The East Coast Rail Link (ECRL) project which was awarded without any tender to China Communications and Construction Company (CCCC) has been criticised for being overly expensive at RM55 billion and potentially soaring to RM70 billion according to some reports. The government’s own consultants had estimated the cost to be only RM29 billion.
Yet despite the heavy price tag, the Deputy Finance Minister Datuk Othman Aziz told Parliament on 28 November that the project was expected to “break even from the operational aspect”, after just 8 years of operation in 2032.
The Deputy Minister’s statement is wildly ambitious on many counts.
Firstly, we have to assume that the Deputy Minister meant that “break even from the operational aspect” meant that it does not cover the enormous cost of constructing the ECRL, which is covered entirely by debt.
So far, the government has said that 85% of the project will be financed by China’s Export-Import Bank (EXIM), with a soft loan carrying an interest rate of 3.25% per annum repaid over 20 years with a 7-year moratorium. The remainder 15% will be financed via a sukuk issuance.
Therefore, the annual repayment of the ECRL borrowings will amount to an estimated whopping RM3.7 billion. This simply means that even if the ECRL is to “break even from the operational aspect” after 8 years, it will still be suffering cashflow losses of some RM3.7 billion annually!
However, even Datuk Othman Aziz’s claim of “break even from the operational aspect” is preposterous to begin with.
Datuk Othman claimed that the government was projecting a revenue of RM2.9 billion to be recorded in 2024. But this amount is more than 4 times the current revenue of KTM Berhad today!
The ridiculous revenue projection is achieved with a fantastical projection of cargo the ECRL will transport. As raised by economist KS Jomo, the ECRL is expecting to carry 60 million tonnes of freight yearly by 2032 even though KTM’s existing freight haulage is only 6 million tonnes across the entirety of its existing rail network from Padang Besar to Johor Bahru.
How exactly is the ECRL expecting to see 10 times the amount of freight currently being transported on the matured and industrialised west coast of Peninsula Malaysia?
The BN Government must stop trying to mislead the people with fanciful daydreams and start providing data, analysis and studies to back up its wild and preposterous claims. Who will also take responsibility if the ECRL fails achieve any where close to the projections above? Will the Deputy Minister take responsibility by resigning from his position? Or will it be the Prime and Finance Minister, Dato’ Seri Najib Razak who owns the ECRL brainchild and awarded to contract to CCCC?
The rakyat has the right to know the details because it will be our children and grandchildren who will have to bear the reckless debt burden of the current government should the project fail to meet its lofty targets.
Showing posts with label East Coast Rail Link. Show all posts
Showing posts with label East Coast Rail Link. Show all posts
Thursday, November 30, 2017
Wednesday, November 08, 2017
Is a switch from “Project Delivery Partner” to “Turnkey” model really to save on financing cost, or is there more than it meets the eye?
MRT Corp has recently announced its tender for the third phase of MRT project. The big changes to the tender conditions compared to the MRT 1 and 2 projects come as a big surprise to the infrastructure players and investment community.
The biggest change comes in the project delivery structure which has gone from a project delivery partner (PDP) model to a turnkey model. The PDP model used in the MRT 1 and 2 projects saw the participation of local companies who were to ensure the on-time delivery the project.
Under the turnkey model, however, a single contract is awarded for the entirety of the project, which is estimated to worth between RM40-50 billion. This model has similarly been used for the ECRL which has the China Communications Construction Company Ltd. (CCCC) as its turnkey developer. The CCCC is now responsible for building and financing of the entire project, which includes the hiring of subcontracts for different packages of the development.
The first question that needs to be asked is why the sudden switch to a turnkey model over the existing PDP model? The government has previously praised the delivery of MRT for being done ahead of schedule and purportedly under budget.
Under the revised scheme, MRT3 requires the winning bidder to provide at least 90% financing with an 8-year moratorium whereby no repayments on the principal and interest of the financing will be paid to the government. On top of that, it requires the repayment period to be no less than 30 years.
MRT Corp has said that the turnkey financing model is aimed at attracting foreign companies who may provide better financing options for the line. Dato’ Seri Shahril Mokhtar claimed that “if we utilise funds from say, DanaInfra… with an interest rate of about 5.1%... the borrowing cost will kill us… if foreign parties can give us 3% then why not, its good for us”.
Perhaps MRT Corp is trying to be disingenuous with their arguments. How come the financing cost of DanaInfra didn't "kill" MRT1, MRT2 and LRT3? While financing costs is indeed important, what is more important is the actual project cost. If the actual project cost is say, 20% higher, then a 2% lower financing cost will still cost MRT Corp more in the end.
It is the same point we have raised for the ECRL project – what is the point of awarding the RM55 billion contract directly to CCCC without any open tender merely for 1% lower in financing cost, when the Government’s own consultants estimated the project to cost less than RM30 billion?
What’s more, the unprecedented stringent financing requirements seem intentionally designed to disqualify locally experience major infrastructure builders like Gamuda Bhd or MRCB. Analysts interviewed by The Edge Financial Daily have cited the heavy financing burden as a huge barrier preventing the participation of Malaysian firms in the tender.
Unlike the MRT 1 and 2 projects that saw the participation of Malaysian at all levels of the project, it now seems much less likely for local firms to participate in MRT3, unless they form consortiums or are hired as subcontractors by the turnkey developer. Why is the Government so intent on hiring foreign contractors when we already have all the expertise locally?
What is even more suspicious is the fact that MRT2 is only due for completion in 2022, and yet the Prime Minister has brought forward the completion date for MRT3 to 2025 from 2027. Why the sudden rush to award these contracts?
All the above questions only go to prove that there’s more than it meets the eye with the latest ‘mysterious’ decision to switch the project model from the much ‘praised’ PDP to the turnkey cum financing model. The cost of the switch might just end up a whole lot more for the Malaysian tax-payers at the end of the day – what is the purpose and who are the real beneficiaries?
The biggest change comes in the project delivery structure which has gone from a project delivery partner (PDP) model to a turnkey model. The PDP model used in the MRT 1 and 2 projects saw the participation of local companies who were to ensure the on-time delivery the project.
Under the turnkey model, however, a single contract is awarded for the entirety of the project, which is estimated to worth between RM40-50 billion. This model has similarly been used for the ECRL which has the China Communications Construction Company Ltd. (CCCC) as its turnkey developer. The CCCC is now responsible for building and financing of the entire project, which includes the hiring of subcontracts for different packages of the development.
The first question that needs to be asked is why the sudden switch to a turnkey model over the existing PDP model? The government has previously praised the delivery of MRT for being done ahead of schedule and purportedly under budget.
Under the revised scheme, MRT3 requires the winning bidder to provide at least 90% financing with an 8-year moratorium whereby no repayments on the principal and interest of the financing will be paid to the government. On top of that, it requires the repayment period to be no less than 30 years.
MRT Corp has said that the turnkey financing model is aimed at attracting foreign companies who may provide better financing options for the line. Dato’ Seri Shahril Mokhtar claimed that “if we utilise funds from say, DanaInfra… with an interest rate of about 5.1%... the borrowing cost will kill us… if foreign parties can give us 3% then why not, its good for us”.
Perhaps MRT Corp is trying to be disingenuous with their arguments. How come the financing cost of DanaInfra didn't "kill" MRT1, MRT2 and LRT3? While financing costs is indeed important, what is more important is the actual project cost. If the actual project cost is say, 20% higher, then a 2% lower financing cost will still cost MRT Corp more in the end.
It is the same point we have raised for the ECRL project – what is the point of awarding the RM55 billion contract directly to CCCC without any open tender merely for 1% lower in financing cost, when the Government’s own consultants estimated the project to cost less than RM30 billion?
What’s more, the unprecedented stringent financing requirements seem intentionally designed to disqualify locally experience major infrastructure builders like Gamuda Bhd or MRCB. Analysts interviewed by The Edge Financial Daily have cited the heavy financing burden as a huge barrier preventing the participation of Malaysian firms in the tender.
Unlike the MRT 1 and 2 projects that saw the participation of Malaysian at all levels of the project, it now seems much less likely for local firms to participate in MRT3, unless they form consortiums or are hired as subcontractors by the turnkey developer. Why is the Government so intent on hiring foreign contractors when we already have all the expertise locally?
What is even more suspicious is the fact that MRT2 is only due for completion in 2022, and yet the Prime Minister has brought forward the completion date for MRT3 to 2025 from 2027. Why the sudden rush to award these contracts?
All the above questions only go to prove that there’s more than it meets the eye with the latest ‘mysterious’ decision to switch the project model from the much ‘praised’ PDP to the turnkey cum financing model. The cost of the switch might just end up a whole lot more for the Malaysian tax-payers at the end of the day – what is the purpose and who are the real beneficiaries?
Thursday, March 30, 2017
Is our national interest now subjected to foreign terms and conditions?
Last week, I had asked the Finance Minister to justify the award of the RM55 billion East Coast Rail Link project to China Communications and Construction Company (CCCC) and why Malaysian companies were not given the opportunity to tender for the project.
In the Finance Ministry’s reply, it said "to qualify for this financing offered by China Exim Bank, the project had to be executed by CCCC".
The Minister said that the Export Import Bank of China (China Exim Bank) offered a soft loan to Malaysia for the project at low interest rates. He added that the loan, for a period of 20 years, also allows for a grace period of seven years where the government does not need to repay the principal.
In addition, "the government has, in principle, agreed at least 30 percent of the infrastructure work will involve local companies and contractors".
If studied carefully, the reply carried very sinister undertones.
Malaysia now appears so desperate for foreign financing for its so-called national interest projects that it is willing to subject itself to terms and conditions of foreign powers.
Just because somebody is willing to lend you the money at seemingly favourable terms does not mean that you should accept the condition to select the product that will cost nearly double the estimated price.
This is no different from unscrupulous retailers to duped Malaysian shoppers into “zero-interest” financing schemes on products costing significantly higher than if you have paid for it in cash. Any financial consultant will educate you that the real cost of financing is already built into the jacked-up price of the product.
Worse, the real cost of funds for the project is now opaque because we do not know the real cost of the project as it was awarded without any open and competitive tender. We do know however, that the Government’s own appointed consultants, HSS Integrated has estimated that the cost of the 600km railway project will cost less than RM30 billion.
Therefore, to pay for the project at RM55 billion just because China Exim Bank offered an “attractive financing package” is absolutely scandalous!
Worse, only 30% of the project will involve local companies and contractors, despite an abundance of experience and expertise which are already widely available in Malaysia. We have now got many companies who have built double tracking railway projects, dug award-winning tunnels systems and constructed the MRT. And yet, the Government is awarding a standard rail link project at substantially higher cost to a foreign company with minimal local participation.
The irony is, the Finance Ministry has advised or even instructed our Government-Link Companies to halt their investments abroad and repartriate its foreign funds from overseas to check the drastic decline of the ringgit. Bank Negara even put in harsh measures to force private companies to convert their foreign currency receipts into ringgit. However, the Government clearly doesn’t practise what it preaches because the overwhelming bulk of the inflated RM55 billion cost will be paid to China despite available local options.
There can be no better example of the English saying, “penny wise but pound foolish”. What boggles the mind is, the Finance Ministry doesn’t comprise of idiots – they should know that we are paying well above what is a fair price for the project. What is the ‘real’ reason why the project has been awarded to CCCC – is the real ‘quid pro quo’ the fact that CCCC will help launder part of the astronomical profits to pay off 1MDB debts as widely speculated?
Wednesday, November 16, 2016
Transport Minister Datuk Seri Liow Tiong Lai’s attempts to justify increase in ECRL price from RM29 bil. to RM55 bil. raises many more questions than answers
Finally, after more than a week of denying that the proposed East Coast Rail Link (ECRL) would cost a whopping RM55 billion, the hapless Transport Minister, Datuk Seri Liow Tiong Lai finally conceded that the project would indeed cost RM55 billion or RM91.7 million per kilometer.
This admission came after slamming me on 8 November last week in The Star that I was making assumptions of the cost of the ECRL when it was still not finalised yet. “We have to go into negotiation on every kilometre so where did he get the cost?” he had then asked.
The Transport Minister’s admission in Parliament yesterday came after the Pakatan Harapan law-makers exposed the existence of an extensive feasibility study by HSS Engineers Bhd which had estimated that the cost of the 545km project to be only RM29 billion or RM53.2 million per kilometer.
He then tried to defend the staggering increase in cost by arguing that:
The project has been extended from 545km to 600km to include the Gombak-Port Klang link – a fact which we have never disputed.
The HSS feasibility study is based on RM3.2 to the US Dollar in 2009-2010.
There is a new alignment resulting in an increase in tunnel length from 30km to 50km, which also results in additional viaducts.
Datuk Seri Liow Tiong Lai’s appears to be desperately making up responses to questions as they arise, as his answers raises far too many more questions on the highly questionable RM55 billion project.
The HSS feasibility study which cost the Government RM8.7 million was carried out over a 6-year period, starting in December 2009 and completing only in December 2015 before concluding on the cost of RM29 billion.
Is the Transport Minister telling us that HSS consultants, who have completed many mega-infrastructure projects in the country, are so stupid as to use the 2009-2010 exchange rates to calculate the cost of the project, even though they finalised the report only in December 2015 when the exchange rate was already RM4 to the Dollar by then?
Since the comprehensive HSS report had to take 6 years to complete and was finalised only in December 2015, how did the Government decide to suddenly alter the alignment within 6 months or so? Was a new engineering consultant actually appointed to carry out a new study which could be completed in such a time-frame?
I would agree with Dato’ Seri Liow that if there is an increase in tunnel length through the Titiwangsa range from 30km to 50km, it would certainly increase the cost of construction. However, it begs the question, why take a 50km tunnel route across Titiwangsa range if indeed HSS recommended the much shorter 30km route?
The Transport Minister had told the Parliament that “we have nothing to hide. We are a responsible, accountable and transparent government.”
If he really has nothing to hide, Datuk Seri Liow should immediately order that both the HSS feasibility study and the subsequent study which changed the scope of the HSS study be released to the public.
That way, if what Datuk Seri Liow said is right, then the Pakatan Harapan critics would have no choice but to shut up immediately. Otherwise, the Transport Minister, who is also the MCA President has no right to accuse us of trying to “gain political mileage” when what we clearly want to ensure is not another project where tens of billions of ringgit are embezzled by the powers that be. Instead it would be Datuk Seri Liow who is playing politics to cover up for another multi-billion ringgit mega-scandal.
This admission came after slamming me on 8 November last week in The Star that I was making assumptions of the cost of the ECRL when it was still not finalised yet. “We have to go into negotiation on every kilometre so where did he get the cost?” he had then asked.
The Transport Minister’s admission in Parliament yesterday came after the Pakatan Harapan law-makers exposed the existence of an extensive feasibility study by HSS Engineers Bhd which had estimated that the cost of the 545km project to be only RM29 billion or RM53.2 million per kilometer.
He then tried to defend the staggering increase in cost by arguing that:
The project has been extended from 545km to 600km to include the Gombak-Port Klang link – a fact which we have never disputed.
The HSS feasibility study is based on RM3.2 to the US Dollar in 2009-2010.
There is a new alignment resulting in an increase in tunnel length from 30km to 50km, which also results in additional viaducts.
Datuk Seri Liow Tiong Lai’s appears to be desperately making up responses to questions as they arise, as his answers raises far too many more questions on the highly questionable RM55 billion project.
The HSS feasibility study which cost the Government RM8.7 million was carried out over a 6-year period, starting in December 2009 and completing only in December 2015 before concluding on the cost of RM29 billion.
Is the Transport Minister telling us that HSS consultants, who have completed many mega-infrastructure projects in the country, are so stupid as to use the 2009-2010 exchange rates to calculate the cost of the project, even though they finalised the report only in December 2015 when the exchange rate was already RM4 to the Dollar by then?
Since the comprehensive HSS report had to take 6 years to complete and was finalised only in December 2015, how did the Government decide to suddenly alter the alignment within 6 months or so? Was a new engineering consultant actually appointed to carry out a new study which could be completed in such a time-frame?
I would agree with Dato’ Seri Liow that if there is an increase in tunnel length through the Titiwangsa range from 30km to 50km, it would certainly increase the cost of construction. However, it begs the question, why take a 50km tunnel route across Titiwangsa range if indeed HSS recommended the much shorter 30km route?
The Transport Minister had told the Parliament that “we have nothing to hide. We are a responsible, accountable and transparent government.”
If he really has nothing to hide, Datuk Seri Liow should immediately order that both the HSS feasibility study and the subsequent study which changed the scope of the HSS study be released to the public.
That way, if what Datuk Seri Liow said is right, then the Pakatan Harapan critics would have no choice but to shut up immediately. Otherwise, the Transport Minister, who is also the MCA President has no right to accuse us of trying to “gain political mileage” when what we clearly want to ensure is not another project where tens of billions of ringgit are embezzled by the powers that be. Instead it would be Datuk Seri Liow who is playing politics to cover up for another multi-billion ringgit mega-scandal.
Tuesday, November 15, 2016
We challenge EPU Minister, Datuk Seri Abdul Rahman Dahlan to make public the feasibility study conducted by HSS Engineering Group which was commissioned by the East Coast Economic Region Development Council (ECERDC)
In our research over the controversy surrounding the 600km East Coast Rail Link (ECRL), we have discovered that the East Coast Economic Region Development Council (ECERDC) has appointed HSS Integrated Sdn Bhd to conduct a feasibility study including engineering studies, ridership studies, systems and rail operation studies, environmental screning, land use and socio-economic impact studies and most importantly, a economic and financial evaluation.
HSS Integrated is part of HSS Engineers Bhd, an engineering company which is listed on Bursa Malaysia who have been involved in some of the biggest engineering projects in Malaysia. Their rail experience would include the Electrified Double-Tracking from Ipoh to Padang Besar, the Sungai-Buloh to Kajang MRT I Line, the Ampang Line LRT Extension Project and the KLIA Express Rail Link.
They were appointed to carry out the ECRL feasibility study in December 2009 and completed their work in December 2015 and were paid RM8.7 million for their services. As disclosed in the HSS Group’s Corporate Profile and Capability statement, the proposed route was approximately 545km in length from Kuala Lumpur to Tumpat, passing through Mentakab, Kuantan, Kuala Terengganu and Kota Bahru.
The full HSS Group profile and capability statement can be downloaded here: http://www.hssbim.com/docs/HSS_Company_Profile.pdf
Most importantly, HSS stated that the project value for the project was RM29 billion (pg 21), or approximately RM53.2 million per kilometer. The study hence supports ECERDC CEO, Datuk Jebasingam Issac John who has previously been quoted by news reports in April 2014 that the ECRL will cost approximately RM30 billion.
Hence Pakatan Harapan elected representatives are absolutely right to heavily criticise the award of the East Coast Rail Link (ECRL) project to China-owned China Communications Construction Company as excessively expensive RM55 billion or RM91.7 million per kilometer.
The Edge Financial Weekly had labelled the project as “the world’s most expensive” when compared to similar railway projects in Bangladesh and Kenya which were also being constructed by CCCC for only RM68.1 million and RM61.4 million respectively. Another project in Ethiopia of which 40% of the 375km project to be built by a Turkish contractor, Yapi Merkezi on challenging terrain cost only RM18.1 million per kilometer.
The EPU Minister in-charge of the project, Datuk Seri Abdul Rahman Dahlan tried to dismiss the “world’s most expensive” railway allegations by citing the Golthard rail project in Switzerland, the Madrid-Valladoid and the Barcelona lines in Spain costing significantly more per kilometer.
We have since debunked the EPU Minister’s comparison because those were nearly 100% rail tunnel projects and they were all High Speed Rail travelling up to 300km per hour, which we all know, cost substantially higher than conventional rail like the ECRL travelling up to 170km per hour.
In fact, the Golthard rail tunnel had to cut through the Swiss Alps and was as deep as 2.3 kilometers below surface. As a comparison, even the most expensive tunnelling project in Malaysia to date, carried out for the MRT was only 45 meters at its deepest.
After being caught trying to sell ATP turboprops at Boeing 747 prices, the EPU Minister has changed his argument to insist that “all infrastructure projects cannot be compared directly”. He is now trying to avoid the now-established claim that the ECRL at RM55 billion will indeed be the world’s most expensive in its class.
Of course it is a given that every rail project will be different. However, the EPU Minister cannot claim that the ECRL has to pass through the Titiwangsa range which will require numerous tunnels and viaducts – as if it is the only such project in the world facing such “challenges”.
Hence, to end the “world’s most expensive” railway debate once and for all, we call upon Dato’ Seri Rahman Dahlan to make public the feasibility study carried out by HSS which would already have included the cost of having to cut through the Titiwangsa range with tunnels and viaducts.
The EPU Minister will then have to justify to Malaysians why did the Prime Minister award the contract to CCCC at RM91.7 million per kilometer which is 72.4% more expensive than the HSS study of RM53.2 million.
The failure to do so will only confirm Malaysians’ worst fears, that the RM55 billion ECRL over-priced project is an attempt to siphon up to RM25 billion to pay off 1MDB’s debts, to cover up for the tens of billions of ringgit which have been stolen and laundered overseas.
Rafizi Ramli
MP Pandan
Tony Pua
MP Petaling Jaya Utara
Dr Hatta Ramli
MP Kuala Krai
HSS Integrated is part of HSS Engineers Bhd, an engineering company which is listed on Bursa Malaysia who have been involved in some of the biggest engineering projects in Malaysia. Their rail experience would include the Electrified Double-Tracking from Ipoh to Padang Besar, the Sungai-Buloh to Kajang MRT I Line, the Ampang Line LRT Extension Project and the KLIA Express Rail Link.
They were appointed to carry out the ECRL feasibility study in December 2009 and completed their work in December 2015 and were paid RM8.7 million for their services. As disclosed in the HSS Group’s Corporate Profile and Capability statement, the proposed route was approximately 545km in length from Kuala Lumpur to Tumpat, passing through Mentakab, Kuantan, Kuala Terengganu and Kota Bahru.
The full HSS Group profile and capability statement can be downloaded here: http://www.hssbim.com/docs/HSS_Company_Profile.pdf
Most importantly, HSS stated that the project value for the project was RM29 billion (pg 21), or approximately RM53.2 million per kilometer. The study hence supports ECERDC CEO, Datuk Jebasingam Issac John who has previously been quoted by news reports in April 2014 that the ECRL will cost approximately RM30 billion.
Hence Pakatan Harapan elected representatives are absolutely right to heavily criticise the award of the East Coast Rail Link (ECRL) project to China-owned China Communications Construction Company as excessively expensive RM55 billion or RM91.7 million per kilometer.
The Edge Financial Weekly had labelled the project as “the world’s most expensive” when compared to similar railway projects in Bangladesh and Kenya which were also being constructed by CCCC for only RM68.1 million and RM61.4 million respectively. Another project in Ethiopia of which 40% of the 375km project to be built by a Turkish contractor, Yapi Merkezi on challenging terrain cost only RM18.1 million per kilometer.
The EPU Minister in-charge of the project, Datuk Seri Abdul Rahman Dahlan tried to dismiss the “world’s most expensive” railway allegations by citing the Golthard rail project in Switzerland, the Madrid-Valladoid and the Barcelona lines in Spain costing significantly more per kilometer.
We have since debunked the EPU Minister’s comparison because those were nearly 100% rail tunnel projects and they were all High Speed Rail travelling up to 300km per hour, which we all know, cost substantially higher than conventional rail like the ECRL travelling up to 170km per hour.
In fact, the Golthard rail tunnel had to cut through the Swiss Alps and was as deep as 2.3 kilometers below surface. As a comparison, even the most expensive tunnelling project in Malaysia to date, carried out for the MRT was only 45 meters at its deepest.
After being caught trying to sell ATP turboprops at Boeing 747 prices, the EPU Minister has changed his argument to insist that “all infrastructure projects cannot be compared directly”. He is now trying to avoid the now-established claim that the ECRL at RM55 billion will indeed be the world’s most expensive in its class.
Of course it is a given that every rail project will be different. However, the EPU Minister cannot claim that the ECRL has to pass through the Titiwangsa range which will require numerous tunnels and viaducts – as if it is the only such project in the world facing such “challenges”.
Hence, to end the “world’s most expensive” railway debate once and for all, we call upon Dato’ Seri Rahman Dahlan to make public the feasibility study carried out by HSS which would already have included the cost of having to cut through the Titiwangsa range with tunnels and viaducts.
The EPU Minister will then have to justify to Malaysians why did the Prime Minister award the contract to CCCC at RM91.7 million per kilometer which is 72.4% more expensive than the HSS study of RM53.2 million.
The failure to do so will only confirm Malaysians’ worst fears, that the RM55 billion ECRL over-priced project is an attempt to siphon up to RM25 billion to pay off 1MDB’s debts, to cover up for the tens of billions of ringgit which have been stolen and laundered overseas.
Rafizi Ramli
MP Pandan
Tony Pua
MP Petaling Jaya Utara
Dr Hatta Ramli
MP Kuala Krai
Saturday, November 12, 2016
Minister in Prime Minister’s Department, Dato’ Seri Abdul Rahman Dahlan tried to pull a fast one by comparing the exorbitant cost of the East Coast Rail Link with complex High Speed Rail in Europe
Three days ago, Dato’ Seri Abdul Rahman Dahlan, the Minister in-charge of Economic Planning Unit (EPU) responsible for the East Coast Rail Link (ECRL) tried to deflect the allegations that the cost of ECRL was the most expensive in the world.
Unlike his fellow Cabinet Minister, Datuk Seri Liow Tiong Lai who denied that the ECRL was to cost RM55 billion or approximately RM91.7 million per kilometer, the EPU Minister pretty much confirmed the cost of the project. Instead he argued that it was not the most expensive in the world.
Dato’ Seri Rahman Dahlan gave the examples of a 57km rail project in Switzerland costing US$11.9 billion (RM50bn) or US$209 million (RM860 mil) per km to build; a 177km rail line in Madrid-Valladolid, Spain, costing US$5.48 billion (RM22.46bn) or about US$30 million (RM123 mil) a km; and a 48km rail project in Barcelona costing about US$8.12 billion (RM33.3bn) or US$170 million (RM697 mil) per km.
It is disastrous for Malaysia that the EPU Minister actually cited these projects as comparison to our own proposed ECRL.
Dato’ Seri Rahman Dahlan perhaps didn’t realise that the 57km Swiss Golthard rail project costing a whopping RM50 billion actually involved the building of the world’s longest tunnel as deep as 2.3km below the surface! The neighbouring 56km Brenner rail project which is currently under construction costing just a shade less than Golthard, will be the second longest tunnel in the world when it’s completed in 2025.
Is the Minister telling us that the 600km ECRL link from Port Klang to Kota Bahru via Kuantan will be, if not completely, substantially underground to compare with the Swiss rail lines underneath the Alps?
Similarly, the Barcelona line costing US$8.12 billion has a length of 47.8 km, of which 43.71 km is underground and 4.9 km is on viaducts.
At the same time, the 177km Madrid-Valladoid line was only the first phase of the two-phase Madrid-Leon 342km rail line costing a total of US$6.34 billion. That actually works out to only US$18.54 million (RM76 mil) per kilometer which is cheaper than the ECRL’s RM91.7 million per kilometer!
Most of all, all of the examples cited by Dato’ Seri Rahman Dahlan are not only tunnel-intensive, they are all High Speed Rail (HSR) projects which, as we know cost significantly more than conventional rail projects like ECRL. These European HSRs travels up to a top speed of 300km per hour compared to the ECRL project proposed at 170km per hour.
Hence what the ignorant Dato’ Seri Rahman Dahlan attempted to do, intentionally or otherwise, is to try to sell Malaysians a ATP turboprop at the price of a Boeing 747. Unfortunately for him, Malaysians are not that stupid.
The EPU Minister shouldn’t have to go around to world to try justifying the exorbitant cost of the ECRL project. After all, this isn’t our first and only rail project. He should very well know that the 329km Ipoh-Padang Besar and 179km Gemas-Johor Bahru double-tracking link cost RM44.0 million and RM39.8 million per kilometre respectively. Amazingly, these projects such as the Ipoh-Padang Besar and Rawang-Ipoh links were all completed by local engineering and construction companies!
We challenge Dato’ Seri Rahman Dahlan to show proof that a conventional railway project would cost anything more than the above or that there are no local companies with the necessary expertise who are able to complete the ECRL project for far less than the RM55 billion awarded to China Communications Construction Company.
Rafizi Ramli
MP Pandan
Tony Pua
MP Petaling Jaya Utara
Dr Hatta Ramli
MP Kuala Krai
Unlike his fellow Cabinet Minister, Datuk Seri Liow Tiong Lai who denied that the ECRL was to cost RM55 billion or approximately RM91.7 million per kilometer, the EPU Minister pretty much confirmed the cost of the project. Instead he argued that it was not the most expensive in the world.
Dato’ Seri Rahman Dahlan gave the examples of a 57km rail project in Switzerland costing US$11.9 billion (RM50bn) or US$209 million (RM860 mil) per km to build; a 177km rail line in Madrid-Valladolid, Spain, costing US$5.48 billion (RM22.46bn) or about US$30 million (RM123 mil) a km; and a 48km rail project in Barcelona costing about US$8.12 billion (RM33.3bn) or US$170 million (RM697 mil) per km.
It is disastrous for Malaysia that the EPU Minister actually cited these projects as comparison to our own proposed ECRL.
Dato’ Seri Rahman Dahlan perhaps didn’t realise that the 57km Swiss Golthard rail project costing a whopping RM50 billion actually involved the building of the world’s longest tunnel as deep as 2.3km below the surface! The neighbouring 56km Brenner rail project which is currently under construction costing just a shade less than Golthard, will be the second longest tunnel in the world when it’s completed in 2025.
Is the Minister telling us that the 600km ECRL link from Port Klang to Kota Bahru via Kuantan will be, if not completely, substantially underground to compare with the Swiss rail lines underneath the Alps?
Similarly, the Barcelona line costing US$8.12 billion has a length of 47.8 km, of which 43.71 km is underground and 4.9 km is on viaducts.
At the same time, the 177km Madrid-Valladoid line was only the first phase of the two-phase Madrid-Leon 342km rail line costing a total of US$6.34 billion. That actually works out to only US$18.54 million (RM76 mil) per kilometer which is cheaper than the ECRL’s RM91.7 million per kilometer!
Most of all, all of the examples cited by Dato’ Seri Rahman Dahlan are not only tunnel-intensive, they are all High Speed Rail (HSR) projects which, as we know cost significantly more than conventional rail projects like ECRL. These European HSRs travels up to a top speed of 300km per hour compared to the ECRL project proposed at 170km per hour.
Hence what the ignorant Dato’ Seri Rahman Dahlan attempted to do, intentionally or otherwise, is to try to sell Malaysians a ATP turboprop at the price of a Boeing 747. Unfortunately for him, Malaysians are not that stupid.
The EPU Minister shouldn’t have to go around to world to try justifying the exorbitant cost of the ECRL project. After all, this isn’t our first and only rail project. He should very well know that the 329km Ipoh-Padang Besar and 179km Gemas-Johor Bahru double-tracking link cost RM44.0 million and RM39.8 million per kilometre respectively. Amazingly, these projects such as the Ipoh-Padang Besar and Rawang-Ipoh links were all completed by local engineering and construction companies!
We challenge Dato’ Seri Rahman Dahlan to show proof that a conventional railway project would cost anything more than the above or that there are no local companies with the necessary expertise who are able to complete the ECRL project for far less than the RM55 billion awarded to China Communications Construction Company.
Rafizi Ramli
MP Pandan
Tony Pua
MP Petaling Jaya Utara
Dr Hatta Ramli
MP Kuala Krai
Monday, November 07, 2016
Does Transport Minister Datuk Seri Liow Tiong Lai really know what he is talking about when he said the East Coast Rail Link (ECRL) doesn’t cost RM55 billion?
The Edge Financial Weekly quoted an executive from a construction outfit who said that at RM55 billion, the East Coast Rail Link (ECRL) “could be the most expensive rail infrastructure project in the world in its class... it’s a good project but not at this ridiculous price.”
The Edge cited the examples of the 215km Padma rail line in Bangladesh and 120km Mombasa rail link in Kenya which were being constructed by China Rail Construction Corp for RM68.1 million and RM61.4 million per kilometer respectively.
For another project in Ethiopia awarded to Turkish contractor, Yapi Merkezi, the 375km Awash-Weldia railway line of which more than 40% is built on challenging terrain, the cost was only US$1.7 billion or RM18.1 million per kilometer.
The question hence arises as to why is the Malaysian government awarding the 600km ECRL project to China Communications Construction Company (CCCC) at RM55 billion or RM91.7 million per kilometer without any open competitive tender exercise?
The Minister of Transport, Datuk Seri Liow Tiong Lai tried to allay the concerns of the Malaysian public by claiming that the RM55 billion is not the cost of construction. Instead he claims that it is merely the value of the Financing Framework Agreement.
We have no idea whether the Transport Minister knows what he is talking about or whether he has even seen or read the above agreements given that his Deputy told the Parliament that he could not answer ECRL queries because it was not under the purview of the Transport Ministry but is instead under the Prime Minister’s Department control.
The question hence arises as to whether Datuk Seri Liow, who is also the MCA President is merely shooting off his hip, especially since the Prime Minister himself disclosed during his Budget 2017 address that “the 600-km rail will connect townships such as Port Klang, ITT Gombak, Bentong, Mentakab, Kuantan, Kemaman, Kerteh, Kuala Terengganu, Kota Bharu and ends in Tumpat, with an estimated cost of RM55 billion.”
Datuk Seri Liow even assured Malaysians that the construction cost of the ECRL was “very transparent” and that industry players were well aware of the cost per kilometre of the rail that would be laid. If so, then why didn’t he reveal the “real” cost of the project then?
Even if Datuk Seri Liow does indeed know better than his Prime Minister, his response further begs the question as to why should Malaysia borrow RM55 billion if the cost of the rail project is significantly less?
Malaysians fear a repeat of the multi-billion dollar 1MDB scandal where the state-owned company borrowed US$3.5 billion and RM6.8 billion, or approximately RM18.3 billion (at the then exchange rate of US$1:RM3.30) to acquire Tanjong Power and Genting Sanyen power plants for RM10.8 billion.
As we know today, the balance of the proceeds from the borrowings, US$1.367 billion were siphoned to a fictitious British Virgin Island incorporated Aabar Investment PJS Limited under the guise of a “collateral” to secure the bond guaranteed by Abu Dhabi’s International Petroleum Investment Corporation (IPIC). Of the misappropriated amount, the United States Department of Justice has alleged that US$30 million was transferred to Dato’ Seri Najib Razak’s personal bank account in Ambank while another US$238 million went to his stepson, Riza Aziz’s company in the United States, Red Granite.
The East Coast Economic Region (ECER) Development Council CEO, Datuk Jebasingam Issac John has previously been quoted by news reports in April 2014 that the ECRL will cost approximately RM30 billion. If the figure cited is indeed true and is the same figure Datuk Seri Liow is referring to, perhaps the Transport Minister should enlighten Malaysians as to where the balance of RM25 billion to be borrowed from China’s Exim Bank for the ECRL project will go to.
Can Datuk Seri Liow or any other Cabinet Minister guarantee Malaysians that the excess borrowings will not be misappropriated, perhaps even to bailout of 1MDB debts which were stolen? Is the Malaysian Government digging a bigger hole for itself in order to cover up the previous holes?
The Edge cited the examples of the 215km Padma rail line in Bangladesh and 120km Mombasa rail link in Kenya which were being constructed by China Rail Construction Corp for RM68.1 million and RM61.4 million per kilometer respectively.
For another project in Ethiopia awarded to Turkish contractor, Yapi Merkezi, the 375km Awash-Weldia railway line of which more than 40% is built on challenging terrain, the cost was only US$1.7 billion or RM18.1 million per kilometer.
The question hence arises as to why is the Malaysian government awarding the 600km ECRL project to China Communications Construction Company (CCCC) at RM55 billion or RM91.7 million per kilometer without any open competitive tender exercise?
The Minister of Transport, Datuk Seri Liow Tiong Lai tried to allay the concerns of the Malaysian public by claiming that the RM55 billion is not the cost of construction. Instead he claims that it is merely the value of the Financing Framework Agreement.
We have no idea whether the Transport Minister knows what he is talking about or whether he has even seen or read the above agreements given that his Deputy told the Parliament that he could not answer ECRL queries because it was not under the purview of the Transport Ministry but is instead under the Prime Minister’s Department control.
The question hence arises as to whether Datuk Seri Liow, who is also the MCA President is merely shooting off his hip, especially since the Prime Minister himself disclosed during his Budget 2017 address that “the 600-km rail will connect townships such as Port Klang, ITT Gombak, Bentong, Mentakab, Kuantan, Kemaman, Kerteh, Kuala Terengganu, Kota Bharu and ends in Tumpat, with an estimated cost of RM55 billion.”
Datuk Seri Liow even assured Malaysians that the construction cost of the ECRL was “very transparent” and that industry players were well aware of the cost per kilometre of the rail that would be laid. If so, then why didn’t he reveal the “real” cost of the project then?
Even if Datuk Seri Liow does indeed know better than his Prime Minister, his response further begs the question as to why should Malaysia borrow RM55 billion if the cost of the rail project is significantly less?
Malaysians fear a repeat of the multi-billion dollar 1MDB scandal where the state-owned company borrowed US$3.5 billion and RM6.8 billion, or approximately RM18.3 billion (at the then exchange rate of US$1:RM3.30) to acquire Tanjong Power and Genting Sanyen power plants for RM10.8 billion.
As we know today, the balance of the proceeds from the borrowings, US$1.367 billion were siphoned to a fictitious British Virgin Island incorporated Aabar Investment PJS Limited under the guise of a “collateral” to secure the bond guaranteed by Abu Dhabi’s International Petroleum Investment Corporation (IPIC). Of the misappropriated amount, the United States Department of Justice has alleged that US$30 million was transferred to Dato’ Seri Najib Razak’s personal bank account in Ambank while another US$238 million went to his stepson, Riza Aziz’s company in the United States, Red Granite.
The East Coast Economic Region (ECER) Development Council CEO, Datuk Jebasingam Issac John has previously been quoted by news reports in April 2014 that the ECRL will cost approximately RM30 billion. If the figure cited is indeed true and is the same figure Datuk Seri Liow is referring to, perhaps the Transport Minister should enlighten Malaysians as to where the balance of RM25 billion to be borrowed from China’s Exim Bank for the ECRL project will go to.
Can Datuk Seri Liow or any other Cabinet Minister guarantee Malaysians that the excess borrowings will not be misappropriated, perhaps even to bailout of 1MDB debts which were stolen? Is the Malaysian Government digging a bigger hole for itself in order to cover up the previous holes?
Thursday, November 03, 2016
Has Malaysia become the new rogue nation of this world?
Malaysia has always prided itself to be a progressive nation which built its foundations the principles of justice and moderation. Even before our own independence, we have always been on the on the right side of history, fighting the Axis powers during the World War II and was part of the coalition to halt the rise of communism in Southeast Asia.
Even during the worst of times during the Mahathir’s era of an authoritarian regime, we have never been regarded as a basket case like Cambodia, Burma, Iraq or God-forbid, North Korea.
Our leaders have been reasonably well-educated and speak with the right tones to ingratiate ourselves well in a world led by the United States, Europe and Japan. Even our current Prime Minister, Dato’ Seri Najib Razak had tried extremely hard to be part of international elite fraternity with his constant, albeit rhetorical preaching of the “global movement of moderates”.
Who can forget, how hard our Prime Minister tried to be buddies with President Obama and how proud he was when he had the rare opportunity to have a round of golf with the American President in Hawaii not too long ago in December 2014?
How quickly things have changed in less than 2 years.
In July this year, the United States Department of Justice (DOJ) has labelled Malaysia a kleptocracy, with the single largest seizure of assets purchased with funds laundered in the United States which were misappropriated from 1MDB. While Dato’ Seri Najib Razak was not an owner of the assets to be seized, the DOJ explicitly disclosed that he received US$731 million of these misappropriated funds in his personal bank account in Malaysia.
Despite the severity of the accusation by the US Attorney-General, Dato' Seri Najib has refused to deny the allegations and has chosen to remain silent.
Instead today, Dato’ Seri Najib Razak has decided that it is now in his best interest to pucker up to mighty China. After all, China doesn’t pass judgement on who they deal with, regardless of whether it’s a rogue nation like North Korea or a Western counterpart like United States. China’s investments for influence policy reaches out far and wide to third world countries all around the world, especially in Africa like, Nigeria, Sudan and Angola.
After the much-hyped promise of Middle-Eastern petrodollars-led investment boom in Malaysia failed to materialise, the Prime Minister is turning to Beijing to not only jumpstart our economy, but also to help him clean up his multi-billion dollar 1MDB mess.
It is one thing eschewing open tenders for mega-projects in the past to local Malaysian cronies of the ruling parties. Now, the Prime Minister has decided that we should eschew open tenders and award mega-projects at inflated prices like the RM55 billion East Coast Rail Link to Chinese state-owned companies without any tender, or even the pretence of one.
Dato’ Seri Najib has decided to award of the above project to China Communications Construction Company Limited at a price more than double the price per kilometer of rail ever awarded in Malaysia with borrowings from China’s Export-Import Bank. It is a clear attempt to siphon cash to payoff 1MDB’s outstanding debts, especially those embroiled with Abu Dhabi’s International Petroleum Investment Corporation.
In exchange, Dato’ Seri Najib yields to Chinese geo-political and economic supremacy. When the United Nations Arbitral Tribunal ruled that “there was no legal basis for China to claim historic rights to resources within the sea areas falling within the ‘nine-dash line” in South China Sea, Malaysia has strangely refused to endorse the ruling despite the fact that we are ourselves laying claims on parts of the Spratlys archipelago in the area.
Worse, Malaysia together with Cambodia, has frustrated the attempts by ASEAN nations to recognise the ruling which had resulted in a meaningless water-down statement with regards to the disputes in South China Sea.
Yesterday, as if to hammer the nail into the coffin, the Prime Minister wrote in his special column in China Daily chastising the West including the “former colonial powers”, that “it is not for them to lecture countries they once exploited on how to conduct their own internal affairs today.”
It is a not so subtle statement to tell these Western powers that how Malaysia is a kleptocracy today isn’t any of their business. If they are not happy with him, he is more than happy to embrace China, who couldn’t care less about how the Malaysian government leaders plunder the nation.
Dato’ Seri Najib Razak’s stand has much bigger implications to Malaysia than merely an attempt to play off one Superpower against another. The Prime Minister’s brazen foreign policy switch will lead Malaysia, intentionally or inadvertently, down the road of becoming a rogue nation, globally snubbed and internationally derided.
As basket cases like Burma, Vietnam or even Iran redeems themselves with greater rapprochement with the international communities, it is frightening that a Prime Minister, consumed with the need to save himself is taking actions which will lead us down the slippery slope.
Even during the worst of times during the Mahathir’s era of an authoritarian regime, we have never been regarded as a basket case like Cambodia, Burma, Iraq or God-forbid, North Korea.
Our leaders have been reasonably well-educated and speak with the right tones to ingratiate ourselves well in a world led by the United States, Europe and Japan. Even our current Prime Minister, Dato’ Seri Najib Razak had tried extremely hard to be part of international elite fraternity with his constant, albeit rhetorical preaching of the “global movement of moderates”.
Who can forget, how hard our Prime Minister tried to be buddies with President Obama and how proud he was when he had the rare opportunity to have a round of golf with the American President in Hawaii not too long ago in December 2014?
How quickly things have changed in less than 2 years.
In July this year, the United States Department of Justice (DOJ) has labelled Malaysia a kleptocracy, with the single largest seizure of assets purchased with funds laundered in the United States which were misappropriated from 1MDB. While Dato’ Seri Najib Razak was not an owner of the assets to be seized, the DOJ explicitly disclosed that he received US$731 million of these misappropriated funds in his personal bank account in Malaysia.
Despite the severity of the accusation by the US Attorney-General, Dato' Seri Najib has refused to deny the allegations and has chosen to remain silent.
Instead today, Dato’ Seri Najib Razak has decided that it is now in his best interest to pucker up to mighty China. After all, China doesn’t pass judgement on who they deal with, regardless of whether it’s a rogue nation like North Korea or a Western counterpart like United States. China’s investments for influence policy reaches out far and wide to third world countries all around the world, especially in Africa like, Nigeria, Sudan and Angola.
After the much-hyped promise of Middle-Eastern petrodollars-led investment boom in Malaysia failed to materialise, the Prime Minister is turning to Beijing to not only jumpstart our economy, but also to help him clean up his multi-billion dollar 1MDB mess.
It is one thing eschewing open tenders for mega-projects in the past to local Malaysian cronies of the ruling parties. Now, the Prime Minister has decided that we should eschew open tenders and award mega-projects at inflated prices like the RM55 billion East Coast Rail Link to Chinese state-owned companies without any tender, or even the pretence of one.
Dato’ Seri Najib has decided to award of the above project to China Communications Construction Company Limited at a price more than double the price per kilometer of rail ever awarded in Malaysia with borrowings from China’s Export-Import Bank. It is a clear attempt to siphon cash to payoff 1MDB’s outstanding debts, especially those embroiled with Abu Dhabi’s International Petroleum Investment Corporation.
In exchange, Dato’ Seri Najib yields to Chinese geo-political and economic supremacy. When the United Nations Arbitral Tribunal ruled that “there was no legal basis for China to claim historic rights to resources within the sea areas falling within the ‘nine-dash line” in South China Sea, Malaysia has strangely refused to endorse the ruling despite the fact that we are ourselves laying claims on parts of the Spratlys archipelago in the area.
Worse, Malaysia together with Cambodia, has frustrated the attempts by ASEAN nations to recognise the ruling which had resulted in a meaningless water-down statement with regards to the disputes in South China Sea.
Yesterday, as if to hammer the nail into the coffin, the Prime Minister wrote in his special column in China Daily chastising the West including the “former colonial powers”, that “it is not for them to lecture countries they once exploited on how to conduct their own internal affairs today.”
It is a not so subtle statement to tell these Western powers that how Malaysia is a kleptocracy today isn’t any of their business. If they are not happy with him, he is more than happy to embrace China, who couldn’t care less about how the Malaysian government leaders plunder the nation.
Dato’ Seri Najib Razak’s stand has much bigger implications to Malaysia than merely an attempt to play off one Superpower against another. The Prime Minister’s brazen foreign policy switch will lead Malaysia, intentionally or inadvertently, down the road of becoming a rogue nation, globally snubbed and internationally derided.
As basket cases like Burma, Vietnam or even Iran redeems themselves with greater rapprochement with the international communities, it is frightening that a Prime Minister, consumed with the need to save himself is taking actions which will lead us down the slippery slope.
Wednesday, November 02, 2016
Dato’ Seri Najib Razak must explain to Malaysians why he has forsaken all forms of transparency and accountability in awarding the RM55 billion East Coast Rail Link (ECRL) project to a Chinese company
The Treasury-General Tan Sri Dr Irwan Serigar Abdullah had informed the media two days ago that Malaysia and China will sign the Framework Financing Agreement and Engineering, Procurement, Construction (EPC) Contract for the project yesterday.
Dr Irwan spoke to Malaysian media upon arrival in Beijing on Monday as part of the delegation accompanying Prime Minister Najib Razak who is on a six-day visit to the Chinese capital.
He said the railway link will lower transportation costs between the west and east coasts of peninsular Malaysia, bring down prices of goods and reduce travelling time. "It will also will help create more jobs and business opportunities for Malaysians, especially the rural folks," Dr Irwan said.
Malaysians are not disputing or objecting to the ECRL project or its benefits to the nation.
Malaysians are stunned that such a mega-project is being awarded without any form of transparency and competitive tender to ensure that we receive the best value for money.
Worse, the project was originally touted to cost RM30 billion, as opposed to a monstrous RM55 billion as announced in the Finance Minister’s budget speech.
As a measure of comparison, the 329km Ipoh-Padang Besar double-tracking project was awarded to MMC-Gamuda consortium for RM14.5 billion in 2003. More recently in December 2015, the 179km Gemas-Johor Bahru link was awarded to China Railway Engineering Corporation for the sum of RM7.1 billion. On average, the railway projects cost RM44.0 million and RM39.8 million per kilometre respectively.
However, at the cost of RM55 billion, the 600km ECRL will cost a monstrous RM91.7 billion per kilometre to construct. That would mean that the ECRL will cost 108% and 130% more than northern and southern double-tracking projects respectively!
Tan Sri Dr Irwan Serigar tried to preempt questions on the project by claiming that the financing offered by China was a lower rate compared to the international market, coupled with a long repayment period of 20 years.
A favourable financing rate is not a justifiable excuse not to carry out a proper tender exercise. Based on the above information we have, a financing rate that is say, 2% lower than other parties would never justify a 130% increase in the cost of the project!
If Dato’ Seri Najib Razak or Tan Sri Irwan Serigar think it is, then they should be sacked as the Finance Minister and Treasury-General respectively as they have obviously failed their mathematics in primary school.
Malaysians fear that the real reason why the ECRL project is awarded to China at grossly inflated prices is to hide future illegal money flows from the opaque Chinese companies to 1MDB creditors such as International Petroleum Investment Corporation (IPIC) to rescue the state-owned fund. IPIC, in this case, is suing 1MDB for a massive US$6.5 billion.
As exposed by the Sarawak Report earlier in July, we fear that the “excess” from the inflated Chinese contract will be siphoned in a prearranged but illegal manner to bailout 1MDB.
Dr Irwan spoke to Malaysian media upon arrival in Beijing on Monday as part of the delegation accompanying Prime Minister Najib Razak who is on a six-day visit to the Chinese capital.
He said the railway link will lower transportation costs between the west and east coasts of peninsular Malaysia, bring down prices of goods and reduce travelling time. "It will also will help create more jobs and business opportunities for Malaysians, especially the rural folks," Dr Irwan said.
Malaysians are not disputing or objecting to the ECRL project or its benefits to the nation.
Malaysians are stunned that such a mega-project is being awarded without any form of transparency and competitive tender to ensure that we receive the best value for money.
Worse, the project was originally touted to cost RM30 billion, as opposed to a monstrous RM55 billion as announced in the Finance Minister’s budget speech.
As a measure of comparison, the 329km Ipoh-Padang Besar double-tracking project was awarded to MMC-Gamuda consortium for RM14.5 billion in 2003. More recently in December 2015, the 179km Gemas-Johor Bahru link was awarded to China Railway Engineering Corporation for the sum of RM7.1 billion. On average, the railway projects cost RM44.0 million and RM39.8 million per kilometre respectively.
However, at the cost of RM55 billion, the 600km ECRL will cost a monstrous RM91.7 billion per kilometre to construct. That would mean that the ECRL will cost 108% and 130% more than northern and southern double-tracking projects respectively!
Tan Sri Dr Irwan Serigar tried to preempt questions on the project by claiming that the financing offered by China was a lower rate compared to the international market, coupled with a long repayment period of 20 years.
A favourable financing rate is not a justifiable excuse not to carry out a proper tender exercise. Based on the above information we have, a financing rate that is say, 2% lower than other parties would never justify a 130% increase in the cost of the project!
If Dato’ Seri Najib Razak or Tan Sri Irwan Serigar think it is, then they should be sacked as the Finance Minister and Treasury-General respectively as they have obviously failed their mathematics in primary school.
Malaysians fear that the real reason why the ECRL project is awarded to China at grossly inflated prices is to hide future illegal money flows from the opaque Chinese companies to 1MDB creditors such as International Petroleum Investment Corporation (IPIC) to rescue the state-owned fund. IPIC, in this case, is suing 1MDB for a massive US$6.5 billion.
As exposed by the Sarawak Report earlier in July, we fear that the “excess” from the inflated Chinese contract will be siphoned in a prearranged but illegal manner to bailout 1MDB.
Sunday, October 23, 2016
The Economic Report 2016/7 exposes Dato’ Seri Najib Razak’s hidden budget time-bomb
Since the last general elections, Dato’ Seri Najib Razak has successfully managed the investment community’s perception of the “prudence” of the budget with declining budget deficits, albeit at a snail’s pace.
In 2013, the budget deficit was 3.8%. The figure declined to 3.4% and 3.2% in 2014 and 2015. For this year, the Government estimates it to be 3.1% and is forecasting 3.0% for 2017.
Despite the fact that Dato’ Seri Najib will never achieve his zero deficit target in 2020 at the current snail’s pace, credit should be given to the Finance and Prime Minister for the moderating deficit in the light of difficult economic conditions – that is if the deficit figures truly reflect government spending.
Even for a non-economist, you might raise an eyebrow as to whether deficit decline looked too “uniformly smooth” in a choppy global economy. If you think that the numbers look too good to be true and have been manipulated, you are absolutely right.
In practically every budget in recent years, Dato’ Seri Najib Razak had announced multiple multi-billion ringgit projects such as the LRT Extension Project, the MRT I and II Projects and soon, the proposed High-Speed Rail and the RM55 billion East Coast Railway Link.
However, these spending were never reflected in the Government budget expenditure which showcased the “prudent” budget deficits. Where did these massive spending disappear to?
You will find part of the answer in the Non-Financial Public Corporations (NFPC) Financial Position (Table 6.13 p161 Economic Report 2016/7 – see below).
NFPCs includes 29 key government-linked companies including Indah Water Konsortium, KTM Bhd, Telekom Malaysia, Malaysia Airlines Bhd, Malaysia Airport Holdings, Petronas, Prasarana, Syarikat Perumahan Negara, Tenaga Nasional, MRT Co and the UEM Group.
What is most alarming from the table is the NFPCs’ spending deficit. In 2013, the NFPC deficit was a modest RM10.6 billion. However, since then, the NFPC deficit leaped astronomically to RM52.3 billion in 2014 and further increased to RM56.9 billion in 2015. The estimated deficit for 2016 is currently RM50.5 billion.
To lend context and perspective to the scale of these NFPC deficits, the Federal Government budget deficits for 2015 was RM37.2 billion. In 2016, it is estimated to hit RM38.7 billion while the Government forecast RM40.3 billion for 2017.
In lay man’s terms, the Government has hidden the bulk of its excessive spending under the NFPCs to maintain a semblance of “moderate” budget deficit. However, so much spending has now been shifted to these NFPCs, that the NFPC deficit has grown by leaps and bounds to now become even bigger than the Federal Government deficit!
To make matter worse, the 29 GLCs accounted in the NFPC does not include debt stricken 1Malaysia Development Bhd which is mired in more than RM20 billion of debt.
There is no question that the NFPC deficit is the biggest time-bomb to the Malaysian public finances. We can already feel its ticking with the rapidly rising “Debt Service Charges” which the Government is forced to bear annually. This is caused in no small part, to the Government being obligated to pay for interest and loans which the NFPCs are unable to fulfil.
The Federal Government Debt Service Charges have increased from RM20.3 billion in 2013 to a projected RM28.9 billion in 2017. The increase will only accelerate and snowball as NFPC financial obligations arising from the massive deficits are realised in the years to come.
By the time the time-bomb explodes, the 2017 Budget which is already depressing, will feel like a Hawaiian vacation on hindsight.
Sunday, July 31, 2016
A second international money laundering scam designed to cover up the first will cement Malaysia’s notoriety as the kleptocratic capital of the world
The Sarawak Report has exposed an alleged plan to double the price tag of the East Coast Rail Link (ECRL) to RM60 billion. The “extra” RM30 billion is meant to be channelled to a nominated Chinese company to pay off 1MDB’s bad debts channelled via behind the scenes company.
The massively inflated alleged cost of the ECRL to be awarded to China Communications Construction Company (CCCC) lends credence to the Sarawak Report documents which detailed how the “excess” was to bailout the debt-stricken 1MDB.
The nominated company by CCCC will then pay 1MDB the sum of US$850 million (RM3.4bn) for the purposes of repayment for International Petroleum Investment Corporation (IPIC) advances, and assume the debt of 1MDB subsidiaries amounting to US$4.78 billion (RM19.4bn) inclusive of interest which had been guaranteed by IPIC.
These payments are clearly meant to go towards the settlement with IPIC which has taken 1MDB to the London arbitration court for the amount of US$6.5 billion.
I have since demanded that Dato’ Seri Najib Razak confirm or deny the alleged plan. However, the Prime Minister has remained conspicuously silent on the exposé. His silence on the matter will no doubt leave Malaysians believing another bailout is underway. However, this is no ordinary bailout.
When the Parliament approved a special bill to allocate RM6 billion for Khazanah Nasional to rescue Malaysian Airlines System, that was a bailout. When the Ministry of Finance approved a RM4.5 billion soft loan for the Port Klang Free Zone, that was a bailout.
However, in this case, the Najib administration will be attempting a secret bailout of 1MDB via fraud and deceit. If true, the Prime Minister will be engineering another multi-billion-dollar international money laundering exercise to cover up the first one by 1MDB.
Has Najib not learnt his lesson with the first 1MDB money-laundering scam? The purportedly “legal” transactions such as “investment” in an ostensibly legal joint venture like “1MDB-Petrosaudi International Limited” did not in any way legitimise the attempts to siphon money for unrelated purposes.
Hence similarly, a purportedly “legal” ECRL contract does not in any way legitimise the attempt to siphon money out for the purposes of covering up another crime.
Furthermore, as the second “cover up” bailout will once again involve international cross-border transactions, any bank carrying out the multi-billion-dollar money-laundering exercise for them will be risking their reputation and survival.
After all, the previous banks who have facilitated the 1MDB money-laundering scam are now all in hot soup – including UBS Bank, DBS Bank and Standard Chartered Bank. 143-year-old Swiss bank, BSI not only found itself investigated by the Switzerland authorities but had its operating license terminated by the Monetary Authority of Singapore. Even Goldman Sachs who assisted 1MDB in raising US$6.5 billion of bonds is being probed.
Finally, if CCCC were to accept the fraudulently inflated contract to carry out the money laundering on behalf of the Najib administration, then the US$24 billion company listed on the Hong Kong Stock Exchange will itself be party to the money-laundering scam and subjecting itself to prosecution in jurisdictions around the world.
Malaysia does not need another money-laundering scandal investigated by authorities all around the world to further sully our rapidly diminishing reputation while making Malaysia the kleptocratic capital of the world. The Cabinet must put a stop to this RM60 billion ECRL contract immediately so that the long-suffering Malaysian people will not be scammed again for multi-billion dollars to cover up another scam.
The massively inflated alleged cost of the ECRL to be awarded to China Communications Construction Company (CCCC) lends credence to the Sarawak Report documents which detailed how the “excess” was to bailout the debt-stricken 1MDB.
The nominated company by CCCC will then pay 1MDB the sum of US$850 million (RM3.4bn) for the purposes of repayment for International Petroleum Investment Corporation (IPIC) advances, and assume the debt of 1MDB subsidiaries amounting to US$4.78 billion (RM19.4bn) inclusive of interest which had been guaranteed by IPIC.
These payments are clearly meant to go towards the settlement with IPIC which has taken 1MDB to the London arbitration court for the amount of US$6.5 billion.
I have since demanded that Dato’ Seri Najib Razak confirm or deny the alleged plan. However, the Prime Minister has remained conspicuously silent on the exposé. His silence on the matter will no doubt leave Malaysians believing another bailout is underway. However, this is no ordinary bailout.
When the Parliament approved a special bill to allocate RM6 billion for Khazanah Nasional to rescue Malaysian Airlines System, that was a bailout. When the Ministry of Finance approved a RM4.5 billion soft loan for the Port Klang Free Zone, that was a bailout.
However, in this case, the Najib administration will be attempting a secret bailout of 1MDB via fraud and deceit. If true, the Prime Minister will be engineering another multi-billion-dollar international money laundering exercise to cover up the first one by 1MDB.
Has Najib not learnt his lesson with the first 1MDB money-laundering scam? The purportedly “legal” transactions such as “investment” in an ostensibly legal joint venture like “1MDB-Petrosaudi International Limited” did not in any way legitimise the attempts to siphon money for unrelated purposes.
Hence similarly, a purportedly “legal” ECRL contract does not in any way legitimise the attempt to siphon money out for the purposes of covering up another crime.
Furthermore, as the second “cover up” bailout will once again involve international cross-border transactions, any bank carrying out the multi-billion-dollar money-laundering exercise for them will be risking their reputation and survival.
After all, the previous banks who have facilitated the 1MDB money-laundering scam are now all in hot soup – including UBS Bank, DBS Bank and Standard Chartered Bank. 143-year-old Swiss bank, BSI not only found itself investigated by the Switzerland authorities but had its operating license terminated by the Monetary Authority of Singapore. Even Goldman Sachs who assisted 1MDB in raising US$6.5 billion of bonds is being probed.
Finally, if CCCC were to accept the fraudulently inflated contract to carry out the money laundering on behalf of the Najib administration, then the US$24 billion company listed on the Hong Kong Stock Exchange will itself be party to the money-laundering scam and subjecting itself to prosecution in jurisdictions around the world.
Malaysia does not need another money-laundering scandal investigated by authorities all around the world to further sully our rapidly diminishing reputation while making Malaysia the kleptocratic capital of the world. The Cabinet must put a stop to this RM60 billion ECRL contract immediately so that the long-suffering Malaysian people will not be scammed again for multi-billion dollars to cover up another scam.
Thursday, July 28, 2016
Has the PM’s Department decided to award the East Coast Rail Link to China Communications Construction Company (CCCC) for an inflated cost of RM60 billion without any tender?
The Sarawak Report has exposed new documents which alleged that the Malaysian Government is in the midst of finalising a new contract to award China Communications Construction Company (CCCC) for a whopping sum of RM60 billion. The East Coast Economic Region Development Council had previously expected the cost of the project to be ‘only’ RM30 billion.
Malaysians are taken aback by the speculated cost for the project and cannot be blamed for giving Sarawak Report the benefit of the doubt because the whistle-blower website has been proven right time and again, especially with regards to its reporting of the multi-billion dollar 1MDB scandal.
As a measure of comparison, the 329km Ipoh-Padang Besar double-tracking project was awarded to MMC-Gamuda consortium for RM14.5 billion in 2003. More recently in December 2015, the 179km Gemas-Johor Bahru link was awarded to China Railway Engineering Corporation for the sum of RM7.1 billion. On average, the railway projects cost RM44.0 million and RM39.8 million per kilometre respectively.
However, at the cost of RM60 billion, the 620km ECRL will cost a monstrous RM96.8 billion per kilometre to construct. That would mean that the ECRL will cost 120% and 143% more than northern and southern double-tracking projects respectively!
The massively inflated alleged cost of the ECRL without a tender exercise lends credence to the Sarawak Report documents which detailed how the “excess” was to bailout the debt-stricken 1MDB.
The documents reveal that CCCC, upon the award of the inflated contract, will via a nominated “credit-worthy” company pay 1MDB the sum of US$850 million (RM3.4bn) for the purposes of repayment for International Petroleum Investment Corporation (IPIC) advances, and assume the debt of 1MDB subsidiaries amounting to US$4.78 billion (RM19.4bn) inclusive of interest which had been guaranteed by IPIC.
These payments are clearly meant to go towards the settlement with IPIC which has taken 1MDB to the London arbitration court for the amount of US$6.5 billion.
More interestingly, part of the sum from the inflated cost will go towards acquiring substantial stakes in fugitive Low Taek Jho-linked companies, Putrajaya Perdana Bhd and Loh & Loh Corporation Bhd for US$244 million and US$71 million respectively.
In addition, there is a proposed payment by CCCC to a “consultancy/strategic/comms services” company and another “nominated company” for the amounts of US$65 million and US$200 million respectively. The payment for the unnamed mysterious “nominated company” was to be made upon the official signing of the ECRL contract expected in December this year. Hence, it appears that even in the exercise of a desperate bailout, generous commissions will be paid to certain parties, perhaps to continue their lifestyles of luxury and debauchery.
In effect, the Najib administration is merely ECRL as an excuse and an outrageous cover up to mask additional borrowings of RM30 billion in order to repay the billions embezzled from 1MDB. Most tragically, it means that ordinary Malaysians as the Government will finance the entire ECRL project with more crippling debt. We are merely covering up a gigantic hole by digging ourselves an even bigger hole.
We call upon Dato’ Seri Najib Razak to confirm or deny that the award of the contract to CCCC is in the works, and provide transparent and accountable justifications for the award in the absence of any competitive tender exercise.
Subscribe to:
Posts (Atom)