Tuesday, June 28, 2011

GST to Fund the Poor?

Recent months have seen various Ministers, including the Prime Minister Datuk Seri Najib Razak himself putting forward the proposal that as the Goods & Services Tax (GST) gets implemented, the Government will concurrently reduce our income tax levels.

The latest Minister who has joined the fray is Datuk Idris Jala, the CEO for PEMANDU and Minister in the Prime Minister’s department, who went further to argue that only with the GST, accompanied by reductions in income taxes will the Government be able to fund its policies for the poor.

Datuk Idris Jala said that “with the GST in place, all 28 million Malaysians will pay a little bit which then allows to reduce corporate and income tax and that’s how we can find enough money for the poor people.” The statement is a little shocking coming from Datuk Idris Jala, who’s normally fairly sensible, and completely perverse in its logic.

Today, only approximately 15% of the working population earn enough to afford paying taxes, and that means that the overwhelming majority of the work force is earning less than RM3,000 a month. They are not paying taxes not because they do not want to, but because they are not earning enough to.

What the BN government is proposing to do is to reduce the taxes paid by the wealthier 15% of the working population, and redistributing the tax burden to the 85% who currently do not earn enough to qualify to pay taxes.

The irony is that now the Government is arguing that by taxing the rich less, taxing the poor more, they will be able to source increased funds to support the poor! In effect, the Government is arguing that the wealthier segments, particularly the corporates should stop funding policies in support of the poor, and the poor should fund policies for themselves!

There is no question that the Government cannot rely heavily on taxes derived from the oil and gas sector which today constitutes close to 40% of all government revenue collection. However, the way to do it is not by crudely taxing the rakyat more, particularly those from the lower income groups. Otherwise, should Petronas “strike oil” again and is able to increase its revenue contribution to say, 60% of total government revenue, does it mean that the Government will then increase GST to say 10% for the purposes of “broadening the tax base”?

The appropriate method to increase and broaden our income tax base is to implement policies funded by our oil and gas windfall profits which will raise the income and productivity of ordinary Malaysians. Such policies will include drastically improving the quality of education as well as setting a reasonable minimum wage. Once the income levels of Malaysians increase, automatically, based on existing tax structures, more Malaysians will be paying taxes and the Government will be able to “broaden” its tax base without burdening the poor.

In the short term, the best measures for the Government to implement to increase revenues and reduce expenditure is to introduce competition into all its policies – such as competitive auctions for state land to maximise revenue, and competitive tenders for all privatisation and procurement projects to minimise cost and reduce leakages through wastage, rent-seeking and corruption. Such measures, if imposed with political will, will be more than sufficient to fund policies for the poor in the short to medium term.

Sunday, June 26, 2011

Peter Chin defends IPPs

Peter Chin’s open defence of the Independent Power Producers (IPPs) proves beyond doubt that the BN Government seek to protect the fat cats at the expense of the man-on-the-street

Malaysians throughout the country are taken aback by the open position taken by the Minister of Energy, Water and Green Technologies, Datuk Peter Chin in support of the current Power Purchasing Agreements (PPAs) between the Independent Power Producers (IPPs) and Tenaga Nasional Bhd (TNB).

Datuk Peter Chin has defended the country’s reserve margins of 45% as an intended policy as the Government had wanted a “bigger cushion” to prevent any sudden rise in electricity demand. In fact ever since 1997, a few years after the first IPP concessions were awarded, our reserve margins have been consistently in excess of 40%. The Chief Operating Officer of TNB Azman Mohd even added that our reserve margins are expected to fall below 20% come 2015, a “dangerous level”.

Today, the electricity reserve margin for Thailand and Java, Indonesia are only 25.4% and 26% respectively, is the Minister claiming that both these countries who have been attracting greater foreign direct investments than Malaysia consistently over the past 5 years do not have sufficient margins? Even in the United States and Canada, the North American Electric Reliability Corporation’s (“NERC”) study indicated a reserve margin of 28.6% despite being an advanced and developed country.

The Minister should perhaps enlighten Malaysians as to what makes Malaysia so special that Malaysians are forced to pay for electricity reserve margins which have been consistently close to 50% over the past decade?

In addition to defending the country’s outrageous reserve margins, Datuk Peter Chin adopted the tired excuse utilised by the IPPs that they do not benefit fuel subsidies as “the fuel cost for electricity generation by both TNB and IPPs is a pass-through component”, arguing that it’s the end-consumers who benefit from these subsidies.

While the Minister and the IPPs are absolutely right “technically” and “legally” speaking, the subsidies have allowed the IPPs to mask the high electricity prices they sell, particularly to TNB. For example, despite subsidising less in Thailand where natural gas is sold at RM23.10 per MMBTU to IPPs compared to RM13.70 per MMBTU in Malaysia, the electricity tariffs in Thailand is similar, if not cheaper than that in Malaysia. For example, average commercial tariff rate today is RM40/kWh after the recent tariff hike compared to RM38/kWh in Thailand.

Hence despite industry consensus of the fact that the IPPs enjoy highly lucrative contract terms masked by the heavy susbidies granted by the Government, the Minister has regretfully chosen to defend these IPPs and their contracts.

This goes to show that the Government is completely insincere about its recent talks of “renegotiating” the IPP contracts and that the Minister is only buying time for the first generation IPPs to complete their PPA contracts which are expected to expire starting from 2015.

Saturday, June 25, 2011

University scholarships only after Pre-University

We understand from the Prime Minister, Datuk Seri Najib Abdul Razak’s statement on the radio on Thursday morning that JPA university scholarships will only be awarded at pre-university level after securing admission into top universities, instead of at the current SPM level as one of the means to resolve the perennial scholarship conundrum.

This move is fully in line with the proposal the DAP Socialist Youth led by the MP for Rasah, Anthony Loke has made via a memorandum to the Minister in-charge of scholarships way back in 2009.

The NutGraph had in 2 June 2009 reported that “a proposal to limit overseas Public Service Department (PSD) scholarships to students who have completed Form Six or pre-university equivalents has been well-received by at least one Barisan Nasional (BN) minister.

The Minister in the Prime Minister’s Department Datuk Seri Nazri Aziz had then said the idea merited further thought as it appeared to be a viable solution in reducing the number of applicants for overseas placements. “I strongly support this. It is a good idea and I will look into this.”

However, even way back in 2006, the then Higher Education Minister, Datuk Seri Mustapa Mohamed had already announced that the Government will only continue to award overseas scholarships to students who are able to gain entry into “ivy league” class universities.

The question then is, will the Public Service Department (PSD) comply and execute the Prime Minister’s directive that overseas scholarships only be awarded to students who are able to gain entry into these top universities after pre-university levels instead of SPM?

Since the PSD has been unable to implement such reforms over the past 4 to 5 years, why would next year be any different?

Instead of waiting for another year before the entire scholarship circus repeats itself again, the Government should immediately announce the details of the new scholarship policy so that the Malaysian public and particularly, the potential scholarship holders know what is in store for them.

We call upon the Government to award automatic pre-university scholarships to all top SPM students with 8A+ and above to pursue the pre-university course of their choice, such as such as ‘A’-levels, STPM or International Baccalaureate (IB) programmes.

Subsequently, the Government should announce a full list of top universities and colleges whose courses will be accepted for overseas universities scholarship consideration, whether it’s Economics in Cambridge or Engineering at MIT or medicine in Melbourne.

It is only with full and complete transparency will the Government be able to redeem the credibility and prestige of the PSD scholarship programme. Otherwise, it will just be another case of only rhetoric with little or no action, leading to the same fiasco next year.

Friday, June 24, 2011

Open Tenders, Higher Prices

The Government should just “open tenders” if it intends to continues to select contractors based on political connections and not based on merit and price.

As part of the “Government Transformation Programme” (GTP), the Najib administration had announced its intention to award more contracts for government projects through open tender. However, the Government had continued to award contracts without calls for tenders for many high-profile projects. This includes the MRT to Gamuda-MMC as the “project delivery partner”, the RM682 million Matrade International Convention Centre to Naza TTDI and both the proposed Kuala Lumpur International Financial District (KLIFD) and the Sungai Besi Airport redevelopment project to 1Malaysia Development Bhd (1MDB).

The silver lining was that for certain second tier construction projects, open and competitive tenders had been called subject to pre-qualification. One such recent bid was for the electro-mechanical system for the Kelana Jaya Line LRT extension project. The tender for the project was so successful that it had managed to attract some top international players to submit their bids – Bombardier, Colas, Thales, Siemens, Invensys, Samsung and more – before it closed on May 16.

Unfortunately, the entire exercise has been made a sham, if reports over the past few days by The Malaysian Insider and The Singapore Straits Times were indeed accurate. According to The Malaysian Insider last Friday, “a Finance Ministry committee has ignored the city’s light rail transit (LRT) operator’s recommendation for the Kelana Jaya line extension project by awarding it to a company whose project price of RM890 million is almost 50 per cent higher than that of the lowest bid.”

A source had claimed that “all bids are technically the same but Prasarana had recommended Ingress Corp Bhd-Balfour Beatty Rail Sdn Bhd, which put in a bid of RM610 million, the lowest against Hartasuma-Bombardier’s RM890 million, which is the highest.”

Today, the Singapore Straits Times reported that it was the consortium led by British firm, Colas which will be awarded for its RM670 million bid, which is still RM60 million higher than the lowest bid recommended by Syarikat Prasarana Bhd.

What the Government has done is not only to spend up to RM280 million extra on the project, it also has in effect wiped out the entire credibility of the GTP and the Najib administration by making a complete mockery of its “open tender” exercise. After attracting some of the top international companies to take part in the tender, they are now finding out that Malaysia will award the party which puts in the higher or highest bid, and not that of the lowest.

The “open tender” has wasted millions of ringgit borne by companies that submitted a competitive bid, thousands of man-hours from the private and public sectors and delayed for months the LRT extension project. Given that the Finance Ministry headed by Datuk Seri Najib Abdul Razak himself that owns Syarikat Prasarana Bhd already has in mind to award the project to Hartasuma Sdn Bhd-Bombardier joint-venture regardless of the tender outcome, the Government might as well just scrap the “open tender” show and “save” everyone the trouble.

In fact, the Straits Times quoted industry executives as saying that the “behind-the-scenes intrigue shows how opaque and non-transparent practices that have long characterised large public sector contract awards remain the order of the day in Malaysia.”

I will raise this matter in the Dewan for the supplementary budget debate should I have a chance to speak. The Finance Ministry must confirm if the above allegations are true, and if true, account to the rakyat as to why Malaysians must pay RM280 million more for the LRT extension project.

Postscript: The Deputy Finance Minister, Datuk Seri Awang Adek has disclosed that the 2nd lowest bid of RM670 million has been awarded because the lowest bid submitted a "surat jaminan" from its principal "late". The question is, is that strong enough reason to eliminate a tender RM60 million cheaper - we are not talking about technical failure or non-compliance here, especially since it has received endorsement from Syarikat Prasarana?

Wednesday, June 15, 2011

New 1,000MW Power Plant: Where's the Transparency?

Just as the rakyat is simmering over the lopsided deals Independent Power Producers (IPPs) have been enjoying over the past decades, Malakoff Bhd has announced on Bursa Malaysia yesterday that the Government’s regulatory body, Energy Commission (EC) has awarded the concession to build a new 1000MW coal-fired power plant in Tanjong Bin, Johor.

Based on various media reports, prior to the award of the new concession, the Energy Commission chairman, Tan Sri Ahmad Tajuddin Mohd Ali revealted that the commission had sought proposals from 2 power plant operators to construct the power plant, the other IPP being Jimah Energy Ventures Sdn Bhd.

The question on the rakyat’s mind today is, why did the EC invite proposals from only 2 IPPs instead of conducting an open tender to all existing IPPs as well as new potential IPPs in the country? It is obvious that only through a transparent and competitive tender exercise, can the commercial and industrial sector, as well as the man-on-the-street enjoy the most efficiently produced electricity at the lowest possible price.

Malakoff Bhd, a subsidiary of MMC Corp Bhd owned by powerful and influential tycoon Tan Sri Syed Mokhtar Albukhary already operates Southeast Asia’s biggest coal-fired IPP at the existing 700MW power plant in Tanjong Bin, and has now been awarded the concession to build an even bigger plant.

In the light of extensive public interest involved in the deal, the Government through Energy Commission or the Minister of Energy, Water and Green Technology, Datuk Peter Chin must immediately disclose the full details of the concession. In addition, it is crucial for the Government to show why the Malakoff proposal was preferred over the Jimah Ventures proposal.

The Najib administration must prove that the Prime Minister is indeed sincere when he claimed “he is fighting for the people” and not “on the IPP’s side”. The Government must answer question as to how much the coal-powered plant will be subsidised by the Government, the electricity rates to be charged to TNB as well as any formula for future adjustment of tariff rates.

The Prime Minister must also answer to the public and business community why he has repeated broken his promises to hold open and competitive tenders for the biggest projects to be awarded by the Government, such as the RM53 billion MRT, the RM628 million Matrade International Convention Centre, the RM25 billion KL International Financial District and now, Southeast Asia’s largest IPP coal-fired power plant.

Monday, June 13, 2011

"The Tiger That Lost Its Roar" - Petaling Jaya Book Launch!

You are cordially invited to the book launch of "The Tiger That Lost Its Roar" by Tony Pua, MP Petaling Jaya Utara and DAP National Publicity Secretary. The book is a tale of Malaysia's political economy.
Date: 25 Jun 2011 (Sat)
Time: 2-5pm
Venue: 1Utama New Wing, Ground Floor (next to Coffee Bean)
At the same time, a public forum with invited speakers will be held to discuss how the Malaysian "Tiger" can regain its "Roar".

RSVP on Facebook here.

The distinguished panel of speakers include Tan Sri Ramon Navaratnam, Dr Muhammed Khalid and Dr Ong Kian Ming.

Join us, for a lively, no-holds-barred discussion on our children's political and economic future! Read the foreword of the book here or place your order for the advance copy here.

Of course, you should come purchase a copy of the book as well and get it autographed on the spot! ;-)

About the panellist:

* Tan Sri Ramon Navaratnam

Tan Sri Ramon is the former Deputy Secretary-General of Ministry of Finance and Secretary-General of Ministry of Transport, and author many books on the Malaysian economy including "Healing the Wounded Tiger".

Ramon is also currently a member of the Malaysian Institute of Management (MIM) and the president of Transparency International Malaysia. He is a member of the National Economic Action Council (NEAC) Globalisation Committee and Director of the Asian Strategy and Leadership Institute (Asli).

* Dr Muhammed Abdul Khalid

Dr Muhammed is a Research Fellow with the Institute of Malaysian and International Studies (IKMAS), Universiti Kebangsaan Malaysia. His
PhD thesis ''Wealth Inequality in Malaysia'' was awarded magna cum laude by SciencesPo Paris in December 2010. He holds a Master’s degree in Public Affairs (cum laude) from the same institution, as well as a Master of Economics from University of Malaya and Bachelor of Sciences (Finance) from University of Southern California. He is currently on a secondment to ISIS Malaysia as a senior analyst focusing on economic policy.

* Dr Ong Kian Ming (moderator)

Dr Ong is currently a Lecturer, Faculty of Economics and Policy Science, UCSI University. He received his PhD in Political Science from Duke University, M. Phil. Economics from University of Cambridge and B.Sc. Economics, London School of Economics.

Questions for Parliament 2011 Session II

Parliament just started its 2nd session of the year today and will end before the end of the month. Below are the list of questions which I've submitted for replies from various ministries.

Parliamentary Questions for 2011 Session II

Soalan Jawapan Lisan

1. Tony Pua meminta Perdana Menteri menyatakan prestasi dan kedudukan syarikat 1Malaysia Development Berhad (1MDB) sejak ianya ditubuh

(a) Penyata keuntungan dan “balance sheet”

(b) Kedudukan terkini kesemua pelaburan termasuk nilai dan jangkaan pulangan setiap projek

2. Tony Pua meminta Perdana Menteri menyatakan langkah-langkah yang akan diambil oleh kerajaan untuk mengurangkan ‘brain drain’ akibat perasaan tersingkir seperti yang dibentangkan dalam laporan World Bank terkini, termasuklah jaminan peluang pekerjaan yang saksama.

3. Tony Pua meminta Perdana Menteri menyatakan

(a) Bayaran yang telah dibuat kepada Gamuda-MMC untuk projek pembinaan MRT dan sebarang nilai kerja yang telah dibuat, tetapi yang belum dibayar.

(b) Anggaran kos perlantikan Gamuda-MMC kepada kerajaan, termasuk kos “contingency” atau luar jangkaan, jika ada untuk project MRT.

4. Tony Pua meminta Perdana Menteri menyatakan

(a) Skop projek Karambrunai Resorts yang diumumkan sebagai satu-satu “Entry Point Project” yang bernilai RM9.6 bilion

(b) Sama ada permohonan lesen kasino telah diminta oleh pemaju dan ianya akan atau telah dipertimbangkan oleh kerajaan.

5. Tony Pua meminta Perdana Menteri menyatakan butiran perjanjian yang akan ditandatangani oleh kerajaaan dengan syarikat Tricubes Bhd untuk memajukan projek emel 1Malaysia, dan sama ada Tricubes akan diberikan hak untuk mengesahkan maklumat individu dengan Pejabat Pendaftaran Negara.

6. Tony Pua meminta Menteri Kewangan menyatakan

(a) Anggaran pecahan subsidi yang akan ditanggung kerajaan pada tahun 2011 mengikut kategori terperinci

(b) Anggaran kenaikan hasil kerajaan berpunca dari sektor minyak dan gas, dan lain-lain sumber

7. Tony Pua meminta Menteri Kewangan menyatakan

(a) impek pengurangan subsidi makanan, petrol, diesel, gas dan lain-lain barangan asas kepada golongan masyarakat berpendapatan 40% terendah sejak Januari 2010.

(b) Langkah-langkah ‘mitigation’ yang akan atau telah dilaksanakan untuk membantu golongan tersebut yang menghadapi kenaikan kos kehidupan yang mendadak.

8. Tony Pua meminta Menteri Industri dan Perdagangan Antarabangsa menyatakan sebab-sebab kedudukan Malaysia dari segi “Keberkesanan Kerajaan” dan “Keberkesanan Perniagaan” telah merosot dengan begitu teruk sekali dari tempat 9 dan 4 ke 17 dan 14 mengikut “IMD World Competitiveness Yearbook 2011”

9. Tony Pua meminta Perdana Menteri menyatakan

(a) Laporan daripada ‘public hearing’ yang telah dijalankan oleh SPAD atas pembinaan MRT, termasuk bantahan-bantahan utama

(b) Pengubahsuaian ke atas pelan pembinaan MRT atas maklumbalas yang telah diterima daripada pihak awam

10. Tony Pua meminta Menteri Kewangan menyatakan

(a) Anggaran jadual perlaksanaan sistem cukai GST

(b) Anggaran kos kerajaan untuk menyediakan sistem cukai GST dan kos pengurusan setiap tahun

Soalan Bertulis

11. Tony Pua meminta Perdana Menteri menyatakan secara terperinci sejak portal “MyProcurement” dilancarkan

(a) bilangan kontrak yang telah diterbitkan oleh setiap Kementerian dan setiap bulan

(b) jumlah nilai kontrak yang telah diterbitkan oleh setiap Kementerian dan setiap bulan

12. Tony Pua meminta Menteri Perdagangan Antarabangsa dan Industri menyatakan sejak tahun 1996

(a) Jumlah pelaburan asing yang telah diluluskan oleh kerajaan untuk setiap tahun (“approved investments”)

(b) Jumlah pelaburan asing yang telah dilaburkan untuk setiap tahun (“actual investments”)

13. Tony Pua meminta Perdana Menteri menyatakan senarai terperinci universiti di United Kingdom dan di Amerika Syarikata yang pemegang biasiswa Mara sarjana muda dan jumlah penuntut yang dihantar setiap tahun sejak 2000 untuk setiap universiti tersebut

14. Tony Pua meminta Perdana Menteri menyatakan jumlah pengundi baru yang didaftarkan

(a) Oleh setiap parti politik untuk setiap suku tahun sejak 2008

(b) Oleh SPR lain-lain pihak (seperti kakitangan kerajaan dan POS Malaysia) setiap suku tahun sejak 2008

15. Tony Pua meminta Perdana Menteri menyatakan

(a) Senarai terperinci nama dan nilai setiap projek ETP/EPP yang telah diumumkan

(b) Nilai pelaburan yang telah dibuat sejak projek-projek ini diumumkan

MPs Can Get Copy of IPP Contracts?

Datuk Mukhriz Mahathir was reported to have said that the highly-secret agreements between Tenaga Nasional Bhd (TNB) and independent power producers (IPPs) can be released to parliamentarians, but cannot be disclosed to the public, as these are confidential matters.

He said "In Parliament, when a MP asks for anything, we have always been transparent." In fact, he even added that “MPs also have legal immunity which may allow them to bypass the non-disclosure clause in the agreement.”

Despite being a first term parliamentarian, I can say with certainty that the above statement by Mukhriz is complete and utter bunkum.

Members of Parliament (MP) are not privy to documents protected under the Official Secrets Act (OSA). To have access to these documents, the Cabinet will have to initiate a declassification process. Under the Act, anyone not unauthorised found in possession of these documents will be punishable with a mandatory 1 year, or up to 7 years in prison.

In fact, the then Parliamentary Opposition Leader, Lim Kit Siang had fought the OSA Amendment Bill 1986 tooth and nail, calling it “a critical assault on five crucial areas of Malaysian life: Parliamentary democracy, Freedom of the Press, Independence of the Judiciary, Responsible and Accountable Government, and Corruption-Free Malaysia”. MPs have no immunity over the possession (even if it is for 5 minutes) of the Government’s “confidential” documents!

The precedent has also been set that the tolled highway concession contracts as well as the Port Klang Free Zone contracts were made accessible to the MPs, they went through a lengthy declassification exercise by the Cabinet and Attorney-General.

What made Mukhriz’s statement even more ludicrous is its complete contradiction to the statement by the Energy, Water and Green Technology Minister, Datuk Peter Chin who had just last week announced that the Government has no power to release these documents to MPs and the public as they are agreements signed between “private entities”. Who is telling the truth, and who is lying?

Regardless of the above, I hope to be proven wrong and becoming a complete fool, if Mukhriz can on Monday 13th June next week when the 2nd parliamentary sitting of the year commences, to give each MP a copy of the IPP agreement, attached with an undertaking from the Attorney-General that MPs are not punishable under the OSA for having possession of these documents.

If not, then perhaps Mukhriz should explain in full why the Government chooses not to declassify these public interest documents, especially in the light of the unjust increase in tariffs to residential, commercial and industrial users, without any restructuring of the lobsided power purchase agreements allowing the IPPs to continue to make billions of ringgit in profits annually.

Thursday, June 09, 2011

Follow the Penang Water "Model"

Last Thursday, the Prime Minister, Datuk Seri Najib Abdul Razak and the Penang Chief Minister, Lim Guan Eng signed a historic agreement to transfer the state’s water assets held by Perbadanan Bekalan Air Pulau Pinang (PBA) to the federal agency, Pengurusan Aset Air Bhd (PAAB). This transfer is in exchange for leaseback by PBA of the said assets at a low interest over a period of 45 years in addition to other terms such as the conversion of Penang’s outstanding loan of RM655.24 million to the federal government into a grant as well as a special grant allocation of RM1.2 billion for the expansion project of Mengkuang Dam.

What is of particular importance, especially for other Pakatan-led states is the fact Najib praised the Penang "model" for the water restructuring exercise, and called on similar outcomes in other Pakatan states.

The statement is particularly applicable to the Selangor state which fractious and trouble water industry is resisting consolidation under the state government.

In Penang, while PBA is listed on Bursa Malaysia, the state government retains a majority 65% stake in the company, ensuring that all decisions relating to the provision of water services are in full control by the state government. In fact, the Federal Government has under the above agreement ceded final say on water tariffs to the state government. The state government has also assured the public that water tariffs will not be increased under the restructuring exercise.

The Selangor government have sought to restructure the water industry to the same effect. The state seeks to consolidate the disparate water companies in the state, and retain control over water tariffs so that consumers in Selangor and KL will not be burdened by profiteering from these private water companies.

However, the Federal Government has failed to give any support to the efforts of the state government, and have instead back Puncak Niaga and Syabas to the hilt to ensure that the latter will continue to retain control over the water industry in Selangor post-restructuring.

In fact, the BN Government has gone to the extent of bailing out these water companies from their debt burden by taking over RM6.5 billion of these debts without binding these companies to any restructuring exercise. The result is, there will be no incentive for these companies to agree to any consolidation because the Federal Government has removed the only bargaining power in its hands.

The Minister for Energy, Water and Green Technology, Datuk Peter Chin should heed Najib's call for all Pakatan states water industry to model after Penang's.

He must use the power in his hands, as prescribed by the Water Services Industry Act 2006 as well as the fact that the water bonds will be held by the Federal Government to force these private self-interested water companies to concede their control over the water industry to the Selangor state government. Any disputes over valuation and terms can be resolved via an international arbitration panel of water, legal and financial experts.

The refusal of the Minister to do so will be a figurative slap on Najib's face for the water industry in Selangor will remain under the fragmented control 4 water companies, with the state government having little or no say to ensure that the interest of its citizens is fully protected.

Wednesday, June 08, 2011

BN Government "Powerless" to Protect Rakyat

The reluctance of the Government to make public the PPAs shows that it is "powerless" when needed to protect the interest of the rakyat, but "powerful" where maximising the profits of IPPs are concerned

The Minister of Energy, Water and Green Technologies, Datuk Peter Chin had earlier in the week expressed that the Government is helpless in "declassifying" the Power Purchasing Agreements (PPAs) between the Independent Power Producers (IPPs) and Tenaga Nasional Bhd (TNB) in the light of the demand by the public.

The Ministry's reply to me back in 29 February 2009 for my parliamentary question said the exact same thing, which at the very least showed that they are steadfast and consistent in backing the interest of the IPPs.

The Minister then had replied to me that "dokumen Perjanjian Jual Beli Tenaga (PPA) merupakan satu dokumen perjanjian antara dua entiti swasta, iaitu di antara Tenaga Nasional Berhad (TNB) dan pihak penjana bebas (IPP) yang terbabit. Di bawah perjanjian tersebut, kedua-dua pihak perlu memberikan persetujuan terlebih dahulu sebelum mana-mana kandungan perjanjian tersebut boleh diumumkan. Sekiranya pihka TNB bercadang untuk menamatkan perjanjian PPA tanpa sebab yang kukuh, TNB perlu memberi pampasan penuh kepada pihak IPP."

The Ministry's reply to me on 23 March 2010 again emphasized the Government's sheer reluctance to right the wrong in the PPAs which make the rakyat pay significantly more for its electricity.

"Kerajaan sentiasa menghormati sebarang perjanjian atau kontrak yang telah ditandatangani oleh pihak Kerajaan. Oleh yang demikian, Kerajaan tiada rancangan untuk merombak semula atau menamatkan kontrak Perjanjian Pembelian Tenaga (PPA) secara unilateral dengan pihak IPP sebelum tamat tempoh kontrak tersebut. Sebaliknya, pendekatan yang diambil oleh Kerajaan ialah supaya PPA tersebut dirundingkan semula.Memandangkan rundingan semula PPA merupakan perkara yang rumit dan memerlukan tempoh masa yang agak lama untuk menentukan hasilnya, ia akan ditangani secara berasingan."

The "powerless" nature of the BN government when it comes to declassifying and renegotiating the PPAs, is in direct contrast to the "powerful" role it played to ensure that the IPPs were ensure astronomical profits.

In a revealing interview published by The Star on 26 June 2006, former TNB chairman, Tan Sri Ani Anope who was "involved" in the power agreements with the IPPs had said:

"There was no negotiation. Absolutely none. Instead of talking directly with the IPPs, TNB was sitting down with the EPU. And we were harassed, humiliated and talked down every time we went there. After that, my team was disappointed. The EPU just gave us the terms and asked us to agree. I said no way I would."

As for the pricing and terms of the contracts, "It was all fixed up. (They said) this is the price, this is the capacity charge and this is the number of years. They said you just take it..."

Hence when TNB was forced to sign these lobsided PPAs, it was the Prime Minister's all-powerful Economic Planning Unit (EPU) which dictated all terms. But when it comes to making public these PPAs, its now TNB's own choice as a "private company" and there's not the Government can do about it.

The responses from the Minister are at best "misleading" and at worst a lie, for the Government has a vested interest in not declassifying these contracts, for it was the BN government itself who dictated the terms of these contracts to be signed. Now it just does not want the public to know what it did, and the fact that it prioritised the astronomical profits of these IPPs at the expense of the man-on-the-street.

In fact Tan Sri Ani Anope disclosed that an agreement has been struck between TNB and an IPP, understood to be Genting Sanyen for the former to purchase electricity at 12 sen per kWh. However the "EPU said that unless the IPP raised its price, the contract would not be given to the IPP. So he got it for 14 sen per unit," while other first generation IPPs got 16 sen per kWh.

Now that the interest of the IPPs have been served, the Government reverts to its meek and timid role using the excuse that its an agreement between "private entities" and that any renegotiations can only be done after the existing contracts expire.

On the contrary, as there is no "contract" between the Government and the rakyat, the Government can choose to raise electricity tariffs any time it so chooses, even if it were to mean that these IPPs were to continue to profit at the expense of increased sufferings of the rakyat.

The Prime Minister, Datuk Seri Najib must demonstrate moral and economic leadership by doing what is right and just for the people, instead of dithering over the declassification of the PPAs as well as their renegotiation. Otherwise, all the rhetoric of "transformation" becomes just a facade for continuity and business as usual, where political cronyism comes first.

"The Tiger That Lost Its Roar" - Penang Book Launch!

I'll be going on a roadshow over a few cities to promote my new book on Malaysia's political economy "The Tiger That Lost Its Roar".

The first stop will be in Penang, where Penang Chief Minister as well as DAP Secretary-General, Lim Guan Eng will be officiating the event.

In conjunction with the Book launch, a public forum with distinguished speakers will be held to discuss how the Malaysian "Tiger" can regain its "Roar". The speakers once confirmed, will be updated here.

You can also order your advance copy here, before it hit the bookstores.

The details of the event are as follows:
Date: 12 June (Sun)
Time: 4pm
Venue: Eastern & Oriental Hotel (Arshak Suite), 10 Lebuh Farquhar, Penang

To help us gauge attendance, please RSVP at our Facebook Event

page. Join us, for a lively, no-holds-barred discussion on our children's political and economic future!

p.s., the next stop will be in Petaling Jaya on 23 June evening. Details soon!

Tuesday, June 07, 2011

Chinese Forum: Politics Can Be Young!

MP for Serdang, Teo Nie Ching will be launching her maiden book "念念有群" which is a compilation of her Chinese column articles over the past 2 years, which is published by DAP.

In conjunction with the book launch, she's organising a forum entitled "Politics Can Be Young!". It certainly can, for she's the youngest MP in the House. The forum will be conducted in Mandarin. I've also been invited as one of the speakers at the forum.

Date: 09-06-2011 (Thursday)
Venue: Kuala Lumpur Selangor Chinese Assembly Hall (KLSCAH)
Time: 8.00pm

(Yes, I'll be doing an official launch of my English book "The Tiger That Lost Its Roar" later in the month as well. Watch this space. And if you want an advance copy mailed to you, click here)


你对政治的了解和认知有多少?政治的主要特徵是什麽?政治和年轻一代有着怎样的关系?我们将告诉你,政治可以很 “YOUNG!”

民主行动党总部今天发表文告说,行动党订於6月9日(星期四)晚上8时,於隆雪华堂1 楼会议室主办主题为“政治也可以很 YOUNG!”的青年交流会,以及“张念群《念念有辞》新书发表会”。

文告指出,民主行动党全国宣传秘书兼八打灵再也国会议员潘俭伟丶副宣传秘书兼沙登区国会议员张念群和时事评论员凌国文将担任主讲人,与大家分享他们对国家政治时局的见解,并告诉你什麽是“政治可以很 YOUNG”。


上述活动入场免费, 欢迎各界人士踊跃出席。欲知详情,可在工作时间联络民主行动党总部:03-9200 5000。

Electricity Tariff Increase: "Righting" a Wrong with Another?

The BN Government's decision to increase in electricity tariff without a corresponding restructuring of the power industry is akin to an attempt to right a wrong with another wrong.

The Najib administration announced that it will raise electricity prices by an average 7.12 per cent from June 1 this year.

According to Reuters, the price charged by Petronas for the sale of natural gas to electricity companies would rise to RM13.70 per mmBtu from RM10.70, and increase by RM3.00 every 6 months.

The industrial and commercial consumers will bear the brunt of the tariff hike with an average increase of 8.35 per cent in their power bills. This will inevitably fuel further inflation and reduce the competitiveness of our goods and services.

The Government has employed the excuse of the need to reduce subsidy bills as the basis for the tariff hike in order to reduce the "misallocation of resources", which leads to declining competitiveness. However the Government has at the same time conveniently ignored the fact that the source of the "misallocation of resources" lies with the unbelievably lucrative Independent Power Producers (IPPs) power purchasing agreements (PPAs) with Tenaga Nasional Bhd (TNB).

As a comparison, the power industry structure in Malaysia and Thailand are highly similar, with a little more than 70% of the fuel-mix for electricity generation being natural gas. However despite the fact that natural gas prices are more than double that of Malaysia's at RM23.10 mmBtu, commercial electricity tariff in Thailand is only 0.4% higher at RM38.01 kWh, compared to Malaysia's 37.85 mmBtu.

In fact after the latest revision, it has become stark clear that electricity rates for our commercial sector will be significant higher than that in Thailand, despite the fact that natural gas prices for the sector in Malaysia will still be 68.6% cheaper.

Using Thailand as a benchmark, Malaysian electricity prices should be 16.9% cheaper based on existing subsidy rates. Instead, the BN Government does the exact opposite to raise the electricity tariffs.

This shows clearly that our problem with electricity industry "distortions" as described by Minister in Prime Minister's office, Tan Sri Nor Mohd Yakcop is not with its prices, but with our highly "ineffcient" power producing sector which charges high prices despite lower cost of production. And the key reason for that is the unfair PPAs which results in ridiculously high levels of electricity reserve margins.

According to TNB, our reserve margin is 54.6% in 2008 and 52.6% in 2010, which is double that of Thailand and Java, Indonesia, at 25.4% and 26% respectively. The net effect is TNB is forced to purchase electricity which it does not need to the IPPs, resulting in inflated costs for TNB and correspondingly inflated profits for the IPPs.

The Government's decision to reduce the subsidies to the electricity sector is a clear attempt to right an existing "wrong" with another "wrong", which will only lead to further distortions in our market, and not reduce it. Our export industries which are already affected by the strong ringgit will be dealt with a bigger blow due to higher electricity prices compared to the region as a result of an inefficient and distorted power sector which profits only the IPPs.

The only and proper way to correct the distortions in our power sector is to restructure the lobsided PPAs. In fact by doing so, the Government can kill two birds with one stone, reducing its subsidies and correcting the inefficiencies in the power sector as a result of our super-high reserve margins, while at the same time maintaining our existing electricity rates.

The fact that the Government chooses to punish our consumers and industries, without laying a finger on the IPPs only serves to prove that the Najib administration has no political will to carry out the necessary reforms to our economy, contrary to the rhetoric we hear every day.