Wednesday, March 05, 2014

Dato' Seri Najib's “Kangkung” Economic Model With 1MDB

Dato' Seri Najib Razak is practising “kangkung” economics by awarding lucrative
multi-billion contracts to qualified parties who are not the lowest bidders.

On 28th February, the Energy Commission (EC) confirmed weeks of alleged “baseless speculation”
that 1MDB will be awarded the new Independent Power Producer (IPP) 2,000MW coal-fired
power plant concession. The project is said to be worth RM11 billion.

In the statement by the Energy Commission (EC), it said that “the selection of the preferred
bidder of Project 3B is based on the criteria of full compliance with all the bid requirements as
stipulated in the request for proposal (RFP) document and the lowest levelised tariff offered”. The
EC also announced that the power plant would involve a levelised tariff of 25.33 sen/kWh.

As highlighted in my previous statements, YTL Power has submitted a qualified and cheaper
competing bid at a levelised tariff of 25.23 sen/kWh to supply electricity to TNB. The Edge
Malaysia has also reported that the levelised tariff by 1MDB was 25.65 sen/kWh.

Worse, the EC’s own technical evaluation committee had recommended YTL Power as the
preferred bidder to the Board, based on documents sighted by The Edge, before the decision was
overturned in favour of the more expensive 1MDB.

When we demanded for transparency and explanation over the evaluation, calculation and
selection criteria by the EC and the Ministry of Energy, Green Technology and Water, all we
received was stone-walled silence. The Government hence cannot blame the rakyat for thinking
that this is a clear-cut desperate attempt to prop up 1MDB, which is labouring under a mountain
of debt estimated in excess of RM30 billion.

However, this is not the first time where high-profile multi-billion ringgit projects are awarded not
to the lowest qualified bidder by Dato’ Seri Najib Razak’s Government.

In August 2012, the Najib administration awarded a RM1.18 billion Ampang LRT Extension Project
to George Kent Bhd. Exposes by Pakatan Rakyat had proven that that George Kent won the bid
despite being priced RM167 million higher than the originally recommended bid the project owner
Syarikat Prasarana Negara. Worse, George Kent was awarded the contract despite failing the
technical criteria which has caused the company to be initially rejected by the professional
evaluation consultants.

However, what gave away the manipulation at the highest level was the fact that George Kent
won the bid over other establish rail players such as Siemens, Balfour Beatty, Bombardier, Posco
and Colas despite having zero experience in rail projects. The company’s expertise is in the
manufacture and supply “control instrumentation, telemetry, pipes, valves and fittings, industrial
and domestic water meters, boilers”, as well as “fibre glass reinforced polyester (FRP) panel tanks
for bulk water storage”.

Today, the LRT project is delayed by at least 12 months and it is likely to result in additional costs
for Syarikat Prasarana Negara.

The Prime Minister’s “open tender” system is clearly designed for show, for if the preferred bidder
doesn’t put in the best price, the evaluation system will be manipulated to ensure the company will win against other qualified bidders.

Dato’ Seri Najib Razak has not only set aside the interest of the rakyat, who would have to bear
higher costs – in these cases for electricity and for public transport – he has also decided to bury
his own “New Economic Model” launched with great fanfare at the start of his premiership. He
had declared that “we can no longer tolerate practices that support the behavior of rent-seeking
and patronage…” when he launched his landmark New Economic Model (NEM) to replace the New
Economic Policy (NEP) on 30 March 2010.

We are completely aghast at how Datuk Seri Najib Razak can continue to talk about the “New
Economic Model” and “Economic Transformation” when Barisan Nasional cronies continue to win
lucrative government tenders via rent-seeking and patronage, and not because of competency,
quality and price competitiveness.

It has become clear that Dato’ Seri Najib Razak has abandoned the “New Economic Model”.
Instead what we are witnessing a “transformation” into his “Kangkung” Economic Model, leading
to vicious cycle of price hikes and higher costs of living for Malaysians.

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