| Written by Joseph Chin | |
| EDGE, 23 June 2011 | |
| It said on Thursday, June 23 the news reports alleged the Ministry of Finance ignored the recommendations of the LRT operator, Transparency Intl concerned over LRT extension reports . TI-M said the news reports quoted political analysts and industry executives as saying the “behind-the-scenes intrigue shows how opaque and non-transparent practices that have long characterised large public-sector contract awards remain the order of the day in Malaysia”. TI-M said such reports raised questions about the federal government’s commitment to observe the principles of transparency and accountability at all times when awarding public sector projects. To recap, the Kelana Jaya Line will be extended from Kelana Jaya Station by another 17 km and reaching up to Putra Heights through 13 new stations. SPNB had on June 21, announced it awarded the extension project’s system works contract worth RM673.92 million to CMC-Colas-Uniway (CCU) for the engineering, procurement, construction, testing and commissioning of system for the project. In the latest development and following news reports about alleged lack of transparency, TI-M said on Thursday it had continually recommended to all relevant stakeholders on the need for open tenders and best procurement practices. The winning bid should include both the technical and financial justification. “The lack of transparency will undermine the confidence of investors as well as the rakyat in the award of large public sector projects. This is all the more important when the rakyat are the main stakeholders – as the customers (passengers) and the funders (their tax contributions),” it said. |
Friday, June 24, 2011
Transparency Intl concerned over LRT extension reports
GLCs won’t indulge Bumi pressure, says Azman Mokhtar
By Shannon Teoh 
KUALA LUMPUR, June 24 — The federal government’s committee on GLC performance said today that it will not bow to pressure to implement pro-Bumiputera policies which will undermine their own operations.
The Putrajaya Committee on GLC High Performance (PGC) moved to allay fears that recent pressure from Malay hardliners would derail the Najib administration’s commitment to liberalise the economy and put in place merit-based policies.
PGC secretariat chief Tan Sri Azman Mokhtar said today that it had “active and proper” programmes for Bumiputeras which were part of a national development agenda under the New Economic Model (NEM) which would be inclusive, and see growth with equity for all communities.
“It is important that these companies are not a burden on themselves or on their shareholders or the public. They should be part of the solution and not the problem.
“Our programmes are not just for Bumiputeras but all local vendors,” said Azman, adding that GLCs were also fair in terms of employment.
Putrajaya has come under heavy pressure recently from Malay hardliners with regards to contracts from the RM50 billion Klang Valley Mass Rapid Transit project and the proposed Pudu Jail redevelopment plan under UDA Holdings which could be worth up to RM4 billion.
The agency tasked with ensuring Malays have a bigger stake in urban economy activity came under fire recently from right-wingers in Umno and Perkasa as well as Utusan Malaysia for allegedly abandoning the Bumiputera agenda after it chose not to appoint Bumiputera joint-venture turnkey investors for the proposed Bukit Bintang City Centre (BBCC).
Azman, who is also Khazanah Nasional managing director, added that GLCs were strictly merit-based with their contractors even though it was an unpopular policy.
“It is merit-based, you must deliver. Sometimes it is unpopular but we are strict with them,” he told reporters at the GLC Open Day launch today.
Malaysian Insider, June 24, 2011
Azman said GLCs were strictly merit-based despite the unpopularity of the policy. — Picture by Jack Ooi
KUALA LUMPUR, June 24 — The federal government’s committee on GLC performance said today that it will not bow to pressure to implement pro-Bumiputera policies which will undermine their own operations.
The Putrajaya Committee on GLC High Performance (PGC) moved to allay fears that recent pressure from Malay hardliners would derail the Najib administration’s commitment to liberalise the economy and put in place merit-based policies.
PGC secretariat chief Tan Sri Azman Mokhtar said today that it had “active and proper” programmes for Bumiputeras which were part of a national development agenda under the New Economic Model (NEM) which would be inclusive, and see growth with equity for all communities.
“It is important that these companies are not a burden on themselves or on their shareholders or the public. They should be part of the solution and not the problem.
“Our programmes are not just for Bumiputeras but all local vendors,” said Azman, adding that GLCs were also fair in terms of employment.
Putrajaya has come under heavy pressure recently from Malay hardliners with regards to contracts from the RM50 billion Klang Valley Mass Rapid Transit project and the proposed Pudu Jail redevelopment plan under UDA Holdings which could be worth up to RM4 billion.
The agency tasked with ensuring Malays have a bigger stake in urban economy activity came under fire recently from right-wingers in Umno and Perkasa as well as Utusan Malaysia for allegedly abandoning the Bumiputera agenda after it chose not to appoint Bumiputera joint-venture turnkey investors for the proposed Bukit Bintang City Centre (BBCC).
Azman, who is also Khazanah Nasional managing director, added that GLCs were strictly merit-based with their contractors even though it was an unpopular policy.
“It is merit-based, you must deliver. Sometimes it is unpopular but we are strict with them,” he told reporters at the GLC Open Day launch today.
GST a way to fund the poor, says Idris Jala
Malaysian Insider, June 24, 2011
KUALA LUMPUR, June 24 — Putrajaya believes the Goods and Services Tax (GST) could help widen the government’s tax base and provide funds for the poor now reeling from a global rise in commodity prices.
Economists also do not foresee any issues with implementing the GST despite the country’s low tax base which appears to suggest chronic tax evasion. But the government has shied away from pushing the tax due to outrage from most Malaysians, where only one million pay income tax.
Minister in the Prime Minister’sDepartment Datuk Seri Idris Jala (picture) said yesterday Malaysians have to accept that “we have to move away as only then the government will have sufficient money to go around for everyone, especially the poor.”
“To widen our tax base, we need to get rid of sales and services tax and replace it with GST. Currently, only one million of the 28 million Malaysians pay tax.
“With the GST in place, all 28 million Malaysians will pay a little bit which then allows us to reduce corporate tax and income tax and that’s how we can find money enough for poor people,” Idris said at a forum.
He said this was the reason 143 countries were now enforcing the GST.
Critics however say Malaysia’s natural resources are enough to fund programmes for the poor but economic leakages and an extravagant government have frittered away most of the money.
Only about 10 per cent of Malaysians currently pay income tax but economists say that GST will be harder to evade and will help improve tax collection efficiency.
Detractors say the government must be more efficient in collecting tax, citing the number of mansions and high-ends cars seen in the country despite the low tax base.
Kenanga Investment Bank economist Wan Suhaimi Wan Saidi said the GST will improve the efficiency of tax collection in the long run.
“There will be initial hiccups,” he told The Malaysian Insider.
“It’s a necessary evil now so that they’ll be more efficient in collecting taxes,” he said.
Wan Suhaimi also said he did not foresee a problem with the GST in the cities, but expected those in the rural areas to take time to adjust to it.
Putrajaya has assured the public there will be some 3,000 exceptions or zero-rated products when the GST is implemented but fears remain that people will have to pay more for basic products.
The country’s inflation rate hit a two-year high of 3.3 per cent last month and consumers are bracing for more inflation as the government has cut subsidies for electricity and fuel for vehicles, especially in the transportation sector.
RAM Holdings chief economist Dr Yeah Kim Leng similarly did not expect major problems with the implementation of the GST.
“The GST is long overdue,” he said.
“We’ve been given sufficient time, 1½ years, to prepare for implementation. So they should be ready by now,” he added.
The economist said the implementation of the GST was similar to the current sales and service tax collection.
“It is needed to broaden the government’s tax base or revenue and it is basically seen as a more efficient tax system,” said Yeah.
Kit Wei Zheng, Citibank economist for Malaysia and Singapore, said if GST was properly implemented, it will be harder to evade than income tax.
“GST will likely broaden the country’s tax base,” he said.
Selangor faults Syabas for Klang Valley water disruption
Malaysian Insider, June 22, 2011
Syabas had earlier blamed the protracted dispute over the restructuring of Selangor’s water industry for the Klang Valley's current water disruption woes. — Picture by Jack Ooi
SHAH ALAM, June 22 — The Selangor state government has blamed Syarikat Bekalan Air Selangor (Syabas) for the 48-hour water supply disruption that has affected a million Klang Valley residents since this morning.
Syabas said the protracted dispute over the restructuring of Selangor’s water industry made it difficult for the firm to invest in solutions to redistribute supply from other plants to areas affected by cut.
However, Selangor executive councillor Elizabeth Wong stressed that the water disruption was not due to an inadequate water supply but rather maintenance work by Syabas.
She added that the water level at the state’s water dams still remain high.
“The statement made by Syabas blaming the water restructuring negotiations is not accurate since the privatisation of water began in 1997 and Syabas has not carried out upgrading works of water treatment plants,” she told reporters during a press conference here.
Elizabeth also asked the Ministry of Energy, Water and Green Technology to review the efficiency and ability of Syabas in managing the state’s water supply.
Syabas announced the cut yesterday affecting Kuala Lumpur as well as the Gombak, Petaling and Hulu Selangor districts where residents have had to stock up on water in anticipation of the long supply cut that will only be restored on Friday.
Both state and federal governments have been locked in a struggle over water assets in Selangor since Pakatan Rakyat (PR) took control of the state in 2008, with neither side wanting to cede control to the other over the critical industry.
The state government had made an offer of RM9 billion for the assets of the concessionaires but the group had rejected it, calling the offer “ambiguous.”
The national water industry restructuring scheme has been delayed by a dispute over the price of the privatised assets in Selangor, which also provide water to the federal territories of Kuala Lumpur and Putrajaya.
Selangor made the RM9 billion combined offer to the four water concessionaires in Selangor — Puncak Niaga (M) Sdn Bhd (PNSB), Bekalan Air Selangor Sdn Bhd (Syabas), Konsortium Abass Sdn Bhd (ABASS) and Syarikat Pengeluar Air Selangor Sdn Bhd (Splash).
Selangor, which already owns 80 per cent of the state’s water supply assets, is preparing to take over the remaining assets after Putrajaya said it did not object to direct negotiations between the state government and concessionaires.
Selangor intends to retain management of the water assets, which also cover the federal territories of Kuala Lumpur and Putrajaya. A project to obtain water from Pahang has also been delayed due to the issue.
The state government has made two previous offers for the water assets. The first offer — RM5.7 billion for assets and equity — was turned down by all four players, while the second RM9.4 billion offer — this time including liabilities — was rejected by Syabas and sister company PNSB.
Control of Selangor’s water assets is important to PR so it can set tariffs and fulfil its campaign promise of free water for all residents in the state.
Pemandu: Economy can absorb 5pc inflation
Malaysian Insider, June 23, 2011
Jala said the effects of subsidy cuts were minimal as they were only being made in “small doses”. — file pic
Inflation spiked to three per cent in March and climbed to a two-year high of 3.3 per cent last month, with analysts predicting a further surge past four per cent due to subsidy cuts introduced this month. Most of the price jumps were for in the food and transport sectors.
The Performance Management and Delivery Unit (Pemandu) said that the central bank was consulted before deciding on subsidy cuts that began last year and concluded that “two to three years of between four to five per cent inflation is still okay.”
“The economy will still be okay and inflation will come back down to around three per cent after that,” said Minister in the Prime Minister’s Department Datuk Seri Idris Jala.
The Pemandu chief executive said that the main cause of inflation was the global rise of commodity prices, and the impact of the subsidy cuts were minimal as they were being implemented in “small doses and take into account pain points” for the public.
Seafood prices rose rapidly after diesel super-subsidies were pulled. — Picture by Choo Choy May
Putrajaya insists that it is forced to make cuts to a subsidy bill that would otherwise double to RM21 billion this year.
Most of the subsidies are for fuel, due to the disparity in prices for grades of petrol. RON95 petrol is RM1.90 a litre while premium grade RON97 is now RM2.80 a litre, pushing more motorists to use the lesser grade and adding to the subsidies needed to keep prices low.
The government has repeatedly explained that it must trim subsidies to ensure that the budget deficit, which hit a two-decade high of seven per cent in 2009, is reined in to a projected 5.4 per cent this year.
The Najib administration is expected to call a general election within the year but recent hikes to fuel, electricity and sugar prices have sparked public anger, leading to protests from groups such as fishermen, whose recent strike caused a spike in seafood prices.
A diesel super-subsidy was abolished on June 1 and those driving commercial vehicles now pay RM1.80 per litre of Euro 2 grade diesel instead of RM1.481 previously. The government said most of the cheap diesel was being smuggled to neighbouring countries and has started a crackdown to prevent subsidy leakages.
Commercial lorry operators have said this would force them to charge customers 18 per cent more.
Electricity tariffs were also recently increased by an average of seven per cent but Jala said today that the hikes only affected those who used more than 300 kilowatt-hours per month, which is less than a quarter of consumers.
Diesel subsidy cuts felt by housewives, restaurateurs
Malaysian Insider, June 23, 2011
KUALA LUMPUR, June 23 — All through the Pudu wet market, one of the biggest in the Klang Valley, one can hear customers complaining that prices of goods are shooting up while sellers try to convince them that they are not profiting as well since the start of 2011.
This conversation is repeated across the country from Perlis to Sabah, reflecting the 2.9 per cent hike in the Consumer Price Index (CPI) for the first four months of 2011 but more since June when Putrajaya cut diesel subsidies for hauliers and trawlers, adding to the price of basic food items and other goods.
People buying fish at the Pudu wet market. Customers are complaining that prices of almost everything have gone up. — Picture by Choo Choy May
Restaurant owner Kak Mai told The Malaysian Insider that when prices of chicken and fish go up, she can’t raise the prices at her restaurant.
“I’ll just have to make less, what to do,” the 53-year-old said, pointing out that siakap fish (barramundi) has gone up from RM20 to RM24 per kg in the past few days, although she expects prices to come back down.
Fifty-six-year-old Mrs Cheong , who operates at a school canteen, was buying fish in bulk when approached by The Malaysian Insider.
“I sell at a school canteen, after signing the contract, the price is fixed and I cannot hike the price at all,” she said, adding that her profit went down from 20 per cent to 10 per cent in the past few weeks.
Until May 31, 2011, C2 trawler operators received a subsidy of 28,000l to 30,000l of diesel per month at RM1.25 per litre. Diesel super subsidies were removed for the C2 fishing trawlers and nine other logistic-related groups this month.
Those operating trawlers in the C2 category or 30 nautical miles offshore have been on strike since June 11 over the June 1 diesel price hike from RM1.25 to RM1.80 per litre.
Prime Minister Datuk Seri Najib Razak launched the Kedai Rakyat 1 Malaysia (KR1M) no-frills grocery shops yesterday in a move to mitigate rising prices of dry goods in the Klang Valley.
But the prices in the wet markets are subject to volatility.
Mohd Rosli Osman, 43, who was shopping for his family, pointed out that kerapu (grouper) went from RM9 to RM12 per kg and ikan bawal (pomfret) from RM8 to RM15.
Chan Soon Hoong, 48, who has been selling fish for 30 years, said the government should continue to provide the diesel subsidy.
“It costs twice as much now for almost anything,” he said.
Yuslizal, 42, another fishmonger at the market, agreed.
“The government should continue to subsidise. If the prices are too high, consumers don’t want to buy. Many of my customers complain about the price hike and they don’t know the reason why,” he said, adding that with less sales his profit margin has grown smaller, sometimes he just breaks even.
Rudi, 28, who has been operating at the market for three years, sells only freshwater fish such as pacu, rohu and tilapia.
He said the prices of his fish have also gone up as without the diesel subsidy transportation costs have gone up as well.
“Luckily I just sell freshwater fish because sea fish are way more expensive,” he said.
Mohd Erfan, 29, who sells chicken next to Rudi’s stall, said the price of chicken went up 30 sen continuously over the past three days.
As he was chopping up pieces of chicken, he explained that regular customers who run restaurants have cut down their orders from 10 birds to six per order.
He sells about 200kg to 250kg of chicken per day.
However, when The Malaysian Insider spoke to vegetable sellers, they said that there was no hike in their prices. Most of their vegetables come from Cameron Highlands.
The Najib administration has to take a razor to its subsidy bill despite surging inflation which hit a two-year high of 3.2 per cent in April as it attempts to trim the budget deficit down to 5.4 per cent after it hit a two-decade high of 7 per cent in 2009.
For the first four months of the year when the CPI averaged 2.9 per cent up, the three indices that rose highest was Transport (+ 4.6 per cent); Food and Non-Alcoholic Beverages (+ 4.5 per cent) and Housing, Water, Electricity, Gas and Other Fuels (+ 1.5 per cent).
Putrajaya said the June 1 subsidy cuts would save RM659.30 million, and had to be done due to the global increase in fuel prices since the start of 2011. Coincidentally, it brought down the market float price of RON97 premium petrol by 10 sen to RM2.80 a litre this month when global prices eased.
Government To Enact Energy Efficient Law Soon
June 24, 2011
KUALA LUMPUR, June 24 (Bernama) -- The Energy, Green Technology and Water Ministry plans to enact an energy efficient (EE) law soon to push for EE in a big way, Minister Datuk Seri Peter Chin Fah Kui said.
He said EE initiatives were in the supply side, while there was so much scope in the demand side currently.
Speaking at the "1Malaysia Gala Dinner in Celebration of the 20th Year of Support to the Malaysian French Business Trade" here, he invited French energy service companies to start operations in Malaysia, especially in initiating EE projects at the demand side.
Chin said the ministry would be launching the feed-in tariff mechanism in September.
He said renewable energy (RE) would be eligible for premium tariffs that would help surge in RE in Malaysia.
"We have projected RE to contribute to 10 per cent of our fuel mix for power generation in 2020," he said.
Chin also welcomed French automotive companies to explore opportunities in the electric vehicle (EV) programme in Malaysia.
He said the ministry had received requests from foreign car companies to facilitate the entry of their EVs here.
-- BERNAMA
He said EE initiatives were in the supply side, while there was so much scope in the demand side currently.
Speaking at the "1Malaysia Gala Dinner in Celebration of the 20th Year of Support to the Malaysian French Business Trade" here, he invited French energy service companies to start operations in Malaysia, especially in initiating EE projects at the demand side.
Chin said the ministry would be launching the feed-in tariff mechanism in September.
He said renewable energy (RE) would be eligible for premium tariffs that would help surge in RE in Malaysia.
"We have projected RE to contribute to 10 per cent of our fuel mix for power generation in 2020," he said.
Chin also welcomed French automotive companies to explore opportunities in the electric vehicle (EV) programme in Malaysia.
He said the ministry had received requests from foreign car companies to facilitate the entry of their EVs here.
-- BERNAMA
PBA Holdings Reports RM26.23 Million Profits For Last Year
June 23, 2011
GEORGE TOWN, June 23 (Bernama) -- PBA Holdings Bhd (PBAHB), the sole appointed water supply company for Penang, has reported a 76.99 per cent increase in pre-tax profit to RM26.23 million for the financial year ended Dec 31, 2010, from RM14.82 million recorded in 2009.
Chairman, Lim Guan Eng said the better performance was attributed to a 63 per cent improvement in other operating revenue and a 9.3 per cent increase in commercial water usage in Pulau Pinang.
"Besides, a five per cent reduction in administrative cost and a comprehensive revenue of RM1.24 million also contributed to the higher pre-tax profit," he told reporters after chairing its annual general meeting here today.
In line with the encouraging performance, PBAHB approved a final dividend of three per cent, less tax, bringing the total dividend payment for the year to six per cent.
Revenue rose 7.5 per cent to RM198.54 million in 2010, said Lim, adding that this translated into a 77 per cent increase in profits.
"This demonstrated efficient management of the company," Lim said.
-- BERNAMA
Chairman, Lim Guan Eng said the better performance was attributed to a 63 per cent improvement in other operating revenue and a 9.3 per cent increase in commercial water usage in Pulau Pinang.
"Besides, a five per cent reduction in administrative cost and a comprehensive revenue of RM1.24 million also contributed to the higher pre-tax profit," he told reporters after chairing its annual general meeting here today.
In line with the encouraging performance, PBAHB approved a final dividend of three per cent, less tax, bringing the total dividend payment for the year to six per cent.
Revenue rose 7.5 per cent to RM198.54 million in 2010, said Lim, adding that this translated into a 77 per cent increase in profits.
"This demonstrated efficient management of the company," Lim said.
-- BERNAMA
Petronas Forgoes RM133 Billion To Keep Gas Prices Low
June 22, 2011
PUTRAJAYA, June 22 (Bernama) -- Petronas should have saved almost RM133 billion between 1997 and end-March 2011 if gas prices were not fixed by the government to the power and non power generation industry.
Gas prices have been capped for almost 10 years at RM6.40 per million metric British thermal unit (mmBtU) since 1997 as an interim measure to alleviate the rakyat's burden.
The decision to cap prices had to be extended beyond the original schedule as the region faced the Asian financial crisis.
"It was an attempt to help with the economic recovery process," said Minister of Energy, Green Technology and Water Datuk Seri Peter Chin at a press conference here today to explain the gas subsidy to the power generation industry.
He said the decision to fix the price resulted in Petronas having to forego a certain percentage of its revenue based on the difference in gas prices being sold in the international market.
"The price cap on the industry is also to ensure the electricity tariff paid by the rakyat is kept low," he said.
The gas price was increased by RM3 per mmBtU to RM13.70 per mmBtU on June 1, resulting in an increase of 1.6 sen in electricity tariffs.
And, if gas prices are not adjusted by RM3 per mmBtU, every six months as proposed by the Performance Management and Delivery Unit or PEMANDU, it would result in Petronas forgoing another RM2 billion.
Chin reiterated that no funds were being transferred to either Independent Power Producers (IPPs) or Tenaga Nasional Bhd (TNB).
He said that the fuel cost for electricity generation by both TNB and IPPs was a pass-through component which would be reflected in the end-tariff to consumers.
"It is, however, subject to government approval," the minister said.
Gas accounts for 54.2 per cent of the main fuel used for electricity generation in the Peninsula and the generation cost increases in tandem with every increase in gas prices," he said.
If the gas to the power generation sector had been allowed to increase according to market price, he said the average electricity tariff would be increased by 16 sen per kilowatt hour (kWh) to 47.31 sen/kWh.
"It is still lower than Singapore's tariff of about 57.5 sen/kWh where the country's gas prices is floated in tandem with the international market," he said.
The international market price for gas is currently at about RM40.70 per mmBtU.
The government had earlier decided to gradually increase gas prices as it recognised the implications of the policy on future generations and to allow Petronas to redeploy its revenue for other activities such as exploration in new areas to ensure sustainable gas supply to the nation.
Chin also slammed opposition parties who were unable to grasp simple concepts such as the subsidy scheme and chose to misrepresent the details for political mileage.
Denying recent allegations that the gas subsidy was being handed out to benefit IPPs and TNB, the minister said:"I am surprised at such allegations...it is inaccurate and grossly misleading.
-- BERNAMA
Gas prices have been capped for almost 10 years at RM6.40 per million metric British thermal unit (mmBtU) since 1997 as an interim measure to alleviate the rakyat's burden.
The decision to cap prices had to be extended beyond the original schedule as the region faced the Asian financial crisis.
"It was an attempt to help with the economic recovery process," said Minister of Energy, Green Technology and Water Datuk Seri Peter Chin at a press conference here today to explain the gas subsidy to the power generation industry.
He said the decision to fix the price resulted in Petronas having to forego a certain percentage of its revenue based on the difference in gas prices being sold in the international market.
"The price cap on the industry is also to ensure the electricity tariff paid by the rakyat is kept low," he said.
The gas price was increased by RM3 per mmBtU to RM13.70 per mmBtU on June 1, resulting in an increase of 1.6 sen in electricity tariffs.
And, if gas prices are not adjusted by RM3 per mmBtU, every six months as proposed by the Performance Management and Delivery Unit or PEMANDU, it would result in Petronas forgoing another RM2 billion.
Chin reiterated that no funds were being transferred to either Independent Power Producers (IPPs) or Tenaga Nasional Bhd (TNB).
He said that the fuel cost for electricity generation by both TNB and IPPs was a pass-through component which would be reflected in the end-tariff to consumers.
"It is, however, subject to government approval," the minister said.
Gas accounts for 54.2 per cent of the main fuel used for electricity generation in the Peninsula and the generation cost increases in tandem with every increase in gas prices," he said.
If the gas to the power generation sector had been allowed to increase according to market price, he said the average electricity tariff would be increased by 16 sen per kilowatt hour (kWh) to 47.31 sen/kWh.
"It is still lower than Singapore's tariff of about 57.5 sen/kWh where the country's gas prices is floated in tandem with the international market," he said.
The international market price for gas is currently at about RM40.70 per mmBtU.
The government had earlier decided to gradually increase gas prices as it recognised the implications of the policy on future generations and to allow Petronas to redeploy its revenue for other activities such as exploration in new areas to ensure sustainable gas supply to the nation.
Chin also slammed opposition parties who were unable to grasp simple concepts such as the subsidy scheme and chose to misrepresent the details for political mileage.
Denying recent allegations that the gas subsidy was being handed out to benefit IPPs and TNB, the minister said:"I am surprised at such allegations...it is inaccurate and grossly misleading.
-- BERNAMA
Tuesday, June 21, 2011
Policies Affecting Electricity Supply Industry Under Review
June 21, 2011
Energy, Green Technology and Water Ministry Deputy Secretary-General (Energy) Badaruddin Mahyudin said the was due to the need for reform in the industry landscape so that it would grow along with the world.
"Over the years, reliable electricity is still an essential key element to nation building and economic development, especially to industries and other critical services that bring about increased income and benefits to the people.
"All these are some of the challenges in the landscape towards our aspiration to become a developed nation by the year 2020," he said when opening the two-day Power Plant Operations and Maintenance 2011 conference here today.
Over 60 participants from eight countries attended the conference whose aim was highlight the core power plant operation and maintenance issues.
Badaruddin said power plants in Peninsular Malaysia were currently among the best maintained and operated, and some independent power plants were operating at the unscheduled outage rate of below four per cent which was well within world class acceptance.
Nevertheless, improvements would still have to be introduced to ensure the power consumers got value for their money.
"Looking at the challenging future that we will be facing, we must be prepared for the eventual increase of energy prices to a more market-based mechanism.
"However, market-pricing will not be accepted by the masses if the power generation industry does not rise to the efficient level of expectation by the consumers," he said.
-- BERNAMA
Tuesday, June 14, 2011
Subsidies masking IPP ‘inefficiencies’, says think tank
Malaysian Insider, 13 June 2011
Without subsidies, IPPs would need to charge more than what Singapore consumers now paid for power. — Reuters pic
KUALA LUMPUR, June 13 — Independent Power Producers (IPPs) would have to charge much more than their Singapore counterparts if natural gas were sold to them at market rates, due to their bloated and inefficient cost structures, claimed Research for Social Advancement (Refsa) today.
The think tank estimated that local IPPs would need to raise their average prices from 25 sen/kWh to 74 sen/kWh if subsidies were removed and gas prices were allowed to rise from RM10.70/mmBTU to the present market price of RM47.42/mmBTU.
In comparison, Singapore power producers charge 41 sen/kWh.
“Put simply, if the gas subsidy in Malaysia is completely removed, the IPPs generation cost would be 80 per cent higher than that of power generators in Singapore,” said Refsa executive director Teh Chi Chang, noting that in Singapore fuel prices are market based.
“In fact, the IPPs would not be able to survive in Singapore at all, because Singaporeans pay only 52 sen/kWh for their electricity, compared to the (estimated) Malaysian IPPs cost of 74 sen/kWh.”
He added that the IPP’s cost structure appeared to be “bloated” and suffering from “substantial inefficiencies”.
Refsa’s estimates come following statements from the Association of Independent Power Producers (Penjanabebas) that savings in gas costs — the difference between international gas prices and fixed price set by the government — are passed on directly to consumers through lower tariffs.
Teh also called for the IPP contracts to be made public, pointing out that even toll concession agreements that were previously classified have been made public, following which several toll freezes and abolishments were announced.
IPPs and their perceived lopsided purchasing power agreements with Tenaga Nasional Berhad have come under renewed scrutiny following the recent government’s decision to hike electricity prices.
The Najib administration yesterday formed a Cabinet committee comprising Minister in the Prime Minister’s Department Tan Sri Nor Mohd Yakcop; Energy, Green Technology and Water Minister Datuk Seri Peter Chin; and Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah to look into IPP related issues.
Cabinet Committee To Study IPP Issue
He stressed that the committee would study all aspects of power supply and not just the IPP issue.
Ahmad Husni is in the committee with Minister in the Prime Minister's Department Tan Sri Mohamed Yakcop and Minister of Energy, Green Technology and Water Datuk Seri Peter Chin Fah Kui.
"The committee will study various aspects (of power supply) and not just the IPP problem...among them (production) costs and (requirements for) the future because there are IPPs whose concession is due to end in 2014 and 2015," he told reporters here after opening the Rukun Tetangga beat base for Kampung Tengku Hussin.
He was commenting on a statement by Gua Musang Member of Parliament Tengku Razaleigh Hamzah who suggested that the government set up a royal commission of inquiry to IPP concessions.
IPPs are said to be reaping huge profits supplying power to Tenaga Nasional Berhad.
Ahmad Husni said the committee would also look at the question of subsidies and present a report to the cabinet as soon as possible although no deadline had been set.
"We have not been given any deadline for submitting the report, but what must be stressed here is that it will give priority to the interests of the people," he said.
Thursday, June 9, 2011
New 1Malaysia consumer portal facing some hiccups: Ismail Sabri
STAR, 9 June 2011
KUALA LUMPUR: The Domestic Trade, Cooperative and Consumerism minister Datuk Seri Ismail Sabri Yaakob admitted there were some hiccups after the 1Malaysia Pengguna Bijak (1MPB) portal was launched.
“I admit there were a few problems with the portal because of the unexpected overwhelming hits,” he told reporters on Thursday.
He said there were 3.5 million hits since it was launched.
“We only expected 300,000 to 400,000 hits,” he said.
However, he assured users that they would continuously improve the portal from time to time.
On June 7, he announced that consumers could check and compare prices of products sold at 1,255 retail outlets nationwide by clicking on the 1Malaysia Pengguna Bijak (1MPB) portal.
The prices of products are to be monitored and updated daily by 1,200 price watch officers from the Domestic Trade, Cooperative and Consumerism Ministry.
Developed at a cost of RM1.4mil, the portal can be browsed at www.1pengguna.com.
He said the price list comprised 355 consumer products sold at 110 hypermarkets, 100 products at 404 supermarkets, 50 products at 360 wet markets and 100 products at 24-hour convenience stores.
KUALA LUMPUR: The Domestic Trade, Cooperative and Consumerism minister Datuk Seri Ismail Sabri Yaakob admitted there were some hiccups after the 1Malaysia Pengguna Bijak (1MPB) portal was launched.
“I admit there were a few problems with the portal because of the unexpected overwhelming hits,” he told reporters on Thursday.
He said there were 3.5 million hits since it was launched.
“We only expected 300,000 to 400,000 hits,” he said.
However, he assured users that they would continuously improve the portal from time to time.
On June 7, he announced that consumers could check and compare prices of products sold at 1,255 retail outlets nationwide by clicking on the 1Malaysia Pengguna Bijak (1MPB) portal.
The prices of products are to be monitored and updated daily by 1,200 price watch officers from the Domestic Trade, Cooperative and Consumerism Ministry.
Developed at a cost of RM1.4mil, the portal can be browsed at www.1pengguna.com.
He said the price list comprised 355 consumer products sold at 110 hypermarkets, 100 products at 404 supermarkets, 50 products at 360 wet markets and 100 products at 24-hour convenience stores.
Maritime agency to take over as sole enforcement unit soon
Bernama, 9 June 2011
PUTRAJAYA: The Malaysian Maritime Enforcement Agency (MMEA) will soon be the sole enforcement agency in Malaysian waters.
Its main role is to ensure the safety, security and sovereignty of the Malaysian Maritime Zone as well as to protect life and property in our waters.
At present, there are eight maritime agencies involved in enforcement.
They are the Royal Malaysian Navy (RMN), Royal Malaysian Air Force (RMAF), Marine Police, Royal Malaysian Customs Department, Marine Department, Department of Fisheries, Department of Environment and Immigration Department.
MMEA, however, needs to overcome several shortcomings to effectively police 614,000 sq km of the country’s waters.
In a recent interview, MMEA director-general Admiral Datuk Mohd Amdan Kurish said the agency had implemented several measures to enable it to function efficiently.
He said it had plans to obtain more patrol ships, aircraft and other assets from the Government to increase its efficiency.
These assets include a new airbase for its aircraft to operate from.
“The air base in Subang is not adequate ... We should have one here (in the peninsula) and another in the east (for Sabah and Sarawak).”
At present, it has 130 vessels and eight helicopters, most of which belonged to the RMN and some are in a run-down condition.
“Our assets (ships) have surpassed their lifespan.
“The ships from the RMN are 38 to 40 years old.
“It is time for us to get new ships,” he said.
Mohd Amdan added that the MMEA was currently focusing on eradicating smuggling of contraband such as drugs and firearms.
It was also dealing with the rampant smuggling of consumer goods like cooking oil and diesel in the country’s northern region.
Among the biggest challenges faced by the agency is human trafficking, which requires the MMEA to conduct regular patrols and station surveillance units. — Bernama
PUTRAJAYA: The Malaysian Maritime Enforcement Agency (MMEA) will soon be the sole enforcement agency in Malaysian waters.
Its main role is to ensure the safety, security and sovereignty of the Malaysian Maritime Zone as well as to protect life and property in our waters.
At present, there are eight maritime agencies involved in enforcement.
They are the Royal Malaysian Navy (RMN), Royal Malaysian Air Force (RMAF), Marine Police, Royal Malaysian Customs Department, Marine Department, Department of Fisheries, Department of Environment and Immigration Department.
MMEA, however, needs to overcome several shortcomings to effectively police 614,000 sq km of the country’s waters.
In a recent interview, MMEA director-general Admiral Datuk Mohd Amdan Kurish said the agency had implemented several measures to enable it to function efficiently.
He said it had plans to obtain more patrol ships, aircraft and other assets from the Government to increase its efficiency.
These assets include a new airbase for its aircraft to operate from.
“The air base in Subang is not adequate ... We should have one here (in the peninsula) and another in the east (for Sabah and Sarawak).”
At present, it has 130 vessels and eight helicopters, most of which belonged to the RMN and some are in a run-down condition.
“Our assets (ships) have surpassed their lifespan.
“The ships from the RMN are 38 to 40 years old.
“It is time for us to get new ships,” he said.
Mohd Amdan added that the MMEA was currently focusing on eradicating smuggling of contraband such as drugs and firearms.
It was also dealing with the rampant smuggling of consumer goods like cooking oil and diesel in the country’s northern region.
Among the biggest challenges faced by the agency is human trafficking, which requires the MMEA to conduct regular patrols and station surveillance units. — Bernama
Tuesday, June 7, 2011
MPs can ask for IPP agreements, says Mukhriz
Malaysian Insider, 7 June 2011
KUALA LUMPUR, June 7 — Datuk Mukhriz Mahathir said today that details of the contentious independent power producer (IPP) agreements can be requested by MPs to safeguard public interest since lawmakers represent voters.
The Jerlun MP, however, reiterated the government’s contention that the agreements cannot be revealed to the public as the contents are confidential.
“In Parliament, if an MP can ask for anything. You know we are all very transparent about it. If it is within the boundaries of the law then so be it but it is still up to what is said in the agreement,” the deputy minister of international trade and industry told reporters here.
The DAP has been pressuring Putrajaya to declassify the independent power producer (IPP) agreements to justify its failure to restructure the contracts and to allow public scrutiny.
The opposition has stated that the Najib administration would only spur inflation by removing the diesel super subsidy before cutting “big opium” gas subsidies worth RM19 billion for IPPs and commercial power sectors.
However MCA president Datuk Seri Dr Chua Soi Lek countered that argument by saying that Putrajaya is unable to do so because it is tied up in agreements with various IPPs, and to restructure the agreements would put the government in a bad light.
Deputy Prime Minister Tan Sri Muhyiddin Yassin has said the government expects the subsidy burden to double from RM10.32 billion to RM20.58 billion this year.
Prime Minister Datuk Seri Najib Razak also said fuel subsidies were “like opium” to the Malaysian economy and would have to be gradually slashed as the initial bill of RM11 billion had soared to RM18 billion for the year due to escalating crude oil prices.
New incentive packages for SMEs
Bernama, 7 June 2011
KUALA LUMPUR: The government today announced a package of incentives under the Green Lane facility that will benefit innovative Small and Medium Enterprises (SMEs) to support their growth.
Deputy Prime Minister Tan Sri Muhyiddin Yassin said SMEs that qualify for the incentives will gain a two per cent interest rebate for loans approved by developmental financial institutions.
In addition, he said, the stamp duty on the loan agreement document would also be exempted.
He also said qualifying SMEs would have access to a tax deduction on expenses incurred to acquire 1-inno CERT Certification such as for site audit,certification and logistics costs.
"The 1-innoCERT programme criteria and mechanism was used to select the inaugural SME innovation award winners," Muhyiddin said at the SMIDEX 2011:SME Innovation Showcase here today.
He said the SMEs concerned would also be given fast track registration in e-Procurement, from the current seven days to one day, upon submission of complete documentation.
"They also get priority to participate in Government Offset Programmes as well as privileges in the government and the Ministry of Finance Incorporated companies' procurement," he added.
Muhyiddin said that in a developed nation, SMEs contributed between 40and 60 per cent to the country's Gross Domestic Product (GDP)and 60 and 70 percent to its employment.
"In Malaysia, SMEs contribute 31 per cent to the GDP and 59 per cent to employment. Indeed, the SME sector has a lot of catching up to do, as we work towards achieving the developed nation status by 2020," he added.
In supporting the development and growth of the SME sector, he said the government had allocated a total of RM26.6 billion for development programmes,benefiting more than 2.4 million people.
"This year alone, the government through the various ministries and agencies, is implementing 219 SME development programmes costing RM5.9 billion,"he said.
Meanwhile, Deputy Minister of International Trade and Industry Datuk Mukhriz Tun Dr. Mahathir said SME Corp had collaborated with SIRIM Bhd to conduct an extensive assessment and audit of the 1-InnoCERT for this year.
He said a total of 169 companies had undergone the online assessment, of which seven, were repeat companies.
Of this number, 37 companies were successfully certified and were in the running for the inaugural SME Innovation Awards 2011. Mukhriz also said that SMEs need to adopt the right strategies to compete in order to reap opportunities arising from Free Trade Agreements (FTAs).
He said among the strategies are, an understanding of the characteristics and requirements of target markets, application of requisite technologies to support business expansion, compliance to international standards and adopting good business practices such as compliance to corporate governance as well as supporting corporate social responsibility.
The inaugural SME Innovation Awards was held in conjunction with the SMIDEX2011:SME Innovation Showcase and recognises the most innovative SMEs for the year in five categories.
Proeight Offshore Engineering Sdn Bhd won the Best Innovation Award in Manufacturing as well the Grand Prize Award while Biofusion Sdn Bhd bagged the Best Innovation Award in Biotechnology & Agro Technology.
Malaysia Microelectronic Solutions Sdn Bhd was awarded the Best Innovation Award in Engineering & Industrial Design while bio-refinery company, Success Nexus Sdn Bhd, walked away with the Best Innovation Award in Green Technology.
N2N Global Solutions Sdn Bhd won the Best Innovation Award in ICT &Electrical & Electronics.
The awards are a joint initiative of SME Corporation and SIRIM. Winners of each category took home a total of RM200,000 cash and the Grand Prize winner bagged RM1 million in cash.
KUALA LUMPUR: The government today announced a package of incentives under the Green Lane facility that will benefit innovative Small and Medium Enterprises (SMEs) to support their growth.
Deputy Prime Minister Tan Sri Muhyiddin Yassin said SMEs that qualify for the incentives will gain a two per cent interest rebate for loans approved by developmental financial institutions.
In addition, he said, the stamp duty on the loan agreement document would also be exempted.
He also said qualifying SMEs would have access to a tax deduction on expenses incurred to acquire 1-inno CERT Certification such as for site audit,certification and logistics costs.
"The 1-innoCERT programme criteria and mechanism was used to select the inaugural SME innovation award winners," Muhyiddin said at the SMIDEX 2011:SME Innovation Showcase here today.
He said the SMEs concerned would also be given fast track registration in e-Procurement, from the current seven days to one day, upon submission of complete documentation.
"They also get priority to participate in Government Offset Programmes as well as privileges in the government and the Ministry of Finance Incorporated companies' procurement," he added.
Muhyiddin said that in a developed nation, SMEs contributed between 40and 60 per cent to the country's Gross Domestic Product (GDP)and 60 and 70 percent to its employment.
"In Malaysia, SMEs contribute 31 per cent to the GDP and 59 per cent to employment. Indeed, the SME sector has a lot of catching up to do, as we work towards achieving the developed nation status by 2020," he added.
In supporting the development and growth of the SME sector, he said the government had allocated a total of RM26.6 billion for development programmes,benefiting more than 2.4 million people.
"This year alone, the government through the various ministries and agencies, is implementing 219 SME development programmes costing RM5.9 billion,"he said.
Meanwhile, Deputy Minister of International Trade and Industry Datuk Mukhriz Tun Dr. Mahathir said SME Corp had collaborated with SIRIM Bhd to conduct an extensive assessment and audit of the 1-InnoCERT for this year.
He said a total of 169 companies had undergone the online assessment, of which seven, were repeat companies.
Of this number, 37 companies were successfully certified and were in the running for the inaugural SME Innovation Awards 2011. Mukhriz also said that SMEs need to adopt the right strategies to compete in order to reap opportunities arising from Free Trade Agreements (FTAs).
He said among the strategies are, an understanding of the characteristics and requirements of target markets, application of requisite technologies to support business expansion, compliance to international standards and adopting good business practices such as compliance to corporate governance as well as supporting corporate social responsibility.
The inaugural SME Innovation Awards was held in conjunction with the SMIDEX2011:SME Innovation Showcase and recognises the most innovative SMEs for the year in five categories.
Proeight Offshore Engineering Sdn Bhd won the Best Innovation Award in Manufacturing as well the Grand Prize Award while Biofusion Sdn Bhd bagged the Best Innovation Award in Biotechnology & Agro Technology.
Malaysia Microelectronic Solutions Sdn Bhd was awarded the Best Innovation Award in Engineering & Industrial Design while bio-refinery company, Success Nexus Sdn Bhd, walked away with the Best Innovation Award in Green Technology.
N2N Global Solutions Sdn Bhd won the Best Innovation Award in ICT &Electrical & Electronics.
The awards are a joint initiative of SME Corporation and SIRIM. Winners of each category took home a total of RM200,000 cash and the Grand Prize winner bagged RM1 million in cash.
Price List For Consumer Products At 1,255 Retail Outlets Now Available On 1MPB Portal
Bernama, 7 June 2011
KUALA LUMPUR, June 7 (Bernama) -- The public can now check and compare the prices of consumer products sold at 1,255 retail outlets nationwide by clicking on the 1Malaysia Pengguna Bijak (1MPB) portal.
Domestic Trade, Cooperative and Consumerism Minister Datuk Seri Ismail Sabri Yaakob said the price of consumer products in the portal would be monitored and updated daily by 1,200 price-watch officers from the ministry to ensure that all participating outlets would sell their products at reasonable prices.
He said the price list comprised 355 consumer products sold at 110 hypermarkets, 100 products at 404 supermarkets, 50 products at 360 wet markets and 100 products at 24-hour convenience stores.
"For hypermarkets, they will personally key-in the data concerning all changes in their price lists, but for other outlets, the price-watch officers will do that," he told reporters after launching the portal here Tuesday.
Developed at a cost of RM1.4 million, the portal can be browsed at www.1pengguna.com. Apart from providing the price list for comparison, the portal is also a platform for consumers to discuss consumerism issues interactively.
Ismail Sabri said the consumers could also file a complaint to the Malaysian Consumer Claims Tribunal through a link provided in the portal.
In his speech earlier, the minister said the introduction of the portal was in line with the current communication and information exploration trend.
"There is an increase in the number of Internet users in Malaysia, that is from 15.8 million users in 2009 to 16.5 million users in 2010. The number will continue to rise to 17.5 million by 2015," he said.
Ismail Sabri said it was also hoped that the portal would enhance the effectiveness of the government's delivery system and hence, bring the government closer to the people.
"It is hoped that through the 1MPB, the people will be able to get first hand information on any changes in the price of consumer products nationwide," he added.
Domestic Trade, Cooperative and Consumerism Minister Datuk Seri Ismail Sabri Yaakob said the price of consumer products in the portal would be monitored and updated daily by 1,200 price-watch officers from the ministry to ensure that all participating outlets would sell their products at reasonable prices.
He said the price list comprised 355 consumer products sold at 110 hypermarkets, 100 products at 404 supermarkets, 50 products at 360 wet markets and 100 products at 24-hour convenience stores.
"For hypermarkets, they will personally key-in the data concerning all changes in their price lists, but for other outlets, the price-watch officers will do that," he told reporters after launching the portal here Tuesday.
Developed at a cost of RM1.4 million, the portal can be browsed at www.1pengguna.com. Apart from providing the price list for comparison, the portal is also a platform for consumers to discuss consumerism issues interactively.
Ismail Sabri said the consumers could also file a complaint to the Malaysian Consumer Claims Tribunal through a link provided in the portal.
In his speech earlier, the minister said the introduction of the portal was in line with the current communication and information exploration trend.
"There is an increase in the number of Internet users in Malaysia, that is from 15.8 million users in 2009 to 16.5 million users in 2010. The number will continue to rise to 17.5 million by 2015," he said.
Ismail Sabri said it was also hoped that the portal would enhance the effectiveness of the government's delivery system and hence, bring the government closer to the people.
"It is hoped that through the 1MPB, the people will be able to get first hand information on any changes in the price of consumer products nationwide," he added.
Monday, June 6, 2011
WIKILEAKS: Malaysia's New Economic Model
Malaysia Today, 6 June 2011
C O N F I D E N T I A L SECTION 01 OF 05 KUALA LUMPUR 000103
SIPDIS
STATE FOR EAP/MTS FOR DBISCHOF
STATE FOR EEB/IFD/OMA FOR BSAUNDERS AND AWHITTINGTON
STATE PASS USTR - WEISEL AND BELL
STATE PASS FEDERAL RESERVE AND EXIMBANK
STATE PASS FEDERAL RESERVE SAN FRANCISCO TCURRAN
SINGAPORE PASS SBLEIWEIS
USDOC FOR 4430/MAC/EAP/MHOGGE
TREASURY FOR OASIA AND IRS
GENEVA FOR USTR
E.O. 12958: DECL: 01/19/2020
TAGS: ECON, EFIN, ENIV, EXIM, MY, PGOV
SUBJECT: MALAYSIA’S NEW ECONOMIC MODEL: ECONOMIC REFORM EFFORTS MAY MEET OPPOSITION
REF: A. 09 KUALA LUMPUR 303
B. 09 KUALA LUMPUR 318
C. 09 KUALA LUMPUR 887
1. (C) Summary: Prime Minister Najib Razak (Najib) introduced a first wave of limited economic reforms (refs A and B) shortly after taking office in April 2009 and has promised more substantial economic reforms designed to improve Malaysia's competitiveness (ref C).
To accomplish this, Najib formed the National Economic Advisory Committee (NEAC) to develop a New Economic Model (NEM), an economic policy roadmap which he hopes will lead Malaysia from middle income to high income country status.
Little has been revealed about the contents of the NEM, but government officials say it is intended to address Malaysia's "stagnating" economy, by improving education, reducing corruption, strengthening weak public institutions, reconfiguring emigration, cutting back on government over-involvement in the private sector, and increasing low domestic investment rates.
Leading Malaysian economists believe that Najib is sincere in his desire to address these problems. However, they question his ability to make major changes in the government's long-standing discriminatory Bumiputera preference policies which have discouraged domestic investment and new business formation and are driving the "brain drain" of young professional Malaysians frustrated with limited opportunities under this system.
Economists here expect Najib's effort to establish a policy framework that will foster a more gradual move away from ethnic preferences to a merit-based economy, but believe that may be insufficient. If PM Najib is unable to deliver on NEM reforms, they expect the opposition will seize the reform agenda as an issue for possible 2012 elections.
Executing a robust NEM, however, will be even more difficult as the PM will undoubtedly face steady opposition from within his own political party (UMNO), particularly from members who fear their parliamentary seats may be lost if the current patronage system is dismantled. End Summary.
The New Economic Model: Reigniting High Growth
2. (C) Since Prime Minister Najib Tun Razak (Najib) took office in April 2009, he has called for Malaysia to move from a low value-added, manufacturing-for-export oriented middle income economy to a knowledge-based service oriented high income economy. He has used the rubric of former Prime Minister Mahathir's Vision 2020 goal of reaching "high-income country" status by the year 2020 as his call to action to justify developing a "New Economic Model" (NEM) to promote economic transformation.
PM Najib quickly announced an investment liberalization agenda and by April 2009 implemented a first tranche of reforms aimed at reducing bumiputra (ethnic Malays and other non-Chinese or Indian ethnicities) ownership requirements in 27 different non-influential service sectors (e.g. veterinary services and ship salvage and refloatation services) and allow foreign controlling ownership interests in some types of financial institutions (Ref A).
PM Najib announced a second tranche of reforms late in April including reducing bumiputra ownership requirements on all listed companies from 30% to 12.5% and repealing Foreign Investment Commission guidelines on new mergers and acquisitions by foreign firms (Ref B).
In July, PM Najib formed the National Economic Advisory Committee (NEAC) and charged the new body - made up of high profile Malaysian and non-Malaysian economic figures - with developing the NEM. In his October 23 budget speech (Ref C), PM Najib promised additional economic reforms.
Financial Crisis and Capital Flight Push GOM to Reform
3. (C) Najib has been forced to consider a broader reform program because the Global financial crisis (GFC) has put tremendous pressure on the underpinnings of Malaysia's economic growth. FDI has slowed to a trickle, $15 billion of portfolio investment departed in 2009 and has just begun to return, and there remain large domestic reverse investment outflows as Malaysian conglomerates focus on overseas rather than domestic investment.
According to a January 8 UBS Securities report, Malaysia experienced net capital out flows in excess of $27 billion from mid-2008 to mid-2009. More telling, the UBS report states Malaysia has not experienced net capital inflows in any one calendar year since 1997. UBS cites domestic investors investing outside Malaysia as the primary source of the outflows.
PriceWaterhouse Coopers Consulting Malaysia (PWC) General Manager Pearlene Cheong described Western multi-national corporate interest in investing in Malaysia as "dormant" and that ethnic Chinese Malaysians had been taking their money out of Malaysia ever since the Asian financial crisis. She said that PWC's investor advisory business has seen primarily North Asian investors working in the extractive industries focused in East Malaysia and added, "This is not the knowledge-based type of employment that the government is looking for to stimulate wage growth."
Bold Statements Calling for Change
4. (C) The Najib administration has identified several areas of the economy needing reform and has announced its intentions to carry out reforms through the NEM. In a December 1 speech to the Malaysian Institute of Economic Research, Finance Minister II Husni said Malaysia's economy was "stagnating" and highlighted Malaysia's most pressing economic issues needing to be addressed by the NEM as education, corruption, GOM economic over-management, weak public institutions, emigration, and low domestic investment rates.
Education: Husni said, "Our universities are a disappointment." He cited Malaysia as having its highest unemployment rate for recent college graduates while adding that there is a severe shortage of skilled workers, implying that large numbers of Malaysian recent college graduates are unskilled. Malaysian sovereign wealth fund Khazanah reported that skilled labor shortages and the poor quality of Malaysian graduates costs Malaysian competitiveness 15% of GDP annually.
Corruption and Cronyism: He cited the recently released Transparency International 2009 Corruption Perception Index, in which Malaysia fell to number 56 of 180 countries, its lowest rating in over 20 years, and continuing a fall from number 26 in 2004.
Husni promised wholesale reform in government procurement practices, controlled by the Ministry of Finance, and an end to sole source contracts, except for the military.
GOM Over-involvement in the Economy: Husni called for the transparent divestiture of GOM interests in government-linked corporations (GLCs) and the restoration of the private sector's role as the primary engine for growth. He also cited that the GOM needs to discontinue open-ended protection of domestic industries, allow market driven resource allocation including greater precision in subsidy allocation, and foster better competition policies to spur innovation.
Weak Public Institutions: Husni criticized the lack of diversity in the civil service and proposed strengthening public institutions through greater ethnic participation.
Brain Drain: He noted barriers to non-bumiputras in the job market, starting and growing businesses, purchasing housing, and educational opportunities began a move of many well educated non-bumiputra Malaysians to emigrate. The fact that 800,000 young Malaysians are now working abroad, 300,000 having emigrated in the past 18 months, including increasing numbers of ethnic Malays was recently noted in Parliament. Malaysia's "brain drain" has begun to get the attention of policy makers, according to Husni.
Low Domestic Investment: Since 1997, domestic investment rates halved from 20-25% of GDP annually to roughly 10% and have remained at reduced levels for the past decade. Husni said that the 1Malaysia concept is intended to introduce competition and move Malaysia to a more performance-based culture like Japan, Korean, and Singapore, promoting an attractive investment and working environment for all Malaysians.
NEM to be Broad and Wide-Ranging
5. (C) The government and our contacts have released few details of the upcoming NEM. However, PM Najib announced December 22 at the Finance Ministry's "Media Night" that he had approved the NEM direction, and that the final model will be presented to the Cabinet and made public by the end of February 2010. The NEM will "set the direction of the economy and make the economy more resilient", according to Najib.
NEAC Acting Director of Research Tong Yee Siong, said the NEAC met the week of February 1-5 to finalize its recommendations to the Cabinet for approval and public release by the end of February. Tong told Econoffs that the NEAC will produce goal papers and an economic model framework. Tong expected the recommendations to be very broad, and would propose a policy framework to address the most significant economic issues facing Malaysia and improve its economic competitiveness.
Nicholas Zefferies, the president of AmCham, and the only "foreign" member of the NEAC, told Econ Counselor January 13 that NEAC reform recommendations to PM Najib would be wide-ranging. Zefferies said that Najib was planning to give NEAC powers similar to the Prime Minister's Special Task Force to Facilitate Business (Pemudah), to enforce the planned economic reform program on government Ministries.
Economic Reform Versus Ethnic Preferences
6. (C) Tong told us that the NEAC is focused on removing disincentives to domestic investment established in the New Economic Policy (NEP) as a key to reinvigorating domestic and foreign investment. He added that any basis for serious economic and investment reform efforts in Malaysia involves dismantling old entrenched Bumiputra ethnic preferences established since the Mahathir regime in the NEP.
Finance Minister II Husni's speech was important for connecting Najib's 1Malaysia slogan to real economic reform, according to Malaysian Institute for Economic Research Managing Director and long-time UMNO economic advisor Mohamed Ariff.
However, as Husni criticized Malaysia's longstanding ethnic preference policies, he qualified his statements by asserting that "the government is not abandoning bumiputras" and that the government will pursue reform in "a prudent and cautious method" in an effort to allay bumiputra fears of economic displacement.
Ariff told us that the Husni speech angered some senior UMNO members who complained that Najib was opening the economy too much and moving too fast toward reform. Opposition parliament members praised the speech, according to Ariff.
PM Najib Seeks Incremental Reform
7. (C) Our economic contacts close to PM Najib said they were convinced he is sincere about wanting economic reform. Economic Planning Unit Deputy Director General K. Govindan, who briefs PM Najib and the cabinet weekly on Malaysian economic performance and economic policy, told us he believes PM Najib understands in general terms the reforms needed to improve human capital and productivity, increase trade and investment, and reduce corruption.
Nevertheless, Govindan said he does not make specific economic policy recommendations at those meetings for fear of offending other Ministers in the meeting who oppose the reform agenda.
Ariff also believes PM Najib legitimately seeks economic reform. Ariff told us PM Najib's words to him were "change or be changed" when referring to economic reform. But Ariff also said he expected PM Najib to slowly pick away at the NEP without causing too much economic and political disruption. This will require regularly announcing small reforms rather than the sweeping reforms required to transform the economy.
Ariff offered the February NEM release and the June 2010 release of the 10th 5-year Malaysia Plan as two upcoming opportunities for Najib to roll out more economic reforms.
Safe Won't Work
8. (C) In the view of our economist contacts, PM Najib's "politically friendly" incremental strategy to economic reform may end up being too little too late. Tong projected that for reform to work, the PM will need to make a bold announcement on major reforms and then rally public support for change. Tong said that NEAC members are advocating that PM Najib announce significant structural changes to Malaysia's economy as a part of the NEM.
Govindan agreed that major structural changes are needed for sustained economic growth. He added that a series of small reform programs will eventually limit Malaysia to an unacceptably low 3-4% annual growth rate that will keep the country trapped in middle income status until "politics are removed from education and the economy."
The critical point, Ariff said, was that while Malaysia continued taking baby steps on economic reform, its competitors for investment such as Indonesia, Thailand, and Vietnam would be overtaking Malaysia as the first choice for foreign direct investment.
Ruling Party May Block Aggressive Reform
9. (C) Each of our contacts agreed that political will is the key to reform, but none are convinced all of the coming announcements of plans to reform Malaysia's economy will be backed by substantially broad concrete measures.
Ariff told us that after early enthusiasm for economic reform, some UMNO insiders do not want reform that would take away the economic rents and patronage system they have relied on to maintain the party's power base for over a generation.
Ariff predicted that UMNO would not survive in power by moving to an open and transparent system and that UMNO insiders would challenge Najib if he moved too strongly on government reform.
Govindan sees Malaysia's huge and largely ethnic Malay civil service, completely loyal to UMNO, but increasingly incompetent, as PM Najib's largest obstacle. He commented that the civil service has a very narrow worldview and will oppose, even refuse to implement, reforms perceived as damaging ethnic Malay interests, even if convinced of the long-run gains for Malaysia.
Tong told us that achieving any of the goals developed by the NEAC will require significant political buy-in to operationalize the policy changes necessary to reinvigorate investment and spur additional growth. However, Tong commented that NEAC members are frustrated with a lack of high-level political commitment outside of PM Najib as well as the slow responses from Ministries which impeded progress on the NEM.
He added that some NEAC members are concerned that the NEM maybe merely a public relations exercise that will have no real long-term policy impact. Zeffries told us that he was not confident that PM Najib has a sufficiently strong political position to pursue the NEAC's upcoming proposals. Liew described the opposition closely watching economic reform, offering that an inability of the ruling coalition to implement promised economic reforms will provide powerful political ammunition for use in upcoming federal elections in 2012.
Ethnic Minorities Support Reform
10. (C) Cheong sees her Malaysian private sector business clients as highly supportive of the type of economic opening she believes PM Najib will announce in the NEM and commented that ethnic Chinese, Indian, and urban Malays not directly benefitting from UMNO patronage will strongly support economic reform efforts, but that rural Malays, a strong UMNO constituent base, will fear changes labeled as detrimental to Bumiputra interests.
However, Cheong observed that Non-Bumiputras have successfully competed in the open economy at a disadvantage to Bumiputra and government linked businesses for over 30 years and that Malaysians would patiently wait for change. She added that the lack of investment is so obvious that the government is practically being forced to take action.
C O N F I D E N T I A L SECTION 01 OF 05 KUALA LUMPUR 000103
SIPDIS
STATE FOR EAP/MTS FOR DBISCHOF
STATE FOR EEB/IFD/OMA FOR BSAUNDERS AND AWHITTINGTON
STATE PASS USTR - WEISEL AND BELL
STATE PASS FEDERAL RESERVE AND EXIMBANK
STATE PASS FEDERAL RESERVE SAN FRANCISCO TCURRAN
SINGAPORE PASS SBLEIWEIS
USDOC FOR 4430/MAC/EAP/MHOGGE
TREASURY FOR OASIA AND IRS
GENEVA FOR USTR
E.O. 12958: DECL: 01/19/2020
TAGS: ECON, EFIN, ENIV, EXIM, MY, PGOV
SUBJECT: MALAYSIA’S NEW ECONOMIC MODEL: ECONOMIC REFORM EFFORTS MAY MEET OPPOSITION
REF: A. 09 KUALA LUMPUR 303
B. 09 KUALA LUMPUR 318
C. 09 KUALA LUMPUR 887
1. (C) Summary: Prime Minister Najib Razak (Najib) introduced a first wave of limited economic reforms (refs A and B) shortly after taking office in April 2009 and has promised more substantial economic reforms designed to improve Malaysia's competitiveness (ref C).
To accomplish this, Najib formed the National Economic Advisory Committee (NEAC) to develop a New Economic Model (NEM), an economic policy roadmap which he hopes will lead Malaysia from middle income to high income country status.
Little has been revealed about the contents of the NEM, but government officials say it is intended to address Malaysia's "stagnating" economy, by improving education, reducing corruption, strengthening weak public institutions, reconfiguring emigration, cutting back on government over-involvement in the private sector, and increasing low domestic investment rates.
Leading Malaysian economists believe that Najib is sincere in his desire to address these problems. However, they question his ability to make major changes in the government's long-standing discriminatory Bumiputera preference policies which have discouraged domestic investment and new business formation and are driving the "brain drain" of young professional Malaysians frustrated with limited opportunities under this system.
Economists here expect Najib's effort to establish a policy framework that will foster a more gradual move away from ethnic preferences to a merit-based economy, but believe that may be insufficient. If PM Najib is unable to deliver on NEM reforms, they expect the opposition will seize the reform agenda as an issue for possible 2012 elections.
Executing a robust NEM, however, will be even more difficult as the PM will undoubtedly face steady opposition from within his own political party (UMNO), particularly from members who fear their parliamentary seats may be lost if the current patronage system is dismantled. End Summary.
The New Economic Model: Reigniting High Growth
2. (C) Since Prime Minister Najib Tun Razak (Najib) took office in April 2009, he has called for Malaysia to move from a low value-added, manufacturing-for-export oriented middle income economy to a knowledge-based service oriented high income economy. He has used the rubric of former Prime Minister Mahathir's Vision 2020 goal of reaching "high-income country" status by the year 2020 as his call to action to justify developing a "New Economic Model" (NEM) to promote economic transformation.
PM Najib quickly announced an investment liberalization agenda and by April 2009 implemented a first tranche of reforms aimed at reducing bumiputra (ethnic Malays and other non-Chinese or Indian ethnicities) ownership requirements in 27 different non-influential service sectors (e.g. veterinary services and ship salvage and refloatation services) and allow foreign controlling ownership interests in some types of financial institutions (Ref A).
PM Najib announced a second tranche of reforms late in April including reducing bumiputra ownership requirements on all listed companies from 30% to 12.5% and repealing Foreign Investment Commission guidelines on new mergers and acquisitions by foreign firms (Ref B).
In July, PM Najib formed the National Economic Advisory Committee (NEAC) and charged the new body - made up of high profile Malaysian and non-Malaysian economic figures - with developing the NEM. In his October 23 budget speech (Ref C), PM Najib promised additional economic reforms.
Financial Crisis and Capital Flight Push GOM to Reform
3. (C) Najib has been forced to consider a broader reform program because the Global financial crisis (GFC) has put tremendous pressure on the underpinnings of Malaysia's economic growth. FDI has slowed to a trickle, $15 billion of portfolio investment departed in 2009 and has just begun to return, and there remain large domestic reverse investment outflows as Malaysian conglomerates focus on overseas rather than domestic investment.
According to a January 8 UBS Securities report, Malaysia experienced net capital out flows in excess of $27 billion from mid-2008 to mid-2009. More telling, the UBS report states Malaysia has not experienced net capital inflows in any one calendar year since 1997. UBS cites domestic investors investing outside Malaysia as the primary source of the outflows.
PriceWaterhouse Coopers Consulting Malaysia (PWC) General Manager Pearlene Cheong described Western multi-national corporate interest in investing in Malaysia as "dormant" and that ethnic Chinese Malaysians had been taking their money out of Malaysia ever since the Asian financial crisis. She said that PWC's investor advisory business has seen primarily North Asian investors working in the extractive industries focused in East Malaysia and added, "This is not the knowledge-based type of employment that the government is looking for to stimulate wage growth."
Bold Statements Calling for Change
4. (C) The Najib administration has identified several areas of the economy needing reform and has announced its intentions to carry out reforms through the NEM. In a December 1 speech to the Malaysian Institute of Economic Research, Finance Minister II Husni said Malaysia's economy was "stagnating" and highlighted Malaysia's most pressing economic issues needing to be addressed by the NEM as education, corruption, GOM economic over-management, weak public institutions, emigration, and low domestic investment rates.
Education: Husni said, "Our universities are a disappointment." He cited Malaysia as having its highest unemployment rate for recent college graduates while adding that there is a severe shortage of skilled workers, implying that large numbers of Malaysian recent college graduates are unskilled. Malaysian sovereign wealth fund Khazanah reported that skilled labor shortages and the poor quality of Malaysian graduates costs Malaysian competitiveness 15% of GDP annually.
Corruption and Cronyism: He cited the recently released Transparency International 2009 Corruption Perception Index, in which Malaysia fell to number 56 of 180 countries, its lowest rating in over 20 years, and continuing a fall from number 26 in 2004.
Husni promised wholesale reform in government procurement practices, controlled by the Ministry of Finance, and an end to sole source contracts, except for the military.
GOM Over-involvement in the Economy: Husni called for the transparent divestiture of GOM interests in government-linked corporations (GLCs) and the restoration of the private sector's role as the primary engine for growth. He also cited that the GOM needs to discontinue open-ended protection of domestic industries, allow market driven resource allocation including greater precision in subsidy allocation, and foster better competition policies to spur innovation.
Weak Public Institutions: Husni criticized the lack of diversity in the civil service and proposed strengthening public institutions through greater ethnic participation.
Brain Drain: He noted barriers to non-bumiputras in the job market, starting and growing businesses, purchasing housing, and educational opportunities began a move of many well educated non-bumiputra Malaysians to emigrate. The fact that 800,000 young Malaysians are now working abroad, 300,000 having emigrated in the past 18 months, including increasing numbers of ethnic Malays was recently noted in Parliament. Malaysia's "brain drain" has begun to get the attention of policy makers, according to Husni.
Low Domestic Investment: Since 1997, domestic investment rates halved from 20-25% of GDP annually to roughly 10% and have remained at reduced levels for the past decade. Husni said that the 1Malaysia concept is intended to introduce competition and move Malaysia to a more performance-based culture like Japan, Korean, and Singapore, promoting an attractive investment and working environment for all Malaysians.
NEM to be Broad and Wide-Ranging
5. (C) The government and our contacts have released few details of the upcoming NEM. However, PM Najib announced December 22 at the Finance Ministry's "Media Night" that he had approved the NEM direction, and that the final model will be presented to the Cabinet and made public by the end of February 2010. The NEM will "set the direction of the economy and make the economy more resilient", according to Najib.
NEAC Acting Director of Research Tong Yee Siong, said the NEAC met the week of February 1-5 to finalize its recommendations to the Cabinet for approval and public release by the end of February. Tong told Econoffs that the NEAC will produce goal papers and an economic model framework. Tong expected the recommendations to be very broad, and would propose a policy framework to address the most significant economic issues facing Malaysia and improve its economic competitiveness.
Nicholas Zefferies, the president of AmCham, and the only "foreign" member of the NEAC, told Econ Counselor January 13 that NEAC reform recommendations to PM Najib would be wide-ranging. Zefferies said that Najib was planning to give NEAC powers similar to the Prime Minister's Special Task Force to Facilitate Business (Pemudah), to enforce the planned economic reform program on government Ministries.
Economic Reform Versus Ethnic Preferences
6. (C) Tong told us that the NEAC is focused on removing disincentives to domestic investment established in the New Economic Policy (NEP) as a key to reinvigorating domestic and foreign investment. He added that any basis for serious economic and investment reform efforts in Malaysia involves dismantling old entrenched Bumiputra ethnic preferences established since the Mahathir regime in the NEP.
Finance Minister II Husni's speech was important for connecting Najib's 1Malaysia slogan to real economic reform, according to Malaysian Institute for Economic Research Managing Director and long-time UMNO economic advisor Mohamed Ariff.
However, as Husni criticized Malaysia's longstanding ethnic preference policies, he qualified his statements by asserting that "the government is not abandoning bumiputras" and that the government will pursue reform in "a prudent and cautious method" in an effort to allay bumiputra fears of economic displacement.
Ariff told us that the Husni speech angered some senior UMNO members who complained that Najib was opening the economy too much and moving too fast toward reform. Opposition parliament members praised the speech, according to Ariff.
PM Najib Seeks Incremental Reform
7. (C) Our economic contacts close to PM Najib said they were convinced he is sincere about wanting economic reform. Economic Planning Unit Deputy Director General K. Govindan, who briefs PM Najib and the cabinet weekly on Malaysian economic performance and economic policy, told us he believes PM Najib understands in general terms the reforms needed to improve human capital and productivity, increase trade and investment, and reduce corruption.
Nevertheless, Govindan said he does not make specific economic policy recommendations at those meetings for fear of offending other Ministers in the meeting who oppose the reform agenda.
Ariff also believes PM Najib legitimately seeks economic reform. Ariff told us PM Najib's words to him were "change or be changed" when referring to economic reform. But Ariff also said he expected PM Najib to slowly pick away at the NEP without causing too much economic and political disruption. This will require regularly announcing small reforms rather than the sweeping reforms required to transform the economy.
Ariff offered the February NEM release and the June 2010 release of the 10th 5-year Malaysia Plan as two upcoming opportunities for Najib to roll out more economic reforms.
Safe Won't Work
8. (C) In the view of our economist contacts, PM Najib's "politically friendly" incremental strategy to economic reform may end up being too little too late. Tong projected that for reform to work, the PM will need to make a bold announcement on major reforms and then rally public support for change. Tong said that NEAC members are advocating that PM Najib announce significant structural changes to Malaysia's economy as a part of the NEM.
Govindan agreed that major structural changes are needed for sustained economic growth. He added that a series of small reform programs will eventually limit Malaysia to an unacceptably low 3-4% annual growth rate that will keep the country trapped in middle income status until "politics are removed from education and the economy."
The critical point, Ariff said, was that while Malaysia continued taking baby steps on economic reform, its competitors for investment such as Indonesia, Thailand, and Vietnam would be overtaking Malaysia as the first choice for foreign direct investment.
Ruling Party May Block Aggressive Reform
9. (C) Each of our contacts agreed that political will is the key to reform, but none are convinced all of the coming announcements of plans to reform Malaysia's economy will be backed by substantially broad concrete measures.
Ariff told us that after early enthusiasm for economic reform, some UMNO insiders do not want reform that would take away the economic rents and patronage system they have relied on to maintain the party's power base for over a generation.
Ariff predicted that UMNO would not survive in power by moving to an open and transparent system and that UMNO insiders would challenge Najib if he moved too strongly on government reform.
Govindan sees Malaysia's huge and largely ethnic Malay civil service, completely loyal to UMNO, but increasingly incompetent, as PM Najib's largest obstacle. He commented that the civil service has a very narrow worldview and will oppose, even refuse to implement, reforms perceived as damaging ethnic Malay interests, even if convinced of the long-run gains for Malaysia.
Tong told us that achieving any of the goals developed by the NEAC will require significant political buy-in to operationalize the policy changes necessary to reinvigorate investment and spur additional growth. However, Tong commented that NEAC members are frustrated with a lack of high-level political commitment outside of PM Najib as well as the slow responses from Ministries which impeded progress on the NEM.
He added that some NEAC members are concerned that the NEM maybe merely a public relations exercise that will have no real long-term policy impact. Zeffries told us that he was not confident that PM Najib has a sufficiently strong political position to pursue the NEAC's upcoming proposals. Liew described the opposition closely watching economic reform, offering that an inability of the ruling coalition to implement promised economic reforms will provide powerful political ammunition for use in upcoming federal elections in 2012.
Ethnic Minorities Support Reform
10. (C) Cheong sees her Malaysian private sector business clients as highly supportive of the type of economic opening she believes PM Najib will announce in the NEM and commented that ethnic Chinese, Indian, and urban Malays not directly benefitting from UMNO patronage will strongly support economic reform efforts, but that rural Malays, a strong UMNO constituent base, will fear changes labeled as detrimental to Bumiputra interests.
However, Cheong observed that Non-Bumiputras have successfully competed in the open economy at a disadvantage to Bumiputra and government linked businesses for over 30 years and that Malaysians would patiently wait for change. She added that the lack of investment is so obvious that the government is practically being forced to take action.
Friday, June 3, 2011
PAAB to acquire water bonds
| Written by Sharon Tan |
| Edge Financial Daily, 25 May 2011 |
| The conditional offer amounting to RM6.5 billion, which expires on May 31, would see Acqua SPV paying the settlement value for the securities based on the purchase yield to maturity, according to sources familiar with the matter. This latest development confirms a front page story in The Edge Financial Daily on May 12, 2011 that the federal government and PAAB were said to have finalised a RM6.5 billion proposal to take over the Selangor state’s water-related bonds, and that an offer was likely to be made within two weeks. It is learnt that Acqua SPV is offering a yield of between 4.83% and 7.36% for the remaining tranches of bonds maturing in 2013 to 2023. “The yield price offered basically allows most bondholders to get out with a profit. “For the 2021 paper, the buyback yield is at 5.82% against mark to market at the end of last month at 14.2%. This means that in terms of price, the buying back is at 94.49 against mark to market value of only 54.54 at the end of last month,” said a source. The bondholders are understood to include Great Eastern Life Assurance (M) Bhd, CIMB Group Holdings Bhd, the Employees Provident Fund (EPF) and Kumpulan Wang Amanah Pencen. Among the water players in Selangor is Puncak Niaga Holdings Bhd, which has two concessions — Puncak Niaga (M) Sdn Bhd, a treatment player and its 70%-owned unit Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), a distributor. Puncak Niaga is controlled by Tan Sri Rozali Ismail. Another company which has a water treatment concession is Syarikat Pengeluar Air Sungai Selangor Holdings Bhd (Splash), which is 40%-controlled by construction giant Gamuda Bhd, and 30% each by Kumpulan Perangsang Selangor Bhd (KPS) and Tan Sri Wan Azmi Wan Hamzah’s The Sweet Water Alliance Sdn Bhd. KPS is 60.7%-controlled by Kumpulan Darul Ehsan Bhd, the Selangor state investment arm. The other water treatment concessionaire is Konsortium Abass Sdn Bhd, which is 55%-controlled by KPS and 45% by Operasi Murni Sdn Bhd. An analyst said the government’s takeover of the bonds was imminent since there are repayments due in the next couple of months. He said the RM6.5 billion offer from the federal government, after a RM200 million discount, will be spread out among the bondholders. “But the interesting part is the equity side. This remains to be seen. The bond issues can be solved but the equity is another ball game. The bottom line is both the Selangor and federal governments want control. They want to champion cheap water. “In this instance, the state government also has a stake in the water supply chain,” he said. The analyst also said there was a disconnect between the federal government and the state government where the valuation of physical assets is concerned. The state owns about 80% of the physical assets such as pipes and water treatment plants. “PAAB will still have to pay for these assets ultimately,” he added. A bondholder said the acquisition was expected as it is in line with the consolidation of the water industry to ensure the sustainability of investor confidence for infrastructure and utility projects in Malaysia. “The acquisition will simplify the credit risk of what was previously a fragmented and complicated group of utility bonds, which were built on a web of SPVs (special-purpose vehicles” he said. Asked if the RM6.5 billion figure that has been bandied about was a fair number for the bondholders, he replied: “At the end of the day, the acquisition monies required would at least closely reflect the bonds’ outstanding nominal value. “However, from an investor’s standpoint, a more holistic approach to overall returns should be addressed. For example, much management time was wasted during lengthy and numerous meetings in the initial stages of the water bonds’ financial distress, and [this] does not compensate investors for lowered yields and stretched payback periods after the acquisition.” On Monday, Energy, Water and Green Technologies Minister Datuk Seri Peter Chin Fah Kui said the Cabinet would decide on the acquisition of the Selangor water bonds but to date there is no Cabinet paper on the matter. “It is for the Cabinet to decide. The paper has not gone in yet. Wait for the paper to be submitted to the Cabinet,” Chin told the media when asked if the federal government would take over the water bonds. Petaling Jaya Utara MP Tony Pua meanwhile, said in a statement any move by the government to bail out the debts of the privatised Selangor water companies has in effect killed any remaining possibility of the state government striking a deal with the companies to restructure and take over the water industry in Selangor. Pua said had there been no bailout offered by the federal government, the companies would have to negotiate the terms of restructuring with the state government or other parties that have made offers to acquire the businesses and assets. The Selangor government had made several offers to acquire the water companies. In January, it made an offer of more than RM9 billion for the water assets. Prior to that, in April last year, Gamuda made a RM10.75 billion offer to take over the water assets in Selangor. A month earlier, the federal government via PAAB made an offer to acquire all the water assets from the concessionaires for RM8.3 billion. “However, as a result of the federal government bailing out the massive debts, it has relieved these companies of their cash flow problems. This will mean that there is now no urgency for these companies to agree to any form of restructuring as desired under the Water Services Industry Act (2006) as they now have the upper hand at the negotiating table at the expense of the rakyat. “In fact, the likely outcome of the bailout is that the federal government will follow up with the taking over of the water-related assets. The privatised water concessionaires will continue to operate and profit from the provision of water services in Selangor, without being burdened by debts,” said Pua, adding that Chin ought to clarify the move for the bailout. |
Industries grapple with rising power bills
| Written by Sharon Tan & Chua Sue-Ann | ||||||
| Edge Financial Daily, 01 June 2011 14:03 | ||||||
| The worst hit industries include those in the steel, oil and gas, food processing, cement and electronics and electrical sectors. In a note yesterday, Maybank IB Research opined that the tariff increase was fair and manageable for commercial and industrial customers given that Tenaga Nasional Bhd’s (TNB) tariffs remain competitive compared with regional rates. Maybank IB Research noted that the tariff hike was more subdued this round compared to that in July 2008, where natural gas price jumped 111% to 135% and electricity tariffs rose 24%. It added that the gradual RM3 per mmbtu rise in natural gas every six months would allow commercial and industrial users to plan ahead. In announcing the tariff hike, the government explained that 75% of consumers would be shielded from the direct brunt of the rise in rates. However, increasing margin pressures are expected to force manufacturers to pass rising costs to end-users, which would further drive up the cost of goods. Apart from the direct impact on companies’ earnings, HwangDBS Vickers Research noted that the decision to increase electricity tariffs and gas prices may also translate into higher inflationary pressures as the multiplier effect works its way through the economic chain. The research house expected a reassessment of the timing of a potential snap general election, initially rumoured to be held this year, to allow time for the public to adjust to the higher cost of living. The Edge Financial Daily spoke to industry players in the affected sectors to find out the impact of the electricity and gas price increases and their strategies to grapple with the rising cost pressures. Rubber gloves According to CIMB Research, higher energy costs are negative for the rubber glove sector given that electricity accounts for 2% to 4% of total costs while natural gas makes up between 3% and 9% of total operating costs. “Glovemakers that are already battling with higher input costs, a weaker US dollar and weak demand now have to squeeze out further operating efficiencies to offset the higher energy costs,” the research house said. As for Maybank IB Research, the average 7% hike in electricity tariffs and 20% rise in industrial gas price could result in a 1% to 2% increase in glovemakers’ total production costs. “In our view, an immediate average selling price adjustment in response to the higher energy costs is not likely as glovemakers also face mild over-capacity, a weaker US dollar and higher raw material (NBR) cost,” the research house said.
It opined that glovemakers should still have the pricing power to fully pass on the higher costs but producers’ competitiveness could be impacted in the longer term by rising energy and raw material costs. Company remarks Top Glove Bhd chairman Tan Sri Lim Wee Chai The overall impact of natural gas and electricity price increases is less than 1% of our total manufacturing costs. Top Glove started using biomass in 2005 to avoid depending entirely on natural gas. Currently, around 60% of the heat energy comes from natural gas as we have turned to biomass. Our new factories will no longer use natural gas. More research and development will be conducted on our production process to find ways to minimise energy costs. We will feel the short-term impact as we are unable to make any adjustment to the selling price some of the orders we have sold forward. This is because of the short short notice [less than two days] of the tariff increase. We hope the government will provide sufficient advance notice should there be any future price revision. We will have to pass on the additional costs to consumers just as we have done in the past. We will review the costing to factor in the current latex price and exchange rates in deciding how much to revise our prices. The price revision will be reflected in all new orders received from June 1 onwards. Steel The steel industry is expected to feel the impact of rising power prices given its intensive use of energy with electricity and gas contributing almost 10% of total production costs. Maybank IB Research anticipated that near-term margins for steel could be hit and local steelmakers would not be able to easily pass on additional costs as average selling prices are subject to international pricing. Company remarks Malaysia Steel Works (KL) Bhd CEO and managing director Datuk Seri Tai Hean Leng The degree of impact of the electricity tariff hike on steel players is largely dependent on three factors — size of the steel plant, process equipment and raw material used. The larger the steel plant, the higher the quantum of electricity cost. Steel plants with specialised equipment or with direct access to large quantities of alternative fuel such as oxygen can help reduce the impact of higher electricity tariffs. Adjustments to the steelmaking process and grades of raw material used can also cushion the effects of higher tariffs. In the case of Masteel, the new tariff will increase its electricity cost by approximately 10.5%. Masteel believes it will be able to partially reduce its electricity cost by making adjustments to the three factors mentioned and partially pass the remaining cost to its customers. Masteel’s strategy is to deploy the appropriate equipment to use alternative fuels to supplement the usage of electricity in steelmaking. Company remarks Ann Joo Resources Bhd group managing director Datuk Lim Hong Thye The natural gas price increase has an insignificant direct impact on Ann Joo as it is not a substantial cost component. As for our electric-arc-furnace operator, electricity is the second largest cost component, accounting for 8% to 10% of total costs for billet production. In anticipating future hikes in energy price, Ann Joo embarked on a blast furnace project in 2008. The blast furnace, used for iron and steel production via hot metal charging, ultimately reduces electricity and natural gas consumption. We are currently at the hot commissioning stage of the blast furnace project, the first blast furnace in Malaysia. We expect to reduce up to 40% of our electricity consumption per tonne of steel with the hot metal charging technology. In addition, the blast furnace off gas will be used to replace the natural gas that is currently used in the rolling mill operation. Real estate and housing The burgeoning real estate and property market is likely to feel the heat of higher costs, particularly if the cement and steel sectors begin to pass on rising costs to end-users. For the cement sector, Maybank IB Research said it may have to bear the brunt of the adjustments to gas and electricity prices at least for the next six months with cement prices rising about 7% last month. Company remarks Real Estate and Housing Developers’ Association Malaysia (Rehda) president Datuk Seri Michael Yam In the short term, developers are obliged to maintain their pricing for ongoing projects which have had their prices locked in already. Unsold units of ongoing projects would still be sold according to the launch price. However in the long term, property prices could trend higher as contractors and suppliers pass on additional costs. The dilemma is often about whether to launch property projects prior to starting the tendering process or vice versa. Steel and cement prices are volatile and very often, tender prices are higher than the pre-contract estimates. Consumers can expect property prices to rise not more than 5%, although it is difficult to gauge as there are many factors to consider such as price increases in steel, cement and other raw and finished materials such as tiles. The property market will still be alright for this year. Next year when the price increases start to feed through, it will be interesting to see if there are salary adjustments. If salaries are adjusted accordingly, then maybe we will not feel the impact so much. |
Ani Arope blames high power tariffs on ‘Economic Plundering Unit’
Malaysian Insider, June 03, 2011
KUALA LUMPUR, June 3 — Former Tenaga Nasional Berhad (TNB) chief executive Tan Sri Ani Arope is blaming the Economic Planning Unit (EPU) for rising electricity tariffs, saying the powerful agency forced the national power company to sign lopsided purchase deals nearly 20 years ago.
Ani said EPU, which he sarcastically dubbed "Economic Plundering Unit", forced Tenaga to buy electricity from an independent power producer (IPP), believed to be Genting Sanyen, at 14 sen per kilowatt hour (kWh) despite an existing offer of 12 sen/kWh then. Other IPPs then were charging 16 sen/kWh Genting Sanyen became the first IPP to transfer 15 million watts (MW) in electricity to TNB’s national grid on April 15 and is scheduled to complete a RM1.8 billion upgrade on its existing gas-fired plant with a capacity for 720 MW by June next year.
“You don’t need to go to a fanciful business school to figure out why we need a tariff hike — just revisit the terms given to some IPPs,” Ani, who helmed the utility company between 1990 and 1996, said in his last Facebook posting three days ago.
“With the take-or-pay clause and with the 40 per cent excess reserve that we have today, one only has to produce half of one’s capacity and be paid 80 per cent of the agreed capacity. Well done the then-EPU — Economic Plundering Unit,” he added, mocking the economic unit under the Prime Minister’s Department.
Ani called for a review of the original terms with the IPPs as the storm over energy price deals continues to build up.
DAP publicity chief Tony Pua cited today Ani’s 2006 interview with English daily, The Star, to increase pressure on the federal government to declassify the power purchase agreements (PPAs) inked between TNB and the IPPs.
Ani caused a stir 15 years ago when he chose to resign from his executive chairman post rather than sign the imbalanced deals, which saw the first generation of IPPs created, such as YTL Power Services, Powertek and Malakoff during the Mahathir administration.
“TNB is the whipping boy. TNB has no control of the price it has to pay to the IPPs. Get to the source of the problem,” said the Penang-born now in his early 80s.
The Najib administration has been savaged for allegedly protecting the interests of IPPs rather than the public.
Putrajaya announced the 7.12 per cent hike in electricity rates in an effort to trim a subsidy bill that would otherwise double to RM21 billion this year and promised the hike will not affect 75 per cent of domestic consumers.
But power prices will now rise by as much as 2.3 sen per kWh in areas taking TNB’s electricity supply, a potential source of public anger just ahead of a general election expected within the year.
The Star daily reported today the government was close to inking a deal for a 1000 MW coal-fired plant in Manjung which will charge 25 sen/kWh.
Contract to Malakoff to build 1,000MW power plant expected soon
STAR, 3 June 2011
PETALING JAYA: Malakoff Corp Bhd, owned by MMC Corp Bhd, is expected to be awarded a contract to build a 1,000MW coal-fired power plant soon, said sources.
According to sources, the plant will have a 15-year concession to sell the power at a rate of 25 sen per kwh to Tenaga Nasional Bhd (TNB).
“MMC has yet to receive the award letter but the decision has been made already, based on tender submissions,” said one source.
In August, the Energy Commission had awarded a concession to TNB to develop a 1,000MW coal-fired power plant on its existing power plant site in Manjung Perak.
Malakoff’s Tanjung Bin power plant in Johor At that time, the industry was abuzz with the possibility of a new tender for another coal-fired power plant of the same capacity being called up soon.
Certain quarters believed that Malakoff, the owner of the 2,100MW Tanjung Bin power plant in Johor, stood a good chance of winning the tender.
A Bernama report earlier this year, quoting Energy Commission chairman Tan Sri Dr Ahmad Tajuddin Ali, said the Government was likely to decide on the concessionaire for the second 1,000MW plant this month.
The commission had issued a request for proposals from MMC Corp's unit, Malakoff and Jimah Energy Ventures Sdn Bhd, with regards to this, the report said, adding that the plant could either be at Tanjung Bin in Johor or Jimah in Negri Sembilan.
The urgency to ramp up electricity-generation capacity in Peninsular Malaysia is to avert a potential power shortage by 2015 and make up for the “lost” supply of 1,600MW from the Bakun Dam in Sarawak, which was initially supposed to be supplied to the peninsula.
According to the commission, the peninsula could face a power shortage by 2015 based on the Government's targeted growth rate of 6% per year for the next five years for the country's economy.
Electricity demand in the peninsula has already been growing between 5% and 8% every year.
Industry experts said that based on the demand growth trend, the current electricity reserve margin of about 42% could be halved if there were no new plant-ups soon.
One of the major concerns in this regard is to make sure that the electricity reserves margin does not fall below the 20%-mark by 2015.
Electricity consumption per capita in Malaysia now stands at about 3,412 kwh per annum, significantly higher than most developing countries, but still below the average in developed countries.
It is projected to more than double to 7,571 kwh per person in 2030, higher than that of the Asia Pacific Economic Cooperation region's average of 6,833 kwh per person.
PETALING JAYA: Malakoff Corp Bhd, owned by MMC Corp Bhd, is expected to be awarded a contract to build a 1,000MW coal-fired power plant soon, said sources.
According to sources, the plant will have a 15-year concession to sell the power at a rate of 25 sen per kwh to Tenaga Nasional Bhd (TNB).
“MMC has yet to receive the award letter but the decision has been made already, based on tender submissions,” said one source.
In August, the Energy Commission had awarded a concession to TNB to develop a 1,000MW coal-fired power plant on its existing power plant site in Manjung Perak.
Malakoff’s Tanjung Bin power plant in JohorCertain quarters believed that Malakoff, the owner of the 2,100MW Tanjung Bin power plant in Johor, stood a good chance of winning the tender.
A Bernama report earlier this year, quoting Energy Commission chairman Tan Sri Dr Ahmad Tajuddin Ali, said the Government was likely to decide on the concessionaire for the second 1,000MW plant this month.
The commission had issued a request for proposals from MMC Corp's unit, Malakoff and Jimah Energy Ventures Sdn Bhd, with regards to this, the report said, adding that the plant could either be at Tanjung Bin in Johor or Jimah in Negri Sembilan.
The urgency to ramp up electricity-generation capacity in Peninsular Malaysia is to avert a potential power shortage by 2015 and make up for the “lost” supply of 1,600MW from the Bakun Dam in Sarawak, which was initially supposed to be supplied to the peninsula.
According to the commission, the peninsula could face a power shortage by 2015 based on the Government's targeted growth rate of 6% per year for the next five years for the country's economy.
Electricity demand in the peninsula has already been growing between 5% and 8% every year.
Industry experts said that based on the demand growth trend, the current electricity reserve margin of about 42% could be halved if there were no new plant-ups soon.
One of the major concerns in this regard is to make sure that the electricity reserves margin does not fall below the 20%-mark by 2015.
Electricity consumption per capita in Malaysia now stands at about 3,412 kwh per annum, significantly higher than most developing countries, but still below the average in developed countries.
It is projected to more than double to 7,571 kwh per person in 2030, higher than that of the Asia Pacific Economic Cooperation region's average of 6,833 kwh per person.
Acqua SPV buys RM5.8bil Selangor water bonds
PUTRAJAYA: Acqua SPV Bhd, a special-purpose vehicle set up by Pengurusan Aset Air Bhd (PAAB), has acquired 99.6% of Selangor water bonds amounting to RM5.8bil in nominal value.
PAAB chief executive officer Datuk Ahmad Faizal Abdul Rahman said bondholders would be paid accordingly within this month.
“It (the payment) depends on the maturity because different bond tranches have different maturity. And for the different programmes we need to give seven days notice, some 14-day or 21-day. That’s why we give up to end-June,” he said at a press conference after a signing ceremony between PAAB and Penang government on a water restructuring deal.
Faizal said the offer acceptance had been completed and it was not on the payment. He stressed that the payment from PAAB would not be an issue.
He said the offer took into account various factors such as the ratings, current yields, coupon structures and levels of liquidity of the bonds. “We are confident in achieving the 100% target within this week, pending official confirmation from several bondholders who have given positive indication earlier,” Faizal said.
According to documents obtained by StarBiz on May 24, Acqua SPV will pay the bondholders based on their relevant purchase yield to maturity.
The offer documents provided a comprehensive table explaining the settlement value and the payment will be made to bondholders by June 30.
A source said PAAB had identified the remaining three bondholders and was certain it would be able to convince them.
The source said the offer was a “fair value” and the acceptance level by PAAB indicated that it was a good offer.
Acqua SPV had on May 20 made an offer to buy the Selangor water bonds to the existing bondholders of Syarikat Bekalan Air Selangor Sdn Bhd, Syarikat Pengeluaran Air Sungai Selangor Sdn Bhd, Puncak Niaga Sdn Bhd, Titisan Modal Sdn Bhd and Viable Chip Sdn Bhd under seven bond programmes.
In a statement yesterday, Acqua SPV the exercise was seen as an interim measure to consolidate the assets and liabilities of the water operators while negotiations between the Federal Government and the Selangor state government on the restructuring of the state water industry continue.
“This acquisition, however, will not relieve any existing obligations of the issuer under the current terms and conditions of the respective bond programme,” it said, adding that Acqua SPV was merely taking over the ownership and role of the existing bondholders.
It said the protracted negotiations between the Federal Government and the state government on the restructuring of the water industry in Selangor had resulted in the deterioration of cashflows of the water concessionaires, seriously jeopardising the ability to service the bonds. — By LEONG HUNG YEE
Water deal a 'victory for people'
New Straits Times, 2 June 2011
PUTRAJAYA: Penang yesterday signed a water restructuring deal with the Federal Government -- a move which Prime Minister Datuk Seri Najib Razak described as a "victory" for the people of Penang.
This was because the deal, signed with Pengurusan Aset Air Berhad (PAAB), which is a state government-owned company, "will not burden the people, financially".
Najib said the deal "means a lot" as Penang was an opposition-ruled state.
He hoped that other opposition-ruled states -- Selangor, Kelantan and Kedah -- would follow suit.
"This collaboration between the federal and state governments will see that water is managed more efficiently and clean and quality water is supplied to the rakyat at an affordable price.
"This deal is an example of strong cooperation between two quarters for the sake of the state's development and well-being of the people.
"The interests of the people have always been the government's priority.
"I hope other states will also join this initiative for the benefit of the people," Najib said at the signing ceremony here, yesterday.
He added that the water tariff would be decided by the state government.
Present were Energy, Green, Technology and Water Minister Datuk Seri Peter Chin Fah Kui, Penang Chief Minister Lim Guan Eng and PAAB chairman Datuk Seri Mohamad Tajol Rosli Mohd Ghazali.
Penang became the fifth state to agree to a water restructuring initiative after Malacca, Negri Sembilan, Johor and Perlis.
Najib said the move would lead to rapid development in the state, especially the water industry.
He said the water restructuring initiative began in 2005 when the Federal Government amended the federal constitution to allow water supply and service to come under the purview of both the federal and state governments.
Under the agreement, Penang will be alienating a total of RM655.2 million worth of water-related assets to PAAB while the company will take over the state's water liability from the Federal Government for the same sum and lease the water assets to the Penang Water Supply Corporation (PBAPP).
The deal also allows PBAPP to either finance its water development via PAAB or separately.
Najib said the deal was the "first of its kind" as the water operator was granted both service and facility licences that will run until May 31, 2014. "This initiative proves that the Federal Government is serious in creating a holistic and efficient water industry in the state by taking into account all aspects, such as water demand, operations and financial stability."
Lim, meanwhile, said the state government would be given RM1.2 billion in grants to expand the Mengkuang Dam in Penang. Construction will begin in August.
Currently, the dam's capacity is 23 million cubic metres. The expansion will see the capacity increasing to 78 million cubic metres to meet the state's water needs until 2020.
The expansion project has been awarded to China International Water and Electrical Corp (M) Sdn Bhd.
Lim also said the current 20 per cent water conservation surcharge for excessive water usage would be reviewed by the end of the year.
He also promised not to increase the water rates for domestic users.
PUTRAJAYA: Penang yesterday signed a water restructuring deal with the Federal Government -- a move which Prime Minister Datuk Seri Najib Razak described as a "victory" for the people of Penang.
This was because the deal, signed with Pengurusan Aset Air Berhad (PAAB), which is a state government-owned company, "will not burden the people, financially".
Najib said the deal "means a lot" as Penang was an opposition-ruled state.
He hoped that other opposition-ruled states -- Selangor, Kelantan and Kedah -- would follow suit.
"This collaboration between the federal and state governments will see that water is managed more efficiently and clean and quality water is supplied to the rakyat at an affordable price.
"This deal is an example of strong cooperation between two quarters for the sake of the state's development and well-being of the people.
"The interests of the people have always been the government's priority.
"I hope other states will also join this initiative for the benefit of the people," Najib said at the signing ceremony here, yesterday.
He added that the water tariff would be decided by the state government.
Present were Energy, Green, Technology and Water Minister Datuk Seri Peter Chin Fah Kui, Penang Chief Minister Lim Guan Eng and PAAB chairman Datuk Seri Mohamad Tajol Rosli Mohd Ghazali.
Penang became the fifth state to agree to a water restructuring initiative after Malacca, Negri Sembilan, Johor and Perlis.
Najib said the move would lead to rapid development in the state, especially the water industry.
He said the water restructuring initiative began in 2005 when the Federal Government amended the federal constitution to allow water supply and service to come under the purview of both the federal and state governments.
Under the agreement, Penang will be alienating a total of RM655.2 million worth of water-related assets to PAAB while the company will take over the state's water liability from the Federal Government for the same sum and lease the water assets to the Penang Water Supply Corporation (PBAPP).
The deal also allows PBAPP to either finance its water development via PAAB or separately.
Najib said the deal was the "first of its kind" as the water operator was granted both service and facility licences that will run until May 31, 2014. "This initiative proves that the Federal Government is serious in creating a holistic and efficient water industry in the state by taking into account all aspects, such as water demand, operations and financial stability."
Lim, meanwhile, said the state government would be given RM1.2 billion in grants to expand the Mengkuang Dam in Penang. Construction will begin in August.
Currently, the dam's capacity is 23 million cubic metres. The expansion will see the capacity increasing to 78 million cubic metres to meet the state's water needs until 2020.
The expansion project has been awarded to China International Water and Electrical Corp (M) Sdn Bhd.
Lim also said the current 20 per cent water conservation surcharge for excessive water usage would be reviewed by the end of the year.
He also promised not to increase the water rates for domestic users.
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