said several mega IT projects undertaken by the country's public sector bodies often ended up as "white elephants".

Crackdown on projects gone wrong
Tony Pua, Economic Advisor to the DAP Secretary General, said troubled public sector IT projects such as the CIS, represented only the "tip of the iceberg, as the Auditor-General will not have the necessary resources to audit every single project".

"If the [CIS] isn't working to requirements, then it's critical that the system's vendors be taken to task and [asked to] make the necessary remedies," Pua said in an e-mail interview with ZDNet Asia. "Or, if no proper training and change management programs were conducted to ensure efficient utilization, then these must be carried out."

"It doesn't make any sense for the government to bear the cost of a new system to replace a not-very-old one within such a short period of time," said Pua, who is also the former CEO and founder of Cyber Village, a SESDAQ-listed IT services company.

He said the 451.3 million ringgit (US$129.7 million) allocated to develop a new system appears to be excessive.

"For example, an advanced and complete SAP integration project for a large utility service provider such as Tenaga Nasional, would not cost more than 100 million ringgit (US$28.7 million)," he noted.

To prevent misuse of the billions of dollars allocated for public sector IT projects, Pua said it was critical that these projects are awarded on an open, competitive and transparent basis. "In Singapore, once a tender closes, details of the bidders' submissions are made available online for the public to view," he said. "The transparency discourages 'hanky-panky' business, and will substantially reduce the likelihood of the [country's] government being cheated with astronomical and unjustifiably high prices."

The KDRM debacle is just one of a slew of cases, highlighting public fund mismanagement, outlined in the Auditor-General's report. Malaysia's Anti-Corruption Agency (ACA) has promised to investigate any possibility of corruption in how funds are managed by the country's federal and state governments.

"We will study the entire report and if there are any elements of malpractice, we will conduct an investigation," ACA director-general Ahmad Said Hamdan told local reporters last week.

Lee Min Keong is a freelance IT writer based in Malaysia.