Sunday, February 11, 2007

Secrets

To quote the most recent issue of our leading financial weekly, The Edge newspaper, "What's the big secret?" The Government has classified the toll and other utilites concession agreements under the Official Secrets Act (OSA), which if contravened, will require a mandatory 1-year jail sentence.

The problem is, while 4 leaders of opposition parties are facing the threat of prosecution under the OSA at this point of time, many others who have made equally 'damning' disclosures are not investigated.
Information contained in water and toll concession agreements is often readily available to investors and bondholders... While bondholders do not necessarily view the actual concession agreements, all vital information contained in these is presented to them through those other documents.

These secondary documents tell investors in precies detail what and when toll rates or water tariffs will be raised and what sort of compensation concessionaires are liable for men the government fails to raise tariffs as provided in the concession agreements.

Hence, given that the concession companies have themselves made the information within the so called confidential agreements "publicly" available to the "investment class", why shouldn't we, the taxpayers be "accorded an equal right to such transparency and accountability"?

As an example, while it's not a widely available public information, the "investment class" would have known for a while now that Litrak, the conession-holder for the Lebuhraya Damansara-Puchong (LDP) is cash-rich despite it's borrowings and requisite loan repayments. It has been highlighted that Litrak has so much cash, it's like to return them to its shareholders soon.
Over the next 2 years, [Litrak] may have the capacity to undertake further repayments as its free cash flows increases, says AmResearch. The research house estimates that Litrak's free cash flows will increase between 16% and 18% by FY2007-2008 from 9.3% in 2006.

Litrak's earnings are expected to increase significantly in its financial year ending March 31, 2008, on the back of higher toll roates. Given the higher toll receipts, AmResearch estimates that the company's earnings will grow 64.8% to RM136.2 million in FY2008.
Such sharp estimates could not have been made without access to OSA-classified information, or AmResearch must have been irresponsibly plucking assumptions from thin air.

Of course, the fact that, thanks to our benevolent government, the shareholders of Litrak will have more guaranteed bumper years, at the expense of the rakyat.

Footnote: For more examples of such disclosure of OSA-classified information, check out the post by Sdr Lim Kit Siang.
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