As polls loom, pressure on Terengganu to explain oil royalty suit withdrawal

By Clara Chooi, Malaysian Insider, 25 April 2012

KUALA LUMPUR, April 25 - Pressure is mounting on Terengganu Mentri Besar Datuk Seri Ahmad Said and his state leaders to explain why their administration suddenly dropped its RM2.8 billion oil royalty suit against Petronas and Putrajaya, a move that threatens to become a key campaign issue for the opposition in the coming polls.

Already, Pakatan Rakyat (PR) leaders are drumming up demands on the Barisan Nasional-led (BN) state and Putrajaya to reveal the terms of the controversial out-of-court settlement, which appeared to have been resolved in a hushed fashion.

In an interview with Harakah Daily yesterday, PAS secretary-general Datuk Mustafa Ali even labelled the Terengganu government "traitors" for unravelling actions that could have helped improve the livelihoods of its people.

Withdrawing the suits, he said to the PAS organ, was tantamount to the state relinquishing its oil rights  to the federal government.

Opposition lawmakers have also demanded to know how much would go into Terengganu's coffers and if the funds would be channelled to its rightful recipients, instead of being squandered away for non-welfare based projects like the Monsoon Cup and the Crystal Mosque.

Further to this, the settlement also places Putrajaya in a tight position with the PAS-led Kelantan, another oil-rich state that claims it has been denied its right to oil royalties of up to RM800 million annually since 2005.

"This is something that is just not right... what were the terms that led to the withdrawal of the suits?" Mustafa was quoted as saying in the daily today.

He added that Terengganu folk must be explained the reasons behind the sudden settlement as the oil royalties were their rights as well.

"Doing things in such a hushed fashion, the people do not even know. The people want to know what action the government plans to take," the former Terengganu state executive councillor added to the daily.

At a press conference in Petaling Jaya yesterday, PKR secretary-general Saifuddin Nasution had also demanded that Putrajaya reveal the terms of its settlement Terengganu over the multibillion ringgit suit.

He asked how much the state government stood to gain from the settlement, saying there would be "no element of finality" to the dispute of its terms are not publicly revealed.

"PKR believes the Terengganu people need an immediate explanation on this latest development.

"An honest and open explanation on the terms of settlement, on how much the Terengganu government is being paid for its oil, should not be too difficult if the government is truly responsible and respects its people," he said.

The Machang MP also demanded to know the actual total of wang ehsan (goodwill payments) and royalties that the Terengganu government has received between 2001 and 2011, taking into consideration that global oil prices had fluctuated from as low as USD20 per barrel to USD100 per barrel.

According to The Edge Financial Daily on Monday, the now BN-led Terengganu government had withdrawn its civil suit against Petronas and the federal government on March 21 but did not provide details of its out-of-court settlement.

"We are not in a position to explain the settlement terms as these are under the purview of the federal government and the Terengganu government," the financial daily had quoted Petronas as saying.

Petronas had signed a profit-sharing deal shortly after being incorporated in 1974 where the states of the federation receive five per cent in royalties for fossil fuel discovered in their territories and sold by Petronas.

But when Terengganu fell to PAS in 1999, then prime minister Tun Dr Mahathir Mohamad ordered Petronas to rescind oil royalties in September 2000 on the grounds that the opposition party did not have the ability to manage the funds of over half a billion ringgit annually.

The royalties were instead channelled through wang ehsan (goodwill payments) which opposition leaders and some BN politicians have claimed were mismanaged and directed to prestige projects such as the Monsoon Cup and the Crystal Mosque.

Datuk Seri Abdul Hadi Awang's administration filed the suit in March 2001 insisting the federal government's orders were illegal as the state's agreement was exclusively with Petronas.

The case has not proceeded significantly and in 2009, Putrajaya decided to reinstate the royalty payments to the state which had already returned to BN rule.

But the east coast state still demanded RM2.8 billion in compensation for the nine-year lapse, rejecting the federal government's offer of RM1.7 billion.

Terengganu received RM7.13 billion in royalties for the 22 years up to March 2000 when Petronas halted the payments.

During this period, global oil prices averaged at just over US$20 (RM61) per barrel but in the last six years, it was US$87.

In August 2010, PAS-controlled Kelantan launched a suit against Petronas for failing to pay royalty for oil and gas extracted within its territory including the overlapping areas with Terengganu, Thailand and Vietnam which has seen joint-development deals with the federal government.

It says it is owed RM800 million annually since 2005 but Putrajaya has disputed the state's claims over the territorial waters where the joint-development projects are located
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Bumiputera equity rises to RM168b in 2010

Prime Minister Datuk Seri Najib Razak chairing the Bumiputera Agenda Action Council meeting in Putrajaya yesterday. Bernama pic

New Straits Times, 24 April 2012

KUALA LUMPUR: PRIME Minister Datuk Seri Najib Razak said Bumiputera equity in the corporate sector expanded to 23.09 per cent, or RM167.7 billion, in 2010 from RM127.4 billion in 2008.

This is based on the total corporate equity of RM726.4 billion in 2010, compared with RM581.8 billion in 2008.

In a statement issued by Unit Peneraju Agenda Bumiputera (Teraju) in Putrajaya yesterday, Najib said Bumiputera corporate equity included those held by individuals; institutions that handled Bumiputera funds, such as Lembaga Tabung Haji (LTH) and the Armed Forces Pension Fund, and trust agencies mandated by the government to boost Bumiputera participation in the economy, such as Permodalan Nasional Bhd (PNB), Perbadanan Usahawan Nasional Bhd, Majlis Amanah Rakyat (Mara) and state economic development corporations.

Najib had earlier chaired the Bumiputera Agenda Action Council (MTAB) meeting.

According to the Economic Planning Unit (EPU) of the Prime Minister’s Department, Bumiputera equity ownership was the highest in the financial, insurance and takaful sector.

This sector saw Bumiputera equity rise from 37.56 per cent in 2009 to 38.97 per cent in 2010.

In terms of value, Bumiputera equity in this sector rose 22.5 per cent to RM65.37 billion in 2010, from RM53.35 billion in 2009.

“Among all industries, wholesale and retail has the highest number of Bumiputera companies.

However, the number has declined from 73,230 companies in 2009 to 70,216 in 2010.”

EPU attributed the increase to the government’s commitment to the Bumiputera development agenda, for example, reinforcing the role of Bumiputera institutions, such as Mara, PNB, LTH, Urban Development Corporation and Amanah Hartanah Bumiputera.

Bumiputera corporate equity ownership is further strengthened by widening the interpretation of corporate equity to include property, asset and intellectual property ownership.

Together with the setting up of Teraju, or Bumiputera Agenda Driving Unit, EPU said, these initiatives would help the government achieve its target of 30 per cent Bumiputera equity ownership by 2020.

On the possibility of achieving this target by 2020, Bernama quoted Najib as saying it would depend on several factors, including domestic and foreign economic conditions.

“According to our analysis, if the economy can grow like in the last one or two years and we can maintain this momentum, there is a good chance, Insya Allah (God willing), that the 30 per cent can be achieved by 2020.”

He said the 15-month-old Teraju had identified 130 Bumiputera small- and medium-sized enterprises (SMEs) under its TeraS programme.

Under t he prog ramme, high-performing SMEs with good growth potential will be developed to grow beyond local markets through merit-based access to business opportunities.

He said Teraju had collaborated with two core companies under TeraS: Ahmad Zaki Resources Bhd (AZRB) dan MITC Ancasa Hotel (M) Sdn Bhd.

The partnership aims to create more bu si ne s s opp or t unities for smaller introduce a supply chain development programme, where the company will offer supply contracts worth RM500 million to Bumiputera companies within two years.

MITC Ancasa Hotel will invest RM100 million within three years to expand its business aggressively, thus providing opportunities for Bumiputera companies through spin-offs in the tourism sector such as halal food, logistics and cultural activities.

On the disposal of 10 companies — five under  PNB and five subsidiaries of Khazanah Nasional Bhd — to Bumiputera companies through open tender,  as announced at the last MTAB meeting in February, Najib said the names of the companies would be announced soon as they needed to  get the approval from the board of directors.

Najib also said Yayasan Peneraju Pendidikan Bumiputera (YPPB)’s Peneraju Tunas programme has so far received 8,000 applications from SPM and STPM holders. In the first phase, 225 students will be offered scholarships to further their studies at the foundation level, A levels, International Baccalaureate as well as diploma and degree.

YPPB will also introduce its second signature programme, called “Peneraju Profesional Akauntan” to increase the number of certified Bumiputera accountants. This programme is a collaboration between YPPB and Mara, which will also involves other major accounting firms in the country such as PricewaterhouseCoopers, Ernst & Young and KPMG.

Najib also announced income tax exemption for cash or in-kind contributions to YPPB Fund, which aims at expanding the number of Bumiputeras pursuing the tertiary education level.

Cheaper power with competitive bidding

STAR, 25 April 2012

A MORE competitive bidding process seems to be emerging in the power sector.

The first-generation independent power producers (IPPs) have been asked to put in their proposals for possible extension of their power purchase agreements (PPAs), which will mostly expire in 2016/17.

But approval is not going to be automatic; it will be based on the cheapest cost of electricity.

“If these IPPs can produce electricity that is cheaper than the new power plants, they are likely to be considered,'' said an industry player.

The first gauge of competitiveness, said analysts, would be against the cost of producing electricity from the Prai combined cycle gas turbine power plant, for which nine consortia and sole bidders have been shortlisted to take part in the tender process.

“If these IPPs can produce electricity that is cheaper than the Prai plant, the plan appears to be an initial uptake of 2,500 megawatts,'' said an analyst.

The first-generation IPPs YTL Power International Bhd; Segari Energy Ventures Sdn Bhd (a subsidiary of Malakoff); Port Dickson Power of the Sime Darby group; Powertek Bhd and Genting Sanyen Power Sdn Bhd have a combined capacity of 4,150MW.

1Malaysia Development Bhd (1MDB) had earlier announced it would acquire the power assets of Tanjong plc which would include Tanjong's wholly-owned unit, Powertek, the holding company of Pendekar Power.

These IPPs can submit bids for possible extension of up to 10 years, subject to some conditions, including reducing capacity payment for four years from now till the end of their current agreements.

“They are still preparing the bids,'' said the analyst. “It will probably take until September or October.''

Originally, the first-generation IPPs were supposed to negotiate for their PPA extensions on a one-on-one basis; however, Tenaga Nasional Bhd (TNB) was said to be firm in its stand that these IPPs had already made a lot of money.

Currently, these IPPs are also part of the nine consortia and sole bidders taking part in the tender process for the Prai plant.

Based on the cheapest cost of producing electricity, industry players have voiced their concerns that Tenaga Nasional Bhd (which owns the site for Prai power plant) and Petroliam Nasional Bhd (which controls the availability of gas) could be in a more advantageous position to lower costs.

The consortia comprise 1MDB, which has teamed up with South Korean conglomerate Hyundai Engineering & Construction; YTL Power with Marubeni Corp of Japan; CI Holdings Bhd and Teknologi Tenaga Perlis Consortium Sdn Bhd with Daelim Industrial Co Ltd of South Korea; Amcorp Power Sdn Bhd with Japanese group Mitsui & Co Ltd; and Malakoff and Petronas Power Sdn Bhd with Mitsubishi Corp of Japan.

Sole bidders are represented by local players Pendekar Power, Mastika Lagenda Sdn Bhd, an indirect 97.7%-owned subsidiary of Genting Bhdand the holding company of Genting Sanyen; TNB and Sime Darby Power Sdn Bhd.

Outdoor ad firms decry NS plan to privatise billboards

Malaysiakini, 23 April 2012

Some 12 outdoor advertising companies in Negri Sembilan are furious over a privatisation policy introduced by the state government to hand over the ownership and management of all billboards in the state to a single company.

The company allowed to monopolise the multi-million ringgit business is said to have no track record in the advertising industry, and will allegedly hike the billboard rental to more than 10 times the current cost.

According to Alex Yew, the vice-president of the Outdoor Advertising Association of Malaysia (OAAM), billboards were previously under the purview of local governments.

For the past 20 years, he said, media owners who wish to erect a billboard would apply to the local council, detailing the billboard’s location and size.

“If the council thinks it is appropriate, it will issue a licence and temporary occupation licence (TOL) for state land, and the media owner will construct the billboard and make annual payments for both the licence and TOL," Yew explained to Malaysiakini.

“If the billboard is constructed on private land, the media owners will still need to apply to the local council for a licence and pay an annual licence fee, but the rental will be paid to the landowner."

Their nightmare began in October 2011 when the state government decided to transfer the local government’s authority over billboards to Yayasan Negri Sembilan (YNS), a state foundation chaired by Menteri Besar Mohamad Hasan.

The reasons given by the state government, said Yew, were that it needs to standardise the billboard format and to fund the charity and welfare programmes under YNS.

“Using this as an excuse, they instructed us to take down all our  billboards and refused to renew our licences,” claimed Yew.

He is also director of operations of Kurnia Outdoor Sdn Bhd, a company under Big Tree Outdoor Sdn Bhd which is affected by the privatisation.

Malaysiakini obtained copies of official letters written by YNS director Jamaludin Abu Bakar to media owners, instructing them to dismantle their billboards within 14 days as their licences had expired on Dec 31, 2011.

“If (you fail) to do so, the council will take down the structure and all the (related) costs will be borne by your company,” reads the letter.

Under the privatisation plan, YNS has appointed a private company, Semarak Media Sdn Bhd, to replace all billboards in the state according to the new format and lease these to the media owners, said Yew.

Even for the billboards on private land, YNS has asked media owners to surrender their contracts with the landowners together with the rental rights to Semarak Media, revealed Yew.

The copies of YNS letters to media owners obtained by Malaysiakinishowed that copies were sent to Semarak Media.

Rental 12 times higher

Yew described the new rental rate imposed by YNS as “daylight robbery”.

For example, the media owners were verbally informed that the annual rental for a 40x10ft billboard has skyrocketed to RM18,000, over 12 times higher that the previous annual fee for licence and TOL, which was less than RM1,500.

“The rate is unfair. They based it on Klang Valley rate. This is a no-brainer, no advertiser will take up the billboards,” said Yew, adding that the privatisation policy is clearly a grossly unfair monopoly.

The current cost for a 40x10ft billboard in the Klang Valley can be as much as RM36,000 per year.

The new policy will affect some 200 billboards in the state operated by some 12 media owners including major outdoor advertising companies Big Tree, UPD, Gelombang Jaya and Seni Jaya.

The annual revenue generated is between RM5 million and RM6 million. If the rental is hiked up 10 times after privatisation, the amount would balloon by RM50 million to RM60 million.

According to Yew, YNS had explained that the foundation has no knowledge in managing such a business, hence the decision to appoint Semarak Media.

“YNS also claimed that the new policy had been endorsed by the state exco,” he said.

However media owners argued they are more than willing to follow the new billboard format or guidelines set by YNS, and the foundation can deal directly with them without the involvement of a third party.

“You might as well deal with the existing companies. We are happy to follow your guidelines. Why give it to a new company which just comes in to mark up the price by 10 times more?” queried Yew.

Newbie in advertising industry

According to Yew, who has 28 years of experience in the outdoor advertising industry, neither the shareholders nor directors of Semarak Media have any experience in the industry.

“If you want to privatise the business, at least have an open tender and give to existing operators. Why give to a company with no experience at all?” he asked.

A search with the Companies Commission of Malaysia revealed that Semarak Media is a dormant company with RM1 million paid-up capital.

Aside from a registration address, it has no business address.

The company directors are listed as Ibrahim Abdullah, Teh Hee Lok, Teh Jin Chin and Chan Tiam Hin. All except Ibrahim are shareholders of the company. Another shareholder is named as Tee Lok Teck.

The media owners as well as OAAM have held a few meetings with YNS but the latter is adamant about continuing with the privatisation move, said Yew.

“They gave us the lame excuse that they had signed an agreement with Semarak Media, so they must proceed with the plan.”

Several demands from the frustrated media owners to meet with the state secretary and menteri besar to present their case were rejected. A memorandum and an appeal were also sent but to no avail.

“Hear us out, maybe we can come up with a win-win solution,” Yew pleaded.

Move may be expanded to other states

The current situation is critical, Yew said, as YNS has started to forcibly take down some of the billboards after the media owners refused to abide by its order.

Semarak Media even wrote to the advertisers asking them to skip the media owners and deal with it directly, and some advertisers who are in dire need for advertising space have engaged the company, claimed Yew.

He disclosed that the privatisation model was first started six years ago in Malacca and emulated by Perlis last year. The media owners had compromised at the time because there are comparatively fewer billboards in both states than in other states.

The Johor Baru Tengah Municipal Council has also privatised the business to a private company, he said.

The media owners are worried that the same model will be expanded to other states after Negri Sembilan.

“When you monopolise the business, there will be no competition. The price will go up and there will be no innovation in the industry.

“It does not add any extra value to the state or the general economy. Instead the revenue from the industry will drop,” warned Yew.

Malaysiakini has contacted YNS on the matter but the foundation has yet to respond.