Friday, August 30, 2013

Finance Ministry Secretary-General’s Arrogant Remarks of Fitch Rating’s Outlook Revision


Finance Ministry Secretary-General Tan Sri Dr Mohd Irwan Siregar Abdullah has blamed the Fitch Ratings revision of Malaysia’s economic outlook to ‘negative’ by saying that the ratings agency was run by young analysts. He had even jokingly said he regarded the case of Fitch Ratings as “ratings analysts from Hell”.

The sheer contempt and arrogance in the comments made by the Finance Ministry Secretary-General exposes the fact that the Government doesn’t treat the negative outlook revision by Fitch Ratings last month as important.

These comments are consistent with the position of Dato’ Seri Najib Razak, who is both the Finance and Prime Minister, who tried to make light of the negative revision by pointing out that Fitch still “affirmed our rating”. He said negative element “is just the revision of our outlook but that depends on the move the government would make”.

The absolute lack of gravity of the response by the Finance Ministry does not give Malaysians and investors any comfort that real concrete actions will be undertaken.

It should be emphasized that this isn’t the first “warning” by Fitch Ratings. In August 2012, Fitch has already warned that Malaysia’s “fiscal trends may eventually lead to some form of negative rating action”. This means that the negative rating did not come without warning, and but as a result of complete inaction by the Government over the past year.

Of biggest concern to Fitch then was “the increasing reliance on off-balance sheet funding could potentially call into question the meaningfulness of the 55% of GDP federal debt ceiling.” The “off-balance-sheet funding” refers to Malaysia’s penchance to provide of guarantees to government-linked borrowers which does not officially count as Federal Government debt. In reality, if both official government debt and government guaranteed debt are put together, our debt to GDP ratio will be a much higher and worrying 68.9%, as opposed to the official 53.7%.

Tan Sri Mohd Irwan even went on to praise S&P (Standard and Poor’s) and Moody’s, who were apparently “willing to listen” to the Government, and hence are the “senior fellows”. Even with these 2 reports, the Secretary-General appears to fail to read between the lines which were consistent with Fitch’s statement.

The S&P in its July report, while maintaining the country’s outlook said “we may lower the ratings if the government fails to deliver reform measures to reduce its fiscal deficits and increase the country's growth prospects.” Similarly, in the Moody’s generally positive statement this month stated that “the [Malaysian] authorities have the institutional capabilities for advancing reforms, however, political willingness has been lacking”.

The Government’s penchance for listening only to the statements of praise, and contempt for those which criticise will only lead to our economic downfall.

We would like to remind the Finance Ministry of a Benjamin Franklin quote, “Geese are but Geese tho' we may think 'em Swans; and Truth will be Truth tho' it sometimes prove mortifying and distasteful”, or to quote Bill Clinton, “Our critics are our friends, they show us our faults”.

If the Finance Ministry really believes that the Fitch warning “is a concern that we share as a government and [the Government] would seek to address those concerns”, then the most important measure that he must agree to is to recognise all off-balance sheet loans and contingent liabilities as Federal Government debt in the upcoming Budget.

Only then Malaysians can see the true picture if the Najib administration has the political will to cut down our real budget deficit, instead of just providing a feel-good statistic that does not incorporate hidden debts. If Dato’ Seri Najib does not reform the budgetary process as well as cut wasteful expenditure which are hidden with off-balance sheet loans, then we fear the ultimate consequence of not just a “negative outlook” but an actual downgrade of our sovereign ratings by all three international rating agencies.

Monday, August 26, 2013

Home Minister's Tall Tale Justification to Revive Emergency Ordinance (EO)


On July 11th, the Home Minister Dato’ Seri Ahmad Zahid Hamidi claimed he will present statistics from a recent study on crime in full at the next Parliament session to justify the need to revive the Emergency Ordinance (EO), to allow the Police to place suspects under detention without trial for 2 years.

He said “I obtained the statistics, which were derived empirically, that in Selangor, 90% of organised crimes were carried out by ex-detainees who were released from Simpang Renggam where they were held under the EO. I will present the statistics and the study in the Dewan Rakyat in the coming session, the September session, to prove the need for the EO.”

When pressed again for statistics and evidence last week of his allegations on the August 17th, Dato’ Zahid Hamidi continued to insist that he had the figures in hand but urged for continued patience before making them public.

He provided the excuse that media captains need to be properly “briefed” by the home ministry and police before the government can allow any disclosure of classified crime data involving former Emergency Ordinance (EO) detainees.

Instead, it is now the Attorney-General, Tan Sri Abdul Ghani Patail himself who has provided the concrete evidence that the Minister was giving cock and bull stories to justify the reinstatement of EO-like laws.

Ghani informed a forum by the Malaysian Crime Prevention Foundation yesterday that “even after the repeal of the EO in 2011, there was no evidence from the 1,567 investigation papers submitted that violent crimes were committed by former detainees”.

The Attorney-General didn’t even tried to mince his words to say that there was “only some” or “very little” evidence of former detainees committing these crimes. He said “there was no evidence”.

Tan Sri Abdul Ghani was unapologetic in saying that the police had relied on the Emergency Ordinance (EO) to lock up suspected hardcore criminals, as they were simply "addicted to it".

Dato’ Seri Zahid Hamidi must now own up to making up ficticious claims about how 90% of organised crimes today are being carried out by ex-EO detainees. These claims never held water in the first place because if the study is already concluded, and he already have in his possession the study, why does he need to wait 2 months before the report is presented to the Parliament?

However, if you read into Dato’ Seri Zahid’s statement, one can only deduce that it is completely oxymoronic. If the “study” even exists, then surely for a shocking 90% of the crimes to be identified as being carried out by ex-detainees who were released from Simpang Renggam, these “criminals” would have been identified, arrested, investigated and possibly even charged already. But if they have been arrested and investigated – and there have been very few reports of such, then how come crime is still rampant and the Police still needs the EO?
In fact if Dato’ Seri Zahid’s allegation that 90% of these crimes were committed by former EO detainees were true, it actually doesn’t “prove the need for the EO”. On the contrary, it only proved that the police force to be totally incompetent.

Unlike Dato’ Seri Zahid who seems to have trouble coming up with concrete statistics, we have shown using past published police statistics have shown that the EO was completely ineffective in fighting rising crime. For example, the Malaysian crime index was rising rapidly from 2003 to 2008. At the peak, with the crime rate rose by 34.0% from 2004 to 2007. During this period, the EO was readily available at the Police’s disposal and yet, crime was seemingly unstoppable.

However, despite the EO repeal at the end of 2011, the Police and the Home Ministry were claiming victory in the fight against crime, with the crime index declining by 7.6% in 2012. Hence, based on the above official crime statistics presented by the Police themselves, how can the Home Minister, Dato’ Seri Zahid Hamidi, now claim that the cause of rising crime is almost entirely due to the repeal of the Emergency Ordinance?

With the damning evidence by the AG, we call upon the Home Minister to heed Dato’ Seri Najib Razak’s advice when he announced the repeal of the EO, that “now police must train themselves how to look for evidence.” Instead of just catching suspects and chucking them into EO detention, Dato’ Seri Najib asked the police to now “provide evidence to charge them in court”.

Thursday, August 22, 2013

Pihak Kementerian Enggan Menjemput Ahli Parlimen PR untuk Melawat Tapak Kerja KLIA2


Pada 20hb Ogos, Timbalan Menteri Pengangkutan Datuk Abdul Aziz Kaprawi berkata, beliau memberi jaminan dan yakin pembinaan KLIA-2 berjalan lancar seperti dijadualkan dan berpuas hati dengan kerja dilaksanakan kontraktor.

Menteri Pengangkutan Datuk Seri Hishamuddin Hussein juga telah memberikan jaminan sebelum ini bahawa lapang terbang kos rendah KLIA2 akan bermula operasi pada 2hb Mei 2014 dan tidak akan ditunda lagi.

Isu kelewatan pembinaan KLIA2 yang sepatutnya siap pada September 2011, dan peningkatan kos pembinaan daripada RM1.7 bilion sehingga memcecah RM4 bilion telah dibangkitkan oleh ahli parlimen Pakatan Rakyat sejak 2 tahun yang lalu. Jaminan sebelum ini telah diberikan oleh pihak kerajaan dan juga Malaysia Airports Holdings Berhad (MAHB) bahawa kos tidak akan meningkat dan kerja pembinaan tidak akan lewat. Akan tetapi, akhirnya, pihak MAHB terpaksa mengakui bahawa projek ini tidak dapat disiap mengikut jadual dan kos telah melonjak ke RM4 bilion.

Sejak 2 tahun yang lalu, kami telah meminta satu sesi perjumpaan dengan pihak Menteri dan lawatan ke tapak pembinaan KLIA2. Kali terakhir permintaan ini dibuat semasa parlimen bersidang pada bulan Jun dan Datuk Abdul Aziz Kaprawi telah menjawab bahawa permintaan ini akan dipertimbangkan.

Akan tetapi, sehingga hari ini, permintaan kami masih belum ditunaikan dan nampaknya pihak Menteri langsung tidak berkeyakinan bahawa projek KLIA2 dapat disiapkan seperti yang dilaporkan. Datuk Abdul Aziz Kaprawi yang telah dilantik sebagai Ketua “KLIA2 Taskforce” berkuasa untuk melibatkan pihak kami dalam satu lawatan ke tapak pembinaan untuk menghancurkan “once and for all”, kritikan daripada kami.

Tetapi nampaknya pihak kementerian langsung tidak bersifat telus dan tidak berani berbuat begitu kerana adanya udang disebalik batu yang tidak dilaporkan kepada media mengenai projek ini.

Kita dapat perhati bahawa sikap MAHB dan Kementerian selama ini adalah untuk menuding jari kepada pihak lain selama ini tanpa mengakui bahawa keputusan-keputusan MAHB untuk memindahkan tapak KLIA2 dan juga ketidakcekapan pengurusan projek telah menyebabkan penundaan projek berkali-kali.

Kesemua pihak di atas telah menafikan tuduhan daripada MAHB dan rakyat masih berkabur dan tidak mendapat kebenaran dalam skandal yang telah memakan perbelanjaan sebanyak RM4 billion ini. Akibat peningkatan kos, MAHB sekarang telah dilaporkan terpaksa meminjam lagi sebanyak RM1 bilion melalui penawaran sukuk dengan kos yang lebih tinggi.

Sikap kerahsiaan daripada MAHB dan kementerian menunjukkan bahawa segala jaminan yang diberi oleh kedua-dua pihak adalah jaminan kosong dan ada isu-isu besar yang ingin dikuburkan supaya rakyat tidak akan mengetahui kebenaran atau pihak yang bersalah tidak akan dikenakan sebarang hukuman.

Saturday, August 17, 2013

Which Part of Khairy Jamaluddin’s Statement that DAP’s Decision to Conduct Re-election is “An Admission of Guilt” is “Evidenced-based”?


In a press conference yesterday, the Minister of Youth & Sports, Khairy Jamaluddin stated that “Because I got into politics because of policy not because of politics, and I wish that our politics was evidence-based, empirically-based.” I certainly could not agree more with such sentiments.

However, it is ironical that during the very same press conference, the Minister chose to go on an unfounded political rampage against the DAP. Khairy Jamaluddin Abu Bakar has called DAP’s decision to hold a fresh central executive committee (CEC) election an “admission of guilt”.

“I don’t know why it took so long, finally they admitted they were wrong in this issue, with the decision for re-election. In fact they admitted they are wrong, (it is an) admission of guilt,” he said.
Firstly, I’d like to ask Khairy how he arrived at his “evidence-based, empirically-based” conclusion that our decision is “an admission of guilt”?

My statement yesterday on the decision stated very clearly that “to protect the gains by the DAP in its struggles over the past 45 years and in the long term interest of the party, the CEC has decided against its will, to proceed with a fresh election of the party leadership to prevent the devastating impact of a de-registration attempt by the ROS.”

In addition, I stated that “the decision to do so is in no part a concession to the incredulous accusations made of the DAP party elections such as vote-rigging with 547 phantom delegates, or the failure to notify 753 party delegates. Instead, the decision to hold fresh elections will allow our delegates to prove once-and-for-all that the Party has done absolutely no wrong.”

Where is it in any part of any DAP leaders’ statement which cause Khairy to reach his “evidence-based, empirically-based” conclusion?

Secondly, and perhaps more pertinently, the question needs to be asked as to why Khairy has chosen not to apply the same high standards of “evidence-based, empirically-based” politics to the Registrar of Societies (RoS), in the manner by which DAP is being punished?

Perhaps the UMNO Youth Chief can answer on the RoS’s behalf as to which law in the Society’s Act provides RoS the power to punish a political party for any alleged wrongdoing with “fresh elections”? As of today, DAP members and Malaysians in general are still awaiting a factual reply from the RoS on the specific law which gives RoS such arbitrary powers.

The “evidence-based, empirically-based” Minister of Youth and sports can also enlighten us as to whether the punishment meted out by RoS is a result of complaints from less than a handful of disgruntled delegates, or the failure to notify 753 delegates as widely accused by UMNO leaders, media and blogs?

Since the Minister is so certain that DAP’s decision is an “admission of guilt”, perhaps he could provide us the necessary empirical evidence since the RoS has stubbornly refused to provide the party with any proper grounds for their decision. In fact, as an “evidence-based, empirically-based” Minister, he should demand that RoS policy decisions be made based on facts instead of vicious slander and political victimisation.

If Khairy is unable to produce an iota of evidence, empirical or otherwise to prove that the DAP has breached any laws in the Societies Act, then he should immediately retract his claim that our decision is an “admission of guilt”, and to cease his attempts to score brownie points for the upcoming UMNO General Assembly by victimising the DAP with lies and slander. Otherwise, he is unfit to stake a claim on the high moral ground of wishing “that our politics was evidence-based, empirically-based”.

Under normal and routine circumstances, the DAP would not have hesitated to strike out the ROS order in the courts of law. The Party's lawyers have confirmed that the ROS has absolutely no power to "punish" a party with fresh leadership elections.

However, if the ROS can abuse its non-existent powers to demand that DAP hold fresh elections, then certain it will not hesitate to abuse the powers which it has - that is to de-register a political party - if the powers that be deem it politically expedient and necessary. We have also contemplated that any attempts to defy the unlawful ROS order via a judicial review will give "justification" to, and pretext for the ROS to de-register DAP. Hence the CEC has decided to proceed with a fresh election of the party leadership under protest, to prevent the risk of a devastating de-registration by the ROS.

Thursday, August 15, 2013

The DAP CEC Has Decided to Organise Fresh Leadership Elections Under Protest


Further to the statement issued by DAP National Chairman Karpal Singh earlier today, we would like to once again express our regret that the ROS has continued to deny DAP our rights under the law by providing a full and reasonable explanation on its orders for the party to carry out fresh CEC elections. Even not one, but two request to meet the Registrar by the Party Secretary-General, Lim Guan Eng, has been turned down curtly.

Instead, the ROS has besmirch the party with unfounded allegations that we have not been cooperative with the ROS. This is despite the fact that the DAP has complied with every single request and responded to every single query by the ROS within each stipulated period.

The DAP has to date made every attempt to obtain a reasonable explanation from the Registrar on the decision to require the DAP to hold fresh elections for the CEC. As stated previously, we repeat that the ROS has no powers under the Societies Act to demand fresh elections for the DAP and it has stubbornly refused to show us under which law they are able to take such actions.

Not only do they not want to point out which law gives them the powers to demand re-election, they have also most unjustifiably failed to provide any reasons at all as to why a fresh election is required. The only clue given by the ROS in their correspondence is that "some members were not satisfied" with the previous election. The above demonstrates without doubt the degree of unprofessionalism by the ROS in handling the matter.

Such autocratic dictats from the ROS only points to direct political interference by UMNO, and more specifically the Minister of Home Affairs, Datuk Seri Zahid Hamidi.

Under normal and routine circumstances, the DAP would not have hesitated to strike out the ROS order in the courts of law. The Party's lawyers have confirmed that the ROS has absolutely no power to "punish" a party with fresh leadership elections. On the other hand, the law states very clearly under 18C that the "Decision of political party to be final and conclusive".

The law says "the decision of a political party… shall be final and conclusive and such decision shall not be challenged, appealed against, reviewed, quashed or called in question in any court on any ground, and no court shall have jurisdiction to entertain or determine any suit, application, question or proceeding on any ground regarding the validity of such decision."

But where an insidious and wicked political agenda from the ruling political party is involved, these are certainly not normal and routine circumstances. If the ROS can abuse its non-existent powers to demand that DAP hold fresh elections, then certain it will not hesitate to abuse the powers which it has - that is to de-register a political party - if the powers that be deem it politically expedient and necessary.

The DAP CEC has last evening in an emergency meeting decided that we have exhausted all avenues barring a recourse to the Courts to seek justification for, or to reverse the ROS decision. We have also contemplated that any attempts to defy the unlawful ROS order via a judicial review will give "justification" to, and pretext for the ROS to de-register DAP. The Party is fully aware that the BN and ROS are certainly not beneath such unscrupulous actions, despite what the Prime Minister Datuk Seri Najib Razak might want to say about his "political transformation programme".

Hence to protect the gains by the DAP in its struggles over the past 45 years and in the long term interest of the party, the CEC has decided against its will, to proceed with a fresh election of the party leadership to prevent the devastating impact of a de-registration attempt by the ROS.

The decision to do so is in no part a concession to the incredulous accusations made of the DAP party elections such as vote-rigging with 547 phantom delegates, or the failure to notify 753 party delegates. Instead, the decision to hold fresh elections will allow our delegates to prove once-and-for-all that the Party has done absolutely no wrong.

As such, the CEC of 2008-2011 will meet next Thursday to follow through with preparations for the said fresh CEC election.

Monday, August 05, 2013

Dato' Seri Najib Razak Must Not Use the Excuse of the Fitch Ratings’ Revision of Malaysia’s Outlook to Negative to Impose GST


According to Bloomberg, the Government has emailed a statement to reiterate that “Malaysia remains committed to trimming the deficit to 3 percent of gross domestic product by 2015 and won’t let state debt exceed 55 percent of GDP”, and at the same time, “it still plans to reduce subsidies and broaden the tax base”. This statement was made in response to Fitch Ratings revision of Malaysia’s outlook to negative.

We call upon the Datuk Seri Najib Razak not to punish Malaysians with a Goods and Services Tax (GST) for the wastages, leakages and corruption which has caused the Malaysian government to suffer from a record 15 continuous years budget deficit and sky-rocket federal government debt.

Unlike other resource-starved countries, Malaysia is blessed with revenue from rich natural resources. According to former Prime Minister, Tun Dr Mahathir himself, Petronas has contributed up to RM426 billion as at 2009, and that sum would have increased by another RM260 billion since. Given such extraordinary contributions from the sector, with more than RM60 billion in contributions annually in recent years, Malaysia should be enjoying annual record surpluses instead of suffering from a persistent budget deficit.

In fact, Tun Dr Mahathir himself, who is also the Petronas advisor, has asked in July 2009, “what did the government spend with the RM253.6 billion payment from the national oil company over the past six years” when his successor Tun Abdullah Ahmad Badawi was prime minister.

The above is reflected by the increase in Government revenue by leaps and bounds from only RM93 billion in 2003 to an expected RM209 billion in 2013. That is a massive increase of 125% over just a decade.

The question must be asked as to why is it that despite revenues increasing so ever healthily, an envy of many nations, the BN-led Federal Government has been completely helpless in getting out of the deficit rut. The situation has deteriorated to the revision of Malaysia’s credit rating outlook to negative, which if not met with the right policy responses, will result in a disastrous downgrade.

The immediate policy by the Government it appears to be to “broaden the tax base” by implementing the much discussed GST. However, will GST help resolve the Federal Government’s deficit crisis? In the short term, of course it would. In fact, the easiest way to reduce the deficit for the Government is by increasing the taxes on every person and every product in this country. However, will such measures be just a “panadol” which give temporary relief, but fails to cure the underlying cancer in Malaysia’s public finances?

If GST is a cure, then Greece would never have gone “bankrupt”. Spain, Ireland, Portugal and Italy would not have been in financial crisis. The standard GST or value-added tax (VAT) rate in Greece is 23%. It is the same for Spain, Ireland, Portugal while it is 21% for Italy. Did the VAT or GST save these countries from a crisis arising from persistent deficits?

The answer is an obvious “no”. And if the GST couldn’t save all these nations from plunging into severe economic crisis, why should it be any different in Malaysia?

The simple reason to the above is that the GST will only postpone a crisis by boosting the revenue of the Government. However, if the Government continues to spend wastefully, run inefficiently and be embroiled in the cancer of cronyism and corruption, then no amount of taxes raised from the man-in-the-street will be able to prevent Malaysia from plunging into a crisis sooner or later.

In fact, the more the Government collects from taxes, the more leakages there will be. This correlates directly with the fact that our country’s debts have continued to accelerate despite the massive increase in government revenues, particularly from the oil and gas sectors over the past decade.

Instead of the GST becoming the ‘reform’ measure, the attempt to broaden the tax base in will fact become the hindrance to the much needed real reforms of reducing the reliance of off-balance sheet financing or contingent liabilities, enforcing open and competitive tenders for all government procurement and privatisation contracts, as well as to increase transparency at all levels of the government’s budgeting processes to fight corruption.

If the Prime Minister really believes that the Fitch warning “is a concern that we share as a government and [the Government] would seek to address those concerns”, then he must heed our call in upcoming Budget and not impose the unnecessary burden of additional taxes on ordinary Malaysians, 85% of whom still do not earn enough to qualify to pay income taxes today.

Saturday, August 03, 2013

Appointment of Datuk Abdul Farid Alias as the New President and CEO of Malayan Banking Bhd


The DAP welcomes the new appointment of Datuk Abdul Farid Alias as the new President and Chief Executive Officer of Malayan Banking Bhd (Maybank) to replace Datuk Abdul Wahid Omar who was tapped to be a Minister in the Prime Minister’s Department.

The position comes with the heaviest of responsibility to lead Malaysia’s largest bank by assets, and the single largest Government-linked company by market capitalisation – RM40 billion - on Bursa Malaysia. We hope to see under Datuk Farid’s leadership that Maybank will not only continue to be a giant in the country but will become a leader in Asia Pacific.

According to the latest rankings from The Banker of The Financial Times, Maybank, with a tier-1 capital of US$12.61 billion (RM40.89 billion), is ranked 15th among Asia-Pacific (excluding China and Japan) banks. The bank is ranked 95th in the world. Our neighbours Singapore has 3 banks ranked higher than Maybank – DBS, OCBC and UOB placed at 58th, 74th and 80th respectively. Therefore we certainly hope to see continued progress of our global rankings during Datuk Farid’s reign.

The performance of Maybank is a matter of public interest not only because it is a matter of national pride, but more importantly because nearly 70% of Maybank is owned by public funds managed by Permodalan Nasional Bhd, Employees Provident Fund, FELDA, KWAP and LTAT. Any crisis at Maybank will not only have a systemic impact on the entire Malaysian banking system but will create massive losses for our public funds.

Therefore we hope that the new Maybank CEO will focus on expansion in Southeast Asia per his interview with Bernama, Datuk Farid will also take concrete steps to enhance corporate governance, accountability and transparency within the Banking group to ensure that the interest of all Malaysians are protected.

In this respect, we hope that Datuk Farid will be able to shed more light on the sale of “5,065,380,000 ordinary shares in BII (Bank Internasional Indonesia), representing approximately 9% of the issued and paid-up share capital of BII, to a third party investor”, as announced by the Bank in June.

The curious question was raised when there was no mention of the price of the transaction, and no mention of who this 3rd party investor was. The price of the transaction is crucial because that will determine if Maybank had made and realised losses in the sale in the light of the fierce criticisms it received from all parties during the acquisition in 2008. BII was acquired at the cost of RM8.25 billion at approximately Rp455 per share in 2008.

As late a January 2012, Maybank Chairman Tan Sri Megat Zaharuddin bin Megat Mohd Nor told Reuters that Maybank is “not going to sell down if we're going to make a loss compared to what we thought it should be.” Tan Sri Zaharuddin, who is also BII's president commissioner, said the bank will not sell BII's stake below Rp510 per share, the price it paid to buy the bank in 2008 before discount.

However, in the 1st July 2013 issue of The Edge, it was revealed “according to banking sources” that the 9% stake had been sold at Rp355 per share, or a significant 21.9% lower than the cost of acquisition. This 9% stake sale will immediately translate to an estimated realised loss of RM157 million. And if these loss is extrapolated, Maybank could be looking at a potential loss of RM1.74 billion.

What is worse is if we were to look at BII’s stock price performance since the acquisition 5 years ago. As at last week, BII shares closed at Rp315 or a 30.7% drop from the acquisition price. This is despite the global equity markets hitting record highs currently. At this price, Maybank is already staring at staggering paper losses of RM2.5 billion as a result of the BII acquisition.

In fact since the acquistion, the return on Maybank’s investment in BII has been abysmal at -0.17%, 1.86%, 2.31% and 6.27% in 2009, 2010, 2011 and 2012 respectively.

Despite the above, in the announcement to Bursa Malaysia, Maybank has claimed that “the disposal will not result in any material financial impact to the Group”. Evidence obviously points to the contrary, hence it is crucial now for Maybank to come clean, particularly with regards to the most recent disposal of 9% of BII’s shares at Rp355 per share. More losses will likely be realised when Maybank is forced to sell another 8.3% of BII shares to third parties by 31 December 2013, the new extended deadine granted.

Thus we hope Datuk Farid will take the necessary steps to explain and clarify the above investment losses, and make Maybank an example to follow with regards to corporate governance, transparency and accountability.

Friday, August 02, 2013

Dato’ Seri Najib Razak Must Not Make Light of Fitch Ratings Revision of Malaysia’s Outlook to Negative


Dato’ Seri Najib Razak’s immediate response to Fitch Ratings revision of Malaysia’s outlook to negative does not give confidence that the Government views the matter seriously.

The Prime Minister tried to make light of the negative revision by pointing out that Fitch still “affirmed our rating”. He said negative element “is just the revision of our outlook but that depends on the move the government would make”.

While Dato’ Seri Najib Razak, who is also the Finance Minister, did highlight that “it is a concern that we share as a government and we would seek to address those concerns”, the lack of gravity of the response does not give Malaysians and investors any comfort that real concrete actions will be undertaken.

It should be emphasized that this isn’t the first “warning” by Fitch Ratings although it is the most serious action taken by the global ratings agency to date. In August 2012, Fitch has already warned that Malaysia’s “fiscal trends may eventually lead to some form of negative rating action”.

In November 2012, Fitch further reported that “Malaysia's public finances are a weakness relative to rating peers and offer limited scope for counter-cyclical fiscal stimulus at the current rating level… While this has not hindered the public sector's capacity to contribute to GDP, which grew 5.2% yoy in the third quarter according to Bank Negara Malaysia Friday, the growing is concerning.”

Of biggest concern to Fitch then was “the increasing reliance on off-balance sheet funding could potentially call into question the meaningfulness of the 55% of GDP federal debt ceiling.” The “off-balance-sheet funding refers to Malaysia’s penchance to provide of guarantees to government-linked borrowers which does not officially count as Federal Government debt. In reality, if both official government debt and government guaranteed debt are put together, our debt to GDP ratio will be a much higher and worrying 68.9%, as opposed to the official 53.7%.

Hence despite the warnings given a year earlier, the Najib administration hasn’t taken the necessary steps to correct the fiscal shortcomings in the federal government finances. Instead the reverse happened and As a result, Malaysia’s issuance of off-balance sheet debt accelerated to 15.2% of GDP by end-2012 from 9% at end-2008. This is a drastic increase to nearly RM150 billion in 2012 from RM96.9 billion in 2010.

The above actually points to the failure of Najib’s Economic Transformation Programme (ETP), where “Public Finance Reform” was one of the key “Strategic Reform Initiatives” launch in 2010. Among the key policies to be put in place are “Expenditure Control” and “Transparent Procurement”. The latter includes “eliminating incompetent suppliers/ service providers” and “value management”. The ultimate objective was to reduce the Government’s budget deficit to 3% in 2015.

The outcome of the above initiatives however was for the Government to channel development expenditure to off-budget measures, to paint a false perception of financial prudence. This is because the off balance sheet financing or contingent liabilities are not reflected as government debt and hence isn’t included in the budget deficit calculations.

As an example, despite the RM50 billion MRT project being financed entirely by the Government via debt instruments, not a single sen of the borrowings raised are considered official Federal Government debt despite the guarantees provided. Since such borrowings are excluded from deficit calculations, the official budget deficit figures give a false healthy picture of our public finances.

If the Prime Minister is really believes that the Fitch warning “is a concern that we share as a government and [the Government] would seek to address those concerns”, then the most important measure that he must agree to is to recognise all off-balance sheet loans and contingent liabilities as Federal Government debt in the upcoming Budget.

Only then Malaysians can see the true picture if the Najib administration has the political will to cut down our real budget deficit, instead of just providing a feel-good statistic that does not incorporate hidden debts. If Dato’ Seri Najib does not reform the budgetary process, then we fear the ultimate consequence of not just a “negative outlook” but an actual downgrade of our sovereign ratings.

Thursday, August 01, 2013

Fitch Ratings Revision of Malaysia’s Outlook to Negative


Global ratings agency Fitch Ratings have given Malaysia the starkest warning that the Malaysian Government finances are not in the healthiest of states by revising the country’s outlook from stable to negative. Fitch did not beat about the bush to state that “Malaysia's public finances are its key rating weakness”.

Fitch cautioned that if the Government does not carry out reforms and institute remedial measures heal our financial standing, our public finances will be “more exposed to any future negative shock”.

In fact, the revision isn’t surprising and is in effect a realisation of the earlier Fitch warning in August 2012 that “fiscal trends may eventually lead to some form of negative rating action”.

The latest report outlined the facts that “Federal government debt rose to 53.3% of GDP at end-2012, up from 51.6% at end-2011 and 39.8% at end-2008. The general government budget deficit is estimated to have widened to 4.7% of GDP in 2012 from 3.8% in 2011, led by a 19% rise in spending on public wages in a pre-election year.

As a result, Fitch doubts that the government can achieve its interim 3% deficit target for 2015 without additional consolidation measures. Fitch sees “risks even to the achievement of the agency's 3.5% deficit projection”.

Most pertinently, Fitch repeated its concerns over the Government’s off-budget expenditure and liabilities. Fitch highlighted that the Federal Government guaranteed debt rose to 15.2% of GDP by end-2012 from 9% at end-2008. This is a drastic increase to nearly RM150 billion in 2012 from RM96.9 billion in 2010. Based on current government accounting practices, the federal government debt and budget deficit calculations does not include “government guaranteed-debt”.

Hence despite the official government statistics that Federal Government debt is “only” at 53.7% of our Gross Domestic Product (GDP), the number does not include the sky-rocketing quasi-government debt or our contingent liabilities. Already in December 2012, Fitch Ratings stated the obvious when it said “the increasing reliance on off-balance sheet funding could potentially call into question the meaningfulness of the 55% of GDP federal debt ceiling.” In reality, if both official government debt and government guaranteed debt are put together, our debt to GDP ratio will be a much higher and worrying 68.9%.

Fitch also hinted that Malaysia’s sovereign contingent liabilities will be even higher once we take into account the consolidated indebtedness of our state-owned enterprises (which are not explicitly government guaranteed, but are implicitly so due to the enterprises’ ownership status).

Despite the above, Dato’ Seri Najib Razak has however continued to ignore all warnings with regards to the spiralling levels of contingent liabilities (or hidden debts) for the simple reasons that this form of debt allows the Government to continue to spend money without increasing the budget deficit. As an example, the MRT which is expected to cost more than RM50 billion will be financed by Government-guaranteed debt, which isn’t part of official government budget, despite the blatant fact that it’s to be Government funded.

Furthermore, by channelling development expenditure to off-budget measures, it enables the Najib administration to paint a false perception of financial prudence, that his government has the necessary political will and financial discipline to reduce the country’s fiscal deficit.

We call upon the Government to follow the reform its outdated accounting practice of “off-balance sheet financing” and recognise fully these hidden debts as the Federal Government debt commitments. Without proper accountability, the apparent abuse by the current government in circumventing the legislated 55% limit of Federal Government debt by recklessly issuing debt guarantees to wholly-owned government agencies or GLCs, will only lead to Malaysia finding itself trapped in financial quicksand sooner or later.

Finally, Dato’ Seri Najib Razak must immediately announce measures to give confidence to the financial markets that the Government is serious about cutting wasteful expenditure and reducing the real Government deficit and not just put on a naked emperor show. He must announce concrete plans to ensure that all privatisation projects are tendered competitively amd that all government procurement are open and transparent.

In addition, he must signal to the markets that in the 2014 Federal Government budget expected to be announced in October 2013, he will cut down on unnecessary expenditures such as in “Supplies and Services” which have increased drastically from RM23.8 billion in 2010 to RM33.7 billion in 2013.

Wednesday, July 31, 2013

Najib Said Cops Will Get “Whatever Needed” to Fight Crime. Really?


We fully welcome the Prime Minister’s statement yesterday which said that “the government is prepared to give the police whatever is needed within reason and affordability to raise the effectiveness of the force in fighting crime, particularly serious crime in the country”.

It is also for the first time that Dato’ Seri Najib has made reference to specific incidences of crime which have terrorised Malaysians particularly over “a spate of killings using firearms lately”, and finally admitted that “it affected public confidence and increased fear with regard to security and serious crime”.

Unfortunately, the Prime Minister appears to be barking up the wrong tree in terms of the remedial measures required to fight rampant crime in Malaysia. He said that the Government " will provide the police (with the necessary tools) to fight organized crime and serious crime in the country…. We are prepared to consider the request and requirements of the police as long as there is a guarantee to safeguard against abuse of power and human rights.”

Dato’ Seri Najib appears to continue to place emphasis over the fact that some form of “Emergency Ordinance” which allows for detention without trial is the all-important, one-size-fits-all tool to kill crime in the country. If the Government were to concede to the Police requests for such powers as perhaps “the” solution to fighting crime, the we will only be curing the symptoms, without resolving our weaknesses.

Instead of the Police asking for “whatever needed”, the Government should be the one which must execute “whatever needed” to reform the police force to be more professional, efficient and clean. And by “whatever needed”, it means all sacred cows need to be slaughtered as well, including those vehemently objected to by the police force themselves.

The Prime Minister must carry out his order that “now police must train themselves how to look for evidence.” Dato’ Seri Najib had asked the police to now “provide evidence to charge them in court”. This can only be done if the Government has the political will to enforce reforms onto the police force.

The Government must start by shifting 22,000 police officers from non-crime-fighting division to crime-fighting duties as recommended by the Tun Dzaiddin 2005 Royal Commission of Inquiry. This is because less than 9% of the police force are placed in the criminal investigation department. Instead “internal security force” such as the Federal Reserve Unit, the Light Strike Force and the General Operations Forces forms 31%, while the Administrative, Management and Logistic Units form 40% of the police force.

Secondly, the Police force must also reallocate its officers to urban centres. Currently despite the fact that urban centres are more crime prone than rural areas, the former receives proportionately less allocations than the latter. For example, in Petaling Jaya city, the police to population ratio is 1:470 despite the fact that the national ratio is 1:270.

Thirdly, the Home Ministry must also support the establishment of the Independent Police Complaints and Misconduct Commission (IPCMC) as recommended by the Royal Commission of Inquiry, to help improve the professionalism and effectiveness of the Police force and regain the confidence and trust of the people in the force. Without an IPCMC to provide the necessary check and balance, it is unsurprising that Police scored four on a scale five – five being most corrupt in Transparency International’s Global Corruption Barometer survey for Malaysia. Corruption will inevitability destroy all efforts to fight crime in the country.

If the Government continues to ignore and hesitate over the above police reforms and restructuirng to be carried out, then Dato’ Seri Najib’s statement of doing “whatever needed” to fight crime will just be another empty promise. The ultimate victims will be Malaysians who will continue to live in fear of their properties and their lives.

Thursday, July 25, 2013

When National Schools Cultivates Schism and Seggregation


I am a proud product of a Malaysian national school and continues to harbour romantic notions of how the school was able to bring various races of different religions together under a single roof.

However today, such thoughts are mere nostalgic reminiscenes of days long past.  Instead of bringing Malaysians together, the national schools have become the ironic reason, directly and indirectly for our young to be seggregated by race and religion.

There are two key reasons why the non-Malays of this country, particularly the Chinese community has chosen to shun the national schools today.  This will include parents who have gone through the national school system, who often don’t even speak a word of Chinese besides their own name.

The first and perhaps the most dominant reason is the drastic decline in the quality of teaching at the national schools.  Parents who can’t afford private schools would prefer to send their children to the Chinese vernacular schools to ensure that they receive an education of sufficient rigour and quality.  National test results have proven that the Chinese vernacular schools outperform the national schools significantly.

However, the quality of education isn’t the only factor.  No parents would want to send their children to a school where their child will be seggregated and discriminated against, by teachers, schoolmates and the school administration.

Malaysians are up in arms over the news reports yesterday of photographs which have emerged online allegedly showing non-Muslim students of a primary school being made to eat in a shower room during fasting month.  The pictures show students of SK Seri Pristina in Sungai Buloh sitting around tables set up in the school’s changing or shower room.

The school authorities have made the students eat in the makeshift dining room, located next to the toilets.  No food is believed to be served in the canteen, which is said to be closed during Ramadan.

Although the Ministry of Education has “pledged” action on this matter, the above while extreme in its nature, is certainly not the first case, nor will it be expected to be the last.  Over the past few years, we have read many such reports, including a principal in Kedah telling off the Chinese pupils for being insensitive towards their Muslim peers by eating in the school compound during Ramadan and telling them to “balik Cina”.

There were equally ridiculous cases of cheerleading teams being disbanded, decrees for lion dance without drums during Chinese New Year as well as blanket bans on Christian fellowship groups.  And certainly, if one were to pay a visit to practically any national school today during the month of Ramadan, non-Muslim students are seggregated in secluded corners during recess, to “respect” their Muslim peers.

Even during normal months, students in many schools are seggregated so as not to contaminate Muslim food and utensils.  What’s more, many students have in the past complained that they were forced to take Arabic or attend Islamic classes despite being non-Muslims.

Is this the “respect” that our national education system seeks to cultivate?  Shouldn’t it be such that while non-Muslims understand and give respect to Muslims who are fasting, Muslims should equally understand and respect non-Muslim who are not?

The “transformation” of our national schools into such religious hardline schools has major negative ramifications for the country’s future.  Not only are non-Malays extremely deterred from sending their children to these national schools, those who do – both Malays and non-Malays – will be scarred for life.

The non-Malays who attend these schools, such as SK Sri Pristina above, will see the entire country’s system as biased against non-Malays and they will forever be discriminated as unworthy second class citizens.  The Malay students who attend these schools will on the other hand deem it is right and proper to subject other races, religions and cultures to their own beliefs and practices.

If the BN Government is serious about making the national schools, the school of choice for Malaysians and the grounds to breed national unity, then some very drastic reforms need to take place.

We call on the Ministry of Education to mete out swift and severe punishment to the school authorities who had the audacity to come up with policies demeaning our Malaysian children in SK Sri Pristina.  More importantly, we call upon the Ministry to come out of strict guidelines on these matters in our schools.  For example, non-Muslim students must be allowed to eat in school canteens during fasting month, and the canteen must be operated instead of being closed.  The failure to even come up with, and enforce such guidelines would only mean that the Ministry is granting tacit approvals for such actions, and will almost certainly make racial polarisation in Malaysia an irreversible process.

Wednesday, July 24, 2013

Maybank Must Explain BII Investment Losses

On 20 June 2013, Maybank has quietly announced that the Bank “has disposed of 5,065,380,000 ordinary shares in BII, representing approximately 9% of the issued and paid-up share capital of BII, to a third party investor”.

Maybank has been under pressure to sell its stake in BII due to the Indonesian stock market regulation which requires that at least 20% of BII’s shares to be “free float”.  This was a condition imposed by the Indonesian authorities and accept by Maybank when BII was acquired in 2008.  With the completion of the disposal, the free float of BII shares has increased from around 2.7% to 11.7% of the issued and paid-up share capital of BII.

The curious question was raised however when there was surreptitiously no mention of the price of the transaction, and no mention of who this 3rd party investor was.  The price of the transaction is crucial because that will determine if Maybank had made and realised losses in the sale in the light of the fierce criticisms it received from all parties during the acquisition.

BII was acquired at the cost of RM8.25 billion at approximately Rp455 per share. Maybank was flayed by critics for paying more than 4 times the asset value of BII.

In May 2008, the then Prime Minister Tun Abdullah Badawi defended the acquisition claiming that "the government is confident that the management of Maybank and its Board of Directors have made the purchase not only in the best interest of Maybank but also for the country."  Later in October 2008, the then Finance Minister Dato’ Seri Najib Razak insisted that “the move was still a good one for the country”.

In fact, as late a  January 2012, Maybank Chairman Tan Seri Megat Zaharuddin bin Megat Mohd Nor told Reuters that Maybank is “not going to sell down if we're going to make a loss compared to what we thought it should be.”  The Chairman argued that “we don't think we need to give a discount.”  Zaharuddin, who is also BII's president commissioner, said the bank will not sell BII's stake below Rp510 per share, the price it paid to buy the bank in 2008 before discount.

However, in the 1st July 2013 issue of The Edge, it was revealed “according to banking sources” that the 9% stake had been sold at Rp355 per share, or a significant 21.9% lower than the cost of acquisition.  This 9% stake sale will immediately translate to an estimated realised loss of RM157 million.  And if these loss is extrapolated, Maybank could be looking at a potential loss of RM1.74 billion.

What is worse is if we were to look at BII’s stock price performance since the acquisition 5 years ago.  As at last week, BII shares closed at Rp315 or a 30.7% drop from the acquisition price.  This is despite the global equity markets hitting record highs currently.  At this price, Maybank is already staring at staggering paper losses of RM2.5 billion as a result of the BII acquisition.

This is despite assurances by Bank Negara, represented by Assistant Governor Puan Nor Shamsiah binti Mohd Yunos to the Public Accounts Committee on 18th November 2008 that the acquisition “will result in very minimal impairment to Maybank”.  Despite myself expressing reservations during the meeting then over the potential impairment value, the Deputy Governor Dato’ Zamani bin Abdul Ghani supported Puan Nor Shamsiah’s assessment that any impairment will be minimal or at most “in the region of RM300 million” if the conditions don’t improve.  In reality, as at 31 December 2012, Maybank has already made impairments of RM1.62 billion for the acquisition.

In fact since the acquistion, the return on Maybank’s investment in BII has been abysmal at -0.17%, 1.86%, 2.31% and 6.27% in 2009, 2010, 2011 and 2012 respectively.

Despite the above, in the announcement to Bursa Malaysia, Maybank has claimed that the disposal will not result in any material financial impact to the Group.  However, evidence points to the contrary and in the light of billions of ringgit of losses incurred by Maybank as a result BII’s acquisition, it is crucial now for Maybank to come clean, particularly with regards to the most recent disposal of 9% of BII’s shares at Rp355 per share.  More losses will likely be realised when Maybank is forced to sell another 8.3% of BII shares to third parties by 31 December 2013, the new extended deadine granted.

We also call upon the Finance Minister, Dato’ Seri Najib Razak to personally look into this matter, whether the cause of the losses was “a bad business decision” or possibly a reckless abuse of power.  Whichever the cause, action must be taken against those found at fault so that the rakyat’s interest in Maybank Bhd will continue to be protected.

Tuesday, July 23, 2013

Rahim Noor Exemplifies Why EO Should Not Be Reinstated

Disgraced former Inspector-General of Police (IGP), Tan Sri Abdul Rahim Noor has argued over the weekend in Mingguan Malaysia that the new law to replace the Emergency Ordinance (EO) must permit “preventive detention”.

He claimed the police have admitted that gangsterism is on the rise and even gone “out of control”.  According to the former IGP, the police turned into mere observers, becoming completely helpless in crime prevention since the repeal of the EO.

“They see the situation as having gone out of control. Preventive arrests cannot be made because the laws no longer permit it. Gangsterism is getting worse but they cannot keep it contained,” he said.  Tan Sri Rahim painted a bleak picture of the Royal Malaysian Police today, “it’s like they have broken wings. Things are no longer like they were before. Intelligence gathered can only be documented”.

Instead of justifying the EO, the above admission by the former IGP is the most damning piece of testimony of the competence and professionalism of the Royal Malaysian Police has declined to deplorable standards.  Tan Sri Rahim argued that "the information gathering and tracking is done by the police. They know more deeply about the crime world”.  However, the “intelligence gathered can only be documented” with no further action possible. As a result, these criminals “are free to extort businessmen and rob businesses. Gang fights also keep happening around Klang Valley and Malacca where they kill each other.”

That however, can only mean that either the “intelligence” isn’t very intelligent, or there isn’t anyone intelligent to exercise the “intelligence” to fight crime.

Hence the Prime Minister, Datuk Seri Najib Razak was in this case, absolutely spot on when he decreed that “now police must train themselves how to look for evidence” upon repealing the EO.  Instead of just catching suspects and chucking them into EO detention, Dato’ Seri Najib demanded the police to now “provide evidence to charge them in court”.

The former IGP also dismissed the views of the Attorney General (AG) claiming he “does not know fully about the twist and turns and modus operandi of criminals especially those involved in gangsterism”.

Perhaps Malaysians really do not understand the twist and turns of those involved in gangsterism, it was Tan Sri Rahim Noor himself who had beaten former Deputy Prime Minister, Datuk Seri Anwar Ibrahim to pulp while the latter was in custody. Despite evidence to the contrary, the Police had for the longest period denied any abuse on their part, and even suggested that Datuk Seri Anwar had given himself the infamous black eye.

Instead of taking his advice on the EO, Tan Sri Rahim Noor’s action instead exemplifies the need to repeal the EO as the police, and even the IGP lacks the competence and cannot be trusted to decide who is or is not guilty before a person is charged in Court.  Datuk Seri Anwar Ibrahim for example, has been acquited of all charges against him.

We ask that the Government adopts the AG’s position in this matter, that “the existing laws are sufficient to tackle criminals”, and that “it is better to let more guilty people go free than to send the innocent to jail”.

Therefore, the Police must start to lose their dependence on the EO like a crutch and instead, both the Home Minister and the Police must immediately focus the crime-fighting efforts such as restructuring the police force by reallocating more personnel to fight crime and setting up the Independent Police Complaints and Misconduct Commission (IPCMC).

Monday, July 22, 2013

1Malaysia Or 1Race-1Religion?


Housing & Local Government’s Minister’s Defence of Ibrahim Ali’s Bible-burning call proves there is no 1Malaysia, but only Malaysia for 1Race and 1Religion

For those who are familiar with the antics of Datuk Abdul Rahman Dahlan, Member of Parliament for Kota Belud and new Housing and Local Government Minister, he will be the first in the House to stand up and concoct a reason to defend “why the chicken cross the road?”

However his latest response as to why Perkasa chief Ibrahim Ali's urging to burn bibles containing the word ‘Allah’ cannot be compared with the present case against the sex bloggers Alvin Tan and Vivian Lee for insulting Muslims certainly takes the cake.

Datuk Rahman Dahlan argued that Ibrahim’s remark was merely to “correct the error of printing the said bibles”, and hence “burning them was the proper thing to do” just as Muslims burn copies of the Quran that have misprints.

He further added that "what Ibrahim Ali said was normal”, but has been “twisted”.

No right-thinking Malaysian would believe the explanation that Ibrahim’s fiery and emotional remark was just an innocent and virtuous attempt to “correct the error of printing” in the bibles.  And even in the unlikely earth-shattering event that it was, that is no defence against the current Sedition Act.

For example in the landmark case of Public Prosecutor v Mark Koding, Justice Azmi Kamaruddin in the course of his judgment said: “... It is immaterial whether the accused intention or motive was honourable or evil when making the speech” when finding the latter guilty of sedition.  All the judge has to do is to see whether the words are likely to create disaffection against the government, the ruler or the people.

What Datuk Rahman Dahlan has done is to defend the indefensible attempt by the right-wing Perkasa leader, Ibrahim Ali in his attempt to incite Malays and Muslims in the country to burn the holy books of Christians.

However, in the case of the bloggers Alvin Tan and Vivian Lee, better known as “Alvivi”, who probably thought it was “funny” to ridicule fasting Muslims, “justice” was meted out before those charged has an opportunity to defend themselves.

Make no mistake, those found guilty must be punished accordingly and the acts of insulting another’s religion is not acceptable.  However, in the case of Alvivi, they have been denied bail on the basis that “both accused had a tendency to upload pictures that could arouse public outrage”, making them guilty before their defence is called.

The clear-cut double-standards in Malaysian prosecution system proves the hypocrisy of “1Malaysia”, a slogan preached by the Prime Minister Datuk Seri Najib Razak himself.  It also makes a mockery of our Federal Constitution which provides that all Malaysians are equal before the law.

The fact that Ibrahim Ali who the open and defiant call for bibles to be burnt was not only left uncharged, but also now defended by the UMNO Minister, while summary punishment was meted out to the blogging duo who carried out the tasteless prank confirms that the Federal Government practices not “1Malaysia” but Malaysia for 1Race and 1Religion.

Sunday, July 21, 2013

"Private Sector Initiative" Not Justification for Direct Negotiations


Earlier this week, I have questioned the award of the RM1 billion Johor commuter train project to Metropolitan Commuter Network (MCN), a subsidiary of Malaysia Steel Works (KL) Bhd (Masteel) by the Malaysian government without open tender.

Masteel has responded via a press statement to say that “other bidders had not been prevented from submitting their bids to the government”.  It added that “it was a private sector initiative, as opposed to a government-driven project”.

Let me first make it clear that it is the right for any private company to submit any number of unsolicited bids for any types of projects to the Government.  However, the unsolicited bids by these companies do not in themselves justify direct negotiations between the Government and these companies.

The Federal Government, in this case represented by Public-Private Partnership Agency (UKAS) in the Prime Minister’s Department, must still place emphasis on transparency and accountability in the award of any contracts. And the best mechanism to ensure that the interest of the public are fully protected especially in projects such as this, is via open, transparent and competitive tenders.

What is more, this RM1 billion project involves the provision of a 20-year RM700 million soft loan to the concessionaire.  The question that needs to be asked to the Prime Minister’s Department is, if the Government has to fund 70% of the project, why bother privatising it in the first place to a 37-year concession?

As admitted by Masteel CEO, Datuk Seri Tai Hean Leng himself, MCN will take “12 to 13 years to recover its costs”, which means that the concessionaire will have the remaining 24 to 25 years to make lucrative returns for their project.

Masteel has also defended itself in our claim that the company is mainly involved in steel manufacturing, and has no prior experience in train services.  The company argued that it has “experience in complex mechanical and electrical hardware and automation” which gives them “the relevant experience in operating trains are trains are relatively simple mechanical system compared to steel mills”.

It is not my place to judge the competence of Masteel and whether it will be able to manage rail systems despite having no prior experience in such projects.  However, based on the company’s own reply that “experience in complex mechanical and electrical hardware and automation” is sufficient, then I am certain that scores of other companies would be equal to the job.  Certainly in this case, there would then be little justification for a direct negotiation because the project apparently requires very little specialised expertiese as “trains are relatively simple mechanical systems”.

Therefore given Masteel feedback, the direct negotiations must stop immediately and the Prime Minister, Dato’ Seri Najib Razak himself must insist that the project be tendered openly and competitively.

Despite news articles being posted on Masteel on website entitled “Masteel Gets Nod for Iskandar-Singapore Rail Link”, the company has now clarified that “at the time of writing, MCN is still undergoing the process of obtaining the necessary approvals fro various ministries and has not been granted full approval to undertake the project.”

This clarification is welcome as we can now call upon the Government to ensure that this RM1 billion project which has yet to be awarded, be tendered openly instead of being directly negotiated.  It is only by ensuring that all projects awarded by the Government are at the best value, can the interest of the commuters and Malaysians be protected – e.g., the commuter fares will be at the lowest possible.

In the open tender exercise, we would strongly encourage the Government to invite Masteel to take part in the tender to prove that it is the most competent party offering the lowest prices to implement the project.