Pay Day for Civil Service

It's a good and welcome move by the Government to increase the pay of the civil service between 7.5% and 42% from July 1st, as announced yesterday by the Prime Minister. It is the first pay rise since 1992.

In addition, it's a good move to provide an additional 20% pay increase to police and army personnel on top of the above increments. It was difficult to believe that a constable in the police force currently draws a meagre RM690, an amount that barely on par with the poverty line in Peninsula Malaysia.

The salary raise however, accentuates another major unresolved problem within the our civil service sector. The civil service has been expanding rapidly since the 1990s, and the growth accelerated under the current prime minister. In 1990, the Federal Government had 773,997 employees; by the year 2000, there were 894,788 on the payroll, a significant increase of 15.6%. However, since then, the civil service employment has accelerated by another 210,000 personnel, marking a 23.5% increase over the past 6 years alone.

The increase in civil service has come about despite the massive privatisation exercises conducted over the past 20 years to reduce the economic burden of the Government as well as to increase the efficiency of the delivery system. One of the key objectives under the privatisation programmes launched by the then prime minister, Tun Dr Mahathir Mohamad, was to reduce the civil service population to just above 500,000. Hence, it could be verily argued that the privatisation exercise by the Government was a failure in maintaining a lean and efficient government for the civil service is today more than double its intended size.

The unwieldy civil service we have today has, in a large part, to do with the Government's policy of making our civil service the dumping ground for the politically sensitive constituency of unemployed Malay graduates. For example, last year alone, the Public Services Department (PSD) and Public Services Commission have been urged to speed up the recruitment of graduates to fill some 30,000 vacancies in the civil service. This call was made by the Deputy Prime Minister Datuk Seri Najib Tun Razak to overcome the problem of unemployed graduates, of which an overwhelming majority was bumiputeras.

By absorbing these graduates who were not able to obtain gainful employment in the private sector, it results not only in a poor quality workforce within the civil service, it also increases the Government's financial obligations.

Hence, one of the unnecessarily negative impact of the very necessary increase in the civil service pay is the massive RM8.0 billion financial commitment for the current and future years. Despite the record RM159.4 billion budget for 2007 as announced last year, the RM4.0 billion civil service pay increase for the 2nd half of this year was not previously budgeted, raising questions if the targeted deficit of 3.4% of GDP for 2007 can still be achieved. The RM8.0 billion increase also marks a permanent 7.1% increase on the Government's annual operating expenditure.

The Government must hence take the painful but very important step of trimming the civil service sector into a leaner and more efficient “machine”. The increase in pay will be a waste of public funds, if the move is not accompanied by a corresponding increase in civil service productivity. The Chief Secretary to the Government, Tan Sri Mohd Sidek Hassan, must wield the stick to ensure the “shape up or ship out” culture which he promised to deliver earlier this year. He cannot let his words be mere rhetoric, or it'll just enhance the perception that the Government emphasizes only on rhetoric and not deeds.

Finally, it is also hoped that the Government will make additional adjustments, just like that for the Police Force, for the teaching sector as well as critical professionals such as doctors. Additional adjustments for teachers in primary and secondary schools as well as lecturers in local universities will serve to attract better and more qualified candidates into the teaching profession. This is critical in achieving the country's mission to build human capital as part of its key pillars to achieving our Vision 2020. The adjustments will certainly make for a more meaningful teachers' day which was celebrated just last week.

As for doctors, they are certainly one of the most poorly paid medical professionals in the region, resulting in many qualified Malaysian doctors seeking greener pastures overseas where they are in demand. At the same time, this compromises our healthcare system with sub-standard doctors recruited from many Third World countries.

It is hoped that the Government will pay heed to the above constructive criticisms and take urgent and imperative steps to make the pay rise for the civil service a truly meaningful one for Malaysian citizens, and not just a one-off pre-election handout.

(This above post was also sent out as a statement to the press. It has been carried in Malaysiakini here and here)

"Excessive Profits"

We have always been griping that the Government compensates the toll concessionaires too much, or the toll rates are set at unreasonably high levels. But no one is really in the know as to how much these toll concessionaires make in terms of profits, not exactly anyway, even though many of these companies are listed entities.

So when I got my hands on a copy of the Lebuhraya Damansara-Puchong (LDP) concessionaire, Litrak's stock exchange listing prospectus issued in November 1996, I (figuratively) fell off my chair.

Here's a little background about listing prospectuses. They are issued firstly not only as information with regards to the prospective company, but also a document to protect investors from unscrupulous businessmen. That means that all information contained in the prospectus must be fair and true, with all statements and forward projections verified and validated by lawyers, accountants, market researchers as well as regulators. Non-compliance or provision of information found to misleading or untrue will land the various parties, including the directors of the company itself into hot soup.

Within the prospectus itself, there is no other piece of information more important than earnings projections, for it is the key benchmark by which investors can make reasonable evaluation on the worth of the company. Companies seeking listings without earnings certainty, need not make such forecasts or projections. Hence, when Litrak made their 30 year earnings projection based on their LDP concession agreement, you can be certain that it was almost as good as gold.

Well, lets get to the juicy details:

Cost of building LDP: RM1.327 billion

The total capital cost of construction of the Highway is currently estimated at RM1.327 billion inclusive of capitalised interest of RM142.3 million.

Projected Profit after Tax (PAT) over 30 year concession period: RM18.865 billion

Projected PAT 1997-2006: RM1.222 billion
Projected PAT 2007-2015: RM3.826 billion
Projected PAT 2016-2029: RM13.817 billion

Yes, you've read it right. Over a short period of 30 years, Litrak is practically guarateed of RM18.7 billion profits, relative to an initial cost of RM1.3 billion. That's more than 14.2 times return on capital. The LDP concession agreement signed by our elected Barisan Nasional government virtually guaranteed “excessive profits at the public's expense”.

Even if the Government had funded the construction of LDP by issuing generous high yielding treasury bonds at 5% rate, the overall cost of construction taking into account interests payable would only have amounted to no more than RM5.75 billion.

More than RM10 billion of our hard-earned tax payers' monies are literally siphoned off for the benefit of the few politically connected. There was no open or competitive tenders made for the concession rights..

And this is only for a single highway project. Can you imagine the cumulative impact of the tens of highway concessions in this country? Is it "excessive (guaranteed) profits"? You decide.

Credibility Gap I

In Datuk Seri Najib Abdul Razak's keynote address at the Jeddah Economic Forum (JEF 2007) on 27th February, Najib outlined the lessons Malaysia has gained from the privatisation exercises since the 1980s.

Judge for yourself if our Deputy Prime Minister, as well as the Barisan Nasional government has a 'credibility gap' like Mr Bush on the left.

• Firstly, whenever and wherever possible, Government should allow for competitive bidding for privatised assets or concessions and ensure that the process is transparent and fair.
  
  Even when there is a national agenda of preferential treatment in favour of disadvantaged economic groups, there must be enough competition within this group to ensure that only those with the necessary skills, capabilities and resources are selected, he added.
  
  Sufficient safeguards must also be in place to ensure that when there is default or non-compliance, the Government can reclaim privatised assets and concessions without disadvantaging the taxpayer.
  
  
• Secondly, avoid a "first come first serve" approach. The deputy prime minister admitted that “our experience has also shown that by providing exclusivity to one party, this approach has the real potential to escalate the eventual costs and burden to consumers and the taxpayer.”
  
  
• Thirdly, make sure the Government and private sector are on equal footing at the negotiation table, to protect taxpayers' and national interests.
  
  
• Fourthly, be mindful of public concerns over tariff rates and tariff increases. He said that “in designing contracts, we must avoid in-built automatic escalation of tariffs that are not linked to performance and quality of services provided.”
  
  
• Fifthly, he said that the “onus is on Government to ensure on one hand, the viability and sustainability of projects, and on the other hand, prevent the private sector from making excessive profits at the public's expense.”

The speech writer should certainly deserve a pay-rise. First or all, its an admission that our Malaysian privatisation policy since the 1980s is a failure in many aspects. It is certainly the first time I've ever heard a Malaysian governing party leader expressing such an opinion.

But secondly and more incredulously, it is amazing how our Deputy Prime Minister is able to deliver the above speech to an international audience with a straight face. Out of the five points raised, I'm certainly hard-pressed to find any examples of Pak Lah's administration practising what it apparently preaches. Check out "Open Tenders", for example.

It is plausibly forgivable if the Datuk Seri Najib Abdul Razak is pursuing the current misguided economic policies for Malaysia out of sheer ignorance. But as the above statement indicates, he, as a leader of this country, is knowingly pursuing policies antithetical to good governance, at the expense of ordinary Malaysians.

Is this the future Prime Minister of Malaysia? We should be worried.

SYABAS v PBA

The Selangor State Government has promised that if we were to take over the operations and maintenance of the water concessions in Selangor, we will be able to immediately offer a 10% reduction in water tariffs, while longer term improvements in efficiency will easily bring about a 25% reduction in tariffs within 5 years. Instead a bailout is now in progress for these private water concessionaires.

Here's a clear illustration of why it can easily be done by comparing what the people of Selangor pays for water today, relative to our friends in Penang.


The above shows clearly that at the people of Selangor are being fleeced for its water for at every stage, Syabas charges more than double the rates charged by Perbadanan Bekalan Air (PBA) Pulau Pinang! 

In fact, if you use only 38m³ of water a month, in Penang you'd be paying the rate of RM0.42, while in Selangor, you'd be paying a whopping rate of RM2.00, or nearly 5 times the price!  Or in absolute terms, you'll be paying RM11.96 in Penang, but it's an incredible RM32.85 in Selangor and KL!
What's more, PBA is very profitable (check the accounts) despite the lower water rates. It made RM31.3 million last year on revenues of RM187.8 million, or a very decent net profit margin (after tax) of 16.7%.  Therefore Syabas which supplies much more water than Penang, should have the economies of scale to offer even lower prices than Penang!

Hence for the Selangor state to promise that we can cut the fat in Syabas to reduce rates by 25% within 5 years is "chicken feet"!

However, when asked by The Star, the Minister immediately dismissed our pledge:

How can the state reduce the tariffs? To avoid the hike, it would have to compensate the concessionaires and this could amount to RM38 million a month. If we take over the assets, it would be much lower than the 31% [scheduled] tariff hike.

The Minister misses the point, whether intentionally or otherwise.

The whole idea about asking the Federal Government to support Selangor's takeover offer is so that we can get out of the crony contract signed by the previous Minister, which allowed Syabas to increase rates in 2009 by up to 37%, or a monthly RM38 million compensation in exchange.

If Selangor government takes over the assets and concession, we will then be able to offer not just a token "lower tariff hike" but actually be able to cut rates by 10% immediately, and more after working off the fats in the system.

Puncak Niaga Executive Chairman's Pay Package

Puncak Niaga Holdings Bhd (PNHB) Executive Chairman, Tan Sri Rozali Ismail gets paid RM5.1 million in director's fee/salary as per the 2007 Puncak Niaga Holdings Berhad annual report.  It's well within the Top 10 highest paid directors in Malaysia.

According to Malaysian Business, he's also the 33rd richest man in Malaysia, after successfully securing the water privatisation deals in Selangor, under its subsidiaries, Puncak Niaga Sdn Bhd and SYABAS Sdn Bhd.

When asked by reporters about his pay package, he had only this to say, "...If they want professionals to run the company, they will have to pay." Ooooh....ouch!

Now he wants the Federal Government to pay much more for "his" water concession which was granted to PNHB for a song (he rejected Selangor Government's offer), while at the same time, also asking the Government to take over all the companies' bond and loan obligations amounting to RM4.1 billion in total due to ever increasing cashflow problems. (Note: PNHB incurred a quarterly loss (for the first time?) for its most recent Oct-Dec 2008 results.)

Well, looks like in Malaysia, even if you get monkeys to run companies, you will still have to pay.

RM64 Billion Toll Compensation For PLUS

RM63.83 billion.

That's the approximate amount which needs to be paid in terms of compensation PLUS Expressways Bhd between 2008 to 2038 (when the concession ends), should the Government for one reason or other decide to maintain the tariffs at the current rate. That works out to an shocking average of RM2.1 billion a year, and an incredible strain on taxpayers and the Government's finances.

For 2008, the Government has agreed to pay (or have paid) PLUS more than RM731 million in toll compensation (compared to RM698 million in 2007) . With toll rate hikes of 10% scheduled every 3 years, this amount will just keep increasing over the next 30 years.

For example, a Kuala Lumpur - Penang return trip costing RM86.60 today will cost an exhorbitant RM247 by 2038, if the tariff structure is fully complied with. And based on existing compensation terms in the agreement, the Government will have to pay for all loss of revenue from actual traffic volume, which is estimated to increase by 5% annually.

Of course, in between, the Government may just decide to raise the toll rates or alternatively, perpetually extend the toll concession with PLUS. But given the highly charged political scenario where the Barisan Nasional government has little political capital or credibility, the frozen rates may just be extended ad infinitum. Rates will never be raised in the 2 years before general elections, they will also not be raised when there is a change of prime ministers, or even before critical by-elections or for any other reasons.

Of course the compensation figure has yet to take into account the RM112 billion in actual toll which will be collected from the road users over the next 30 years based purely on current toll rates, and an annual 3% increase in traffic volume. The type of returns guaranteed for PLUS, relative to its RM5.9 billion cost of construction is just absolutely mind-boggling. Worse, PLUS isn't even the only highway concession in the country enjoying such lucrative returns (or compensations)!

The BN government has obviously dug a deep deep hole for themselves, and are now stuck between the devil and the deep blue sea, with their past excesses fast catching up on them.

But for PLUS at least, there's an "easy" way out. DAP has proposed that the Government "privatises" PLUS Expressways from Bursa Malaysia with RM13.75 billion which will be more than paid for within 6 years of operations. This means that the Government and hence tax-payers do not have to fork out a single additional cent.

Come on BN, for the sake of the people, let go of your ego and pride and do something right for once! ;-)

Buy Up PLUS: Yes or No?

Frankly speaking, I quite like the new Works Minister, Dato Mohd Zin Mohamed. He's the only Minister I know to date, that actually replies to every small query which was raised within any of my speeches. And when Parliament's not in session, his office will mail the answer(s) to me. I was frankly speaking, impressed. And honestly, I think (for whatever reasons), he does try to improve things within his very very limited means and scope.

But you'll certainly have to help me here with the cryptic answer he gave in a short interview with Malaysiakini after announcing the embarrassing 24-hour U-Turn of the toll rates increase for several highways.

Why can’t the government buy up the highways?

That is the principle of privatisation to nationalisation. We have to look at the financial capabilities of the government, what would be total liability, who are the shareholders. It is not also technical parameters but financial parameters we would have to address.

Are you looking into it?

I’m just defining the parameters we have to address...it is a question if whether we want to stick to privatisation vis-a-vis nationalisation.

What do you think of DAP’s proposal for the government to buy up Plus highway?

Anyone can come up (with such plans). What Tony Pua should do is not look at Plus as a standalone. The whole concession is operating as an integrated entity.

Are you rejecting his proposal?

I didn’t say that.

So what say you? I can assure you that based on the declassified contract agreements, the Government can certainly afford to "expropriate" many of these toll concessionaires.  But  I didn't understand his "operating as an integrated entity" bit, but if it's any consolation, he hasn't yet rejected our very constructive PLUS buy-back proposal ;-)

BN Rubs Salt On Our Wounds

At a time when Malaysians are facing the greatest economic challenge, when 100,000 Malaysians are expected to be out of a job by the end of the year as projected by the Minister of Human Resources, the Barisan Nasional Government has decided to increase toll rates from 5 to 25% for 5 toll concessions, while at the same time still pay compensation amounting to RM277 million to these toll concessionaires! The act is clearly a case of rubbing salt onto the wounds of anxious and suffering Malaysians.

In announcing this, Works Minister Datuk Seri Mohd Zin Mohammed said the increase was “minimal” and hoped the public understood that the increase was “stipulated in the concession agreements” that the government had signed.

Firstly we will like to reiterate that the increase was by no means minimal. For PLUS itself, even a 5% increase in toll rates will increase toll revenue by as much as RM120 million in 2009. This doesn't yet take into consideration the fact that the Government is likely to have to compensate PLUS for the other 5% which has yet to be increased, which may be an additional RM100 million. It is an insult for to all Malaysians to say that RM220 million to be incurred by road users and tax-payers “minimal”, especially in times of economic hardship, and shortfall in Government revenues.

In fact, we would like to ask the Government if the compensation sums being paid to concessionares are part of the “economic stimulus packages” to help turnaround our economy, badly affected by the global economic crisis.

Secondly, while the toll rate increase is indeed “stipulated in the concession agreements”, there were also other clauses stipulated in the agreements such as the “expropriation” clause which the Government has chosen to blatantly ignore. This selective compliance to the legal agreements smacks of a government favouring the interest of cronies instead of those of the people.

The DAP Ops Restore team has demonstrated using many examples over the past 2 months how expropriating these highways as per the terms “stipulated in the conession agreements” are more economical and cost effective for both the Government and the road users. But the Government continues to turn a blind eye to these constructive proposals.

Just yesterday, the team have outlined a detailed proposal on how the Government can “take back” PLUS Expressways Bhd without costing tax-payers a single cent and without unfairly penalising minority shareholders (they are to be offered 15% premium to the current share price) which will result in a toll-free North South Expressway by 2016.

Why does the Government who owns directly 65% of PLUS Expressway, continue to choose the route of unfairly “taxing” road-users and tax-payers (if compensation is paid) instead of taking appropriate actions to help the people?

It should also be noted that PLUS Expressways is extremely profitable. PLUS made RM1.31 billion in net profits before tax, which translates into an enormous net profit margin of 57.3% in 2007!

The privatisation policies a-la Barisan Nasional have brought an enourmous burden on all Malaysians and have profited only Barisan Nasional crony businessmen. If Prime Minister-elect, Datuk Seri Najib Abdul Razak wants to commence his term on the right note, then we call upon him to take back these highways, and other unfairly privatised projects to relieve the burden of the rakyat, especially in these difficult times.

Offer to Water Concessionaires Sabotaged

As highlighted in the earlier blog post, the Selangor Government's offer to acquire the assets and concessions from the privatised water companies in the state was sabotaged by the Federal Government in a most shocking manner, and it certainly reeks of another mega bailout for failed privatisation projects.

The Selangor Members of Parliaments involved in the above acquisition exercise issued another statement yesterday to the above effect, as follows:

Federal Government Sabotaged Offer by Selangor Government to Acquire Water Assets and Concession in the State

The Selangor state government made an offer to 4 privatised water service providers – Puncak Niaga Sdn Bhd (PNSB), SYABAS, SPLASH and ABASS to acquire their water assets and concessions on the 13th February 2009.

The combined RM5.71 billion offered was made with the objective to deliver the lowest possible water tarriffs for the residents of Selangor and Kuala Lumpur. At the same time, the offer was consistent with, and guided by the terms and conditions specified in the concession agreements signed willingly by all parties involved. It was a comprehensive offer because it encompasses the audited asset value of all water-related assets as well as a very fair and reasonable return to the capital invested by the respective concessionaires.

However, before the concessionaires are able to respond to the state government's offer by the 20th February, we are shocked that the Ministry of Energy, Water and Communications, via Dato Teo Yen Hua, CEO of National Water Services Commission (SPAN) announced on the 18th February that the Federal Government will proceed to negotiate directly with the water concessionaires.

Instead of supporting the state's offer, SPAN intentionally threw a spanner in the works to sabotage the Selangor state's attempt at delivering the lowest possible water tarriffs to her people.

For with an alternative competing offer which will not only encompass higher cash valuation but also more lucrative terms and conditions from the Federal Government, SPAN has single-handedly destroyed any likelihood of a positive response from the concessionaires to the state government.

Therefore with SPAN's interference, it was not surprising that the concessionaires rejected the state government's offer on 20th February, last Friday. We will like to call upon the Minister to explain the actions of his Ministry for sabotaging the efforts of the Selangor State Government.

We will like to reiterate our position that if the offer from the Federal Government to acquire these assets and concessions at the same or lower price than what the Selangor state government has offered, we will not only agree to letting the Federal Government lead the negotiations, but also provide the Ministry with our full support and co-operation.

If however, the Ministry offers the concessionaires a much higher cash value for its assets as well as lucrative license terms for them to continue as the water operators in the state, the Minister must explain why he is forsaking the rights and interest of 7.3 million population of Selangor and Kuala Lumpur.

We will also like to emphasize to the Minister that under the law, particularly the Water Services Industry Act 2006, as well as the terms of the current concession contracts, the Selangor state is a counter-party to all previous and future agreements. Hence the attempt by the Federal Government to unilaterally negotiate with the concessionaires is illegal and will be subjected to future dispute and complications.

Therefore, we call upon the Federal Government to respect the rights of the State and let the Selangor Government proceed with the negotiations with the concessionaires in the interest of the people of Selangor and Kuala Lumpur.

Bailout of Water Concessionaires Begins

Almost as if on cue, the Federal Government has dismissed the Selangor state government's attempts to return the rights of cheap water and efficient water supply to the people of Selangor and Kuala Lumpur.

Two days ago, National Commission of Water Services (SPAN), on behalf of the Ministry of Energy, Water & Communications, surprised the state and the public by declaring that the Federal Government will unilaterally proceed to negotiate with the water concessionaires in the state directly, by-passing the state.

The CEO of SPAN, Dato Teo Yen Hua (one of those behind the failed original water privatisation exercise which screwed Malaysians throughout the country in the first place) gave some flimsy excuse of an alleged non-existent deadline which was missed by less than week, acting almost like a lackey for the concessionaires.

This came while the state government was still waiting for a response from the respective concessionaires on our earlier buy back offer. In fact, the SPAN U-turn trespasses the constitutional rights of the state and the Menteri Besar, Tan Sri Khalid Ibrahim rightly rapped SPAN and demanded that Dato 'mischievous' Teo declare his interest in the matter.

It was a clear attempt at sabotaging the state negotiations as the concessionaires will clearly reject the offers by the state as they know that the Federal Government will definitely pay much more money to take back their concessions!

Unsurprisingly, as if on cue, these concessionaires rejected Selangor's offer today (Puncak Niaga & Syabas here, Gamuda & Kumpulan Perangsang here) while obviously twiddingly their thumbs and licking their lips for a much more lucrative offer from the BN Government to line their pockets.

As highlighted in my earlier post, the Minister in this case has near absolute powers to determine the outcome of the restructuring exercise. It now appears that he will not use these powers to protect the rights and interests of the rakyat, but instead abuse it only to enrich and bailout the water concession cronies. The country is getting raped twice, right before our very eyes.

Don't Rape the Country Twice!

I've blogged on "We Want Our Water Back Too!" two weeks ago. The Selangor state government has since issued offer letters to the concessionaires to take back the water concessions.

The four Selangor members of parliament [Charles Santiago (Klang), William Leong (Selayang), Dzulkifli Ahmad (Kuala Selangor) and myself] who are involved in the Water Review Panel issued the following press statement today. Additional comments are available at The Malaysian Insider, Malaysiakini and The Star.

Call Upon the Minister of Energy, Water & Communications to support and endorse the Selangor Government's Offer to Acquire the water assets and concession in the state

The water privatisation exercises in Selangor was started in the early 2000s by the Mahathir administration, where hugely lucrative concessions were granted to politically-linked private companies with neither the skills or experience in the water industry, nor the necessary equity funds to operate these businesses. As a result, the residents of Selangor and Kuala Lumpur were forced to pay high prices for the water supply, unreasonable penalties as well as often poor service quality.

In view of the clear unsustainability and failure of the privatisation exercise, where some of these concessionaires are facing serious concerns in repaying its bonds and water tariffs are scheduled to increase beyond tolerable range, the Federal Government has embarked on an exercise to nationalise the water-related assets nationwide under the new Water Industry Services Act (WISA) enacted in 2006.

The people has suffered once already when the assets were forcibly piratised by the Government. We will like to call upon the Minister not to rape the country twice by buying back these water assets and concessions at inflated prices. Doing so will only provide the basis to the dictum that the Barisan Nasional government privatises profits and nationalises losses.

The Selangor members of parliament who sits in the Selangor Water Review Panel call upon the Minister, who is granted wide-ranging powers under WISA, to not only support, but help execute Selangor's fair and reasonable offer to acquire the water assets and concessions in the state. The offers to the concessionaires were made last week on Friday, 13th February.

The offer made by the Selangor Government was made on the basis of one-time book value of the water-related assets in the concessionaires as at 31st December 2007, and a fair and reasonable return to the actual equity invested by the concessionaires since the industry was first privatised. It should be noted that the offer made by the Selangor state government is guided by and in compliance with the terms and conditions willing signed by all parties in the concession agreement. Therefore contrary to press reports in the last few days, the acquisition offer is neither a cynical offer which is too low, or without basis.

It should be noted that all investment analysts have been using the “discounted cashflow model” which results in significantly higher valuation for these concessions. However, the “discounted cashflow model” is just a technical term for paying the concessionaires its future profits, which in itself is a totally unreasonable proposition, and defeats the purpose of the Governments' water restructuring exercise.

If we were to acquire McDonald's today, it will be fair to put a value to its future profits as it's a wholly private enterprise. However, we are acquiring government concessions in this case – which means that the Government should not be paying for future profits for licenses and rights which it has itself granted!

The Minister is granted wide-ranging powers under the WISA (2006) Clause 191(5) where:

The determination of what amounts to national interest issues arising from the coming into operation of this Act shall be made by the Minister and such determination shall be final and binding upon all persons and shall not be challenged, appealed against, reviewed, quashed or questioned in any court.

Therefore with the powers vested in the Minister, Dato' Shaziman Abu Mansor, a newly minted Minister since the last elections, we call upon the Minister to do the right thing and act to ensure that the rights and welfare of Selangor people and that of all Malaysians.

Ali Baba Economy

Malaysia's New Economic Policy (NEP) fails the Malays and bumiputeras it sought to assist. And it fails all Malaysians who have a rightful stake in the wealth of the country.

Finally, the Government has come up with statistics which we have known for the past 2 decades or so. An overwhelming bulk of contracts granted under the NEP scheme to bumiputera contractors are subcontracted to other parties, particularly non-bumiputeras, “Ali Baba” style.

The Prime Minister, Datuk Seri Abdullah Ahmad Badawi himself admitted that an astounding average of 85.37 per cent of projects secured by Bumiputera contractors goes to the other communities.

...the prime minister said this not only foiled the government's desire to empower Bumiputera contractors but also, in a wider context, undermined the more important Bumiputera agenda to ensure the country achieved progress and stability in the long term.

What does the above statistics mean?

It means that the NEP has failed to improve the plight of the bumiputeras, particularly the poor bumiputeras in picking up competitive skills to improve their well-being in the longer term.

It means that the NEP only provides short term lucrative financial benefits to politically-connected bumiputeras, particularly UMNOputras and does nothing towards enhancing the skills and performance of bumiputeras in general.

It means that the country's precious government resources are not allocated efficiently due to non-competitive tenders and biddings. It allows the politically-connected to acquire contracts from the Government at much higher prices than the Government would have had to pay under competitive conditions.

It is clear that is the case, as otherwise, other contractors would not have willingly taken on the subcontracts at substantially lower prices, leaving the main contractors with lucrative “commissions” for doing very little. At the end of the day, the tax payers funds from every community – the Malays, the Chinese and the Indians are wastefully expended on the 'Ali Babas'.

It is high time to scrap the NEP which has clearly failed so many, and benefited so few of the population it was designed to assist, both bumiputeras and Malaysians.

We need ironically, a new economic policy which will focus on helping poor bumiputeras and poor Malaysians and helping them build wealth generating capabilities. The new plan should also serve as a foundation for national unity, not one of national segregation and disintegration which the current policy personifies.

'Bad Boy' Samy

I'm not a bad boy, Datuk Seri Samy Vellu, the Works Minister who is under the spotlight would like to tell you.

"Many people think I'm a bad boy as if I decide on the tolls, as if I put people in trouble, that I go for blood and all that. I'm a minister of the government and I implement the decision made by the Cabinet. It's not my decision to raise the toll or to reduce it," said the agitated minister.

So, maybe Datuk Seri Samy Vellu really isn't a bad boy, for surely Will Smith did a much better job at being one. In this case, Datuk Seri Samy Vellu is just a clueless, hapless hatchet man and spokesperson for the UMNO-led Barisan Nasional (BN) government. Of course, the Works Ministry title is just a convenient facade to give the impression that he actually has executive powers.

But then, he went on to "lash out at certain quarters" who said they would buy up the toll companies if they were in his position. Datuk Seri Samy Vellu said that he the toll companies were taken over, "it would cost the government nearly RM500 billion".

Now, not only is Datuk Seri Samy Vellu clueless and hapless, he probably failed his Mathematics (badly) as well. If the overall construction cost of all the 5 highways affected by the unreasonable toll hikes added up to RM4.13 billion, how is it that the Government would need to pay some RM500 billion for the highways?

Is Datuk Seri Samy Vellu and the BN Government out of their minds? Or are we that stupid?

Secrets

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

The problem is, while 4 leaders of opposition parties are facing the threat of prosecution under the OSA at this point of time, many others who have made equally 'damning' disclosures are not investigated.

Information contained in water and toll concession agreements is often readily available to investors and bondholders... While bondholders do not necessarily view the actual concession agreements, all vital information contained in these is presented to them through those other documents.

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

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

As an example, while it's not a widely available public information, the "investment class" would have known for a while now that Litrak, the conession-holder for the Lebuhraya Damansara-Puchong (LDP) is cash-rich despite it's borrowings and requisite loan repayments. It has been highlighted that Litrak has so much cash, it's like to return them to its shareholders soon.

Over the next 2 years, [Litrak] may have the capacity to undertake further repayments as its free cash flows increases, says AmResearch. The research house estimates that Litrak's free cash flows will increase between 16% and 18% by FY2007-2008 from 9.3% in 2006.

Litrak's earnings are expected to increase significantly in its financial year ending March 31, 2008, on the back of higher toll roates. Given the higher toll receipts, AmResearch estimates that the company's earnings will grow 64.8% to RM136.2 million in FY2008.

Such sharp estimates could not have been made without access to OSA-classified information, or AmResearch must have been irresponsibly plucking assumptions from thin air.

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

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