I was not informed of MoU between Selangor and Putrajaya, says Anwar

BY MOHD FARHAN DARWIS

Malaysian Insider, FEBRUARY 26, 2014

Anwar at the meet-the-people session in Taman Cuepacs, Kajang today. He said Selangor MB Khalid Ibrahim will inform him of the details of the MoU at a later date. - The Malaysian Insider pic by Nazir Sufari, February 26, 2014.PKR de facto leader Datuk Seri Anwar Ibrahim has said he was not told about the Memorandum of Understanding which was inked between the Selangor government and Putrajaya today.

He said Selangor Menteri Besar Tan Sri Khalid Ibrahim did inform him about the progress of talks between the state and Putrajaya on the matter, but not the latest development.

"I know of the earlier agreements. Khalid has told me from time to time. But not today's MOU. I don’t know,” he said after a meet the people session today in Taman Cuepacs, Kajang.

Anwar said the state wanted a solution to the matter and in principle he agreed with the decision.

The agreement is the culmination of a protracted four year negotiation between Putrajaya and the Selangor government.

Present at the signing session in Putrajaya today were Prime Minister Datuk Seri Najib Razak, his deputy Tan Sri Muhyiddin Yassin, and Energy, Water and Green Technology Minister Datuk Seri Dr Maximus Ongkili, who represented the Federal government, and Selangor Menteri Besar Tan Sri Abdul Khalid Ibrahim.

The MoU will, among others, enable Selangor to take over four water concessionaires in the state, costing the state government RM9.65 billion in compensation to the companies. In its place, a consortium will be formed to manage the water industry under state-owned Kumpulan Darul Ehsan Berhad.

Selangor has long resisted the Langat 2 water treatment plant despite insistence by Putrajaya that it was necessary to ensure future water supply.

Last year, Khalid's state administration made a final offer of RM9.65 billion to buy over all equities of the four water companies – Syarikat Bekalan Air Selangor Bhd (Syabas), Puncak Niaga Sdn Bhd (PNSB), Konsortium Abbas Sdn Bhd and Syarikat Pengeluar Air Selangor Holdings Bhd (Splash).

The offer was turned down by PNSB and Konsortium Abbas last December, but Puncak Niaga Holdings Bhd – which owns PNSB and has a 70% stake in Syabas – revived talks on several conditions, which included a 15%  return on equity for its water concessionaires, according to a report by The Edge Financial Daily.

However, Khalid said whatever the outcome of the negotiations, both the state and Federal governments were adamant about going ahead with the restructuring exercise.

“They (concessionaires) have indicated their position on this... they should be responsive because the law allows for the Federal and state governments to implement the takeover.

“This is the best that we can offer. We did include a clause that if they feel short-changed, they can go for international arbitration.

“If the international arbitration decides that we should pay more, then we will pay more, but we also gave an undertaking that if the international arbitration says it should be cheaper than what we are offering, we will maintain our offer,” Khalid had said.

Last week, Ongkili had said Putrajaya preferred for all parties to reach a mutual agreement on the takeover of water assets in Selangor.

He, however, did not discount the possibility that the Federal administration will resort to invoking Section 114 of the act – which gives the Federal government ultimate power over all concessionaires – if the talks fall through.

“Hopefully, many things can be finalised in the next few weeks,” he was quoted as saying by Bernama.

Negotiations on how to proceed with restructuring Selangor's water industry met numerous obstacles over the years, not least being what Khalid previously described as “unrealistic expectations” of the water concessionaires’ shareholders regarding their companies’ equity value.

The state and Federal governments had also been at loggerheads for the longest time, especially over the construction of the Langat 2 water treatment plant in Kuala Langat, which will process raw water piped from Pahang to meet growing demand for treated water in the Klang Valley. – February 26, 2014.

As data traffic surges, Malaysian telcos opt to watch costs instead of improving service

Malaysian Insider, 10 December 2013

Mobile operators are looking to reduce their cost structure rather than improve services as network congestion occurs due to Malaysia’s high mobile data demand, said Frost & Sullivan in a report yesterday.

The report by the global consulting firm revealed that demand for internet access surged with 3G subscriptions surpassing 14.5 million in 2012, charting an annual growth of 41%. Subscriptions for 2013 are expected to reach 18.4 million by the end of this month.

“However, the increased data demand and spikes in geographies are leading to network congestion/outage,” said the report.

“To cope with increasing diverging cost and revenue market realities due to surging data traffic, service providers are focusing predominately at reducing cost structure rather than top line improvements,” it added.

Malaysia’s mobile penetration rate reached 146% in the third quarter of 2013, with 3G subscriptions amounting to more than 17.4 million of the total of 43.6 million mobile subscriptions. In 2012, there were only 14.5 million 3G subscriptions out of 41.3 million subscriptions.

Mobile operators are dealing with the surge by sharing facilities, thus cutting operational costs to handle the massive flow of data.

“For example, take Maxis and REDtone’s arrangement to share its 4G (LTE) infrastructure. Infrastructure sharing allows defrayment of cost, risk sharing… enabling parties to meet regulatory obligations with reduced financial burden,” said Ajay Sunder, senior director of telecoms, Frost & Sullivan Asia Pacific.

However, Sunder noted the current mechanism employed by operators is not sustainable when they are forced to consider “lowering the overall cost of network and maintain a scalable network”.

Judging by the rapid growth of mobile subscriptions that is expected to hit 50 million in two years, operators would expect an annual growth rate of 6% even as the market reaches saturation.

The increase is attributed to the current trend of consumers owning a second device, be it a smartphone or a tablet. Another factor is the government’s Youth Communication Package (YCP), a plan that offers a RM200 rebate to those aged 21-30 with a monthly income of RM3,000 and below.

The increasing demand for smart devices in Malaysia saw shipments shoot up to 49.6% out of the total mobile phone shipments made in the first half of 2013, according to International Data Corporation (IDC) Asia/Pacific Quarterly Phone Tracker. The jump was only 31.8% for the same period last year.

IDC credited the increase to vendors bringing in low-cost smartphones that encouraged sales to grow.

“The rebates brought about a surge in shipments of low-cost smartphones during the first half of 2013 as vendors launched more than 25 new sub-RM600 models in Malaysia,” said Ryan Lai of IDC Asia/Pacific in an article by Digital News Asia. 

M'sia CPI seen rising 3% following electricity tariff increase

STAR, 4 December 2013

KUALA LUMPUR: Businesses and households can expect costs to go up, as inflation trends higher in the wake of the new electricity tariffs effective Jan 1 for the peninsula as well as Sabah and Labuan.

Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said an early estimate showed that there could be a 0.4% increase in the consumer price index (CPI), which measures headline inflation, including volatile food and energy costs, when the new electricity rates become effective.

Sarawak is not affected by the hike as its power supply and distribution are managed by state-owned Sarawak Energy Bhd. The state has a separate enacment on electricity production.

Economists expect inflation to rise above 3% next year after picking up pace in recent months, as the Government consolidates spending with cuts in subsidies such as fuel, where the RON95 petrol and diesel prices were raised by 20 sen each on Sept 2 to RM2.10 and RM2 per litre, respectively.

Data from the Statistics Department showed the CPI rose to 2.8% year-on-year in October from 2.6% in September and 1.9% in August.

“Right now, it would be in the region of 3%, but we don’t know what other adjustments are to take place,” Zeti told reporters at the Leadership Energy Summit Asia 2013.

However, she said the tariff hike’s impact on prices would only be temporary based on the central bank’s assessment of the trend.

“This is something that needs to be done because it is not sustainable when the market price changes, and therefore, it is important that Malaysia makes such adjustments,” said Zeti.

The rise in tariffs, announced by Energy, Green Technology and Water Minister Datuk Seri Dr Maximus Ongkili on Monday, would see those in the peninsula paying an average of 14.89% or 4.99 sen more per kilowatt-hour (kWh) to 38.53 sen, while for Sabah and Labuan, the average tariff would rise 16.9% or five sen per kWh to 34.52 sen.

For industry users, the average tariff will be raised by 16.85% to 36.15 sen per kWh, while commercial users will pay 47.92 sen, up from 41.01 sen.

Citigroup Inc economist Kit Wei Zheng said in a report that Bank Negara might not be in a hurry to raise benchmark interest rates, which stands at 3%, as there were few signs of demand-pull inflation or second-round effects after the September fuel price hike.

He pointed out that recent comments from Zeti suggested that the central bank might be prepared to tolerate what it viewed as a “temporary” rise in inflation (of up to 3.3% in the first quarter of next year) due to supply-side cost-push factors, while the growth outlook remains uncertain.

Kit said hikes in the benchmark interest rates had become increasingly contingent over the growth outlook firming up.

He expected a 25-basis point rate hike in May, with another 25-basis point hike in July in anticipation of inflation hitting 3.8% to 3.9% from June/August.

He said considerations that the central bank would have to take into account included the ability of households to service debt, as well as the direct and second-round inflationary impact of the 6% goods and services tax effective April 2015.

“Going forward, our base case is for five sen to 10 sen per litre fuel price hike by year-end and for 20 sen per litre hike before July 1, 2014. As we had argued in our assessment of Budget 2014, we suspect policymakers would probably opt for gradual but somewhat more frequent and frontloaded hikes.

“With the kick up from the tobacco excise hike, inflation may hit Bank Negara’s implicit tolerance threshold of 3% by year-end, with a decisive breach coming in the first-half of 2014,” he noted.

Meanwhile, CIMB Investment Bank Bhd economic research head Lee Heng Guie said the second-round impact of higher power rates depended on the degree of pass-through to end-users.

“If previous episodes of tariff hikes are any guide, then the impact on inflation could be rather muted. Thus, we maintain our CPI growth estimates of 2.2% for this year and 3% for 2014, which continue to factor in some administered price adjustments, especially for fuel,” he said.

Electricity tariff up by average 15% from Jan 1

STAR, 2 December 2013

KUALA LUMPUR: The electricity tariff will be increased by an average of about 14.89% for Peninsular Malaysia, and by about 17% for Sabah and Labuan from next year, said Energy, Green Technology and Water Minister Datuk Dr Maximus Johnity Ongkili.

"The average electricity tariff in Peninsular Malaysia will be up 4.99 sen per kWh or 14.89% from the current average rate of 33.54 sen/kWh to 38.53 sen/kWh.

"For Sabah and Labuan, the average tariff will be up 5.0 sen per kWh or 16.9% from current average rate of 29.52 sen per kWh to 34.52 sen per kWh," he told reporters at a press conference in Parliament on Monday.

Rates in Sarawak will not be affected because the electricity supply in the state is operated by state-run company, Sarawak Energy.

The new rates will take effect from Jan 1, 2014, he added.

However, Dr Ongkili noted that 70.67% of consumers in Peninsular Malaysia and 62% of consumers in Sabah and Labuan will not be affected by the tariff hike.

"There will be no tariff increase imposed on the consumers who use electricity at a rate of, or lower than, 300kWh a month.

"This amounts to 4.56 million consumers in the peninsula and 260,000 consumers in Sabah and Labuan," he said. The group most likely to be affected are those whose electricity usage is between 301 to 400 kWh and 401 to 600 kWh.

The table on implications of the revised rate on domestic users.

The first group (about 720,000 consumers) will be billed between RM77.52 and RM128.60, an increase ranging from 12 cents to RM11.60 per month. (Not including 1.6% feed in tariff).

The second group (about 670,000 consumers) will be billed between RM129.12 to RM231.80, an increase of between RM11.71 to RM33 per month. (not including 1.6% feed in tariff).

Meanwhile in a statement to Bursa Malaysia, Tenaga Nasional said for domestic consumer (with a monthly consumption of up to 200kWh) the tariff would be maintained at a subsidised rate of 21.8 sen/kWh (i.e. no tariff increase).

This rate has not been reviewed during several tariff reviews since 1997.

Also consumers using 300kWh per month and below will not experience any tariff increase, the rate is maintained at 33.4 sen/kWh. Hence, there is no tariff increase to 70.7% of the household consumers (4.6 million consumers).

The domestic tariff band is reduced from current 8 bands to 5 bands for better understanding of tariff structure.

Commercial consumers will experience an average increase of 16.85% (ranging from 1.2% to about 18%). Industrial consumers will experience an average increase of 16.85% (ranging from 0.9% to about 17%). Special Industrial Tariff (“SIT”) consumers will experience an increase of about 19%.

This is in line with the Government’s effort to gradually reduce subsidies to industries. Even with this increase, SIT consumers will continue to enjoy discounted tariff rates, as compared to the rates for normal Industrial consumers.

The 10% discount on electricity bills currently enjoyed by Government schools, Government institutions of higher learning, places of worship and welfare homes registered with the Government and educational institutions partly-funded by the Government is maintained. The 10% discount will also be extended to the Universities teaching hospital under Ministry of Education (USM, UKM, UM).

Special Industrial Tariff (“SIT”) for water and sewerage operators will be given automatically and the electricity rebate by the Government for domestic consumers with a monthly bill of RM20 or lower will be maintained.

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

Malaysian Insider, 21 September 2013

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

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

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

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

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

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

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

Both airlines have up to October to appeal the fines.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

New Straits Times, 20 September 2013

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

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

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

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

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

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

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

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

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

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

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

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

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

Malaysian Insider, 6 September 2013

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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