Monday, September 03, 2012

Najib Must Disclose EDL Buy Back Compensation

The Prime Minister must practice full disclosure on the proposed acquisition of the Eastern Dispersal Link from Malaysian Resources Corporation Berhad (MRCB) to ensure the latter does not profit enormously from the exercise

We welcome the news from the Minister from the Prime Minister’s Department, Tan Sri Nor Mohamed Yakcop who announced that the Government intents to buy-back the Eastern Dispersal Link (EDL) from the concession holder.

This proves that the proposals by Pakatan Rakyat to acquire toll concessions is financially viable and will not “bankrupt” the country as accused repeated by Barisan Nasional (BN) leaders. As my colleague, PKR Strategy Director Rafizi Ramli has highlighted earlier, it also shows that BN is desperately copying policies from our Buku Jingga in order to dampen the support for Pakatan Rakyat.

However, the Government must be completely transparent in the buy-back exercise to ensure that they will not end up compensating Malaysian Resources Corporation Bhd (MRCB) with astronomical amount of profit.

Malaysians, especially Johoreans do not want to see a repeat of the aborted Gerbang Perdana “crooked bridge” project fiasco where the concessionaire was compensated RM257 million.  This was despite the fact that they would only be paid RM100 million to build the bridge. That meant it cost the Government more money to stop the project halfway, than it is to actually complete it!

We do not want the Government to agree to buy-back the concession only to compensate for “loss of future profits” to MRCB – which effectively means the taxpayers’ money will be used to pay for toll upfront to MRCB.

We call on the Government to:

  1. Declassify and make public the EDL concession agreement so that Malaysians will know the complete terms of the agreement.  There’s no reason why the Government cannot do this as past concession agreements have already been declassified by former Works Minister, Datuk Seri Mohd Zin Mohamed in 2009.
  2. Based on terms in past concession contracts, the Government is only required to pay for the “value of the Construction Works” of the Highway and “12% interest returns per annum to shareholders' capital and loan invested”.

Given that the RM1.2 billion project (MRCB Annual Report 2011) was built with RM1,044 million of sukuk bonds, the shareholders’ contribution to the project is only approximately RM160 million.  Assuming that the RM160 million was invested upfront in 2007 when the concession was awarded, the maximum total compensation payable to MRCB on top of their investment sum is 12% of RM160 million multiplied by 5 years or RM96 million.

Hence given the initial estimates, based on the presumption that the concession contract terms for expropriation by the Government is the same as previously declassified agreements, the maximum compensation the Government should agree to is:

   RM1,044 million (sukuk)
+ RM160 million (shareholders’ capital and/or loan)
+ RM96 million (5 years’ interest on shareholders’ capital and/or loan)
= RM1,300 million

Therefore the Government must compensate the concessionaire in accordance to the 34-year concession agreement and not to unfairly compensate for more than what was specified in the agreement.

By paying MRCB anything more than RM1.3 billion, it will show that BN is abusing its powers to profit its crony companies and is failing in its fiduciary duty to protect and defend the interest of ordinary Malaysian taxpayers.  The Prime Minister, Dato’ Seri Najib Razak promised that the “people’s interest comes first”, and there is no better time to prove it in the expropriation of the EDL concession.

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