Competition and Regulation in Malaysia

MYCC to investigate if AirAsia-MAS share swap has made airfares go up

2012-01-15T19:55:00.000-08:00

STAR, 4 January 2012

PETALING JAYA: The Malaysia Competition Commission (MYCC) wants AirAsia Bhd and Malaysia Airlines (MAS) to provide more information and documents regarding their share swap agreement to find out if it could potentially put air travellers at a disadvantage.

The MYCC, which began operations yesterday, would continue its probe if there was a breach of anti- competitive behaviour and abuse of dominant position in the deal which was signed in August.

It is also surprising that no one has lodged a complaint with the commission regarding the AirAsia/MAS share swap and collaborative deal even though it was widely criticised by many quarters.

The share swap and collaboration agreement forged between the two airlines had raised concerns that the absence of competition would result in more expensive airfares.

The MYCC is established under the Competition Commission Act 2010 to enforce the Competition Act 2010. Its main role is to protect the competitive process in the interest of businesses, consumers and the economy.

When contacted, MYCC chief executive officer Shila Dorai Raj said the commission had only received verbal complaints on the share swap issue. There are three ways for the MYCC to begin an investigation via a complaint lodged by someone with the commission, on its own accord or a directive from the Domestic Trade and Consumer Affairs Minister.

In the case of the share swap/collaboration agreement, Shila said the commission was acting on its own accord given the brouhaha surrounding the deal.

“We are going to request for information from both the airlines with regards to the share swap and collaboration, which were supposed to have been concluded in November. We need to know the exact contents of the agreement,” she said.

Without the documents, it would be impossible for the commission to make a conclusive study especially an economic analysis on the impact of such a collaboration on the consumers.

However, the commission “is not empowered to examine mergers and acquisitions.” Shila explained that it did not prevent the commission from checking on the collaborative activities arising after the merger and whether the activities were anti-competitive.

The commission is likely to give both airlines until the end of the month to revert with the information and documents that it needs to investigate the matter.

The commission also has the powers to extract information from both the airlines if they failed to oblige with the required documents.

The impact of anti-competition is higher airfares for the consumers. Some travellers in Sabah and Sarawak had alleged that the element of competition had been removed with the suspension of Firefly jet operations soon after the share swap deal was announced.

Under the share-swap deal AirAsia's major shareholder Tune Air Sdn Bhd now holds a 20.5% stake in MAS, while MAS' major shareholder Khazanah Nasional Bhd holds a 10% stake in AirAsia.

Under the collaborative agreement both parties would cooperate in the areas of ground handling, training and engineering among others. “The jet operations have infused competition in the KL-Kota Kinabalu (KK) and KL-Kuching sectors and fares were competitive but now the fares are not as competitive,” said an air traveller who commuted between KK and KL.

Whether the MYCC would find anything conclusive or if it has the clout to take both the airlines to task remained to be seen but AirAsia's sister airline, AirAsia X (AAX) surprised many travellers when it offered flat pricing for its KL-Dehli and KL-Mumbai routes.

“There is no longer the pull factor. Its pricing is now closer to what full service carriers offer, so where is the promise that low cost fares are 30% to 40% lower than full service carriers?” another traveller asked.

A check on the airline's web-site reveals that its KL to Mumbai airfare is RM694 (fares only) and for KL-Dehli, it is RM894 (fares only) unlike other destinations where there are several classes of high and low fares. The fares are applicable from Feb 15 to Oct 15 and the same rate is offered on the return journey.

“Whether it ties up with what the market is speculating (that the airline would suspend flights to India and Europe) is unclear, but for a low cost airline to charge like a full service carrier seems very strange,” the traveller added.

AAX CEO Azran Osman Rani, when contacted, said: “It is a commercial decision to have such fares. They are our non-promotional fares but we are working on a sale.” He declined to elaborate on the sale.

He added that the fares were structured in that manner because the cost to fly into Indian airports was higher than to Australia and the demand for flights to northern India was lower compared with southern India. “In reality, the airfares do not commensurate with cost,” he said.

Asked when AAX would begin plying the KL-Sydney route as there were talks that it would begin mounting flights to the capital city in April ahead of its rival, Scoot, Azran said: “Right now we have not received all the approvals, but we remain interested in Sydney.” Scoot is planning flights from Singapore to Sydney in the middle of this year.

SPAD: Meet state government to settle woes

2012-01-13T16:30:00.000-08:00

STAR, 9 January 2012

PUTRAJAYA: The Land Public Transport Commission (SPAD) has urged the Malacca Omnibus Operators Association to meet the state government to resolve its financial woes.

SPAD chairman Tan Sri Syed Hamid Albar said the problem could be settled if the group discussed the matter so that an agreement could be reached.

He said there was a need to review the public transport system in the state.

“We need to examine the whole system, including the ticketing system, routes and fares, among others, to improve the current situation. Bus operators should also be financially ready to compete with one another,” he told The Star.

The Government, he said, had come up with short-term measures to help keep bus services, particularly on unprofitable routes in rural areas, afloat.

On Dec 19, the Government pledged a RM400mil fund to support troubled stage bus companies. SPAD began receiving applications on Jan 3.

Stage bus operators in Malacca had threatened to halt their services from Feb 1 in protest over the state government's failure to solve the concessionaires' woes.

Malacca Omnibus Operators Association president Razali Endun said 10 of the concessionaires decided to halt their buses after no financial lifeline was rendered as pledged by the state government.

“The impending strike was aimed at forcing the state government to pay compensation to the ailing bus operators as promised in July.

“We have waited for the monetary assistance until Dec 31 but there was no response from the state government,” he said.

Last November, the Malacca Government agreed to buy all 10 stage bus companies servicing about 130 routes in order to alleviate the financial burden faced by the local concessionaire.

Razali said the bus operators suffered huge financial losses as much of their earnings were allocated for maintenance of their aging fleet, besides salary payments to about 1,500 staff.

“Our woes are further compounded by the existence of state government-funded bus service Panaroma which services lucrative routes.

“We are forced to ply the social route that is not covered by Panaroma, which is unfair to us,” he added.

SPAN and NGO at odds over RM1.7bil NRW findings

2012-01-13T16:27:00.000-08:00

STAR, 9 January 2012

PETALING JAYA: The National Water Services Commission (SPAN) and an NGO continue to lock horns over the issue of reducing Non-Revenue Water (NRW).

NRW is water that has been treated and is “lost” either through leaks, thefts or metering inaccuracies before reaching the customers.

Association of Water and Energy Research Malaysia (Awer), recently revealed that the country's water industry lost RM1.7bil to NRW in 2010.

Awer president S. Piarapakaran said that as a technical regulator, SPAN must set the procedures and guidelines to ensure that water quality was not compromised.

“To realise this, SPAN must prepare the National NRW Reduction Action Plan and not let water operators tell SPAN what to do,” he said in a statement yesterday.

He was referring to SPAN's statement that the loss was due to insufficient funding to replace aging pipe networks as well as poor construction and maintenance.

Piarapakaran said SPAN was formed to improve the operational efficiency of the industry and in particular the reduction of NRW through short, medium and long-term programmes as outlined in the SPAN Act 2006.

Meanwhile, a SPAN spokesman said the RM1.7bil figure is highly erroneous.

“It is not only misleading, it can also cause unnecessary alarm,” he said.

2014 water crisis warning

2012-01-13T16:25:00.000-08:00

STAR, 14 January 2012

PETALING JAYA: Selangor may experience a water crisis before 2014 if the state government keeps delaying construction of the Langat 2 water treatment plant, warned the Association of Water and Energy Research Malaysia (Awer).

Its president S. Piarapakaran said a study it conducted concluded that 2014 would be a “suitable candidate” for a water crisis to occur in Selangor if the demand for water increased between 2% and 2.5%.

“If the annual demand increase is higher (than that), the crisis might hit the Klang Valley earlier,” he said in a statement yesterday.

He said the average increase of treated water production annually from 2007 to 2010 was 2.14%.

According to the Malaysia Water Industry Guide 2011, Selangor (including Kuala Lumpur and Putrajaya), produced 3,889mld, 3,926 and 4,063 million litres of water per day in 2008, 2009 and 2010 respectively.

To prevent such a crisis, Piarapakaran urged the state and Federal governments to set aside their differences and work together to prevent such a crisis, including ensuring water concessionaires were regulated and fully-licensed under the Water Services Industry Act (WSIA) 2006.

Pointing out that the water services industry restructuring process had been “hibernating” since 2008, he stressed that the Pahang-Selangor Raw Water Transfer project and Langat 2 water treatment plant must go forward.

“Delay in building the Langat 2 treatment plant will escalate the cost, which will be passed on through the tariff eventually,” he said, adding that water should not be politicised.

Piarapakaran said the Langat 2 treatment plant was much more cost-effective and reliable compared with the Selangor government's suggestion of constructing more groundwater extraction plants.

“Groundwater extractions also come with many other environmental impacts such as hydraulic cracks and instability of ecosystem,” he said, adding that it might not successfully work during a water crisis either.

Privatise waste management, states advised

2012-01-13T16:23:00.000-08:00

STAR, 14 January 2012

KUALA LUMPUR: Selangor and Penang have been urged to privatise their solid waste management, as had been done by the other states and the Federal Territories in peninsular Malaysia under the Solid Waste and Public Cleansing Act.

Perak had also recently agreed to privatise its solid waste management and be regulated by the Act by the end of the year.

Housing and Local Government Minister Datuk Seri Chor Chee Heung urged Selangor and Penang to do so as soon as possible to ensure good public health.

The Act provides for, among others, the separation of wastes, storage, collection, transportation, processing, recycling and disposal.

The Federal Territories of Kuala Lumpur and Putrajaya as well as Pahang, Kelantan and Terengganu are supervised by Alam Flora Sdn Bhd; Kedah and Perlis by Environment Idaman Sdn Bhd and Johor, Malacca and Negri Sembilan by SWM Environment Sdn Bhd.

“The privatisation of solid waste management will not incur any additional charge for consumers as the Federal Government will bear all the extra costs,” Chor said after presenting mobile bins to residents in Taman Desa here yesterday.

Three million units of mobile bins will be distributed in stages to residents and business owners in all local councils to improve solid waste management efficiency.

Chor said the first phase from Sept 1 involved the distribution of bins to residents under the jurisdiction of Kuala Lumpur City Hall and the various city councils.

“The second phase under the municipal councils will be done by Sept 1 next year and for district councils, from Sept 1, 2014,” he said, adding that all bins came with a cover and were able to prevent leaking from leachate.

Chor said owners of landed properties would get a 120-litre bin each while those who lived in high-rise buildings would be given either a 60-litre or 110-litre bin each and commercial property owners would receive a 240-litre bin each.

Cityliner calls it quits after 10 years of losses

2011-11-22T01:12:00.000-08:00

STAR, 18 November 2011

GEORGE TOWN: After 10 years of losses, Konsortium Transnasional Bhd (KTB) is also throwing in the towel in the mainland.

KTB gave the state government a 10-day notice that its Cityliner buses would cease to operate from Nov 21.

“Among the reason given was that most of the routes are not profitable because of competition from other operators,” said Local Government and Traffic Management Committee chairman Chow Kon Yeow yesterday.

“The company is also expecting to post a loss of RM4mil from its mainland operations alone,” he said.

Chow said KTB had proposed that it be appointed a sub-contractor to Rapid Penang and be paid a fixed per kilometre sum in exchange for all collected fares which would be forwarded to Rapid Penang.

“The KTB management also proposed that the state government take over the routes and contract it back to them, also on a fixed per kilometre sum.”

In ALOR SETAR, state Environment, Chinese Community Affairs and Transport Committee chairman Tan Joo Long @ Tan Chow Kang said he had received a letter from a bus company stating its intention to cease operations.

“I am in the midst of the state assembly sitting and have yet to study the contents of the letter. I will only issue a statement next week after finding out more,” he said.

In IPOH, the Perak Government plans to extend its subsidies to more bus operators in various districts to avoid any disruption to bus services.

State executive councillor Datuk Dr Mah Hang Soon said the state government would be holding dialogues with bus operators in Kerian, Larut Matang and Selama, and Kuala Kangsar to find out how it could help the operators.

“I understand that the public transportation industry is running at a loss daily.

“It is a long-standing problem faced by the operators and we are trying our best to help them,” Dr Mah told The Star yesterday.

The state government, he revealed, was currently subsidising about RM72,000 monthly to maintain bus operations in Manjung.

KTB: We cannot subsidise Negri services any more

2011-11-22T01:09:00.000-08:00

STAR, 18 November 2011

SEREMBAN: Konsortium Transnasional Bhd (KTB), the country’s largest bus operator, stopped its stage bus services in Negri Sembilan as its express bus operations could no longer subsidise them.

KTB executive director Tengku Hasmadi Tengku Hashim said the consortium, which owns 1,500 buses, had over the years been providing “social service” subsidised by its profitable express bus operations.

“But the Government’s move to issue express bus permits to many new players covering lucrative routes, particularly over the past five years, affected our revenue from express bus operations.

“Our group has been registering continued losses because our express bus operations were not making enough to subsidise our stage bus business.”

No more business as usual: A handful of people walking around the Terminal 1 bus station yesterday. KTB stopped its stage bus service in Negri Sembilan on Wednesday. — UU BAN / The Star

“Since the new operators are not obliged to provide stage bus services, they have not been badly affected like us,” he told The Star.

KTB has stopped servicing all but a few of its routes in the state, including the Seremban-Kuala Pilah-Bahau, Seremban-Port Dickson and Seremban-Kuala Lumpur expressways.

Tengku Hasmadi, who met Land Public Transport Commission officers yesterday, said he had written to the Kedah, Kelantan, Pahang, Selangor, Penang and Negri Sembilan governments early this year on the company’s predicament.

“We told them that we cannot continue with the stage bus service any more as our operating expenditure had increased significantly while the fares are controlled by the Government,” he said.

Two million TNB consumers to pay 1% levy from Dec 1

2011-11-22T00:56:00.001-08:00

STAR, 22 November 2011

PUTRAJAYA: An estimated two million (25%) of Tenaga Nasional Berhad (TNB) consumers in Peninsular Malaysia will pay a levy of 1% out of their total electricity bills starting Dec 1.

This will follow the launch of the Government's Feed-in Tariff (FiT) system for the development of renewable energy next month.

Energy, Green Technology and Water Minister Datuk Seri Peter Chin said Tuesday that electricity consumers will contribute 1% of their total electricity tariff bills issued by TNB to the Renewable Energy Fund if they use more than 300kWh of electricity per month.

"Nonetheless, 75% of TNB's customers who consume less than 300kWh per month will be exempted from contributing to this fund," Chin told a press conference here.

The FiT system is a funding mechanism under the Renewable Energy Act (REA) 2011 and Sustainable Energy Development Authority (SEDA) Act 2011 designed to encourage the development of renewable energy via cost-sharing among electricity consumers.

It was originally set to be launched in September but was postponed to wait for legal mechanisms under the REA to be in place.

Woodlands move a drain on KTMB

2011-10-29T17:33:00.000-07:00

The Woodlands train station is registering a sharp fall in passenger volume after KTM Berhad moved its operations there from Tanjung Pagar in July.

New Straits Times, 29 October 2011

JOHOR BARU: The shifting of KTM Berhad's railway operations to Woodlands in July following the closure of the Tanjung Pagar railway station has taken its toll on the revenue of the rail company.

Checks showed the company has incurred an average monthly loss of RM1.8 million since July as a result of a decline of between 20 and 30 per cent of passengers using train services to the republic.

KTMB believes most of its customers are instead opting to travel to the republic by express buses, and some by planes, as the Woodlands station is not quite convenient for travellers.

There are seven train services to Singapore daily, and all services stop at the Woodlands checkpoint.
All the trains will make a brief stop at JB Sentral before moving towards Woodlands, which is about one kilometre away.

Industry sources said it is economically not viable to have two stations located too near to each other, more so when both are located near the border of two different countries using different currencies.

In the case of Woodlands, alighting passengers who turned to other modes of transport to reach their destination will have to pay for their fare in Singapore dollars.

For those who travel to the republic by express bus, the problem does not arise.

KTMB president Dr Aminuddin Adnan told the New Sunday Times that there are no plans to stop all seven trips to Woodlands despite the losses.

"It is too early to conclude the whole picture. We will wait and see before planning the next course of action.

"Our customers are basically from the middle-income bracket. We believe those who have abandoned our service are those who do not want any inconvenience throughout their journey, especially when they reach Singapore."

The Tanjong Pagar station became part of KTMB's history following the departure of the last train piloted by the Sultan of Johor at 11.03pm on June 30.

Dr Aminuddin said KTMB is trying to offset the losses by capitalising on the Johor Baru market.

It plans to introduce an additional train service from Tumpat to Johor Baru from next January.

Called the Malayan Tiger, the 14-coach service is believed to be an impetus for the tourism industry in Johor in view that more tourism products are coming up in Iskandar Malaysia.

Meanwhile, Dr Aminuddin said the stripping of the 23km railway track from Tanjong Pagar to Woodlands had been completed.

He said the track weighed a total of about 2,500 tonnes, of which about 70 per cent had been transported back to Malaysia.

The rest, which was still being placed at a temporary storage area in Kranji, will be sent back to the country by the middle of next month.

"We are now demolishing all the locomotive shades and depots and we hope to complete the work by Dec 22," he added.

It was reported that part of the track would be showcased in KTMB museums as a historical exhibit while others would be kept for future use on KTMB tracks throughout the country.

The first museum to display part of the track is the former Johor Baru railway station, which will be turned into a museum soon.

Outcome-based funding for ministries, agencies

2011-10-29T17:30:00.000-07:00

New Straits Times, 29 October 2011

The amount of funding allocated to ministries and government agencies in the 2013 Budget will be measured by their performance next year.

Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said ministries and government agencies found to be involved in irregularities or discrepancies in the next Auditor-General's Report will receive lesser funding allocations.

He said the 2012 Budget announced on Oct 7, would be implemented based on an "outcome concept", which linked the performance of each ministry or government agency to the amount of funds allocated in the next annual budget.

"Instead of looking only at the amount of funds spent, an outcome-based budget will scrutinise the benefits, development or profit gained through each ministry or agency's expenditure.

"Any discrepancy or irregularity is bound to show up in the end performance which will directly affect the funding allocated to the ministry or agency in the next budget," he said after launching a 1Malaysia computer centre at Kampung Jelapang Jaya here yesterday.

Husni said the move was being introduced to increase accountability and curb irregularities as revealed in last year's Auditor General's Report.

He pointed out that ministries or agencies found to be involved in misuse of funds or showing disregard for financial procedures would face strict consequences under the Financial Procedure Act 1957.

He also stated that starting next January, under-performing civil servants would be axed.

"We plan to introduce a new scheme whereby slacking is not tolerated and promotions will be tied to each staff's performance record.

"This is meant to create higher credibility and integrity among staff and hopefully the overall quality of the civil service will improve."

He also revealed that a review of the Auditor-General's report in 2009 and last year would be conducted for a comparison.

"We want to see if the measures introduced so far have been effective."

Meanwhile, Husni also announced that the government had agreed to back up SME Bank's acquisition of bonds worth RM3billion to help fund the country's Small and Medium Enterprises (SME) for a period of three years from now until 2013.

He said the government was confident with the bank's new management which succeeded in reducing the non-performing loan ratio for new loans to a minimum level.

AirAsia X slams Malaysia Airports

2011-10-29T17:21:00.000-07:00

Star, 30 October 2011

PUTRAJAYA: AirAsia X, the long-haul budget airline subsidiary of Tune Group, has fired one salvo after another at Malaysia Airports Holdings Berhad (MAHB).

Its chief executive officer Azran Osman-Rani aired his grievances against the airport operator via Twitter yesterday.

What irked him most was the delay in the construction of the new budget terminal at the KL International Airport, KLIA 2, and the recent hike in airport fees imposed by MAHB.

“Would be interesting to sponsor (Powerman Malaysia Duathlon) if 2012 edition held at KLIA. But too bad MAHB will miss construction deadline for KLIA2.

“If the Government allowed AirAsia/Sime Darby to build new low-cost carrier terminal at Labu, it would have been ready by now, no public funds used, and lower charges,” he said, revisiting the old controversy of the Government's earlier nod for AirAsia to build their own terminal in Labu before U-turning in 2009 and ordering MAHB to build the terminal instead.

“MAHB promised the prime minister they could deliver the same.

“Now, delayed construction, public funds cost overruns, and they're hiking fees! Way to go, GLC,” he said.
MAHB had recently announced the International Passenger Service Charge (PSC) and Aircraft Landing and Parking Charges.

The PSC has been raised by 28% from RM25 to RM32 for international passengers departing from LCCT-KLIA and the Terminal 2 Kota Kinabalu.

This has been lambasted by Azran in his series of hard-hitting tweets, saying that there was no consultation in MAHB's decision.

“The critical failure of this knee-jerk policy decision to reinstate airport fee monopolistic increase, is that there is no consultation or analysis.

“We keep taking two steps forward, and get dragged two steps backward. Macam mana nak maju? (How do we progress?)” he asked.

Asked by one of his Twitter followers what he thought was the reason behind the fee increase, Azran had only one word in response: “Tamak! (Greed!)”

When contacted by The Star yesterday, MAHB declined to comment.

RM454mil Q4 loss for TNB

2011-10-28T22:10:00.000-07:00

STAR, 29 October 2011
KUALA LUMPUR: Tenaga Nasional Bhd (TNB) posted a net loss of RM453.9mil for the fourth quarter ended Aug 31 due to higher fuel costs, its second consecutive quarter of losses as widely expected by analysts.

The company reported a net profit of RM555.2mil in the same corresponding period a year ago. Loss per share was 8.33 sen compared with earnings per share of 10.22 sen.

Revenue, however, was 13% higher at RM9.12bil in the fourth quarter from RM8.07bil previously.
For the financial year ended Aug 31, 2011 (FY11), TNB's net profit plunged to RM499.5mil from RM3.2bil in FY10. Revenue for the year was higher at RM32.2bil versus RM30.3mil.

The utility giant's cash has also fallen due to the higher cost incurred. As at Aug 31, TNB's cash and cash equivalents stood at RM3.25bil from RM8.01bil a year ago.

In the second half, TNB reported a 31.4% increase in operating expenses mainly from independent power producer (IPP) energy payment and fuel costs due to higher consumption of oil and distillate and higher coal price and consumption. The IPP energy payment and fuel costs for the second half of FY11 increased by RM3.2bil, or 50.5%, from the first half.

It also made a foreign exchange translation loss of RM227mil for the whole of FY11, compared with a gain of RM632.6mil last year.

TNB president and chief executive officer Datuk Seri Che Khalib Mohamad Noh said the losses were mainly due to continued gas shortage resulting in an additional fuel cost of RM2.1bil from oil and distillate.

“TNB has to burn an additional 1.1 tonnes of coal amounting to RM400mil to supplement the lower gas volume,” he said at a briefing to announce its financial performance.

Che Khalib said its additional fuel cost did not factor in the extra coal it had to burn. “It we were to calculate it, the additional fuel cost would be about RM2.5bil.”

“We started FY11 with high coal prices but it was still manageable as the existing tariff structure allows TNB to partially recover the coal cost. However, in the second half of the financial year, TNB was hit by severe gas curtailment resulting in higher utilisation of distillate and oil.

“The cost of generation using these alternative fuels is five times more expensive compared to the cost of using gas,” he said.

To a question, he said TNB was currently in discussion with Petroliam Nasional Bhd (Petronas) to seek some compensation concerning its huge losses due to severe gas curtailment. However, he said no decision had been reached as talks were ongoing. “Some form of compensation is required,” said Che Khalib.

Concurrently, Che Khalib said TNB was also in discussing with its stakeholders, Petronas, the Governemnt and IPPs to resolve the shortfall in gas supply.

“We don't think the industry can go on longer (with the severe gas curtailment). We are having many discussion at the moment.

He was quoted as saying recently that, on average, TNB was getting about 900 million std cu ft per day (mmscfd), far from the usual rate of 1,250 mmscfd.

Che Khalib said it was unlikely for Petronas to fully restore its gas supply. “I think they have their own challenges as well,” he said.

He added that TNB's first quarter results may be “similar” to that of the fourth quarter and expected FY12 to be challenging. “Profitability is still too early for us.”

Separately, Che Khalib said the fuel cost pass-through mechanism had been formulated but there was no indication when it would be implemented.

He expected electricity demand to grow 4% next year. For FY11, electricity demand in the peninsula recorded a growth of 3.1%, driven by the commercial sector.

Kenneth Eswaran behind new pay-TV venture

2011-10-28T04:29:00.000-07:00

By Jahabar Sadiq
Malaysian Insider, 28 October 2011

KUALA LUMPUR, Oct 28 — Businessman Datuk K.K. Eswaran, who has close ties with Datuk Seri Najib Razak’s family, is behind the new cable television venture Nilamas Corporation Sdn Bhd, which is to start service as early as the first half of next year, say industry sources.
The Malaysian Insider understands that the company, which expects to spend RM2 billion to challenge satellite TV operator Astro for a share of the local market, has now been renamed Asian Broadcasting Network Sdn Bhd. The new brand will be launched next month.

“Datuk Kenneth Eswaran (picture) is behind this venture and his ties with the first family have ensured he got fast approval for the required licences,” an industry source told The Malaysian Insider, referring to the Indian businessman’s preferred name.

Those close to the venture confirmed Eswaran’s interest, pointing out that Nilamas shares two common directors with the businessman’s main corporate vehicle, Pinehill Pacific Berhad. The two are former top civil servants Tan Sri Mohamad Noor Abdul Rahim and Datuk Nik Mohd Amin Nik Abu Bakar.

“Eswaran is politically connected. It’s no surprise he got quick approvals but he now has to launch it,” another industry source said, confirming the new brand name launch is slated for next month.

Eswaran is the deputy executive chairman of Pinehill Pacific, where he is a substantial shareholder. The company has made a few name changes from its original Benta Plantations to Best World Land Bhd in 1995, a year after Eswaran came in, and then renamed Multi Vest Resources Bhd in 2000. It took its present name last January.

The businessman was elected president of the Malaysian Associated Indian Chambers of Commerce and Industry (MAICCI) in June 2008 and was linked to Najib’s family by popular blogger Raja Petra Kamarudin, who edits the Malaysia-Today news portal.

The Star daily reported last week that Nilamas had secured all the requisite licences to offer digital cable TV in the country, and will compete in the pay-TV space with Astro All Asia Networks plc (Astro) and several IPTV providers including Telekom Malaysia Bhd (TM).

The set-up cost for the cable network offering is expected to be more than RM2 billion over a five-year period and Nilamas, according to sources, is looking at a 40:60 equity-debt combination to fund its venture.
Retired navy chief and former armed forces chief Admiral (Ret) Tan Sri Mohd Anwar Mohd Nor is one of the directors of the company, which has invested in a building in Puchong for its broadcasting centre.

The newspaper also said the new station plans to offer entertainment and educational programmes with an interactive focus.

Nilamas secured the requisite licences to offer subscription broadcasting in the country from the industry regulator, Malaysian Communication and Multimedia Commission, on August 11 and with this licence it is allowed to offer broadcasting services for a fee.

The company also has network facilities licences that will allow it to build up a network and also a network service provider licence. The licences are valid for five years.

It has begin hiring people and already has a chief executive officer, television industry veteran Sreedhar Subramaniam, who had served as chief financial officer in NTV7 and also as chief executive of The Malaysian Insider.

The Star quoted sources as saying the company now has 20 people and is looking to expand to 800 by the time of its launch.

Sources also said the company was in talks with numerous content providers but added that it might find it difficult to secure content already sold to competitors such as Astro and TM.

Astro began service in 1996 with 22 channels and took a decade to break even. It currently broadcasts some 125 pay-TV channels in four major languages including eight channels in high definition across Malaysia and Brunei to more than 2.93 million households.

Sources told The Malaysian Insider that the new venture would use fibre for its backhaul which will be leased from fibre operators such as TM, Time dotCom Bhd, Tenaga Nasional Bhd, Fiberail and Fibercom.

Level playing field a long way off

2011-10-28T04:08:00.000-07:00

Written by R B Bhattacharjee

Friday, 09 September 2011

Constituency development funding is in the spotlight again following the recent report in Sin Chew Daily that the Barisan Nasional (BN) coalition is funnelling millions of ringgit in extra allocations to its Members of Parliament (MPs) in seats that it is confident of winning.

The report alleged that in seats where the BN feels it has no chance of winning, the so-called “black” seats, no allocation would be given. On the other hand, seats that are seen to favour BN (“white”) can get up to RM2.5 million per constituency, DAP MP for Bukit Bendera Liew Chin Tong said in a statement. “Grey” seats, where the BN stand some chance would get RM1 million-RM2 million.

Liew called on the prime minister to answer Sin Chew Daily’s allegation and make public the spending under the special category in the budget of the Implementation Coordination Unit (ICU) of the PM’s Department, which has a total budget of RM513.96 million for 2011.

The DAP leader further alleged that it has been a long standing practice of the BN to exclude elected representatives from opposition parties from access to constituency development funds held in custody by the ICU. In most instances where the parliamentary constituency is held by the opposition, Liew said, the funds are handled by the local Umno division chairmen instead.

The PM has been silent so far on the matter, but BN lawmakers contacted by online news site Malaysiakini said extra funds were “normal”, although they brushed aside the suggestion that allocations were increased due to word of an impending general election.

If the allegations are untrue, it would be fairly simple for the PM to debunk them by releasing the information about disbursements of constituency development funds to all MPs, whether government, opposition or independent. In the absence of that disclosure, the public must rely on other sources to draw their own conclusions.

In this context, it is noteworthy that last October, Sungai Siput MP Dr Michael Jeyakumar Devaraj sued the federal government for withholding funds from the Federal Budget 2010 for his constituency. In his affidavit, the lawmaker from Parti Sosialis Malaysia said he had been deprived of funding for three years of his term, while BN MPs had received funding.

Jeyakumar is seeking a writ against the director-general of the ICU and others, to show cause of their authority to exercise discretion to approve and disburse funds from the Federal Consolidated Funds in the Federal Budget.

Jeyakumar also wants a declaration that the Special Constituency Allocation must be provided fairly to all members of parliament in accordance with Article 8(1) of the Federal Constitution.

Perhaps the strongest reaction to date to the allegations in the Sin Chew report has come from Bersih 2.0, the coalition for free and fair elections, which ignited a mass protest against electoral irregularities with a rally on July 9. In a statement, Bersih 2.0 called the alleged discrimination in parliamentary allocations a “crime against democracy”.

It stressed that all Malaysians, regardless of political affiliation or socio-cultural background, should have fair access to constituency fund. “Treating constituency funds as an election tool to induce support is a shameless and corrupt act of misusing public funds, it is an insult to the celebration of Merdeka, as voters should not be effectively forced to vote for a particular party to gain access to this funding,” the statement said.

More significantly, the coalition called upon the federal and all state governments — from both BN and Pakatan Rakyat (PR) — to respect democracy and stop the current practices of giving constituency development funds to only their party representatives.

To date, neither BN nor PR has come forward to deny or disprove this statement. Nor have civil society groups or the public in general expressed the level of disquiet that would signal that a majority of voters are prepared to hold their elected governments to account on such fundamental principles underlying democratic choice.

Although it may be hard for diehard defenders of justice to accept, the democratic process provides ample opportunities for people in power to skew the game in their favour, such as by the selective use of resources to encourage voters to return them to office.

The advantages of incumbency are considerable, and can only be mitigated by the vigilant enforcement of the rules of fair play. It is in this vein perhaps that the Bersih 2.0 statement highlighted the need for legislation to prohibit and criminalise all misconduct that blurs the boundary between party and state or which abuses state resources for partisan purposes.

In order for the democratic system to remain fairly functional, the concept of a level playing field has to be carefully nurtured at every stage of governance, and not just in the run up to the election.

For this to happen, the role of activist groups like Bersih 2.0 in safeguarding the core principles of democracy are clearly catalytic. However, it is a long road that must be patiently travelled before the people at large become sufficiently conscientised about the importance of upholding such principles as accountability, fairness and separation of powers for them to stand up against the unfair distribution of resources.

It is certain that the public will have to live with a stage-managed electoral process until they choose to defend the democratic system against the erosion of its fundamental tenets.

Indeed, although the winds of change may look like they have been gaining strength from outside the government’s ranks, they may well be calmed somewhat when they meet the mountains of cash that will surely be splurged on projects for the rakyat before the next ballot.

Malaysia’s ‘Big Government’ economy a dampener

2011-10-28T04:05:00.000-07:00

Written by Chua Sue-Ann

Edge, 12 October 2011

KUALA LUMPUR: As the government forges ahead to attract foreign investors and spur domestic private sector activity, independent think- tank Institute for Democracy and Economic Affairs (Ideas) has reiterated warnings that the country’s “Big Government” approach could dampen investor confidence.

Ideas chief executive Wan Saiful Wan Jan yesterday noted ongoing concern that the government’s pervasive presence in the economy, including via government-linked companies (GLCs), as well as government dominance in the provision of services would be detrimental to Malaysia’s economic vibrancy in the long run.

Wan Saiful said the economy should ideally be driven by entrepreneurs, although in reality GLCs will likely continue to play a role in the economy in the next two to three decades.

“There are two elements at play here. First, the government does not trust market forces completely, and second, they think they know best.

“It is difficult to see the government [letting] go of control on the economy but its role can be progressively limited,” Wan Saiful told The Edge Financial Daily on the sidelines of the Economic Freedom Network Asia 2011 Conference yesterday.

In addition, government policy and implementation must also be consistent for Malaysia to be seen as an attractive destination for investors, be it domestic or foreign players, Wan Saiful added.

Indeed, the government has recognised the need to overhaul the present system with a view to making Malaysia into an advanced, high-income nation.

Saiful: It is difficult to see the government letting go of control on the economy.

Among other policy proposals, the National Economic Advisory Council’s (NEAC) New Economic Model (NEM) proposed a shift from the old approach of dominant state participation in selected economic sectors towards private sector-led growth.

To that end, the government is looking to promote competition across and within sectors to revive private investment and market dynamism, the NEAC said.

The NEM also argued for the need to re-engineer public institutions to prevent duplication of functions that can be better provided by the private sector, with public institutions being limited to the role of the facilitator.

“While this approach (public investment and GLC initiatives) may have served the country well in the past, it is unlikely to provide the dynamism needed to spur the country to developed country status. That will come from new ventures, fresh products and emerging niche markets,” the NEM noted.

The NEM’s policy proposals to create an ecosystem for entrepreneurship and innovation include reducing direct state participation in the economy, divesting GLCs in industries where the private sector is operating effectively and ensuring GLCs operate on a strict commercial basis free of government interference.

This comes amid longstanding concerns that the size and presence of GLCs could crowd out the private sector.

In a frank assessment of the present situation, the NEM noted that the government — in playing the role of business owner and regulator of industries — faces conflicts of interest which can result in GLCs gaining an unfair advantage over private firms.

“This in effect discourages new private investment in market segments where GLCs are strong. Such market segments could well be the ones which could attract private investment in high value added products and services,” the NEM stated.

Nevertheless, the NEM pointed out that there is still room for GLCs to partner more effectively with the private sector. These collaborations could take advantage of economies of scale, networking and ventures abroad.

Earlier at the Economic Freedom Network Asia 2011 Conference yesterday, Prof Dr Jurgen Morlok of the Friedrich Naumann Foundation for Freedom (FNF) argued that the state’s role should be restricted to the regulation of the economy to the extent that it allows for fair competition to take place.

“The state should set the rules and act as a referee, no more, no less. When the state becomes the referee and player at the same time, competition becomes unfair,” said Morlok, who chairs the FNF board of trustees.

Earlier reports by the Vancouver-based Fraser Institute’s Economic Freedom of the World, meanwhile, show that Malaysia’s ranking on the Economic Freedom Index has been slipping over the past few years.

Malaysia has gone from occupying 53rd position in 2006 to 78th place in 2009, with a summary rating of 6.68 out of 10.

At the top of the 2009 Economic Freedom Rankings were Hong Kong, Singapore and New Zealand, while countries at the bottom were Venezuela, Myanmar and Zimbabwe.

The Economic Freedom of the World report, which ranks 141 nations, measures the degree to which a country’s policies and institutions are supportive of economic freedom.

A comparison of Malaysia’s summary ratings for 2005 and 2008 show that Malaysia had recorded slight improvements in the regulation of credit, labour and business and, access to sound money.

Malaysia’s summary ratings however declined from 2005 to 2008 in the areas of government size, legal structure and property rights and freedom to trade internationally.

The Economic Freedom of the World 2011 report is scheduled to be released today.

Government in a bind over GST implementation

2011-10-28T04:02:00.000-07:00

by Syarina Hyzah Zakaria
Edge, 19 October 2011

KUALA LUMPUR: The government has again delayed the implementation of the goods and services tax (GST) as it wants to have greater acceptability and enough time to educate the people on what the GST really is, said Veerinderjit Singh, managing director of independent tax advisory firm Taxand Malaysia Sdn Bhd. In a seminar on Budget 2012 yesterday, Veerinderjit said the timing of the GST has always been a crucial point but in light of the global economic uncertainties and high prices of commodities, the acceptability among the rakyat becomes a sensitive issue. “Perhaps it (the GST) should have come earlier (before the current economic uncertainties). We may have missed the boat in a sense,” he added. Veerinderjit said once a law is passed on the implementation of the GST, there would be a 12- to 18-month period to allow businesses to change and make the necessary adaptations to the new tax system. He stressed the importance of the preparation period as it provides a window to further educate the public. In the past few years, the business sector had already been made aware of what the GST entails; the main issue now lies in educating the lower-income group which Veerinderjit sees is more resistant of the GST. “The government is probably having a difficult time grappling with the issue largely because of the large number of the low-income group,” said Kang Beng Hoe, executive director of Taxand Malaysia. He said only two million of the 14 million workforce in Malaysia pay taxes. At present, due to the structure of the economy, there are a number of people in the labour force who are falling out of the tax net as their income levels are too low to be taxed, Veerinderjit said. The mentality is “if I don’t pay income tax, then when I pay the GST later, I’m now paying a new tax”, he said. He said the assistance given to help the lower-income group had resulted in a subsidy mentality where the tendency is to depend on the government. The government has made it its priority to change this mindset, he added. “Introducing something which is considered new by the lower-income group is an issue,” he said. Another issue is the large subsidies it has to pay to support the lower-income group. Kang said the government has clearly stated that over time, they want to claw back the subsidies but the question is, which should come first? “So you have two things pushing in opposite directions, should you be clawing back subsidies first or should you be implementing the GST?” he said. The government has to find a way to reduce the deficit, achieve a balanced budget, as well as grapple with the issue of how to slowly take away subsidies and introduce the broad-based GST, Kang said. Veerinderjit and Kang both cited lessons from the success Singapore has had in implementing the GST. The initial GST rate was set at 3% and is currently 7%. Singapore’s corporate tax was previously around 25% but after the implementation of the GST, it was subsequently brought down to 18%. They added that Singapore is at present classified as a tax haven due to their tax structure, and this proved that Malaysia too could have successful implementation of the GST.

Elizabeth: Non-Revenue-Water may hit 40% due to SYABAS incompetence

2011-10-28T03:53:00.000-07:00

by Maria Begum,

Malaysia Chronicle, 28 October 2011

The Selangor state government is worried about the level of Non-Revenue Water (NRW) and the failure of water concessionaire SYABAS to resolve the problem, despite years of trying but to no avail.

Elizabeth Wong, the executive councilor for Tourism, Consumer Affairs and Environment, slammed SYABAS for failing in its duty to manage the water piping system, through which most of the leakage occurred.

According to Elizabeth, who is also the Bukit Lanjan assemblywoman, SYABAS had a duty to fix the problem swiftly and well under the terms of the privatization agreement inked with the state government.

“If SYABAS cannot afford to reduce NRW to a more acceptable level, it will create a direct impact on the supply of clean water to consumers,” Elizabeth said in a statement.

NRW to exceed 40% due to SYABAS' failure to resolve piping problems

She warned that a report by National Water Services Commission had stated that SYABAS was still struggling to bring the NRW below the 30% target.

The National Water Services Commission now predicts that NRW will shoot beyond 40% until 2020, an alarming trend given the already tight water supply situation in the state.

Although the NRW level in Selangor has been reduced to 32.8% in 2009 compared to 38.43% in 2005, the rate increased again in 2010 and 2011.

Elizabeth added that without enough clean water supply, it is possible that the much-feared water crisis in the Klang Valley will take place as predicted by the federal government although the seven dams in Selangor actually have enough capacity to accommodate all consumers in the state.

Stop trying to force Sungai Langat on us

She took to task Puncak Niaga, a sister firm of SYABAS which is controlled by Selangor Umno's Rozali Ismail, for failing to maintain and keep in good condition two water treatment plants.

“A report by Ranhill found two water treatment plants – Kalumpang and Sungai Sireh – require a big rehabilitation whereas 18 other water plants require smaller scale of rehabilitation,” said Elizabeth.

Thus, she added, it was not a surprise that the plants were functioning below capacity although they could produce enough clean water if they were managed well.

She accused the federal government of taking advantage of these issues to play up the need to build a new water treatment plant in Sungai Langat for its own purposes.

Pundits had said this was a blatant abuse of power and reeked of possible corruption as the firm that would get the contract was alleged to have links with Umno.

If we manage, we can reduce NRW to 10%

Elizabeth accused the federal government of delaying tactics in order to pressure the state government into a deal to benefit an Umno crony. The sooner the federal government allowed Selangor to manage its own water assets, the quicker it could resolve the problems, she said.

“If the state government takes over the management of water, we are convinced that NRW issue will be reduced to around 10% and there will be no problem in supplying water that already saw an increase in demand by up to 10% every year,” said the Bukit Lanjan state assemblyperson.

She pointed to the recent water shortage at an area near to the Subang Airport caused by broken pipes as an example of the mishandling and inability of SYABAS to fix problems swiftly.

While the residents suffered inconvenience and shortage of water, the leakage had caused great wastage of good clean water - exacerbating the NRW problem.

“The company has failed to use green technology like water treatment in containers which is far easier to do, cheap and fast compared to building said Elizabeth.

MCMC’s new chairman faces many challenging issues

2011-10-28T03:49:00.000-07:00

by B.K. Sidhu

STAR, 21 October 2011

DATUK Mohamed Sharil Tarmizi has got himself onto a “hot seat”.

The task at hand is arduous as there are a lot of issues that need sorting out.

Despite that, there were many others vying for the hot seat. Perhaps it is the power that comes with the position that attracts so much interest.

Sharil is the new chairman of the Malaysian Communications and Multimedia Commission (MCMC) and his appointment is effective Sunday. He takes over from Tan Sri Khalid Ramli, who during his two-year term, was well known for helping to widen the reach of Internet to the interiors of the country.

Sharil is akin to a homegrown candidate as he has been with the commission for nearly a decade, although he left after his first six-year stint but came back in 2008 to become chief operating officer.

Globally, he has worked on various projects with the International Communications Union. So his appointment as MCMC chairman came as no surprise to the industry.

But the job that awaits him may surprise him as there are loads of issues and the journey could be arduous.
The biggest issue is transparency and he needs to address that, be it from the way the Universal Service Provider funds are used to how the 2.6G spectrum is being allocated to nine players, the deafening silence over the 700MHz spectrum and the long-overdue tender bid for terrestrial digital TV, among others.

The way he handles them would be closely watched both locally and globally as foreign investors want to know how sound the policies are for them to invest, or whether the would be flip-flops.

This becomes more pressing since the Government has said in the Budget 2012 proposals that 17 services sub-sectors, including telecoms, would be liberalised and the idea behind that is to attract foreign direct investments (FDIs). The country needs FDIs and the area of content and services can do with some foreign players.

Looking from the licensing regime, it took a new format and course when the vertical type of licensing that is based on technology type of services was changed to a horizontal type of services, thereby creating different categories of players such as network facilities providers (NFPs), network service providers (NSPs), application service providers (ASPs) and content application services providers (CASPs).

As someone put it: “It is meant to be an inverted pyramid with smaller numbers of NFPs, a bit more NSPs, and open basket of ASPs and CASPs. The rationale was to have more NSPs and ASPs so that there will be competition and choices but along the way, we may have given too many NFPs and this has resulted in a lot of investments going into network infrastructure building, thereby creating duplication of networks.''

There are also lessons to be learnt from the second round of 3G spectrum award. One company that deserved the spectrum did not get it but two others were given. One of the two did not roll out the services and eventually sold the spectrum to the deserving company, but at a high premium. So, future award of spectrum has to be done with thorough evaluations.

Malaysia was one of the first countries to introduce convergence but it is hard to benchmark the achievements because along the way, the theme of convergence somehow has got diluted.

Whatever has been done up to now has served a specific purpose although the glaring issue over clarity remains. We need the better of it.

Perhaps the first thing that Sharil can do is to take stock and do some soul searching to set things straight for the better of consumers, the industry and the nation. But time is a factor and he knows that too well.

My bet is that the dynamics of change is apparent at the commission. So, stay tuned.

Energy Commission justifies early bidding for Tanjung Bin project

2011-10-28T03:44:00.000-07:00

STAR, 22 October 2011

KUALA LUMPUR: The Energy Commission has clarified that the bidding process for the Tanjung Bin power station project was conducted five years before it begins operations in 2016 because construction of such a large-scale power plant would require at least five years on a brownfield site.

The project in Johor, which is to develop and operate the 1,000 MW coal-fired power plant, was awarded to Transpool Sdn Bhd, a subsidiary of Malakoff Corp Bhd, via a competitive restricted bidding process conducted by the commission from Nov 15, 2010 to April 15, 2011.

The project is needed to meet the projected demand in 2016 following the cancellation of the proposed submarine cable from the Bakun Hydroelectric Project.

“Greenfield development will require a longer period to undertake the Environmental Impact Assessment (EIA), detailed site identification and assessment.

“Based on the projected economic growth, failure to award such a project on time to achieve commercial operation in early 2016 will result in potential brownouts in the country,” the commission said in a statement yesterday.

It was responding to a recent statement by Petaling Jaya Utara MP Tony Pua.

The commission said the brownfield site option was chosen for the bidding process.

“Following an assessment by the Energy Commission, there are only two suitable brownfield sites that can meet the timeline requirement, and they were therefore short-listed for the bidding process.

“The evaluation of the bid proposals was conducted by a team consisting of officers of the Energy Commission as well as reputable financial, legal and technical international consultants appointed by the Energy Commission,” it said.

It said the tariff and concession period had already been determined through the competitive bidding process, adding that the final tariff submitted by the winning bidder and approved by the Government was very competitive compared with similar projects in the region. – Bernama

Railway revamp

2011-10-28T03:42:00.000-07:00

STAR, 27 October 2011

KTM Bhd (KTMB) will undergo a two-year corporate restructuring programme to turn around the ailing national rail operator and a consultant will be hired to manage this, according to the Treasury, in its reply to the Auditor-General's (A-G) report.

The A-G's report had stated that KTMB posted a loss of RM92.6mil in 2009 compared with RM84.6mil loss in the previous year.

The Treasury said that apart from high operational costs, the losses were also due to a decline in cargo transportation earnings by 50% in 2009.

One of the reasons for this was insufficient train capacity of the State Railway of Thailand to support KTMB's cross-border services.

Insufficient capacity: KTMB does not have enough electric multiple sets to support its commuter train services.

KTMB also did not have enough electric multiple sets to support its commuter train services.

KTMB's associate company KL Sentral Sdn Bhd also saw a 70% decline in revenue during the year under review. KTMB also suffered an asset depreciation charge of RM265mil in 2009.

According to the Treasury, the Finance Ministry has directed KTMB to present its financial and non-financial reports to the Government on a quarterly basis.

The A-G's report also stated that KTMB must tackle its problem of having a high number of outstanding debtors in order to achieve healthy cash flows.

As of end-2008, KTMB had failed to collect debts amounting to RM40.7mil and RM3.8mil more was owed to its subsidiary.

The A-G's report also found that KTMB had not charged any interest on overdue credit extended to its customers.

The report suggested that KTMB institute legal actions against companies or individuals who failed to settle their debt.

However, it acknowledged that part of the problems with KTMB's debt collection was due to its failure to renew its land lease with the Federal Land Commissioner.

It added that the land lease contract had expired and because of this, KTMB was unable to collect debt, rent or take legal actions.

The A-G's report noted that the Transport Ministry, had on April 8 2010, decided that Perbadanan Aset Keretapi (PAK) would become the custodian of all land belonging to KTMB under the Railway Act 1991.
PAK would manage all land matters relating to KTMB, including land rental.

KTMB was also in the process of drafting a new credit agreement (cargo) that will include a clause on interest charges.

The report added that KTMB had begun legal proceedings against some cargo debtors.

Government spent RM1.2b keeping IWK afloat

2011-10-05T06:20:00.000-07:00

By Shannon Teoh

Malaysian Insider, 5 October, 2011

KUALA LUMPUR, Oct 5 — Putrajaya said today it had spent RM1.2 billion to sustain Indah Water Konsortium’s (IWK) operations since nationalising the national sewerage company in 2000.

The finance ministry said in a reply to a parliamentary question from Anthony Loke (DAP-Rasah) that IWK has liabilities amounting to RM2 billion, while its assets were valued at about RM1.2 billion.

“The government has spent about RM1.2 billion to cover IWK’s operational deficit due to low sewerage tariffs as compared to the true cost of operations.

“IWK’s total liability up to June 2011, most of which are government support loans, is RM1.98 billion,” it said in a written reply.

The finance ministry also said that there are no plans to privatise IWK but the Energy, Green Technology and Water Ministry would be restructuring the sewerage industry, reviewing sewerage tariffs and guaranteeing future capital expenditure.

Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah had said on September 10 that IWK would be merged with a government unit, confirming a report by The Malaysian Insider.

Ahmad Husni said that the merger process was already underway but declined to disclose the name of the government subsidiary, except to say that IWK would continue to be government-owned after the merger.

The Malaysian Insider reported on September 8 that IWK would be privatised into a consortium led by strategic investment agency 1MDB, some 11 years after the government was forced to bail out the national sewerage company from financial difficulties under its previous owners.

Finance Ministry sources told The Malaysian Insider that the 1MDB-led consortium will include water distribution company Puncak Niaga, and that the deal has been given the nod by the Economic Council chaired by Prime Minister Datuk Seri Najib Razak.

However, it is understood that some ministry officials are still scrutinising the deal amid concerns about its feasibility and worries over whether the government could once again be forced to bail out the company if the latest plan fails.

Under the proposed deal, the 1MDB consortium will acquire IWK for RM1 and take over its debts which include more than RM1.5 billion in loans still owed to the ministry.

The consortium is seeking a 60-year concession from the government and will only pay back the principal amount and interest on the loan over the long term.

Bumis ‘typically’ sold government contracts for cars, houses, leaked study reveals

2011-09-20T04:22:00.000-07:00

Malaysian Insider, 20 September, 2011

KUALA LUMPUR, Sept 20 — An unpublished Works Ministry study found that Bumiputera contractors as a rule sold their government contracts to buy luxury cars and houses apart from misusing payments received from the Treasury, according to a leaked US diplomatic cable.

The cable, revealed by whistleblower website WikiLeaks, comes just after Putrajaya agreed to allocate RM8 billion worth of contracts in the country’s most expensive infrastructure project, the Klang Valley Mass Rapid Transit (MRT), which initially set strict rules for its contractors.

The US diplomatic cable quoted a Works Ministry source as saying the “Study on Bumiputera Contractor Leakage” was the result of feedback from various industry sources on failed and successful projects. The report was used by then-Prime Minister Tun Abdullah Ahmad Badawi (picture) to castigate failing Bumiputera businessmen in February 2007.

“The current system of awarding lucrative government contracts to Bumis provides them with a strong economic incentive to simply act as agents, turning over as many projects as possible and taking a cut before handing each one off to a competent non-Bumi implementer.

“This ‘Bumi agent’ system is firmly entrenched in Malaysia. Any effort to make reforms is likely to be resisted not only by well-established Bumis, but also by the non-Bumi implementers who have built up a network of well-oiled agent partnership,” the US Embassy concluded in the report published by the Malaysia-Today news portal.

The US and European Union have called for more transparency and equality in government procurement by Malaysia as part of the free trade agreement talks which have yet to be concluded.

In the leaked cable, the US embassy reported: “The source said the study, which has not been released to the public, revealed that many Bumi contractors typically sold off their tenders for quick money, often to finance expensive cars and houses. The report also found Bumiputera contractors had misused payments received from the government to pay off creditors and that they often sought additional government tenders prior to completing the ones already awarded to them.”

“The official said contractors were irresponsible and had abused the trust given to them by the government which was meant to help Bumiputeras progress,” it added.

The US cable noted that then-Finance Ministry secretary-general Tan Sri Izzudin Dali had disclosed new regulations that Bumiputera contractors seeking government tenders will soon be required to sign an official declaration promising not to sell or subcontract their tender to other races.

“Violators will have their contracts and registrations terminated. Izzudin added that under the new rules contractors undertaking public infrastructure contracts will now be awarded only one project at a time and that projects will be distributed evenly among contractors in the same area or district,” the cable said, quoting Izzudin’s speech on February 16, 2007.

Incidentally, Izzudin recently completed one term as chairman of Syarikat Prasarana Negara Bhd (Prasarana), the original project owners of the MRT which is now owned by a new Finance Ministry unit called MRT Co. Sources said his strictness in selecting successful contractors had delayed the massive infrastructure project.

The cable also quoted then-executive chairman Datuk Moehamad Izat Emir of the Malay Entrepreneurs and Merchants Association as saying payment was the main issue facing the contractors.

“He said that while Abdullah had directed the disbursing agency to pay the contractors within two weeks after completing the work, this often does not happen,” the cable reported, saying Moehamad suggested Bumiputera contractors be trained to upgrade their skills and suggested government-linked companies (GLCs) be required to support these contractors.

It noted that Roslan Awang Chik, of the Malay Contractors Association, shared Moehamad’s view that “competency comes from exposure”.

“He is puzzled why many well-known and qualified Bumiputera contractors were not being awarded government contracts while several unknown ones were. He suggested the government blacklist any contractors found to be selling their tenders,” the cable said, quoting Roslan as saying “they can be considered traitors.”

The US cable was sent to Washington after Abdullah had publicly expressed frustration and disappointment over findings from a recently released Works Ministry report showing 85 per cent of government contracts awarded to Bumiputera contractors.

“They (Bumiputera) do not want to work, do not want to learn, and give little importance to the opportunities provided by the government...

“This approach will only make us hope and wait for aid and subsidies. Such a mentality thrives among the people, including Bumiputera petty traders and contractors,” the report quoted Abdullah as making the comments at a dinner speech on February 13, 2007.

Put phone tax on hold, telcos told

2011-09-10T19:26:00.000-07:00

STAR, 11 September 2011

PUTRAJAYA: The Information, Communications and Culture Ministry has “blocked” plans by the telcos to impose a 6% service tax on prepaid mobile phone services.

“I have intimated to the telcos to stop the implementation of the service charge at this untimely hour,” said minister Datuk Seri Dr Rais Yatim.

“I will raise the issue with the Cabinet on Wednesday,” he said yesterday.

“My ministry does not support the move.”

Dr Rais said the Malaysian Communications and Multimedia Commission (MCMC) has also been directed to study the mobile operators' licensing regulations on service tax.

“We will see what the regulations state,” he added.

Dr Rais advised the telcos to think about their subscribers, saying that some of the firms had been reaping profits of between RM800mil and RM1.2bil annually.

“They have been earning attractive profits, notwithstanding paying the levy on behalf of subscribers since 1998,” he said.

Meanwhile, Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Ismail Sabri Yaakob also planned to bring the issue up at the Cabinet meeting.

He said there had been numerous calls for the telcos to upgrade their services “which had not been taken seriously”.

“Yet, they now want to impose service tax on customers,” he said.

Prime Minister Datuk Seri Najib Tun Razak had on Friday said the plan to impose the service tax from Thursday was not approved by the Finance Ministry, adding that the people were already being burdened by the rising cost of living

Move by telcos to impose 6% tax on prepaid lines comes under fire

2011-09-10T19:23:00.000-07:00

STAR, 10 September 2011

KUALA LUMPUR: Calling it difficult to accept, the Prime Minister has joined in the chorus of people against the move by telcos to impose 6% service tax on prepaid mobile phone users.

Datuk Seri Najib Tun Razak said the move comes at a time when the Government was trying to ease the burden of the rakyat’s who are already hit by the rise in living costs.

He added the move was not approved by the Finance Ministry as the decision to impose taxes was taken by the telcos themselves.

“I have received many reactions and feedback from the people,” he told reporters yesterday after launching Maybank’s new corporate logo.

“The move to impose the service tax on consumers is very unpopular and difficult to accept.”

MCA Youth chief Datuk Dr Wee Ka Siong said the service tax was a huge burden to the people.He added mobile phones were an essential item to consumers and played a major role in the daily life with most of the prepaid users coming from the lower-income group.

It was reported that from Sept 15 onwards, prepaid users and those purchasing starter kits would need to pay an extra 6% as telcos agreed they would no longer absorb the service tax, which was introduced in 1998.
Umno Youth chief Khairy Jamaluddin described the decision as “unreasonable”.

“Boss @NajibRazak, the decision to impose tax on prepaid users is unreasonable and it would burden the rakyat. I oppose it. Please review it,” he tweeted.

PKR vice-president Tian Chua said the Government must intervene immediately to help low-income earners.
He also noted that prepaid plans were unfair to users by design as users paid for their usage up front.

Consumer groups were also up in arms over the increase, which they have lambasted as unfair.

Consumers Association of Penang president S.M. Mohamed Idris called on the Malaysian Communications and Multimedia Commission to stall the move.

He added mobile phone prepaid users faced the brunt of unfair terms and conditions imposed on them, especially when the balance in their account was forfeited when they did not reload within the validity period.

He suggested that a prepaid number should have lifetime validity and be activated at the customers convenience.

Muslim Consumers Association Malaysia activist Datuk Nadzim Johan said the increase was unfair and ill-timed when consumers were tightening their belts over the increasing cost of other essential goods.

Fomca secretary-general Muhammad Sha’ani Abdullah said the telcos were already pocketing extra from their customers with their “call block” formula.

“If a telco charges RM0.30 per minute with 30 seconds per block, this means that you pay RM0.15 whether you use the phone for only 10 seconds or 30 seconds,” he said.

“This means the telcos are already making money from the unused seconds. Consumers have already been over-paying for years.”

Husni now says IWK to merge with government unit

2011-09-10T19:16:00.001-07:00

Malaysian Insider, 10 September 2011

IPOH, Sept 10 — Putrajaya will merge national sewerage company, Indah Water Konsortium, (IWK) with a government unit, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said today, confirming a report by The Malaysian Insider.

Ahmad Husni said the decision was made recently by the National Economic Council.

“The move is an effort to strengthen both entities which are owned by the government. The biggest asset owned by IWK can be redeveloped to benefit the merged entity,” he told reporters after distributing Jalur Gemilang flags to Chemor residents here.

Saying that the merger process had begun, Ahmad Husni, however, declined to disclose the name of the government subsidiary, except to say that IWK would continue to be government-owned after the merger.
IWK is currently wholly-owned by the Ministry of Finance Incorporated.

The Malaysian Insider reported on Thursday that IWK would be privatised into a consortium led by strategic investment agency 1MDB, some 11 years after the government was forced to bail out the national sewerage company from financial difficulties under its previous owners.

Finance Ministry sources told The Malaysian Insider that the 1MDB-led consortium will include water distribution company Puncak Niaga, and that the deal has been given the nod by the Economic Council chaired by Prime Minister Datuk Seri Najib Razak.

However, it is understood that some ministry officials are still scrutinising the deal amidst concerns about its feasibility and worries over whether the government could once again be forced to bail out the company if the latest plan fails.

Under the proposed deal, the 1MDB consortium will acquire IWK for RM1 and take over its debts which include more than RM1.5 billion in loans still owed to the ministry.

The consortium is seeking a 60-year concession from the government and will only pay back the principal amount and interest on the loan over the long term.

IWK to be privatised to 1MDB

2011-09-09T00:52:00.000-07:00

By Leslie Lau
Malaysian Insider, 8 September 2011

KUALA LUMPUR, Sept 8 — Indah Water Konsortium (IWK) is expected to be privatised soon to a consortium led by strategic investment agency 1MDB, some 11 years after the government was forced to bail out the national sewerage company from financial difficulties under its previous owners, according to sources in the Finance Ministry.
The sources told The Malaysian Insider that the 1MDB-led consortium will include water distribution company Puncak Niaga, and that the deal has been given the nod by the Economic Council chaired by Prime Minister Datuk Seri Najib Razak.

However, it is understood that some ministry officials are still scrutinising the deal because of concerns about its feasibility and worries that the government could once again be forced to bail out the company if the latest plan fails.

Under the proposed deal, the 1MDB consortium will acquire IWK for RM1 and take over its debts which include more than RM1.5 billion in loans still owed to the ministry.

The consortium is seeking a 60-year concession from the government and will only pay back the principal amount and interest on the loan over the long term.

It also has plans to link sewerage charges to water usage.

The plan could spark a new round of controversy because of the lack of transparency surrounding negotiations, with consumers still wary about deals involving IWK.

From Day One, IWK has had problems convincing a sceptical public to pay for separate sewerage charges which had previously been part of the water bill.

In 2000, Tun Dr Mahathir Mohamad’s administration paid nearly RM200 million to nationalise IWK to “safeguard public interest and to avoid service disruptions.”

The nationalisation of IWK was to tackle the company’s debt then of nearly RM700 million.

IWK’s bailout in 2000 exemplified the pitfalls of Dr Mahathir’s privatisation policy in which government-owned assets or resources were allocated or sold to private investors in the hopes of generating profits.

The IWK story began in 1993 when businessman Tan Sri Vincent Tan convinced the government to let a consortium of private interests led by him to take over the ownership, operation and maintenance of more than 2,800 state-owned sewage-treatment plants nationwide.

But IWK subsequently found that many of the treatment plants it inherited from the government were not functioning and costs began escalating.

A nationwide furore also ensued, with many consumers and businesses complaining bitterly about IWK.
Maintaining the plants and staying profitable proved impossible for IWK.

Under pressure, the government also forced the company to reduce its charges.

By 2000 Dr Mahathir’s government then decided to nationalise IWK.

The Najib government’s new plan could attract similar criticisms because it involves 1MDB and Puncak Niaga, a company that is seen as politically connected to Putrajaya.

Prasarana reserves ‘at least’ 30pc of MRT for Bumi contractors

2011-08-24T04:47:00.000-07:00

By Boo Su-Lyn

Malaysian Insider, 23 August 2011

KUALA LUMPUR, Aug 23 — Syarikat Prasarana Negara Bhd will reserve at least 30 per cent of the Klang Valley Mass Rapid Transit (KVMRT) construction packages for Bumiputera contractors.

Abdul Malik Azman, Prasarana’s head of MRT Procurement Management Department, told The Malaysian Insider today that the quota for Bumiputera contractors was part of the government’s “national agenda.”

“We have this Bumiputera agenda approved by the MOF (Finance Ministry).

“At least 30 per cent of packages should be allocated for Bumis. This is the national agenda,” he told The Malaysian Insider after a briefing for pre-qualified contractors at Prasarana’s office here today.

In May, Prasarana had caved in to pressure from Malay rights groups when it revised pre-qualification criteria for several construction packages.

The project owner had said then that contractors who wanted to tender for elevated civil works, stations and depots work construction packages would be allowed to form joint ventures (JV) or consortiums among local companies.

Twenty-eight firms including heavyweights such as Sunway, IJM and MRCB have been shortlisted for the construction of the first phase of the KVMRT project

The works packages were divided into two categories: Open and Bumiputera.

The value for contracts under the Bumiputera category is about RM250 million per package, based on the last briefing to contractors by Prasarana in May.

Abdul Malik said today that there were 18 work packages, comprising eight packages for elevated civil works, eight packages for stations and two packages for depots.

He said six out of the 16 packages for elevated civil works and stations, as well as the Kajang depot work package, were reserved for Bumiputeras.

“A few Bumis here can (also) bid in the Open category. (They can go) fishing in the pond and ocean. They have more chances,” said Abdul Malik.

He pointed out that Trans Resources Corporation Sdn Bhd, Ahmad Zaki Sdn Bhd and MTD Construction Sdn Bhd could bid for all eight elevated civil works packages.

Trans Resources Corporation and Naim Engineering Sdn Bhd could bid for all eight stations and both Sg Buloh and Kajang depot work packages, he added.

Abdul Malik told a press conference earlier today that winning contractors would be picked based on their financial capabilities, their equipment and “realistic” offers.

The Prasarana official, however, refused to specify what he meant by a “realistic” price, saying: “If we say, we might not get a competitive price.”

He added that the first two elevated civil works packages, which are a 5.2km viaduct from Taman Bukit Ria to Phoenix Plaza in Cheras and another 5.4km viaduct from Phoenix Plaza to Bandar Tun Hussein Onn, would be awarded in January or February next year, and construction of the multi-billion ringgit rail project would start.

Najib: Tajuddin intervention ‘off-site’ solution, not settlement

2011-08-13T19:08:00.000-07:00

By Shazwan Mustafa Kamal

Malaysian Insider, 12 August 2011

Najib said his administration’s decision to step in on Tajuddin’s cases should not be “misconstrued”. — File pic

KUALA LUMPUR, Aug 12 — Datuk Seri Najib Razak defended his administration’s intervention in Tan Sri Tajuddin Ramli’s civil cases, saying today that the move should be seen as an “off-site” solution. The prime minister said that Putrajaya’s letter to all government-linked companies seeking for them to withdraw their suits against the former Malaysia Airlines (MAS) chairman should not be “misconstrued” as an out-of-court settlement.

“It can’t be misconstrued as a settlement out of court… this is a discussion to find positive solution off- site,” he told reporters today. He did not, however, elaborate on what he meant by the phrase.
Najib also stressed that the matter was not finalised and was still in the “process of discussion.”

“We are aware of our position and we hope are hoping for positive outcome,” the PM added.
Minister in the Prime Minister’s Department Datuk Seri Nazri Aziz has insisted that the government’s intervention in Tajuddin’s cases could save the government billions in legal claims.

The letter to the GLCs, said Nazri, was not an order set in stone and did not outline any commitment on behalf of the companies stipulating that Tajuddin would walk away scot-free.

Nazri had told The Malaysian Insider yesterday that he had written to GLCs earlier this month seeking for them to withdraw their suits, worth at least RM2 billion, to buy time for all concerned parties to reach a “win-win” agreement and put an end to the prolonged financial saga involving Tajuddin.

The Padang Rengas MP had listed the three main parties involved in suits against Tajuddin — MAS, Telekom Malaysia and Prokhas Sdn Bhd — and said the government-linked entities can still choose to proceed with their suits if they felt they had a strong case against him.

Tajuddin was a protégé of Tun Daim Zainuddin, a close friend of former prime minister Tun Dr Mahathir Mohamad and an ex-finance minister who was the architect of the now-discredited policy of nurturing a class of Malay corporate captains on government largesse.

Individuals such as Tajuddin, Tan Sri Halim Saad and others flew high in the 1990s but their true mettle was tested during the Asian financial crisis. Nearly all of them fared poorly.

The Najib government’s move to settle all outstanding claims against Tajuddin appears to be an attempt to wipe the slate clean in a financial saga that goes back decades to the height of Dr Mahathir’s administration.
MAS had first lodged a police report against Tajuddin in 2002 for allegedly causing the flag carrier to suffer losses in excess of RM8 billion. Tajuddin was the executive chairman of the airline from 1994 to 2001.

Nazri says Tajuddin intervention could save Putrajaya billions

2011-08-13T19:05:00.000-07:00

By Clara Chooi

12 August 2011

Nazri insists that the letter was not an order for the firms to let Tajuddin off the hook. — File pic

KUALA LUMPUR, Aug 12 — Datuk Seri Mohamed Nazri Aziz has rebuked those who have questioned his authority in intervening in the Tan Sri Tajuddin Ramli’s civil cases, insisting today that the move could save the government billions in legal claims.

The minister in the Prime Minister’s Department disagreed that he had overstepped boundaries with a letter earlier this month telling all government-linked companies to withdraw their suits against the former Malaysia Airlines (MAS) chairman, claiming he had done so in his role as a “facilitator” for the government.

Nazri also told detractors to check their facts before spewing insult against him, saying, “I know what I am doing.”

He accused DAP publicity chief Tony Pua of practising double standards for saying the minister should be placed under the Emergency Ordinance for issuing the letter, asking the leader why he had not urged the same when other Pakatan Rakyat (PR) leaders attempted to intrude on government affairs.

“I want to ask him (Pua): When (PAS president Datuk Seri Abdul) Hadi Awang asked the Damansara Utama Methodist Church (DUMC) and Jais (Selangor Islamic Religious Department) to see him and explain the recent church raid, why did he not rebuke Hadi?

“Because what power does Hadi have in doing so? He is not the mentri besar of Selangor and neither is he the minister for religious affairs. So why the double standards, Tony?” Nazri told The Malaysian Insider.
Similarly in the controversy over the Kedah government’s ban on entertainment outlets during Ramadan, Nazri said DAP chairman Karpal Singh had no business ordering the businesses to stay open.

“On my part, I spoke to the second finance minister and he told me why don’t I explore this issue and that I may be the facilitator to urge these GLCs to sit down with Tajuddin to come up with an amicable solution. So what power did I abuse?” he asked.

Nazri said that to defend himself, Tajuddin, who is facing millions in legal claims for allegedly causing MAS to suffer losses in excess of RM8 billion during his tenure, had made a whopping RM13 billion counter-claim.
“Our total claims by the companies against Tajuddin are only half a billion ringgit. That is why, we said we should sit down and talk,” he said.

The letter to the GLCs, said Nazri, was not an order set in stone and did not outline any commitment on behalf of the companies stipulating that Tajuddin would walk away scot-free.

“It’s different if I went and spoke to some parties and then went claiming as if the government has agreed to settle all claims and let him go,” he said.

Nazri also disputed law professor Abdul Aziz Bari’s claim that, notwithstanding his explanation that the letter only constituted advice, he could not absolve the Najib administration of responsibility by attempting to settle the outstanding claims against Tajuddin.

“It is my letter so I should know better whether or not I made an order or advice. I asked them (GLCs) to speak with Tajuddin’s people. He (Aziz) is shallow in his thinking,” he said.

Nazri had told The Malaysian Insider yesterday that he had written to GLCs earlier this month seeking for them to withdraw their suits, worth at least RM2 billion, to buy time for all concerned parties to reach a “win-win” agreement and put an end to the prolonged financial saga involving Tajuddin.

The Padang Rengas MP had listed the three main parties involved in suits against Tajuddin — MAS, Telekom Malaysia and Prokhas Sdn Bhd — and said the government-linked entities can still choose to proceed with their suits if they felt they had a strong case against him.

Pua: Investigate Nazri for power abuse in Tajuddin Ramli’s cases

2011-08-13T19:01:00.000-07:00

By Debra Chong

Malaysian Insider, 12 August 2011

KUALA LUMPUR, Aug 12 — The DAP’s Tony Pua has accused Datuk Seri Nazri Aziz of abusing his authority by meddling in lawsuits involving Tan Sri Tajuddin Ramli, and today called for the de facto law minister to be investigated.

The DAP publicity chief described as “unprecedented” Nazri’s recent directive to several government-linked companies (GLCs) to withdraw their ongoing suits against Tajuddin and settle the matter out-of-court, saying the minister in the Prime Minister’s Department could be investigated under the Emergency Ordinance.

Pua said the directive was ‘unprecedented’. — File pic

“Nazri can be investigated under section 2(1) of the Emergency (Essential Powers) Ordinance No. 22/1970 where ‘Any member of the Administration, Parliament or State Legislative Assembly or any public officer who commits a corrupt practice shall be liable to a term of imprisonment of 14 years or a fine of RM 20,000 or both’,” the Petaling Jaya Utara MP pointed out in a statement.
“Such an instruction from a minister’s office, especially one with no authority over the various GLCs including Malaysian Airlines System (MAS), Telekom Malaysia and Prokhas (formerly Danaharta), must be at the very least highly improper, and at worst an illegal and corrupt practice to allow Tan Sri Tajuddin Ramli to get away with billions of ringgit in debt,” Pua said.

He stressed that the companies are listed on Bursa Malaysia and have their own board of directors to decide the interest of their respective companies and that Nazri had no business giving any kind of instruction as the latter did not sit on any of the boards.

“His directive to these GLCs made a complete mockery of corporate governance in these companies and will only turn away local and foreign investors who will not tolerate blatant interference from the government on business and financial decisions,” Pua said.

He slammed Nazri’s “attempt” to explain yesterday, saying the directive “is clearly designed to provide the [Tajuddin] breathing space and a desperate attempt to bail him out of billions of ringgit in debt to the government agencies and companies, as well as to excuse him from causing billions of ringgit in losses to our flagship carrier MAS”.

Yesterday, Nazri said his directive was merely to buy time for all concerned parties to reach a “win-win” agreement and put an end to the prolonged financial saga involving Tajuddin in a massive debt bailout for the former MAS chairman.

The minister denied it was a bailout.

Law expert says Nazri’s ‘advice’ still an order

2011-08-13T18:59:00.000-07:00

By Shannon Teoh

Malaysian Insider, 12 August 2011

KUALA LUMPUR, Aug 12 — Datuk Seri Nazri Aziz cannot dodge responsibility for the Najib administration’s directive to GLCs to drop their suits against Tan Sri Tajuddin Ramli which critics have called a bailout for the former Malaysia Airlines (MAS) chairman, according to a constitutional expert.

Abdul Aziz Bari, professor of law at the International Islamic University, told The Malaysian Insider that in a constitutional Cabinet government, the entire Cabinet is responsible for all government actions.

Abdul Aziz said the entire Cabinet is collectively responsible. — File pic

“Of course, the finance minister is responsible for fiscal matters. But the entire Cabinet is tied in as well. This is the meaning of collective responsibility.
“In this context, whether or not Nazri gave advice or orders is not important. As a minister, Nazri is responsible to Parliament, meaning the public, on what happens to GLCs which belong to the public,” he said.

Nazri, minister in the Prime Minister’s Department, had told The Malaysian Insider yesterday that he had written to GLCs earlier this month to withdraw their suits, worth at least RM2 billion, to buy time for all concerned parties to reach a “win-win” agreement and put an end to the prolonged financial saga involving Tajuddin.

He said the matter was referred to Second Finance Minister Datuk Seri Husni Hanadzlah who then directed him to pen the letter, taking note that Tajuddin’s case was scheduled for case management in court yesterday.

“Since it involved the law and I am the minister in charge of law, Husni told me, why don’t you look into this. It is not a cloak-and-dagger move ... we knew this would come out somehow and there is nothing to hide. I wrote that letter using my letterhead,” said Nazri.

The Padang Rengas MP listed the three main parties involved in suits against Tajuddin — MAS, Telekom Malaysia and Prokhas Sdn Bhd — and said the government-linked entities can still choose to proceed with their suits if they felt they had a strong case against him.

Nazri issued the directive to the GLCs earlier this month. — File pic

Prokhas is a private limited company wholly-owned by the Minister of Finance Incorporated and tasked to manage the residual assets of Pengurusan Danaharta Nasional Berhad and its group of companies.

But Abdul Aziz said, in his email yesterday, that “Nazri cannot escape with the excuse that he only advised and did not order the GLCs. That is just terminology. Whether advice or suggestion, they are all directives and if they result in losses, then the Cabinet must answer to Parliament.”

He added that in a democracy that practices accountability, this would mean a resignation.

The Malaysian Insider reported yesterday that Putrajaya, through Nazri’s letter, had directed all GLCs, including MAS and the national debt restructuring company Danaharta, to cease all civil suits against Tajuddin, the former chairman of the national carrier and protégé of Tun Daim Zainuddin.

Daim is a close friend of former Prime Minister Tun Dr Mahathir Mohamad and an ex-finance minister who was the architect of the now discredited policy of nurturing a class of Malay corporate captains on government largesse.

Individuals such as Tajuddin, Tan Sri Halim Saad and others flew high in the 1990s but their true mettle was tested during the Asian financial crisis. Nearly all of them fared poorly.

The Najib government’s move to settle all outstanding claims against Tajuddin appears to be an attempt to wipe the slate clean in a financial saga that goes back decades to the height of Dr Mahathir’s administration.
MAS had first lodged a police report against Tajuddin in 2002 for allegedly causing the flag carrier to suffer losses in excess of RM8 billion. Tajuddin was the executive chairman of the airline from 1994 to 2001.

Nazri says directive will not spell bailout for Tajuddin

2011-08-13T18:41:00.000-07:00

By Clara Chooi

Malaysian Insider, 11August 2011

Nazri stressed today that the directive was not a “cloak and dagger” move. — file pic

KUALA LUMPUR, Aug 11 — Datuk Seri Mohamed Nazri Aziz confirmed that Putrajaya had decided to attempt

reaching an out-of-court settlement with Tan Sri Tajuddin Ramli but denied today this would result in a massive debt bailout for the former Malaysia Airlines (MAS) chairman.

The Minister in the Prime Minister’s Department told The Malaysian Insider that his directive ordering all government-linked companies to withdraw their suits against Tajuddin earlier this month was merely to buy time for all concerned parties to reach a “win-win” agreement and put an end to the prolonged financial saga involving Tajuddin.

He stressed that this was not a “cloak and dagger” move and explained that it was “Tajuddin’s people” who first approached the government with a proposal to reach an out-of-court settlement about six months ago.
He said the matter was referred to Second Finance Minister Datuk Seri Husni Hanadzlah who then directed him to pen the letter, taking note that Tajuddin’s case was scheduled for case management in court today.

“Since it involved the law and I am the minister in charge of law, Husni told me, why don’t you look into this. It is not a cloak and dagger move ... we knew this would come out somehow and there is nothing to hide. I wrote that letter using my letterhead,” said Nazri.

The Padang Rengas MP listed the three main parties involved in suits against Tajuddin — MAS, Telekom Malaysia and Prokhas Sdn Bhd — and said the government-linked entities can still choose to proceed with their suits if they felt they had a strong case against him.

Prokhas is a private limited company wholly-owned by the Minister of Finance Incorporated and tasked to manage the residual assets of Pengurusan Danaharta Nasional Berhad and its group of companies.

“I want you to remember here that we, these three parties, sued Tajuddin and of course, he filed his defence.
“Let’s say if we win, we get the money and if we lose, we will probably have to pay his costs but he not only filed his defence — he counter-sued us.

“In any case, there is a 50-50 chance of winning or losing ... If we win, okay, but if not, we will have to make the payout so that is why it was worth looking at his proposal — which is if we withdraw, he will withdraw,” he said.

Tan Sri Tajuddin Ramli. — file pic

Nazri said this was the “minimum offer” the government was willing to settle for but reiterated that the GLCs would still have to discuss the proposal before deciding on their next move.

“This is the minimum ... we withdraw, he withdraws. For further discussion, how much he is to pay and so on, it is up to the two parties to discuss. That letter that I sent was for them to sit and discuss this proposal but you must understand that we cannot direct these three because they are GLCs and they are legal entities that can make their own decisions.

“If they feel they have a strong case, then go ahead but the government feels that we have to look into an out-of-court settlement so that we do not lose,” he said.
Nazri pointed out that MAS was presently not in the best financial position to be battling out expensive court cases and should consider looking into the proposal.
He said his letter was merely to “facilitate” this move but stressed that it would be “too naive” to assume that one letter was enough to settle the long drawn out financial saga.

The Malaysian Insider reported this morning that Putrajaya, through Nazri’s letter, had directed all GLCs, including MAS and the national debt restructuring company Danaharta, to cease all civil suits against Tajuddin, the former chairman of the national carrier and protégé of Tun Daim Zainuddin.

Daim is a close friend of former Prime Minister Tun Dr Mahathir Mohamad and an ex-finance minister who was the architect of the now discredited policy of nurturing a class of Malay corporate captains on government largesse.

Individuals such as Tajuddin, Tan Sri Halim Saad and others flew high in the 1990s but their true mettle was tested during the Asian financial crisis. Nearly all of them fared poorly.

The Najib government’s move to settle all outstanding claims against Tajuddin appears to be an attempt to wipe the slate clean in a financial saga that goes back decades to the height of Dr Mahathir’s administration.
MAS had first lodged a police report against Tajuddin in 2002 for allegedly causing the flag carrier to suffer losses in excess of RM8 billion. Tajuddin was the executive chairman of the airline from 1994 to 2001.

Anwar: Was MAS turnaround a mere charade?

2011-08-13T18:34:00.000-07:00

By Shazwan Mustafa Kamal

Malaysian Insider, 10 August 2011

Anwar also said today that the deal raises fundamental issues of transparency. — file pic

KUALA LUMPUR, Aug 10 — Datuk Seri Anwar Ibrahim has questioned the latest effort to rescue the loss-making state airline, charging today that the Malaysia Airlines (MAS)-AirAsia share swap meant that Putrajaya’s previous turnaround plans had failed.

He also said the deal would create a monopoly that will burden air passengers.
“Is the government specifically admitting that the so-called successful turnaround of MAS was a mere charade? The Prime Minister must be held accountable for misleading the rakyat on this.

“More importantly, the deal raises the question as to what is the fate of the GLC Transformation Programmes that had been launched by Prime Minister Najib Razak to much fanfare and wastage of millions of the rakyat’s money,” he said in a statement, claiming that the share swap would not benefit MAS employees.
The national airline recently recorded a first-quarter net loss of RM242.3 million against a profit of RM310.6 million in the same period a year ago.

MAS main shareholder Khazanah Nasional Bhd has defended previous efforts at reforming the national flag carrier with managing director Tan Sri Azman Mokhtar saying that the share swap was necessary to keep MAS afloat.

Anwar also raised concerns of AirAsia’s possible “monopoly” of the domestic airline industry with the recently-inked MAS-AirAsia share swap yesterday.

“The MAS-Air Asia share swap announced yesterday raises serious concerns over the dominance of Air Asia over MAS and effectively reducing competition between the two.

“This may lead to a virtual monopoly of the domestic airline industry in the long run and give rise to risks and concerns associated with monopolies, more so because of the involvement of cronies and political power brokers,” the Opposition leader said.

The opposition leader charged that Tony Fernandes’s participation in the MAS board was a possible conflict of interest. — file pic

MAS main shareholder Khazanah Nasional Bhd finalised a share swap with Tune Air Sdn Bhd yesterday which saw the state investment arm pare down its stake in the ailing state carrier by almost a third.

Under the “Comprehensive Collaboration Framework”, Tune Air, AirAsia’s main shareholder, will swap a 10 per cent stake in the no-frills airline for 20.5 per cent share in MAS.

Before the share swap, Tune Air was the biggest shareholder in AirAsia with 26.28 per cent stake while Khazanah held a total of 69.33 per cent share of MAS.

The MAS board will also see some new faces, namely Land & General Bhd founder Tan Sri Wan Azmi Wan Hamzah, former IJM chief executive Datuk Krishnan Tan, Astro chief executive Datuk Rohana Rozhan and David Lau from Shell Malaysia, who will act as independent non-executive directors.
AirAsia founder and chief executive Tan Sri Tony Fernandes and Datuk Kamarudin Meranun have also been appointed as non-independent non-executive directors of MAS.

MAS managing director Tengku Azmil Zahruddin Raja Abdul Aziz, who stepped down will join Khazanah as an executive director effective September 12, 2011. An executive committee led by Tan Sri Mohd Nor Yusof will manage the state carrier until a new chief executive is appointed while day-to-day operations will be handled by Khazanah executive director and MAS board member, Mohd Rashdan Mohd Yusof.
Anwar charged that Fernandes’s participation in the MAS board raised the likelihood of a conflict of interest in spite of Fernandes’s “non-executive” position.

“This is clearly a violation of corporate governance rules and should not be condoned.
“This deal also raises fundamental issues of transparency because of the secrecy in which it was shrouded. In this regard, the Securities Commission must investigate the possibility of irregularities including insider trading of the shares of both entities,” added Anwar.

The collaboration agreement comes into immediate effect for a period of five years with the option of an extension for a further five years.

Despite MAS share swap, Fernandes’ heart is with AirAsia, says FT

2011-08-10T08:19:00.000-07:00

Malaysian Insider, 10 August 2011

Brown heaped praise on “serial entrepreneur” Fernandes’ business acumen. — File pic

KUALA LUMPUR, Aug 10 — The Financial Times has praised AirAsia boss Tan Sri Tony Fernandes’ move to swap stakes and help ailing flag carrier Malaysia Airlines (MAS), but said today the “serial entrepreneur” remains focused on plans to make the low-cost carrier the region’s most successful airline. Fernandes and his partners’ private vehicle, Tune Air Sdn Bhd, yesterday exchanged 10 per cent of their AirAsia stock for 20.5 per cent of the loss-making MAS, which has undergone several financial restructuring but keeps bleeding red ink.

The influential global business daily pointed out that Fernandes has had an uphill battle in the aviation industry, buying a two-plane operation in 2001 for RM1 and taking over its then RM40 million debt despite being sneered by the Malaysian elite as a “comic upstart”.

“If he can help MAS recover, he will. But not at AirAsia’s expense. Recognition is sweet. But victory is sweeter,” wrote Financial Times regional correspondent Kevin Brown in a column published today.
The column pointed out that “So far, Mr Fernandes has hardly put a step wrong. As a serial entrepreneur, he has founded no fewer than four airlines — AirAsia, its long-haul affiliate AirAsia X and joint ventures in Indonesia and Thailand. He is also part-owner, with his business partner, of the privately held Tune Group, which runs hotel, financial services and mobile phone businesses”.

It added that AirAsia has grown from two planes to more than 100 planes now, and has just signed an US$18 billion (RM54 billion) deal with Airbus for 200 A320s over 15 years — the third-biggest order in the aircraft maker’s history.

“Investors are in no doubt about Mr Fernandes’ Midas touch. The shares have outperformed the global aviation index by more than 100 per cent since AirAsia was floated in 2004. No carrier has bettered its average 57 per cent annual increase in net income. The stock, up almost a third this year before the latest turmoil, was worth US$3.6 billion before the shares were suspended on Monday. That is more than double the market value of the Malaysian flag-carrier,” Brown wrote.

He noted AirAsia has benefitted from being in the right place at the right time.
“Its pace of growth is underpinned by the rapid expansion of emerging Asian economies. Average economic growth of about seven per cent a year is lifting millions more people every year to an economic level at which they can afford a budget airline flight.

“But Mr Fernandes is not just grabbing chunks of a growing market. AirAsia has grown consistently, as well as fast, thanks to a rigorous focus on expenses. Costs per passenger kilometre are lower than both Southwest Airlines of the US, which invented the low-cost model, and Ryanair, the Irish group often regarded as the world’s most competitive carrier,” Brown said in the article.

However, the state-owned MAS has “failed either to adapt to the low-cost era, or to trade effectively as a premium carrier, the strategy pursued (albeit with faltering success) by neighbouring Singapore Airlines”, Brown wrote, noting that MAS has had to be restructured twice in the past nine years following financial crises.

“Angered by the airline’s resistance to change and worried by the looming cost of fleet renewal, the government has given up, forcing MAS to accept a deal, confirmed on Tuesday,” he added.

“For Mr Fernandes, this is a moment to savour. Never shy of self-promotion, he has been hurt and offended over the years by the Malaysian elite, which has largely regarded him as a comic upstart. They laughed when he started in business with two old aircraft and US$250,000; they laughed again when he spoke of building AirAsia into the region’s most successful airline, when he launched a Formula One racing team and when he tried to buy an English Premiership football club.

“Their laughter has now ceased. But it would be ironic if Mr Fernandes’ moment of recognition turned out to be a millstone round his neck. This is not an inconsiderable risk. The deal was officially characterised as a partnership, but would be better seen as a last-chance rescue. Both earlier restructurings of MAS failed to resolve its underlying problems, and (Tan Sri) Azman Mokhtar, the head of Khazanah, has spent years putting it through a reform programme, to little effect,” wrote Brown.
But Brown said while the government hopes “the freewheeling Mr Fernandes will provide the missing ingredient”, the aviation tycoon’s new task would divert inordinate amounts of time from running AirAsia and its offshoots, which are soon to be joined by a Tokyo-based joint venture with ANA of Japan.
“With Singapore-based rival Tiger Airways in trouble – suspended from flying in Australia on safety grounds, and bleeding S$2 million (RM4.8 millio) a week – this is not the moment for Mr Fernandes to take his eye off the ball.

“All the signals are that he will not. Indeed, all the obvious gains will accrue to AirAsia: Route rationalisation is likely to favour the lower cost operator, and the deal should reboot government thinking on awarding new routes, on which it has tended to favour MAS. Mr Fernandes will aim to push MAS upmarket, and try to close Firefly, the flag-carrier’s largely domestic budget offshoot, leaving AirAsia with a local monopoly,” Brown said.

Share swap deal: AirAsia's Fernandes to gain 20% stake in MAS

2011-08-10T08:15:00.000-07:00

STAR, 7 August 2011

KUALA LUMPUR: Malaysia Airlines (MAS) and AirAsia will swap shares in a surprise deal which will see Tan Sri Tony Fernandes becoming the single biggest shareholder.

Khazanah Nasional Bhd, which owns over 69% of MAS, is said to have concluded negotiations with Fernandes to come up with a deal to save the national carrier.

Sources said the deal, which was struck last week after negotiations over the past year, became urgent after MAS' poor showing in the last two quarters.

Fernandes is set to get 20% of MAS equity under the deal that is to be signed next week, with some sources saying it has already received the Government's approval and could be inked by tomorrow.

Industry players expressed surprise at the deal because of past animosity between the management of the two airlines.

Those who were aware of the negotiations were also surprised at the speed at which it was concluded.

At present, Khazanah, a strategic investment company, holds about 69% stake in MAS, and under the deal with Tune Air Sdn Bhd, it will get a similar stake in AirAsia. Fernandes and his co-founder partner Datuk Kamarudin Meranun hold 26.28% in the world's biggest budget airline.

Fernandes declined to comment when asked about the deal.

Insiders in both airlines confirmed that the negotiations concentrated on the synergy such a share swap would bring.

First, there will be rationalising of routes. Between them, the two airlines cover most of the lucrative routes from Asia to Europe.

Second, when they are seen as a single unit, their bargaining power with airports and aircraft manufacturers will double, said a source close to the deal.

He pointed to the recent move to merge SapuraCrest Petroleum and Kencana Petro-leum via a share swap as an example for the AirAsia-MAS deal.

Insiders said it was unlikely the two airlines would merge into a single unit, but would operate though separate managements at operational level, while sharing common directors and policies.

Malaysia will get the best of both worlds a premier full-service carrier in MAS and the best budget carrier in AirAsia.

“They have been competing with each other for too long, and it's time to work together because there is more than enough to go around,” said a senior government official.

The official added that the “feud” between the two had been going on for 10 years since Fernandes and others took over the ailing AirAsia from DRB Hicom.

AirAsia is twice as big as MAS in terms of market capitalisation. MAS is worth about RM5.3bil, while Fernandes' outfit is worth slightly more than RM11bil.

AirAsia stocks closed at RM3.95 per share yesterday while MAS' was at RM1.60.

A news portal, The Malaysian Insider, which broke the story of the deal yesterday, reported that Fernandes would likely appoint Khazanah's executive director of investments Mohd Rashdan Mohd Yusof as chief operating officer after the share swap. Rashdan already sits on the MAS board.

Sources said no decision was made about the position of MAS CEO Tengku Datuk Azmil Zahruddin.

MAS recorded a first quarter net loss of RM242.3mil against a profit of RM310.6mil in the same period last year. Analysts expect the national carrier to make full-year operating losses due to high fuel costs and falling yields.

In contrast, AirAsia recorded a first quarter profit of RM171.9mil for this year and a record RM1.5bil in profits for 2010.

Sources said the merger would also force the two airlines to take stock of their future aircraft purchases if they are to enjoy any synergy.

AirAsia purchased 200 Airbus A320 aircraft earlier this year with an option to buy another 100, while MAS was set to make a decision on the replacement aircraft for its Boeing 747 and 777 fleet, which is more than 20 years old.

*MEDIA STATEMENT FROM KHAZANAH

Kuala Lumpur, 7 August 2011

”We refer to media reports that Tan Sri Tony Fernandes and Dato' Kamarudin Meranun will emerge as the single largest shareholder of Malaysian Airline System Berhad (“MAS”). These reports are incorrect. The aviation sector is a strategic sector to the economy and MAS remains a core holding in Khazanah Nasional Berhad's portfolio. Khazanah will continue to maintain its position as the single largest shareholder in MAS.
As an active strategic investor, Khazanah constantly reviews ways to improve the performance of its portfolio companies and concurrently the competitiveness of key strategic sectors of the economy. Further announcements will be made at the appropriate time with regard to Khazanah's position in MAS' ongoing transformation plan.”

*MEDIA STATEMENT FROM AIRASIA'S TAN SRI TONY FERNANDES & DATO' KAMARUDIN MERANUN

Kuala Lumpur, 7 August 2011

"We refer to the press coverage over the last two days that has reported that we would become the single
largest shareholder in MAS.

We wish to clarify that this is not true.

As the major shareholders of AirAsia Berhad and AirAsia X Sdn Bhd, we are committed to increasing shareholder value in both our core investments by continuously exploring various opportunities to enhance our franchise."

Astro, Putrajaya in rate hike dispute

2011-07-01T07:21:00.000-07:00

Malaysian Insider, 1 July 2011

KUALA LUMPUR, July 1 — Pay television operator Astro said today its rate hike was done after consulting regulators, hours after the Cabinet told the company to get clearance from the Malaysian Communications and Multimedia Commission (MCMC).

Information Communication and Culture Minister Datuk Seri Dr Rais Yatim had earlier said the Cabinet had rejected the rate hike announced last month.

“Astro noted the minister’s statement with concern as the price revision was conducted in consultation with the Malaysian Communications and Multimedia Commission (MCMC) and in accordance with the Communications and Multimedia Act (CMA) 1998 and the licence conditions,” an Astro spokesman said in a statement.

Astro recently announced that it would be streamlining the packages it was offering, which would take effect on July 11.

According to Astro, following the streamlining exercise, customers could make savings of between RM4 and RM14.95 or pay nominal increases of between RM1 and RM15, depending on packages preferred.
It is understood that Astro had notified MCMC about its proposed rate hike on May 13 but did not receive any feedback.

Bernama Online quoted Rais as saying that the matter was discussed at today’s Cabinet meeting and that the members felt it was not appropriate for Astro to raise its rate at this time.

“I agreed that Astro’s rates could only be hiked with MCMC’s approval and that any hikes must be reasonable and conform to the law,” he told reporters after chairing his ministry’s post-Cabinet meeting at Angkasapuri here.

He said Astro had violated MCMC’s regulations by issuing notices on its rate hikes to customers without the commission’s clearance.

“As such, I have asked MCMC to take appropriate action and instruct Astro not to continue with the rate hike until such a time deemed more suitable.

Explaining what he meant by “appropriate action”, Rais said this was up to MCMC to determine and that it could be a fine with the amount as allowed under the Communications and Multimedia Act 1998.

Transparency Intl concerned over LRT extension reports

2011-06-24T07:19:00.000-07:00

Written by Joseph Chin
EDGE, 23 June 2011

KUALA LUMPUR: Transparency International Malaysia (TI-M) has expressed “grave concern” following news reports about the alleged lack of transparency in the awarding of the Kelana Jaya light rail transit (LRT) extension contract which will stretch for another 17km. 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.

GLCs won’t indulge Bumi pressure, says Azman Mokhtar

2011-06-24T07:14:00.000-07:00

By Shannon Teoh

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

2011-06-24T07:11:00.000-07:00

By Lee Wei Lian and Boo Su-Lyn

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’s

Department 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

2011-06-24T07:07:00.000-07:00

By Asrul Hadi Abdullah Sani

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

2011-06-24T07:04:00.000-07:00

By Shannon Teoh

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

KUALA LUMPUR, June 23 — Putrajaya’s efficiency unit believes the economy can weather inflation of up to five per cent for up to three years, saying today subsidy cuts were implemented to ensure minimal impact amid a global rise in commodity prices.
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

2011-06-24T07:01:00.000-07:00

By Melissa Chi

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

2011-06-24T06:57:00.000-07:00

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

PBA Holdings Reports RM26.23 Million Profits For Last Year

2011-06-24T06:54:00.000-07:00

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

Petronas Forgoes RM133 Billion To Keep Gas Prices Low

2011-06-24T06:53:00.000-07:00

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

Policies Affecting Electricity Supply Industry Under Review

2011-06-21T05:12:00.000-07:00

June 21, 2011

KUALA LUMPUR, June 21 (Bernama) -- The government is reviewing existing policies affecting the Malaysian electricity supply industry to be in line with globalisation.

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

Subsidies masking IPP ‘inefficiencies’, says think tank

2011-06-14T08:13:00.000-07:00

By Lee Wei Lian

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

2011-06-14T08:04:00.000-07:00

IPOH, Jun 12 (Bernama) -- The cabinet has set up a committee to study the Independent Power Producer issue, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said on Sunday.

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.

New 1Malaysia consumer portal facing some hiccups: Ismail Sabri

2011-06-09T04:56:00.000-07:00

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.

Maritime agency to take over as sole enforcement unit soon

2011-06-09T04:51:00.000-07:00

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

MPs can ask for IPP agreements, says Mukhriz

2011-06-07T04:09:00.000-07:00

By Asrul Hadi Abdullah Sani

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

2011-06-07T04:05:00.000-07:00

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.

Price List For Consumer Products At 1,255 Retail Outlets Now Available On 1MPB Portal

2011-06-07T03:57:00.000-07:00

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.

WIKILEAKS: Malaysia's New Economic Model

2011-06-06T02:37:00.000-07:00

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.

PAAB to acquire water bonds

2011-06-03T18:16:00.000-07:00

Written by Sharon Tan

Edge Financial Daily, 25 May 2011

KUALA LUMPUR: The Selangor water impasse appears to have finally been broken. Syarikat Pengurusan Aset Air Bhd (PAAB) will acquire the securities issued by the Selangor state water concessionaires through its-wholly owned subsidiary Acqua SPV Bhd.

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

2011-06-03T18:12:00.000-07:00

Written by Sharon Tan & Chua Sue-Ann

Edge Financial Daily, 01 June 2011 14:03

KUALA LUMPUR: With the upward adjustments of natural gas prices and electricity tariffs, heavy duty power users now have to grapple with additional cost pressures as analysts estimate the increase of an average power bill to be between 6% and 10% for industrial and commercial users.

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.

Lim Wee Chai: We hope the government will provide sufficient advance notice should there be any future revision.

Tai: Adjustments to the steelmaking process and grades of raw material used can also cushion the effects of higher tariffs.

Yam: In the long term, property prices could trend higher as contractors and suppliers pass on additional costs.

Maybank IB Research also said average selling prices would need to be revised upwards by 2% to 3% to fully neutralise the impact of higher power costs.

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’

2011-06-03T08:07:00.000-07:00

By Debra Chong

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

2011-06-03T08:05:00.000-07:00

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.

Acqua SPV buys RM5.8bil Selangor water bonds

2011-06-03T08:03:00.000-07:00

STAR, 3 June 2011

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'

2011-06-03T08:01:00.000-07:00

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.

Power Tariffs Raised, 75 Per Cent Of Rakyat Not Affected

2011-05-30T04:54:00.000-07:00

May 30, 2011 18:06 PM

PUTRAJAYA, May 30 (Bernama) -- As part of its ongoing subsidy rationalisation exercise, the government Monday announced that average electricity tariffs will be raised by 2.23 sen kilowatt per hour (kWh) or 7.12 per cent to 33.54 sen kWh, from 31.31 sen kWh, effective Wednesday, June 1.

However, the move will not affect about 75 per cent of the population who mainly consume less than 300 kWh per month.

The announcement was made at a joint press conference by Minister in the Prime Minister's Department Tan Sri Nor Mohamed Yakcop and Minister of Energy, Green Technology and Water Datuk Seri Peter Chin Fah Kui.

They said the 7.12 per cent hike was due to the increase in natural gas price to the power sector.

As a result, Tenaga Nasional's average tariff had to be reviewed upwards by two per cent or 0.63 sen kWh.

"The review will enable the utility company to increase its investment in better electricity infrastructure including supply and distribution," he said, adding that it would invest about RM4.5 billion, annually.

Chin also said in line with the government's effort to rationalise energy prices in accordance with global market mechanism, the government has agreed to use the fuel-cost-pass formula to determine future tariff prices.

To encourage the use of electricity generated from renewable energy, the government has also decided to impose an additional one per cent feed-in-tariff portion which will be channeled, to the RE Fund, to promote the purchase.

-- BERNAMA

Khazanah MD ‘frustrated’ by political handicap

2011-05-30T00:40:00.000-07:00

By Yow Hong Chieh

Malaysian Insider, May 30, 2011

KUALA LUMPUR, May 30 — Khazanah Nasional Bhd managing director Tan Sri Azman Mokhtar has admitted to being disappointed by his inability to trim fat from the portfolio he inherited in 2004 due to political interference, the Financial Times reported yesterday.

“We have had our frustrations, and there have been areas, mostly in the regulated sectors such as electricity, automobiles and aviation, where value has stagnated or even declined,” Azman (picture) told the international financial daily.

The Financial Times said that despite scoring a “crushing victory” in a US$3.6 billion (RM10.8 billion) takeover battle with India’s Fortis for Singapore healthcare group Parkway Holdings, Khazanah was still struggling to turn around companies in its legacy portfolio, which includes national carmaker Proton and Malaysia Airlines.

“Big questions remain about Khazanah’s ability to deal equally decisively with the rest of its portfolio, not least because of government opposition to radical surgery on any of its significant companies,” the report said.
“Khazanah’s ability to turn round the biggest legacy companies is tightly bound by government limitations on its freedom of manoeuvre.”

It added that the impact of this “political framework” was evident in the detailed financial information released by Khazanah this year, which showed that the value of newer investments grew by an average of over 20 per cent while older investments only grew by five per cent.

The agency, burdened by a complex and potentially conflicting mandate to grow the portfolio, earn significant returns, lead GLC transformation and help Malaysia become a developed country by 2020, had “significantly less firepower” than other wealth funds, the Financial Times pointed out.

The net portfolio value of Singapore’s sovereign wealth fund Temasek at the end of December was US$149 billion compared to Khazanah’s US$24.6 billion.

Tan Teng Boo, chief executive of Kuala Lumpur-based investment adviser Capital Dynamics, told the daily that while there were many “very capable and committed people” in Khazanah, there were just as many political obstacles to real reform.

Although the investment fund’s portfolio showed “some growth”, he faulted politicians who refused to let Khazanah “do what is necessary” for its failure to transform lacklustre GLCs as mandated.

Azman, however, argued that the agency was fulfilling its mandate for the most part, citing a 39 per cent increase in portfolio value last year, with compounded annual growth of 13 per cent from its level of RM33.3 billion when he took over in 2004.

At the same time, the group has sold its 32 per cent stake in Pos Malaysia, reduced holdings in successful companies such as Malaysia Airports Holdings Bhd and strongly encouraged regional expansion by successful portfolio companies like Axiata and CIMB.

“We are in the seventh year of a major transformation programme, and we have achieved a lot in terms of making the GLCs more efficient while also growing the value of our portfolio and playing our part in helping Malaysia to develop,” said Azman, a former UBS and Salomon Smith Barney banker.

“The GLCs have conclusively improved their performance as a result of the management and other changes we have made, with aggregate earnings for the 20 biggest rising by 49 per cent in 2010 to RM17.3 billion and total shareholder returns of 16.4 per cent since 2004.”

Fuel Subsidy To Be Reviewed If Oil Prices Reach US$110-US$120 Per Barrel

2011-05-26T00:43:00.000-07:00

May 26, 2011

PETALING JAYA, May 26 (Bernama) -- The government will review the fuel subsidy if oil prices reaches between US$110 and US$120 per barrel, says Deputy Finance Minister Datuk Donald Lim Siang Chai.

The government yesterday decided to maintain the prices of RON95 petrol, diesel and liquefied petroleum gas (LPG) for the time-being.

"We know at this juncture, a lot of other things have also increased, including food prices and housing. So the government decided not to increase (fuel prices," he told reporters after opening Standard Financial Planner Sdn Bhd's new office here Thursday.

Besides, the decision was also based on declining oil prices from US$110 per barrel, as of April, to just above US$100 per barrel, at present, Lim said, adding that the government was closely monitoring the crude oil market.

He said if oil prices continued to spiral, the government would have to spend more on subsidies, which in turn, could lead to a higher deficit and affect economic growth.

"When we (the government) planned the budget for this year, we were looking at oil prices hovering between US$85 and US$90 per barrel.

"Of course if it (oil price) drops below US$100 per barrel, then the government is not likely do anything because we can still find ways to overcome it. But if it goes beyond US$110, then we have to consider (some measures) as it could affect economic growth," Lim said.

Although, people can continue enjoying the fuel subsidy, Lim also advised then to be prudent.

Asked whether there could be an increase in electricity tariff rates, Lim said the National Economic Action Council would meet tomorrow to discuss and decide on the issue.

On Malaysia's economic outlook in the second quarter, Lim believed the country would be able to register a better growth of 4.6 per cent amid rising foreign direct investments.

-- BERNAMA

No Price Increase For RON95, Diesel And LPG

2011-05-26T00:41:00.001-07:00

May 25, 2011 17:33 PM

PUTRAJAYA, May 25 (Bernama) -- In a move that will please many Malaysians, the government has decided to maintain the prices of RON95 petrol, diesel and liquefied petroleum gas for the time being.

Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Ismail Sabri Yaakob said the decision was made after an in-depth discussion on subsidy rationalisation at today's weekly cabinet meeting.

"The decision was made taking into consideration the interest of the people," he told a news conference at his ministry, here Wednesday.

The government would however continue to study the need for subsidy rationalisations in view of the increase in the prices of oil and gas in the global market.

Asked whether there was any discussion on the time frame for the prices to remain, Ismail Sabri said there was no discussion about time frame.

The price of RON95 petrol is now RM1.90 per litre and diesel at RM1.80 per litre. LPG is priced at RM1.90 per kg.

The last time the prices for these three items were adjusted was in December last year.

Ismail Sabri said the decision to retain the prices of the three items meant that the government had to bear fuel subsidy totalling RM18 billion.

Last year, the fuel subsidy was RM8.15 billion.

Ismail also called on the public not to listen to rumours being spread by the opposition.

"I saw in blogs, in Facebook postings, in pamphlets distributed by opposition parties, that the government will increase prices. Some say by 20 sen, 30 sen. These are all lies, not the truth," he said, expressing regret "because people seem to believe these lies."

"Believe in the government because the government listens to the views of the people. The government will consider every angle before making any decision.

"The decision today clearly shows that the government cares for the people. Enough of opposition's lies," he said.

Asked whether the decision had anything to do with the likelihood of a general election, Ismail said, "This has nothing to do with election."

"Subsidies have been in place for so long. If this is about the election, then we can increase (prices) only in certain months we want it to increase. No one knows when the election is going to be called," he said.

He also dismissed the notion that the decision was due to the pressure from the opposition.

"We don't listen to the opposition. Umno Youth has also been against (price increases). This is not because of the opposition," he said.

-- BERNAMA

Review Of Heavily Subsidised Gas Price Long Overdue

2011-05-23T05:32:00.001-07:00

May 22, 2011 15:01 PM

A News Commentary By Siti Hawa Othman

KUALA LUMPUR, May 22 (Bernama) -- A long-overdue review of the heavily subsidised natural gas price is crucial as demand for cheap gas in Malaysia is far outstripping supply.

Analysts said that if this market-distorting situation is not corrected by the government soon, then Malaysia will run out of gas reserves which will jeopardise future generations.

As it is now, the government continues to subsidise gas by as much as 71-77 per cent, which means lost opportunities for the country and the economy not being cost efficient.

This is because the billions of ringgit used to heavily subsidise gas could have been used for socio-economic development projects such as public amenities, roads, schools and other services.

For gas alone, Petronas paid out a massive amount of subsidies amounting to RM131.3 billion between 1997 and 2010.

This being the case, there is a need to gradually move gas prices to reflect international market prices as gas prices in Malaysia are among the cheapest in the region and cheaper compared with alternative fuels.

As a result, a large number of consumers have shifted their consumption of energy from other fuels such as diesel, liquefied petroleum gas and fuel oil to natural gas.

This has resulted in an imbalance with demand outstripping supply at a rapid pace.

There is also a misconception among the people that Malaysia has lots of gas reserves to be used for power when the actual situation is that there is real concern over gas reserves as they are finite.

Malaysia is now getting 36 per cent of its natural gas supply outside Malaysia at a higher price which continues to increase, but sold to the power and non-power sectors and industries at highly reduced prices.

These price distortions to the economy which are taking a toll on the country's finances needs to be rectified soon by rationalising and reducing subsidies as the situation is increasingly untenable.

The local supply of natural gas is insufficient as demand has escalated 400 per cent over the past 10 years from 2000 for customers using less than 2.0 million standard cubic feet per day (mmscfd) and about 160 per cent for customers using more than 2.0 mmscfd while the country's gas reserves are fast depleting at an annual rate of 12 per cent.

The last gas price revision by the government was in March 2009, at a discount of 50 per cent, the prices ranged from RM15.35 per million British thermal units (mmBtu) to RM10.70 per mmBtu, with the obligation to review every six months but that did not happen.

Since the last revision, the price of medium fuel oil (MFO), a reference index from which gas is priced on, had risen over 100 per cent.

This has led the government to bear the cost of heavier subsidies as the price of energy continues to increase in global markets.

On the local scene, the power sector which has been subsidised since 1997, consumes about 55 per cent of the gas needs and a large part of the balance by the industry which had been subsidised since 2002.

The government has subsidised the price of gas to the power sector by as much as 77 per cent or RM10.70 per mmBtu and that to the industries at an average 73 per cent or between RM15.35 to RM11.05.

Based on a simple calculation, for every RM10, the government will have to subsidise between RM7.70 to RM7.30, which is already a burden, bearing in mind the fact that imported gas is bought at international market prices.

The Malaysian public and industries have been enjoying the benefits of subsidies for so long but the world scenario has changed and the days of cheap energy are gone.

From another perspective, Malaysia was subsidising the cost of products of other countries manufactured by their multinational companies based here.

The government will now have to adapt to strategies it knows best to sustain the economy and Malaysians must learn to accept changes and ride the global economic storm to be at the forefront of the competition.

Like it or not, oil and gas prices have increased and the subsidies which have become a burden to the government are very much due for a relook.

Industries have benefitted immensely enjoying double subsidies in the form of cheap gas and subsidised electricity, while receiving other government incentives.

Having relied on cheap gas for their production, there is no incentive for companies to adopt and adapt to new technologies and find new ways to become efficient.

But a gradual removal of subsidies is expected to induce industries to seek more efficient technologies for their processes.

It is understood that some of the industry players do not mind the market rates but expect any move towards that end to be undertaken in a gradual manner.

Since 1997, the government had spent RM131 billion in oil and gas subsidies and the amount is increasing since the gas usage gets bigger while higher MFO prices had caused the situation to be not sustainable in the long run.

As of now, Malaysia is getting supply of natural gas from the Natuna field in Indonesia, the Malaysia-Thailand Joint Development Area (JDA) and also from Vietnam.

Malaysia's share of gas supply from Vietnam is almost exhausted, which means an additional burden on the government to look for new sources.

It is understood that Petronas would also be importing liquefied petroleum gas (LPG) by 2012 to cater to increasing demand, which is rather costly at about RM40 per mmBtu.

The people have to dispel the misconception that gas is always there and readily available.

In reality, Malaysia is a small player and the country's oil and gas reserves are small.

If gas continues to be subsidised, then Malaysia is not optimising its resources when the reserves should be kept for future generations.

Ideally, the price of gas should be at market rates which would then attract other potential companies to import gas and liberalise the market.

By spurring the gas trade, players could import cheaper gas from abroad compared to the current situation, where players are not willing to come onboard as they would not be making any money competing against subsidised gas.

It is understood that Petronas will have its regasification plant ready by 2012 whereby other companies could import LNG and regasify to sell to the industries.

Malaysia, eventually, will attract investors who can add higher value to the gas industry and generate greater income and spur the economy in the process.

-- BERNAMA

RM6.5b offer for Selangor water bonds?

2011-05-19T21:28:00.000-07:00

Kuala Lumpur: The federal government is poised to make a RM6.5 billion offer today to buy over the Selangor water debts from bondholders.

It is understood that the offer will be made through the federal government and Pengurusan Aset Air Bhd (PAAB), the government's water asset management company.

The offer is a RM200 million discount to the value of the outstanding water bonds of RM6.7 billion.

"The federal government is stepping in to buy over the bonds with a slight discount to what the lenders want. The lenders will have to mark the losses in their book," an industry sources told Business Times.

Lenders include Maybank Investment Bank and CIMB Group, which hold about RM1 billion of the outstanding water bonds. Insurance firms and pension funds hold about RM2 billion each while the rest is held by fund managers such as AmInvestment, CIMB Principal, RHB Asset Management and Public Mutual.

A source said the government is dealing directly with the lenders and has been in heavy discussions following the recent approval from the Minister of Finance Inc to take over the bonds.

"The ultimate aim is for the government to own the assets and debts of the water companies in Selangor in an effort to consolidate the water industry," the source said.

This is the first phase of the consolidation as by June 2, the government is expected to make an offer to buy the water assets in Penang for more than RM3 billion.

The Selangor asset owners are Puncak Niaga (M) Sdn Bhd and Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) - both controlled by Puncak Niaga Holdings Bhd - as well as Syarikat Pengeluar Air Sungai Selangor Bhd (Splash) and Konsortium Abass Sdn Bhd.

The source said there is a possibility the debt could be converted into shares at a later stage.

"This is one of the options being discussed," he said.

The national water restructuring plan is meant to relieve the states and concessionaires of the heavy burden of funding future water infrastructure development.

After the restructuring, the responsibility falls under the purview of the federal government and PAAB, which is entrusted to buy over the states' water assets, making them asset-light and allowing them to focus on operations and maintenance.

Putrajaya to take over Selangor’s water debt for RM6.5b

2011-05-19T21:20:00.000-07:00

Malaysian Insider, 20 May 2011

KUALA LUMPUR, May 20 — The federal government is slated to pay RM6.5 billion to bond holders for the water debts in the country’s most industrialised state of Selangor, the Business Times said today.

“The ultimate aim is for the government to own the assets and debts of the water companies in Selangor in an effort to consolidate the water industry,” the Business Times quoted an industry source as saying.
The major owners of water assets in the central state of Selangor include subsidiaries controlled by Puncak Niaga and Gamuda .

Officials in those companies and the government could not be immediately reached for comment.
The newspaper said the Selangor offer was the first phase of water industry consolidation and the government was expected to buy the assets in the northern state of Penang for RM3 billion.

The government wants to restructure water assets and relieve the burden of funding water infrastructure development that has been usually taken up by water companies and the state governments.
The Selangor offer, which is likely to be made today by the government’s water asset management firm PAAB, is at a RM200 million discount to the value of the outstanding water bonds at RM6.7 billion, the newspaper said.

“The federal government is stepping in to buy over the bonds with a slight discount to what the lenders want. The lenders will have to mark the losses in their book,” the newspaper cited the industry source as saying.
Lenders such as investment banking arm of Maybank and CIMB Group hold about RM1 billion of the outstanding debt. Insurance firms and pension funds hold about RM2 billion each while local fund managers hold the rest. — Reuters

Time to review water tariff, says group

2011-05-19T21:18:00.000-07:00

New Straits Times, 23 April 2011

The Malaysian Water Association (MWA) has proposed that water utility companies in the country review the current water tariff structure in their respective states as a sustainable measure to face an impending water crisis.

MWA president Ahmad Zahdi Jamil said this was because the current tariff does not promote water sustainability and besides being too cheap, it was also not punitive towards excessive use of water.

"Major states in Malaysia will be facing severe water shortage in 2014 if measures are not taken to curb excessive wastage and high non-revenue water (NRW) levels," he told reporters after the MWA's 23rd Annual General Meeting held today.

Citing Johor and Penang as examples, he said domestic water tariff in Johor was the highest among states in Peninsula Malaysia with RM0.61 per cubic meter compared with Penang which is the cheapest at RM0.20 per cubic meter.

Difference in tariff also affected the level of water consumed, with consumers in Johor consuming 205 litre per capita per day in 2009 compared with 286 litre per capita per day by consumers in Penang, he said.

Ahmad Zahdi said according to the Water Sustainability Index (WSI) the availability and usage of water in Malaysia had shown a drop from 64 per cent in 1992 to 33 per cent in 2002, a reflection that the country's water resources are rapidly depleting and have been managed unsustainably.

He said the timely review must take into consideration the affordability for the poor consumers and its ability to increase water conservation among the people.

"Increase in water tariff must modeled in such a way as not to burden the poor and it should not be done drastically. In the long run, the increase must reflect the recoverable cost," he stressed.

Malaysia recorded the highest water usage and has the
cheapest tariff among countries in Asean.

On average, Malaysians consumed 280 litres of water daily, higher than Singapore (155 litre), the Philippines (175 litres), and Indonesia (130 litres). -- Bernama

Selangor invites Putrajaya back to table over water

2011-05-19T06:07:00.000-07:00

By Asrul Hadi Abdullah Sani

Malaysian Insider, May 18, 2011

The Selangor mentri besar said the construction of water treatment plants on Sungai Langat, or Langat 2, will be discussed at the meeting. — file pic

KUALA LUMPUR, May 18 — Selangor Mentri Besar Tan Sri Khalid Ibrahim said today that the state government has agreed to hold another round of talks over the stalled water restructuring issue with the federal government.

Both the 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 give the other control over the critical industry.

Khalid said that a letter would be sent to the Ministry of Energy, Green Technology, and Water regarding the special meeting due to take place in the first week of June.

“The state executive council agreed today to hold a special meeting to discuss restructuring the water industry with the federal government.
“This special meeting will be held during the first week of June and the agenda includes the construction of water treatment plants on Sungai Langat or Langat 2 where the state government will decide whether it should issue a directive on its construction,” he told reporters during a press conference.

In January, Energy, Green Technology and Water Minister Datuk Seri Peter Chin announced that the Selangor government had promised in December last year to allow the federal government to build Langat 2, which is part of the Pahang-Selangor water transfer project.

Chin had said his ministry would put the project out to tender by February at the very latest despite the absence of written approval from the state.

The Selangor government immediately denied giving Putrajaya the go-ahead for the Langat 2 water treatment plant.

State government sources revealed that Selangor, in its December 8 meeting with the ministry, had only agreed to study the “critical path” for both the Langat 2 and Pahang-Selangor water transfer projects before making a decision this month.

The Critical Path Method, developed in the 1950s, is an important tool in project management for scheduling project activities.

The Energy Minister has said that the RM8.65 billion water-transfer project must be completed by 2014 to ensure adequate water supply for residents in Selangor, Kuala Lumpur and Putrajaya.

Khalid, however, has argued that there is no rush to complete the Pahang-Selangor transfer as the state has enough water to fulfil residents’ needs until 2019.

Today, Khalid reiterated that priority should be given to consolidating Selangor’s water players and not to the Langat 2 project, calling for both issues to be discussed jointly.

“The Selangor government will continue to cooperate with all parties and does not object to the construction of Langat 2, but believe that this project should be done after the restructuring of the water industry is resolved,” he added.

Chin warned the Selangor government last year it risked legal action by delaying construction of the water treatment plant, which had been scheduled to begin in August last year.

Metramac Highway Toll Abolished

2011-05-19T06:01:00.000-07:00

May 16, 2011 00:02 AM

KUALA LUMPUR, May 16 (Bernama) -- The government has abolished toll collection at the toll plazas in the direction of Cheras and Petaling Jaya on the Metramac Highway with immediate effect.

Works Minister Datuk Shaziman Abu Mansor said the toll collection was being abolished seven years before the concession period for the highway was due to end, which is May 31, 2018.

He said the move would benefit some 100,000 users of the highway especially residents of Bandar Permaisuri, Bandar Tun Razak and the surrounding areas.

"With the abolition of this toll, it is estimated that RM180 million in toll collection will have to be foregone while the government also will not need to pay any compensation as per the agreement to close this toll collection early," he said at a ceremony to mark the toll abolition at the Cheras toll plaza of the highway Monday night.

The toll rates at the highway (both directions) were RM0.50 (Class 1 vehicles), RM1 (Class 2 and 3), RM0.30 (Class 4) and RM0.50 (Class 5).

On Jan 28, Prime Minister Datuk Seri Najib Tun Razak had announced that toll collection on the highway would be discontinued before the concession period ended in 2018.

-- BERNAMA

IPP subsidies under review

2011-05-19T05:58:00.000-07:00

By Lee Wei Lian

Malaysian Insider, May 19, 2011

KUALA LUMPUR, May 19 — The controversial gas subsidies for independent power producers (IPPs) are under review but no decision has been made yet, said Second Finance Minister Datuk Seri Ahmad Husni Mohamad Hanadzlah today.
“We have done a discussion and study under the Ministry of Energy, Green Technology and Water, EPU (Economic Planning Unit) and myself,” Husni told reporters at the sidelines of the 15th Malaysia Banking Summit today when asked if the subsidies will be relooked at. “We have to wait for the decision.”

The issue of gas subsidies is also a controversial one as the prime beneficiaries are seen to be the IPPs, many of which are highly profitable and perceived to be controlled by politically-favoured parties.
DAP recently urged the Najib administration to first cut billion-ringgit subsidies for IPPs rather than burden the people with subsidy cuts on essential items

“Remove the big opium of gas subsidies that can save tens of billions of ringgit annually before dealing with the opiate for the masses that only save hundreds of millions of ringgit,” said DAP secretary general Lim Guan Eng in a statement recently.

“Why should the masses and the ordinary 27 million Malaysians be made to bear these price rises when the few big corporate giants in the IPPs do not suffer a single cent in gas subsidies cuts?”

DAP publicity chief Tony Pua added that the government must take action against “fat crony companies” like IPPs if it wished to reduce subsidy burden, as last year’s five-in-one subsidy cut would only save RM750 million while a 20 per cent cut in subsidies to IPPs would save RM3.6 billion.

The Petaling Jaya MP said while there was no doubt that the cost would be passed on to consumers, unfair contracts signed between the government the IPPs meant that electricity tariffs should be at least 26 per cent cheaper based on comparison to international rates

He said that based on Petronas annual reports, gas subsidies granted to IPPs amounted to RM8.1 billion in 2008.

Firms Flouting Competition Act Can Be Fined Up To 10 Per Cent Turnover

2011-05-03T04:25:00.001-07:00

Bernama, May 03, 2011

PUTRAJAYA, May 3 (Bernama) -- Companies that are found breaching the main provisions of the Competition Act 2010 can be fined up to 10 per cent of their worldwide turnover.

Because the penalty was high, advocacy programmes would be enhanced to ensure all parties including industry players, traders and the public understand the Act before it came into force in January next year, Domestic Trade, Cooperative and Consumerism Minister Datuk Seri Ismail Sabri Yaakob said today.

"We don't want the traders to say they don't know the Act because the implication is big if they flout the law.

"If we don't give them room to understand and so on surely problems will arise," he told reporters after the presentation of appointment letters to the chairman and members of the Malaysian Competition Commission here.

The commission was formed on April.

Its chairman is former Chief Judge of Malaya Tan Sri Siti Norma Yaakob.

Four members representing the government are Attorney-General Tan Sri Abdul Gani Patail; Domestic Trade, Cooperative and Consumerism Minister Secretary-General Datuk Mohd Zain Mohd Dom; International Trade and Industry Ministry Secretary-General Datuk Dr Rebecca Fatima Sta Maria; and Economic Planning Unit Director-General Datuk Noriyah Ahmad.

Five members representing the private sector are Asian Strategy & Leadership Institute chief executive Datuk Dr Michael Yeoh, Nilai International College vice president Datuk Dr Sothi Rachagan, Universiti Sains Malaysia Graduate School of Business Dean Prof Datin Dr Hasnah Haron, former Bar Council president Ragunath Kesavan and businessman Abd Malek Ahmad.

Putrajaya paid RM2b compensation to toll companies

2011-04-26T05:02:00.000-07:00

By Yow Hong Chieh

Malaysian Insider

April 26, 2011

KUALA LUMPUR, April 26 — The federal government has forked out just over RM2 billion since the 1980s to compensate highway concessionaires for toll hike freezes, Penang Chief Minister Lim Guan Eng has revealed.

“Compensation should be paid following the government’s decision to postpone toll rate hikes for highways [and] expressways in operation, as specified in the concession agreement,” the Works Ministry said in a written reply dated March 21 to Lim.

The ministry also said compensation was also paid to concessionaires after Putrajaya eliminated toll charges at Salak Jaya Toll Plaza and Sungai Besi Highway, and put in place a 50 per cent toll discount for buses on PLUS Expressways Bhd (PEB) highways.

Compensation was also paid for not implementing a “restriction order” on the New North Klang Straits Bypass, the ministry added.

As of December 31, 2010, the total compensation paid out to 27 highway concessionaires stood at RM2.05 billion.

The North-South Highway received the most compensation (RM735.2 million), followed by the Damansara-Puchong Highway (RM631.1 million) and the Penang Bridge (RM181.2 million).

Lim (picture) cautioned today that this total did not take into account bank guarantees, subsidies and tax incentives or the total toll collected from highway users.

“BN (Barisan Nasional) should reexamine highway concession agreements for the welfare of the public,” he said in a statement.

Prime Minister Datuk Seri Najib Razak announced in last October’s Budget 2011 speech that PEB would not be allowed to raise toll rates for the next five years.

Critics warned that the move could cost the government RM5 billion in compensation - in addition to the RM2.5 billion already owed to PEB as of June 30, 2010 - and push up federal debt.

Total federal government debt soared from RM362.4 billion in 2009 to RM408.2 billion last year, or 53.7 per cent of GDP, the highest in five years.

Najib, however, announced a similar five-year toll freeze on the Karak and East Coast Phase One highways in January.

He also said toll charges for the East-West link highway at the Salak and Taman Connaught interchange in Kuala Lumpur would be eliminated by May.

Pakatan Rakyat (PR) has flayed Najib’s “populist” measures, pointing out that any benefit highway users gain from the freezes will be wiped out by compensation paid to concessionaires using public funds.

The opposition has promised to reforms the country’s tolled highway system within 100 days of seizing Putrajaya. PR has promised to abolish the toll system by instructing Khazanah Nasional Bhd, the Employees Provident Fund (EPF) and other government bodies to take over highway assets from the concessionaires.

MRT study: Pua questions McKinsey appointment

2011-03-17T07:08:00.000-07:00

By Clara Chooi

Malaysian Insider, March 09, 2011

KUALA LUMPUR, March 9 — DAP MP Tony Pua questioned today the appointment of McKinsey & Co to study the MRT, pointing out that the American consultancy was the same firm used to set up the rail project’s proposer — Pemandu.

The Petaling Jaya Utara MP said that as McKinsey also works with Pemandu, its appointment as the MRT’s consultants raised doubt as to whether it would conduct a fair analysis of the multi-billion ringgit rail project.
“But all studies done — whether from before or in the future — must be in the open. After all, there is not issue of national security in the MRT so the studies should be made public,” he said.

The Star reported today that McKinsey had been hired to carry out a value management study (VMS) on the proposed MRT project, which is presently undergoing a public scrutiny process.

Quoting the government’s Land Public Transport Commission (SPAD) chief executive Mohd Nur Ismal Kamal, the newspaper reported that the VMS is to help decide the selection of the proposed alignment and station locations to “make cost most effective”.

At the same time, it added, the study would also “consider the factor of helping unlock the full potential of real estate values in locations where stations are located”.

“The VMS will also design a procurement policy which will ensure cost savings and prevent any extravagant spending,” Mohd Nur was quoted as saying.

Pua also accused the MRT project regulators for being insincere in its procurement of public feedback, pointing out that even before the exercise was over, tenders were already being prepared for issuance next month.

“It shows how much weight they are putting into the public feedback. It has become quite clear that the exercise is for show.

“Feedback is collected but there is no intention of ever having them be integrated into the project management and decision-making,” he said.

Work on the MRT system is scheduled to kick off in June and the government has given its assurance that the three-month public feedback exercise would be instrumental in helping to improve the system.

Pua stressed that he was not against the MRT as the system was much needed to improve the country’s fragmented public transportation system but noted that the project should be cost-effective.

“But the way it is being conducted now, it is rushed, and does not give any confidence that it is a value-for-money project,” he said.

Penang Chief Minister Lim Guan Eng agreed and pointed out that the country’s existing rail system was fragmented and “confusing”.

“Do not repeat the same mistakes of the past. Why don’t we do our homework first ... we are talking about a project worth billions here ... not one or two (billion) or ten but maybe up to RM53 billion.

“A one per cent leakage is already RM530 million,” he warned the government.

Initial cost estimates for the MRT were set by project delivery partner (PDP) Gamuda-MMC at RM36.6 billion, but Pua noted that the figure could balloon to RM50 billion or RM53 billion.

Tony Pua said the appointment of McKinsey & Co was a possible conflict of interest.

This, he explained, had been cited in The Star and CIMB Research recently.

“This is despite the fact that the project has yet to take off on the ground and raises major concerns as to whether it will fall victim to similar features cited in the Flyvbjerg study,” he said.

Pua was referring to findings by Oxford Professor Vent Flyvbjerg that he highlighted in the media recently which states that rail projects worldwide often suffered from cost overruns and overestimated targets.

“Flyvbjerg found that rail projects not only suffer from an average of 44.3 per cent in cost overruns but actual passenger traffic is 51.4 per cent lower than the forecast traffic average,” he said.

Also citing from Flyvbjerg’s study, Pua suggested that the Malaysian government consider the measures listed by the professor to prevent such excesses.

The first measure, said Pua, was that all forecast and business cases should be made subject to independent peer review and “scientific and professional conferences should be organised where forecasts would present and defend their forecasts in the face of colleagues’ scrutiny and criticism”.
Next, Pua said that forecasters and their organisations should share financial responsibility for covering cost overruns and benefit shortfalls resulting from misrepresentation and bias in forecasting.

Another suggestion is that public hearings, citizen juries and the like should be organised to allow stakeholders and civil society to voice criticism and support of forecasts.

“Knowledge generated in this way should be integrated in project management and decision making,” said Pua.

Finally, he said Flyvbjerg also suggested that all forecasts, peer reviews and benchmarking be made available for public scrutiny, including by the media.

“Fyvbjerg also argued that projects with inflated benefit-cost ratios should be reconsidered and stopped if recalculated costs and benefits do not warrant implementation.

“Project-realistic estimates of benefits and costs should be rewarded,” he said.

The MRT system is an entry point project identified for the Greater Kuala Lumpur/Klang Valley National Key Economic Area (NKEA) and aims to increase public transport modal share from 18 per cent to 40 per cent by 2020.

With the 40 per cent public transport modal share, the government hopes that at least four million trips of the estimated total of 10 million are made via public transport.

The remaining six million trips will continue to be made via private vehicles.

The MRT Environmental Impact Assessment (EIA) is presently up for public viewing until March 15 at all Department of Environment offices nationwide and several public libraries.

The Sungai Buloh-Kajang line alignment map is also up for public viewing until May 14 at seven locations across the city.

They are Kuala Lumpur City Hall, Petaling Jaya City Council, Shah Alam City Council, Selayang Municipal Council, Kajang Municipal Council, Bangsar LRT station and the SPAD office in Menara Dayabumi.

The public can provide their feedback on the project via email to feedback@kvmrt.com.my or through the SPAD toll-free line at 1-800-82-6868.

Nazri: McKinsey gets RM8.2m for MRT study

2011-03-17T07:05:00.000-07:00

By Clara Chooi

Malaysian Insider, March 15, 2011

Nazri

KUALA LUMPUR, March 15 — The Najib Administration has revealed that American consultants McKinsey & Co will be paid RM8.2 million to study the proposed Mass Rapid Transit (MRT) system.
The consultancy which previously helped set up government think-tank Pemandu will now look at the cost effectiveness of the intended 51km rail system.

Minister in the Prime Minister’s Department Datuk Seri Mohamed Nazri Aziz told Parliament today that the consultancy was appointed without going through a tender process as it was merely commissioned to conduct the value management study (VMS) on the multibillion ringgit rail project.

PKR MP Chua Tian Chang however questioned the appointment, revealing that while the firm was commissioned to study the full potential of real estate value for the project, the government has been disposing parcels of valuable land to “crony” companies at below market value.

In a press conference this afternoon, the Batu MP revealed five such cases of disposal where land was sold or swapped at below cost, some with a difference of up to RM10 billion.

In one example, he pointed to the sale of a 2,675 acre plot of Malaysian Rubber Board land in Sungai Buloh worth RM12 billion to the Employees Provident Fund (EPF) at RM2.62 billion.
Other examples include the sale of a 8ha land at KTMB Bangsar worth RM500 million to Pelaburan Hartanah Bhd at RM200 million.

“The question arises here over the government’s rationale in disposing-off these plots of land when they could have reaped greater returns by selling it through open tender instead of direct negotiation,” said Chua.

Citing the Hong Kong MRT as an example, the PKR vice-president explained that government there had gazetted the land surrounding the rail system and sold parcels through open tender.

“Now, the Hong Kong MRT has reaped returns of between 30 per cent and 50 per cent from its income through the construction of commercial complexes, housing and advertising alone.

“Yet, it has not raised its MRT passenger fares in the past 15 years. At least 90 per cent of its commuters use the public transport there,” he said.

Chua also pointed Syarikat Prasarana Negara Bhd’s bailout of both the failed Star (RM3 billion) and Putra LRT (RM5.25 billion) rail systems, and questioned if the firm would be able to bear the cost of the MRT, said to be at least RM36.6 billion.

Last week, in his explanation on McKinsey & Co’s RM8.2 million bill to study the MRT, Nazri revealed that the government would bear the entire cost of the study via a special entity - Infrastructure Funding Entity (IFE).

“Through the entity, the financial requirements of the project will be identified and the best mechanism to procure allocations will be used.

“For example, through long-term government bonds,” he had said in a written response to Chua.
McKinsey & Co is the same consultancy that was instrumental in setting up the proposer of the MRT project - Pemandu.

The VMS is to help decide the selection of the proposed alignment and station locations and help the project regulators to unlock the full potential of real estate values in locations where the stations are located.
It is also supposed to determine and study the cost-effectiveness of the project.

The MRT system is an entry point project identified for the Greater Kuala Lumpur/Klang Valley National Key Economic Area (NKEA) and aims to increase public transport modal share from 18 per cent to 40 per cent by 2020.

With the 40 per cent public transport modal share, the government hopes that at least four million trips of the estimated total of 10 million are made via public transport.

The remaining six million trips will continue to be made via private vehicles.

Public viewing on the MRT’s Environmental Impact Assessment (EIA) ends today and the Department of Environment will soon announce its decision to approve or reject the project.

The Sungai Buloh-Kajang line alignment map is however still up for public viewing until May 14 at seven locations across the city.

They are Kuala Lumpur City Hall, Petaling Jaya City Council, Shah Alam City Council, Selayang Municipal Council, Kajang Municipal Council, Bangsar LRT station and the SPAD office in Menara Dayabumi.

Upon the end of the public scrutiny process, the Land Public Transport Commission (SPAD) has promised to consider all feedback obtained before proceeding with the project.

The public can provide their feedback on the project via email to feedback@kvmrt.com.my or through the SPAD toll-free line at 1-800-82-6868.

Ad agency says was asked for bribes to win tourism contract

2011-03-17T07:02:00.000-07:00

By Clara Chooi

March 17, 2011

Malaysian Insider

KUALA LUMPUR, March 17 — The advertising agency behind the award-winning “Malaysia, Truly Asia” tourism campaign charged today that it withdrew a bid to renew its contract with the Tourism Ministry after being asked for bribes in exchange for the deal.

Integrated Strategic Communications’ (ISC) complaints against the ministry are already being probed by the Malaysian Anti-Corruption Commission (MACC).

The agency said in a press statement today that it was rebutting Tourism Minister Datuk Seri Dr Ng Yen Yen’s denial of “ambiguity” in the tender process for the advertising and promotions contract, worth a total of RM381 million.

ISC founder and chief executive officer Austen Zecha (picture) alleged that both he and his deputy were jointly approached on January 19 to “offer the client” (the ministry) a 50 per cent “rebate” or an annual share of the firm’s income from the account.

In exchange, he said, ISC would then “re-win” another three-year Tourism Malaysia contract for the Europe, North America and Oceania tender.
“This essentially led ISC to decide to withdraw its tender on Wednesday, January 26,” Zecha said.

He added that ISC’s founders, shareholders, directors and management had unanimously agreed that the incident was a “grave insult” and that it added further suspicion to the ambiguity of the tender process on a whole.

He pointed out that ISC had an “impeccable” record in its work for the “Malaysia, Truly Asia” campaign, which it has handled since 1999 through the terms of four successive tourism ministers — Datuk Leo Michael Toyad, Datuk Seri Tengku Adnan Tengku Mansor, Datuk Seri Azalina Othman and now Datuk Seri Ng Yen Yen.

Zecha also repeated ISC’s earlier allegation that it had been told by the ministry that it could only bill Tourism Malaysia RM3 million both in 2009 and 2010 for its previous three-year contract for Europe, which was actually worth RM18 million annually.

“It is only under this minister’s administration — never ever before, even prior to ISC’s past four contractual three years of service or its two predecessor agencies’ previous three contractual years of service covering the 1970s, 1980s and 1990s — did Tourism Malaysia allow ISC and its two predecessor agencies to bill it only one-sixth of any year’s stipulated contract’s worth, or only about 17 per cent.

“So what happened to the other 83 per cent of each contract year’s worth of the RM18 million in 2009 and 2010, and who authorised and benefited from the standard commissions of the other RM30 million of invoices over the past two years?” he asked.

“And does the government, especially the Treasury, allow for such hidden euphemistically-called ‘Direct Bookings’ to deprive bona fide and Treasury-registered companies to be basically ‘short-changed’ on contracts’ worth, and for which ISC duly paid Treasury the normal stamp duties based on its stipulated contracts’ worth?” said Zecha.

He also called into question Ng’s involvement in the issue, pointing out that the latter’s remarks in Parliament on Tuesday had contradicted her earlier statement that she was unaware of the five companies that were each awarded three-year contracts, totalling RM381 million or RM127 million per year.

“Previously, the minister was quoted in the media as saying she did not even know any of Tourism Malaysia’s five tenders were awarded to any of her ‘friends’ but now she seems to acknowledge knowing at least two of them,” he said.

Ng had been forced to explain the situation to Parliament when she was questioned by the DAP’s Jelutong MP Jeff Ooi if the five contracts had been awarded to crony companies through the use of political connections.

One of the tender winners was Impact Creations Sdn Bhd, which is said to have been selected because Juni Ewe, the managing director of Impact Challenger Sdn Bhd, allegedly related to the first company, is a friend of Ng’s.

Ng denied that the two companies were related.

Ooi had also asked if the award to Naga DDB Sdn Bhd was through a political channel as its founder and executive chairman is Datuk Vincent Lee Fook Long, who is also the executive deputy chairman of the MCA-owned Star Publications (Malaysia) Bhd.

Ng is a vice-president of the MCA, the second largest component party in the ruling Barisan Nasional.
The five recipients of the tenders were Naga DDB for the Asean market with a contract value of RM25 million a year, SMASCOM & Designs Sdn Bhd for East and North Asia (RM25 million), Sen Media Sdn Bhd for South Asia, West Asia and Africa (RM26 million), M&C Saatchi Sdn Bhd for Europe, America, Oceania (RM21 million) and Impact Creations for domestic and events (RM30 million).

Ng was also urged to clarify her denial that her ministry was now under MACC investigation and had its offices raided last Friday.

She explained that she was the one who invited the MACC in order to clear the ministry’s image following ISC’s “lies”.

“We cannot say that just because a company has failed to secure a tender, after getting it for 12 years at a value of more than RM160 million, and now it has raised all kinds of things.

“As a minister, it is my responsibility to ensure that the truth is told, not only the lies,” she was quoted as saying in theSun daily.

But Zecha argued that ISC had not “failed” to secure the tender but had withdrawn itself from the bid on January 26, long before Tourism Malaysia decided on and announced the winners on February 7.

He asked if Ng’s statement meant that the latter had already known even before ISC withdrew its bid who would win the tender.

“Is that why only this time there were no actual agencies’ presentations called for, which, as she has said publicly too, was what Treasury told her ministry to do? This should now receive the MACC’s fullest attention, indeed, because something here does not jive,” said Zecha.

The MACC raided the offices of Impact Creations and the Tourism Ministry last Friday following ISC’s complaints on the tender process.

Zecha also denied a statement by former Culture, Arts and Tourism Minister Tan Sri Abdul Kadir Sheikh Fadzir that the “Malaysia, Truly Asia” slogan was created by him, insisting that the award-winning campaign was its own initiative.

“Indeed, as we had already stated earlier this week, if it had been then-Tourism Minister Datuk Seri Kadir’s idea, why did he have to call us in when in May 1999 ISC was not yet a member of Tourism Malaysia’s panel of agencies?

“If it had been his idea, why not just give the concept or strategy to one of his existing panel of agencies’ members then?” he asked.

Zecha said that to put the matter on record, ISC will be engaging with legal parties, both local and abroad, as well as all participants in its 1999 pitch to Tourism Malaysia, to bear testimony and witness to the fact that the campaign had been its own initiative.

“They will help bear witness to the fact that ISC — led by our then-chairman, co-founder and investor Datuk Mukhriz Mahathir and yours truly — presented our conceived and subsequently developed ‘Malaysia: Truly Asia’ international re-branding for Tourism Malaysia as an unsolicited and requested by and accepted on-the-spot by then-Tourism Minister Datuk Seri Kadir,” he said.

Zecha also urged the MACC to investigate why Abdul Kadir’s statement had only been reported in the MCA-owned The Star newspaper.

“Bizarre or coincidence or collusion, that hopefully is also for the MACC to determine,” he said.

Federal-state relationship from the investment perspective

2011-03-06T02:59:00.000-08:00

Written by Lee Kah Choon

EDGE, Monday, 21 February 2011

The often-asked question by investors has been: How does the federal/state relationship affect their investment here?

The simple answer to that has always been: The relationship is good and it will not affect their investment here.

Look at the investment figures. In 2008, the state broke its record, attracting RM10.16 billion. And in 2010, it broke its own record again by being placed first in the national league table, surpassing Selangor for the first time by attracting RM12.24 billion in investments.

Look at the property sector and we will find that all major developers in the country are in Penang, and that the average property prices in the state have doubled in the past 12 months.

The services sector is doing just as well. For example, passenger arrivals at the Penang International Airport and the cargo handled saw an increase of 30% and 18% respectively in 2010 from 2009. Figures for foreign patients seeking treatment at Penang’s private hospitals are just as encouraging. In 2010, the number of foreign patients jumped 24% from 2009!

In short, business is thriving and it is business as usual, if not better.

However, if we look seriously beneath the surface, all is not well under the present arrangement.

The present situation is not ideal and there is plenty of room for improvement. We need to look at the statistics in order to understand why.

First, there is misalignment between what Penang generates for the country and what she gets in return. Historically, Penang has been sidelined in terms of allocation given by the federal government. For example, under the 8th and 9th Malaysia Plans (2001 to 2010), Penang state received only 3.1% of the total allocation. This ranked Penang at No 10 out of the 14 states, way behind the Federal Territory of Kuala Lumpur and Selangor. For the record, Kuala Lumpur received 11.5% under the 8th Malaysia Plan (MP) and 15.5% under the 9MP. Selangor received 9.6% under the 8MP and 7.8% under the 9MP.

The situation is the same for grants received from the federal government. For the eight-year period from 2001-2008, Penang state received just 3.8% of the total national allocation, ranking 11th in the national league table.

The situation is even more unfair when we consider that Penang, with her 1.6 million population (6% of Malaysia’s total population) contributes 30% of the nation’s total manufactured goods exported; more than 50% of electrical/electronics goods exported; two-thirds of medical tourism receipts; and nearly 9% of the country’s GDP. The list goes on.

This situation is unhealthy and is tantamount to stunting the growth of the goose that lays the golden egg for the country. What Penang needs is to be given a fair share of its contribution to the federal coffers so that she will be able to create more wealth for the nation. To do that, Penang needs investment in its infrastructure to turn her into an international city and the regional hub for Sumatera-northern Malaysia-southern Thailand.

While the allocation to deepen the seaport channel and upgrade the airport is welcomed, more needs to be done. For example, the state needs RM1.2 billion to upgrade the airport comprehensively, instead of the RM0.25 billion that it has been given for some ad hoc upgrading.

Another case that comes to mind is the RM50 million Heritage Conservation Fund that is to be shared by Melaka and Penang. While RM30 million was allocated to the Melaka government directly, not a single sen has been given to the Penang government to this day.

While we may not find good governance and fair play being stated in the investors’ applications for incentives, these attributes are of intrinsic value and are high on their demand list. And they are watching!

Apart from financial allocations, more say should also be given to the state in terms of choice of projects and implementation, execution and participation.

At the moment, most projects are conceptualised in Putrajaya, contractors appointed by Putrajaya and work carried out with minimum or no participation from the state government.

Until and unless these anomalies are recognised and resolved quickly, nation-building will be out of step and moving in different directions.

Datuk Lee Kah Choon is chairman of the executive committee of InvestPenang.

This article appeared in The Edge Financial Daily, February 21, 2011.

Solid waste management act to be enforced from next month

2011-03-06T02:54:00.001-08:00

STAR, 1 March 2011

PETALING JAYA: Malaysians will have to start separating their waste when the Solid Waste Management and Public Cleansing Act is enforced by next month.

Housing and Local Government Minister Datuk Chor Chee Heung said, however, a two-year grace period would be given to the public to get used to the practice before fines were imposed on those who failed to do so.

"Within these two years, the three concessionaires in charge of solid waste management in the country will have to raise awareness on separation of waste at source.

"All household owners must know their duty to segregate their own waste before dumping it," he told reporters at a press conference here Tuesday, after officiating at the Green Tour - A Rehda Youth initiative.
On assessment charges, Chor said houseowners would still be charged the same rate when the Act took effect in April.

"The assessment fees will still be collected by the local councils and not the concessionaires," he said.
He added that RM1.4bil needed to be paid each year to the three companies - E-Idaman Sdn Bhd, which is responsible for waste management in the northern region, Alam Flora Sdn Bhd (central region), and Southern Waste Management Sdn Bhd (southern region).

"However, the fees imposed on houseowners are still very low and the maximum amount we are able to collect from them is only about RM900mil.

"The Federal Government still has to fork out another RM500mil to pay these three companies for their services," he said.

PKFZ: Chan Kong Choy charged with cheating

2011-03-06T02:53:00.000-08:00

STAR, 28 February 2011

PUTRAJAYA: Former Transport Minister Tan Sri Chan Kong Choy claimed trial to three counts of cheating over the Port Klang Free Zone (PKFZ) scandal.

Chan is the second VVIP to be charged over the scandal-ridden project after his predecessor Tun Dr Ling Liong Sik was charged on July 29, 2010 with cheating over the same project.

Chan getting a hug from his wife Puan Sri Anne Chan outside the courtroom Monday

On the first count under Section 417 of the Penal Code, Chan is charged with deceiving then Prime Minister Datuk Seri Abdullah Ahmad Badawi at his office here between Feb 24 and 25 in 2004 into agreeing to approve Kuala Dimensi Sdn Bhd as the turnkey developer of the Transshipment Hub project at the Pulau Indah Free Zone at an estimated cost of RM1bil.

He is said to have dishonestly concealed the fact that the development cost would be financed through Kuala Dimensi’s issuance of bonds through Transshipment Megahub Bhd, with the support of the government and the Transport Ministry.

On the second count, he is charged with cheating Abdullah, also at the Prime Minister’s office here between Oct 11 and 28, in 2005 by deceiving the latter into approving Kuala Dimensi as the turnkey developer to carry out additional development works at PKFZ.

The works are the upgrading of road junction to the zone amounting to RM285.38mil, electrical infrastructure works amounting to RM135mil and construction of a business class hotel at RM90mil.

He is said to have concealed that the financing of the works would involve Kuala Dimensi’s issuance of bonds through Valid Ventures Bhd, with the support of the government and the Transport Ministry.

On the third count, he is charged with cheating Abdullah at the Prime Minister’s office here between March 28 and 29 in 2006 by deceiving him into approving Kuala Dimensi as the turnkey developer to carry out additional development works at PKFZ.

The works are concrete trenching works for electrical cable amounting to RM140mil, works for 33Kv of electricity supply to precincts 2 and 8 amounting to RM80mil, PMU infrastructure works amounting to RM30mil and the construction of a road linking PKFZ to West Port amounting to RM28.1mil and another road linking the main entrance of PKFZ to Cargo Terminal 4 at RM57.5mil.

He is said to have concealed that the works would be financed by Kuala Dimensi’s issuance of bonds through Free Zone Capital Bhd, with the support of the government and the Transport Ministry.

Each count carries a maximum jail term of five-years, a fine or both is convicted.

Attorney-General Tan Sri Abdul Gani Patail, who is heading the prosecution, asked the court to set a date a month later for mention the case so that both sides could exchange documents and identify various issues pertaining to the case.

He said the prosecution also wanted time to hold a pre-trial conference with the defence to ensure that no unnecessary issues or facts were raised during the trial later.

He also said that both parties had agreed to have the bail set at RM1mil.

Gani is aided by Deputy Public Prosecutors Dzulkifli Ahmad and Manoj Kurup while Chan is represented by Arthur Wang, Badrul Munir Bukhari and Azad Bashir.

Azhaniz Teh set bail at RM1mil and set March 31 for mention of the case.

Public must not swallow MRT overruns, Pua says

2011-03-06T02:37:00.000-08:00

By Shannon Teoh

Malaysian Insider, March 06, 2011

Pua said it presently seems as though there is no cap to the MRT’s costs. — file pic

KUALA LUMPUR, March 6 — Gamuda-MMC must bear any increase over their own RM36.6 billion valuation for the Klang Valley Mass Rapid Transit (MRT) after new estimates put the cost at over RM50 billion for the first line, DAP’s Tony Pua said today.

The Petaling Jaya Utara MP questioned whether the government was determined to go ahead and “build at whatever cost” after it admitted that the total cost of the new transport system would be higher than project delivery partner (PDP) Gamuda-MMC’s initial RM36.6 billion estimate.

If the contract was awarded based on the PDP’s own estimates, then Gamuda-MMC must be bound by its estimates and cost overruns should not be borne by the government, the DAP national publicity secretary said in a statement today.
“It makes a mockery of SPAD’s earlier claim that the Gamuda-MMC joint venture will bear all increases in costs,” he added, referring to the regulator, Land Public Transport Commission (SPAD)
SPAD chief executive officer Mohd Nur Ismal Kamal said yesterday that “the government was doing all it could to drive down the cost” but land acquisition and the price of rolling stock could push the price up to RM50 billion.

A CIMB Research report also said that, based on an average cost of RM353 million per kilometre, the entire 150km project could end up costing RM53 billion.

“The dramatic escalation of cost estimates for the Klang Valley MRT project before even the expected commencement of works in July... raises big question marks as to whether the project can ever be completed on time, and within budget,” Pua said.

He argued that the increase in the estimate necessitates a reassessment of the project on its continued viability and the risks involved.

Pua said that Mohd Nur Ismal’s statement made it clear that there was no fixed price for the project and appeared to suggest the government will push ahead no matter what the final bill turns out to be.

“Will the government continue with the project even if the cost were to escalate to RM60 or RM70 billion?” he asked.

He added that the government’s new cost estimate raised concerns that it has not conducted a thorough cost-benefit analysis to determine the point at which the direct and indirect costs become sufficiently high for the project to either be deferred or discontinued.

Pua then called for SPAD to disclose the PDP contract so that it could be known if there were guarantees against cost overruns as Gamuda-MMC was essentially the main contractor to the project.

SPAD must also disclose its detailed cost-benefits analysis of the MRT project for public scrutiny, along with any checks and balances to prevent both the government and the public from being taken for a ride, he said.
Since the MRT’s initial Sungai Buloh-Kajang line was put on display for public viewing, much doubt has been piled on the multibillion rail project.

The MRT system is an entry point project identified for the Greater Kuala Lumpur/Klang Valley National Key Economic Area (NKEA) and aims to increase public transport modal share from 18 per cent to 40 per cent by 2020.

With the 40 per cent public transport modal share, the government hopes that at least four million trips of the estimated total of 10 million are made via public transport.

The remaining six million trips will continue to be made via private vehicles.

MB Khalid to list out all of Selangor's water assets

2011-02-10T04:06:00.000-08:00

Malaysian Insider, 9 February 2011

Khalid Ibrahim said today that Selangor will publish a full report of all water assets in the state by March to ensure that Selangor’s takeover of the state water industry from four water concessionaires is done in a “fair manner.”

The state government had made an offer of RM9 billion for the assets of the concessionaires last month but they had rejected it, calling the offer “ambiguous.”

The move to detail all water assets in the state appears to be a bid to pressure the concessionaires to accept what Mentri Besar Khalid has said is his final offer.

Khalid said that the current deal was “an opportunity for concessionaires to reap high profits. Even in the agreement document, concessionaires are allowed to use the assets without any charge.”

The state government will conduct fixed asset sightings on water treatment plants, pipe supplies and water reservoirs before publishing the report.

The report, which will list down the location as well as individual and collective value of each asset, will also take into account technical details concerning water treatment and management of water in the state.

The state government said last month that it was willing to pay up to RM9 billion for the assets of all four water concessionaires in the state before selling all assets to the federal government.

The national water industry restructuring scheme has been delayed by a dispute over the price of the privatised assets in Selangor, which also provides 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).

Khalid has said that the total water assets in Selangor were currently worth more than RM10 billion, which the previous state administration had never taken into account when agreeing to the privatisation of the water industry in Selangor.

Under the new offer, water concessionaires could bring up any dispute to an international arbitration court.
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 get water from Pahang has also been delayed because of 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.

Both Syabas and PNSB are controlled by Puncak Niaga Holdings Bhd (PNHB) which belongs to executive chairman Tan Sri Rozali Ismail, who is Selangor Umno treasurer and the 31st richest man in Malaysia, according to Forbes.

The two-year water-restructuring saga has been characterised by finger-pointing by the water authorities as well as federal and state governments keen on deflecting blame for the deadlock.

The impasse began soon after parties that formed the Pakatan Rakyat (PR) unexpectedly took control of Selangor, Malaysia’s richest state, in the last general election.

Since then, privatisation plans for the water industry have been put in deep freeze as the federal and state governments engage in what industry watchers have called “excessive politicking”.

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.

- Malaysian Insider

Garbage deal refused

2011-02-07T05:40:00.000-08:00

STAR, 7 February 2011
BUKIT MERTAJAM: There is no need for Penang to privatise solid waste management if the two municipal councils are competent enough to undertake the task.

State Local Government and Traffic Management Committee chairman Chow Kon Yeow said the state had informed the National Committee on Solid Waste Management last year that it wanted the two councils to continue handling solid waste.

“The committee has yet to get back to us on this,” he said when contacted here yesterday.

It was reported that the Federal Government had appointed E-Idaman Sdn Bhd to take over garbage collection and cleaning services in the northern region.

The company took over the services in Perlis and Kedah last year but not in Penang as the state government had reservations about the privatisation model.

Seberang Prai Municipal Council (MPSP) president Mokhtar Mohd Jait had said the council’s workers were carrying out garbage collection in 265 housing schemes or 43% of the total housing schemes in Seberang Prai.
He said the rest of the areas had been privatised to local contractors.

“We are in a dilemma of not being able to appoint new contractors to collect garbage while awaiting the state government’s deliberation with the federal authorities on the privatisation of solid waste management.

“The Federal Government had earlier advised all local authorities not to sign long-term contracts with new contractors pending the privatisation,” he told a full council meeting at the council headquarters in Bandar Perda here.

Chow said all state governments were given an option to accept or reject the privatisation of solid waste management under the Solid Waste and Public Cleansing Management Corporation Act 2007.

He hoped the Federal Government would allow local authorities to sign long-term contracts with new contractors as well as employ new general workers to replace those who have retired.

He advised MPSP to negotiate with existing contractors to widen its areas of coverage to include housing schemes without contractors.

Kuala Dimensi gets PKA suit struck out

2011-02-07T05:37:00.000-08:00

STAR, 7 February 2011

SHAH ALAM: The Shah Alam High Court has struck out the Port Klang Authority's (PKA) suit against Kuala Dimensi Sdn Bhd (KDSB) to rectify a sales and purchase agreement (S&P) for 1,000 acres (404.68ha) of land worth RM1.88bil for the Port Klang Free Zone (PKFZ) project signed in 2002.

Justice Datuk Zaleha Yusof, after hearing submissions of both parties in her chambers, ruled that she agreed with arguments put forward by KDSB that there were no mutual mistakes in the terms of agreement entered by both parties (PKA and KDSB) as contended by the plaintiff.

KDSB's counsel Indran Navaratnam said the defendant (KDSB) had submitted that one of the clauses in the agreement had clearly stated that the agreement superceded all the previous negotiations between both parties.

He said the plaintiff also had argued that there was no evidence that a letter by the Government evaluater over evaluation of each square feet of the said land (1,000 acres) was given to KDSB as contended by the plaintiff.

In the suit filed in Sept 2009, besides seeking rectification of the agreement, the plaintiff also wanted a refund on interest already paid to KDSB.

PKA contended that mistakes and fraud were involved in the agreement and that the value of each square feet of the land should be at RM21 and not RM25.

PKA also claimed the purchase price was already inclusive of interest as stated in the agreement and that it would be paid over 15 years.

PKA counsel Cindy Khaw, when contacted, said the plaintiff would appeal against the court's ruling and wanted the matter to go for full trial.

On Sept 25, 2009, PKA had also filed a RM920mil suit against KDSB, the turnkey contractor for PKFZ, and the project consultant, BTA Architect, in connection with key development and supplemental agreements signed between February 2003 and November 2006.

The suit filed for relief, including for rescission of all the development agreements, and a declaration that KDSB was only entitled to be paid the reasonable value of work properly done.

PKA is also seeking a declaration that KDSB is not entitled to, and PKA is not obliged to pay KDSB, claims totalling RM836,758,459.92 which KDSB had made for the monsoon drain and water supply works, preliminaries, professional fees and variation works respectively under the development agreements.

KDSB was appointed by PKA in 2003 to develop the PKFZ on a 405ha site adjacent to the North Port in Klang. - Bernama