PAC to probe Khazanah’s role in KLIA2, MAS-AirAsia fiasco

Malaysian Insider, 21 September 2013

The Public Accounts Committee (PAC) will look into Khazanah Nasional Bhd's role in delays and rising costs of the KLIA2 project and the Malaysia Airlines-AirAsia share swap that led to a RM20 million anti-trust fine, says its chairman Datuk Nur Jazlan Mohamed (pic).

He said PAC will probe the roles of consultants and merchant bankers in these deals although both MAS and MAHB are public listed companies with state asset manager Khazanah as the main shareholder.

“Khazanah should not rely solely on consultants for advice,” Nur Jazlan told The Malaysian Insider in Kuala Lumpur, adding the consultants were only motivated by profit and at times overlooked the laws governing a transaction.

“The deal should not have happened in the first place to avoid these losses. In fact, the Auditor-General, for the first time, is already doing audit on Khazanah, even before PAC brought this issue up,” said the accountant by training.

The KLIA2 project was initially budgeted at RM1.6 billion but has now grown into a RM4-billion project after several amendments. It was initially slated to open in September 2011 but has been delayed five times and is now expected to be ready by April 2014.

Media reports say MAHB has received a staggering 230 non-compliance reports for the budget terminal, including cracks in the buildings as well as ceilings that were built too low, requiring them to be torn down and rebuilt.

In the case of the airlines, the Malaysian Competition Commission (MyCC) imposed a fine of RM10 million each on national carrier MAS and Asia's largest budget airline, AirAsia, for monopolising four routes during their short-lived eight-month pact.

Both airlines have up to October to appeal the fines.

Nur Jazlan pointed out the Auditor-General has the powers to probe Khazanah although most of its companies are listed and are under the Securities Commission.

He also emphasised that PAC was not questioning government policy, but was merely looking at the way projects were being implemented. Only he and PAC deputy chairman, Kepong MP Tan Seng Giaw, have been appointed to the committee. Others are to be named after parliament resumes next week.

The three-term Pulai MP said it was timely for the Auditor-General to look into the corporate governance of Khazanah as "custodians to public invested funds" as his past experience as a Telekom Malaysia Bhd director showed the need for oversight beyond just financial procedures.

Saying he was made a board member based on his credentials as a chartered accountant and council member of the Malaysian Institute of Accountants, Nur Jazlan said, "In 2005, TM wanted to launch the 3G service and the management wanted Alcatel Telecom which did not have commercially deployed 3G equipment while other companies like Ericson and Hua Wei already had.

"As TM's audit committee chairman, I suspected irregularities in the procurement process and wanted the board to investigate it.

“And I quit as the audit committee chairman after the irregularities were not investigated.”

Two years after Nur Jazlan quit the board, the United States Justice Department indicted Alcatel for bribery and giving kickbacks to Telekom executives.

“So I took a huge risk. I resigned, but two years later, it proved my decision was right,” he said.

The no-nonsense politician, now dubbed ‘PAC man’, said he wants to create the idea of the ‘fear of being audited’ as previously no one feared being audited as they would not be held accountable.

“PAC and Auditor-General’s Department work hand in hand. The AG is trying to change their method from a value for money audit to performance audit.

“Currently, government officers who had committed offences were not afraid as nothing is being done to them. There is no accountability. So what the Auditor-General’s Department is doing is to go with performance audit with the aim to change that culture,” Nur Jazlan added.

He also said besides fraud and corruption, most of the expenditure wastage was due to poor planning.

"For example, when a department wants to starts a highway project, but the company has yet to acquire all the lands along the route. Hence, where there is a delay, it would eventually be a liability to the government. It is poor planning and execution,” he said. -September 21, 2013

MyCC imposes proposed interim measures to Pan-Malaysia Lorry Owners Association

New Straits Times, 20 September 2013

KUALA LUMPUR: The Malaysia Competition Commission ('MyCC’) today issued a proposed Interim Measures under Section 35(4) of the Competition Act 2010 against the Pan-Malaysia Lorry Owners Association ('PMLOA’), its members and related lorry enterprises on a probable infringement of Section 4(2)(a) of the Competition Act 2010 ('the Act’) by agreeing to fix an increase of transportation charges by 15 percent.

"This follows the warning given earlier by the MyCC to associations not to facilitate anti-competitive behavior, especially price fixing,” said MyCC CEO,Shila Dorai Raj.

“It serves to further reinforce the fact that the MyCC is seriously looking at evidence of anti-competitive behavior in the rampant price hikes following the recent rationalisation of fuel subsidy.”

"The Commission considers that it is necessary for it to impose such measures under Section 35(4) of the Act to prevent serious and irreparable economic damage and to protect public interest.

"The MyCC has issued the notices to PMLOA, and 40 other parties comprising members of the PMLOA and lorry enterprises.

The proposed Interim Measures states the following:
(a) PMLOA, members of PMLOA and the relevant lorry enterprises are directed to suspend the effect of, and desist from acting in accordance with,the decision made by the PMLOA during its 3rd Central Committee Meeting dated 7th September 2013 whereby it was decided that transportation charges are to be adjusted by a maximum of 15% ('transportation charge’).

MyCC has reasonable ground that the decision has infringed or is likely to infringe section 4(2)(a)of the Competition Act 2010; and

(b) PMLOA is hereby directed to refrain from deciding on any further increment or fixation, whether directly or indirectly, the transportation charge.

As for the 11 members of PMLOA, they are directed to refrain from implementing the PMLOA’s decision on behalf of its members.

As for the relevant lorry enterprises, they are directed to refrain from implementing the abovementioned decision by the PMLOA and its member enterprises as to any further increment or fixation, whether directly or indirectly, of thet ransportation charge.

The PMLOA, members of PMLOA and the relevant lorry enterprises were given 7 working days to submit written representations from the date the notices were served against them.

Earlier on, the PMLOA had issued a statement that was published in the local papers on 11th September 2013 stating that PMLOA was unanimous in its decision to raise transportation charges by 15 percent.

RM10 million fine each for MAS, AirAsia in anti-trust case

Malaysian Insider, 6 September 2013

Flag carrier Malaysia Airlines (MAS) and AirAsia have been fined RM10 million each for their short-lived share swap which was found to have distorted the domestic aviation service.

The Malaysia Competition Commission (MyCC) said both airlines had infringed Section 4(2)(b) of the Competition Act 2010 by sharing their markets in their eight-month pact.

“Market sharing is considered a serious infringement under the Act as it is deemed to have the object of significantly preventing, restricting, or distorting competition in any market for goods and services,” said MyCC chairman Tan Sri Siti Norma Yaakob in a statement released in Kuala Lumpur today.

“When businesses agree to share markets, they are agreeing to stop competing at the expense of the consumers,” she said.

Monopolies are not illegal in Malaysia per se, but anti-competitive behaviour is an offence under the Competition Act 2010. MyCC deals with allegations of firms partaking in deals that restrict, prevent or distort competition in any market involving goods or services.

The statement said the financial penalties imposed on the two airlines were based on the turnover earned between January 1, 2012 and April 30, 2012 for the Kuala Lumpur-Kuching, Kuala Lumpur-Kota Kinabalu, Kuala Lumpur-Sandakan and Kuala Lumpur-Sibu routes.

"The MyCC concludes that in respect of the infringement of Section 4(2)(b) of the Act, the MyCC will impose a financial penalty of RM10 million on MAS and AirAsia respectively," she said.

The financial penalties are less than 10% of their respective worldwide turnovers between January and April 2012, MyCC said.

The two airlines have 30 days from today to respond to the commission’s decision.

On August 9, 2011, MAS, AirAsia and AirAsia X Sdn. Bhd. entered into a Comprehensive Collaboration Framework with the declared aim to sharpen the focus of core competencies, deliver better product and choice for customers and ultimately create greater value for all stakeholders.

The agreement also witnessed Khazanah Nasional Berhad and Tune Air Sdn Bhd entering into a share swap arrangement which resulted in cross-holding of shares between the two companies.

Tune Air Sdn. Bhd obtained a 20.5% stake in MAS and Khazanah Nasional Berhad obtained a 10% shareholding in AirAsia under the share swap.

It was also agreed between the parties that MAS was to be only a full-service premium carrier, while AirAsia and AAX will be regional low-cost and medium-to-long haul low-cost carriers respectively.

However, the swap agreement was rescinded in May 2012 due to difference of opinions between the parties and complaints were made to MyCC that the share swap would create a monopoly in domestic routes and raise fares.

According to MyCC, the body tasked with probing complaints of anti-competitive behaviour in local and foreign firms operating in Malaysia, it has received 40 complaints in total since it came into force in January 2012. - September 6, 2013.

Eateries allowed to increase food prices by only 0.1%

STAR, 4 September 2013

PETALING JAYA: Eateries which increase food prices after the fuel price hike will face stern action, says Domestic Trade, Cooperatives and Consumerism Minister Datuk Hasan Malek.

He said that unfair price increases were defined by sudden hikes and prices that were not in line with the market norm.

“If your neighbourhood mamak restaurant is selling roti canai at RM1.50 when a week ago it was RM1, you should call the ministry. Another suspicious sign is when shops refuse to exhibit price tags.

“Consumers must report in with the exact facts so we can act immediately. Anything more than a 0.1% hike in prices will be looked into,” he said yesterday.

Hasan urged consumers who encountered unfair profiteering to call the ministry hotline at 1-800-886-800, or email in to e-aduan@kpdnkk.gov.my.

He said those found to have in­­creased prices without permission could be charged under the Price Control and Anti-Profiteering Act 2010.

Separately, the Land Public Trans­port Commission (SPAD) warned taxi drivers against raising fares.

SPAD chairman Tan Sri Syed Hamid Albar advised taxi firms to wait for the commission’s impact study on the fuel price hikes before it issues its recommendations.

On how soon the price review for public transport would be implemented, Syed Hamid said: “Don’t ask me for an exact date but we are working hard on it.”

He said requests for increase in fares by public transport companies were justifiable.

“But SPAD has to look into the quantum and how it would affect the public.”

RON95 petrol, diesel up 20 sen from midnight

STAR, 2 September 2013

PUTRAJAYA: Price for RON95 petrol and diesel will be raised by 20 sen per liter from midnight.

The move is aimed at reducing the fiscal deficit, thus saving RM1.1bil per year for the Government, said Prime Minister Datuk Seri Najib Tun Razak.

Najib said despite the increase, the government would still be subsidising 63 sen for RON 95 petrol.

"The subsidy rationalisation will be carried out in many stages. The first is that the price of RON95 and diesel will be increased by 20 sen per litre from 12.01am Tuesday," Najib told a press conference after chairing a meeting of the Fiscal Policy Committee (FPC) on Monday.

The new prices for RON95 will be RM2.10 per litre and RM2.00 for diesel.

To address the burden on low-income and vulnerable groups in the fuel subsidy rationalization, Najib said the quantum for the 1Malaysia People's Aid (BR1M) will be increased in the upcoming national budget announcement.

 Najib also promised that a comprehensive "social safety net" and further fiscal measures would be introduced in the 2014 Budget.

He said the FPC has reaffirmed the Government's commitment to achieve a fiscal deficit target of about 3% of gross domestic product by 2015 and to attain a balanced budget by 2020.

"The moderation in the current account of the balance of payments (BOP), coupled with continued fiscal deficits pose medium-term risks to the economy.

"Currently, our subsidy system benefits everyone, including the higher income group and foreigners.

"Thus, we need to move to a more targeted subsidy system that caters to vulnerable groups," Najib said.

Other measures announced by Najib include giving priority to public sector projects with low-import content and high-multiplier effects.

"Projects with high import components will be sequenced accordingly, so as not to adversely impact the BOP position.

"However, the Mass Rapid Transport (MRT) Lines 1, 2, and 3 will proceed as planned.

"The Southern Corridor High-Speed Rail project is still under negotiations," he said.

Over the medium to longer term, Najib said the Government will diversify the country's export markets and tourism would be given greater focus in the upcoming Visit Malaysia Year 2014.