Immediate family members of cabinet ministers, menteris besar and chief ministers should not have any direct dealings with government businesses, said watchdog Business Ethics Institute of Malaysia (BEIM).

"They should not qualify for consideration in any business that deals with the government, (as this would) elevate public misconception that there is a conflict of interest and that (they have a) privileged position," said immediate past president Dr Zainal Abidin Abdul Majid.

Zainal Abidin, who now sits on the BEIM board of directors, told malaysiakini today that this is based on international practice.

A company usually has rules prohibiting immediate family member from being appointed to the board, a practice that is also being adopted by some local companies.

He was asked to comment on the merger between investment advisory group ECM Libra Bhd and government-owned financial services company Avenue Capital Resources Bhd, which was approved by the finance ministry in January.

The merger was preceded by Umno rising star Khairy Jamaluddin's purchase of a direct stake in ECM Libra in December 2005. Questions as to whether there was a conflict of interest have arisen since his father-in-law, Prime Minister Abdullah Ahmad Badawi, is also finance minister.

After intense scrutiny, Khairy announced over the weekend that he had sold his entire stake of 10.2 million shares at 65 sen per share, compared to the 71 sen he had paid.

The parliamentary Public Accounts Committee, which has launched a probe, has found that the merger was done in accordance with Securities Commission (SC) regulations, but has questioned if conflict of interest was involved.

Need for guidelines

Zainal Abidin urged the government and SC to enact rules to address the ethical issues although the merger had complied with relevant procedures. He did not give a direct comment when asked whether the merger could be deemed ethical.
"In this transaction, (it would be unethical) if there was a rule stating that (Abdullah) can't be involved - but there is no rule... (the law) is silent," he said.

"(So) It is okay because what is there to stop it? But the situation is that we should have rules in the first place."

Asked whether a family member of leaders should be denied the opportunity to do business with the government, he said such a prohibition is intended to prevent the rise of misconceptions about conflict of interest and to safeguard the leaders' integrity.

BEIM was formed in 1997 with the domestic trade and consumer affairs ministry's support to create positive awareness in ethics among business operators. It called for an ethics unit to be set up in all ministries in 2004 but has yet to receive any positive feedback so far.

Transparency International Malaysia Chapter president Ramon Navaratnam echoed the need for guidelines to address such issues, which he described as falling into a "grey area".

"On one hand, they leaders' family members) should feel free to do business and shouldn't be penalised if there is a genuine transaction. On the other hand, the question is whether this was done because of special connections or preferences," he said when contacted.

Ramon said since the PAC has launched an investigation, it should be left to deal with this matter including ascertaining whether there was conflict of interest when the merger was approved.

He said other financial regulatory bodies such as the SC and Bank Negara should also consider the necessity for guidelines based on international practice.