I’ve spent a year now on community service. When I quit my full-time job, it was with the intention of spending more time with family and focusing on doing things I enjoyed. However, MP Tony Pua persuaded me to lend a hand for a better Malaysia.
So, I helped to craft the privatize PLUS proposal, which the MCA subsequently decided to support and now the Barisan government under PM Datuk Seri Najib has commissioned a study on Malaysia’s toll highways.
The DAP’s Alternative Budget is on its way, and if all goes well, my book The Budget: How the Government is Spending OUR Money will be published by mid-October. I think it’s a good informative read. Buy a copy and tell me if you agree ; -) It’s not all boring financials – Antares (formerly known as Kit Leee) is working on the illustrations. Mail orders also possible - please send an email with your name, address and phone number to econs@chichang.net. Publishers REFSA will contact you just before the book hits the shelves.
Along the way, I also started this blog, helped in explaining the extent of the Port Klang Free Zone (PKFZ) debacle and worked on other odds and ends …
With that, it’s time to go back to paid work. Circumstances change, and a steady cash flow stream would be nice again. Senior managers at statutory bodies may not know what cash flow is, but the rest of us hard working Malaysians fully understand its importance. No cash flow = no money!
All my work was done pro-bono. The only expense claim I’ve made is for one return (Firefly) flight to Penang. All other expenses such as fuel, toll and parking charges and telephone and other bills I paid myself. No donations came my way, and certainly no trips to Disneyland or private jet flights! I would likely have justified a nice, tidy sum in consulting fees if I’d been hired by the government, but that’s the way it is … In the meantime, hats off to all the dedicated staff and volunteers I’ve met.
As for the people who continually gripe about the state of our country, our education system, the crime rate, our politicians .… We get the government we deserve. If you want things to be different, contribute, whether it be in time, effort or money.
Today is our nation’s birthday. Don’t just sit around spouting hot air. Resolve to do something productive instead.
Thanks for reading. This is the 99th and last post for a while.
Well it's all right, remember to live and let live
Well it's all right, the best you can do is forgive
- The Traveling Wilburys
PS: Just a reminder- PLUS can be privatized at zero cost to the taxpayer. It could be toll-free before 2020!
Wednesday, September 16, 2009
Tuesday, September 15, 2009
The Budget: How the government is spending OUR money
Finance Minister and Prime Minister Datuk Seri Najib will present Budget 2010 in Parliament on 23 October.
Every year, come this time, there is plenty of speculation about what “goodies” the government will “give” the rakyat. And every year, after the Budget is announced, there are the usual proclamations of “it’s a people’s budget”, “it’s people-friendly”, “it’s a growth budget”.
You may walk away happy with a small income tax cut, or on the fact that cigarette and beer taxes have not gone up. But there is much more to the Budget than just those few ringgit you saved.
The real “goodies” are hidden away from public view. RM47.8bn is being spent on education and training this year. That’s equivalent to RM8,000 for each student in public education. And yet, so many parents feel compelled to send their children to private schools or for private tuition. So, what happened to all that money?
Also, did you know we spend the same amount on defence - RM13.7bn – as we do on healthcare ? Do you think that is the right choice?
My upcoming book, The Budget: How the government is spening OUR money is a guide to how our government raises its funds and how it spends all that money. The federal government alone spends about RM200bn per year. On top of that, there is also spending by state and local governments. Do you think you got your money’s worth?
The first of its kind in Malaysia, this book explains in plain English where the federal government gets its income and what it spends it on. Interested citizens and taxpayers will find this an accessible read, while professionals will, for the first time, find the numbers compiled in a concise format.
Or, just buy it for the illustrations by Antares!
It’ll be in bookstores by mid-October. If you’d like to a copy delivered to you by mail, please send your name, address and phone number to budgetbook@chichang.net.
Publishers REFSA will contact you just before the book hits the shelves. Indicative price is RM25 + RM5 postage within Malaysia.
Every year, come this time, there is plenty of speculation about what “goodies” the government will “give” the rakyat. And every year, after the Budget is announced, there are the usual proclamations of “it’s a people’s budget”, “it’s people-friendly”, “it’s a growth budget”.
You may walk away happy with a small income tax cut, or on the fact that cigarette and beer taxes have not gone up. But there is much more to the Budget than just those few ringgit you saved.
The real “goodies” are hidden away from public view. RM47.8bn is being spent on education and training this year. That’s equivalent to RM8,000 for each student in public education. And yet, so many parents feel compelled to send their children to private schools or for private tuition. So, what happened to all that money?
Also, did you know we spend the same amount on defence - RM13.7bn – as we do on healthcare ? Do you think that is the right choice?
My upcoming book, The Budget: How the government is spening OUR money is a guide to how our government raises its funds and how it spends all that money. The federal government alone spends about RM200bn per year. On top of that, there is also spending by state and local governments. Do you think you got your money’s worth?
The first of its kind in Malaysia, this book explains in plain English where the federal government gets its income and what it spends it on. Interested citizens and taxpayers will find this an accessible read, while professionals will, for the first time, find the numbers compiled in a concise format.
Or, just buy it for the illustrations by Antares!
It’ll be in bookstores by mid-October. If you’d like to a copy delivered to you by mail, please send your name, address and phone number to budgetbook@chichang.net.
Publishers REFSA will contact you just before the book hits the shelves. Indicative price is RM25 + RM5 postage within Malaysia.
Wednesday, September 9, 2009
Headlines
The media shapes our beliefs and prejudices. It can be for the better, or for the worse, insidiously.
I was clearing a pile of old newspapers when I came across a few covering the time in February 2009 when wheel-chair bound Member of Parliament Karpal Singh was confronted by a group of UMNO Youth members.
Under a caption “Face of Fury”, the Star front-paged a picture of MP Gobind Singh shielding the disabled Karpal Singh from the strapping young men seeking to confront him. The New Straits Times said “Parliament Violated”.
Both headlines and the picture (from the Star) skirted the core issue: A mob of young men confronting a disabled MP twice their age could have been construed as an attempt at intimidation. Yes, they had their grievances. But couldn’t they have appointed one representative to present a memo to Karpal? Surely they didn’t need to feel safety in numbers?
Our government says the media has an undue influence on the young. So we have bans and restrictions on depicting Mat Rempit, effeminate men, long-haired males ….. In the same vein, the government and civic elders should display intolerance of boorish behaviour. Downplaying such antics foments a society where civil, reasoned debate is foregone in favour of might is right.
Media influence also extends to politics, of course. Here are headlines which could have been:
“Terengganu UMNO out of control” – remember the Mercs, the disagreement over who should be Menteri Besar and the on-going issues?
“Deputy Prime Minister Defends Disbarred Lawyer” – the UMNO candidate for Permatang Pasir
This is something easily addressed. If you agree the mainstream media has become unduly one-sided, stop consuming it. Don't buy the daily newspaper and watch less tv. Read independent news and good books instead.
I was clearing a pile of old newspapers when I came across a few covering the time in February 2009 when wheel-chair bound Member of Parliament Karpal Singh was confronted by a group of UMNO Youth members.
Under a caption “Face of Fury”, the Star front-paged a picture of MP Gobind Singh shielding the disabled Karpal Singh from the strapping young men seeking to confront him. The New Straits Times said “Parliament Violated”.
Both headlines and the picture (from the Star) skirted the core issue: A mob of young men confronting a disabled MP twice their age could have been construed as an attempt at intimidation. Yes, they had their grievances. But couldn’t they have appointed one representative to present a memo to Karpal? Surely they didn’t need to feel safety in numbers?
Our government says the media has an undue influence on the young. So we have bans and restrictions on depicting Mat Rempit, effeminate men, long-haired males ….. In the same vein, the government and civic elders should display intolerance of boorish behaviour. Downplaying such antics foments a society where civil, reasoned debate is foregone in favour of might is right.
Media influence also extends to politics, of course. Here are headlines which could have been:
“Terengganu UMNO out of control” – remember the Mercs, the disagreement over who should be Menteri Besar and the on-going issues?
“Deputy Prime Minister Defends Disbarred Lawyer” – the UMNO candidate for Permatang Pasir
This is something easily addressed. If you agree the mainstream media has become unduly one-sided, stop consuming it. Don't buy the daily newspaper and watch less tv. Read independent news and good books instead.
Wednesday, September 2, 2009
Should the CEO also be the CFO?
The two most powerful positions in corporate management are of chief executive officer (CEO) and chief financial officer (CFO). The CEO is the boss and sets overall direction. The CFO controls the purse-strings.
Quite often good CEOs and CFOs will disagree. CEOs by nature and expectation have to seek new growth opportunities to expand corporate profits. They would tend to emphasise the rewards over the risks. CFOs are entrusted with financial stewardship. And when it comes to stewardship, being conservative and risk-averse are the preferred traits.
So, that’s how it works in the corporate world. No reasonable board of directors would countenance the CEO also holding the CFO position. There is just too much at stake to have one person holding the two most senior positions.
That’s also how it’s supposed to work in government. The prime minister leads and the finance minister tells him what the government can afford. Perhaps the most celebrated such pair in recent history was telegenic British prime minister Tony Blair and dour Chancellor Gordon Brown.
Over here in Malaysia though, no eyebrows are raised that the prime minister is also the finance minister. This practice began during prime minister Mahathir’s tenure, was continued by Abdullah Badawi and now Najib has continued the practice.
This might explain the deteriorating state of government finances. By 2009, we would have run 12 consecutive years of budget deficits. Our federal government debt alone is expected to reach RM414bn in 2009. This is more than double the RM206bn level nine years ago in 2000.
Put in other ways:
1. Federal government debt today is more than half the size of our entire RM741bn economy.
2. This is a burden that our youth will have to repay. The debt is equivalent to RM20,700 per person, based on about 20m youths (defined as Malaysians aged 39 and below.
Note that the actual debt burden is higher. The RM414bn number excludes debt incurred by other government-linked corporations (GLCs) such as PLUS Expressways and Tenaga Nasional. Other countries which have not embarked on extensive privatisation programmes incur road construction and electrification costs as part of their national budgets. PLUS and Tenaga alone among the GLCs have RM33.3bn of borrowings – equivalent to 8% to the federal government debt. On top of that, there is borrowing by other government-linked entities such as Syarikat Perumahan Nasional Berhad (SPNB), Putrajaya Holdings Sdn Bhd …..
Even more concerning is that we incurred the increasing debt even while we reaped the windfall gains from high oil prices. More in my up-coming book ….
Quite often good CEOs and CFOs will disagree. CEOs by nature and expectation have to seek new growth opportunities to expand corporate profits. They would tend to emphasise the rewards over the risks. CFOs are entrusted with financial stewardship. And when it comes to stewardship, being conservative and risk-averse are the preferred traits.
So, that’s how it works in the corporate world. No reasonable board of directors would countenance the CEO also holding the CFO position. There is just too much at stake to have one person holding the two most senior positions.
That’s also how it’s supposed to work in government. The prime minister leads and the finance minister tells him what the government can afford. Perhaps the most celebrated such pair in recent history was telegenic British prime minister Tony Blair and dour Chancellor Gordon Brown.
Over here in Malaysia though, no eyebrows are raised that the prime minister is also the finance minister. This practice began during prime minister Mahathir’s tenure, was continued by Abdullah Badawi and now Najib has continued the practice.
This might explain the deteriorating state of government finances. By 2009, we would have run 12 consecutive years of budget deficits. Our federal government debt alone is expected to reach RM414bn in 2009. This is more than double the RM206bn level nine years ago in 2000.
Put in other ways:
1. Federal government debt today is more than half the size of our entire RM741bn economy.
2. This is a burden that our youth will have to repay. The debt is equivalent to RM20,700 per person, based on about 20m youths (defined as Malaysians aged 39 and below.
Note that the actual debt burden is higher. The RM414bn number excludes debt incurred by other government-linked corporations (GLCs) such as PLUS Expressways and Tenaga Nasional. Other countries which have not embarked on extensive privatisation programmes incur road construction and electrification costs as part of their national budgets. PLUS and Tenaga alone among the GLCs have RM33.3bn of borrowings – equivalent to 8% to the federal government debt. On top of that, there is borrowing by other government-linked entities such as Syarikat Perumahan Nasional Berhad (SPNB), Putrajaya Holdings Sdn Bhd …..
Even more concerning is that we incurred the increasing debt even while we reaped the windfall gains from high oil prices. More in my up-coming book ….
Wednesday, August 26, 2009
Independence
Merdeka Day is just around the corner. Here is food for thought from Xanana Gusmao, fighter for independence and the first president of East Timor:
“Independence for East Timor has never been an end in itself but rather is a means. True independence is the recognition of the freedom of others, is the respect for the supreme interests of populations, is the respect for the most basic human rights, is the fundamental right of peoples to determine their own destiny.
When independence is only a trampoline for rulers to enrich the families of a parasitical elite, with the confiscation of peasant lands, and with total disregard and indifference for the miserable living conditions of workers, when independence blinds rulers, greedy for their own well-being and the profits of their grandchildren’s grandchildren and who set the country’s doors wide open for the invasion of international monopolies that ruthlessly destroy the environment, when independence denies the citizens the freedoms to express, to assemble, to organize and to question; when all this happens in a country with its own flag and president, the independence is but a luxurious reality for only a few, and a nightmare for millions of others ….”
Letter from the Commandant, an excerpt of a speech written by Xanana Gusmao while imprisoned in Cipinang, July 1995.
The above is taken from “The Truth and What to Do With It”, Off the Edge, Apr 09.
“Independence for East Timor has never been an end in itself but rather is a means. True independence is the recognition of the freedom of others, is the respect for the supreme interests of populations, is the respect for the most basic human rights, is the fundamental right of peoples to determine their own destiny.
When independence is only a trampoline for rulers to enrich the families of a parasitical elite, with the confiscation of peasant lands, and with total disregard and indifference for the miserable living conditions of workers, when independence blinds rulers, greedy for their own well-being and the profits of their grandchildren’s grandchildren and who set the country’s doors wide open for the invasion of international monopolies that ruthlessly destroy the environment, when independence denies the citizens the freedoms to express, to assemble, to organize and to question; when all this happens in a country with its own flag and president, the independence is but a luxurious reality for only a few, and a nightmare for millions of others ….”
Letter from the Commandant, an excerpt of a speech written by Xanana Gusmao while imprisoned in Cipinang, July 1995.
The above is taken from “The Truth and What to Do With It”, Off the Edge, Apr 09.
Sunday, August 23, 2009
Danajamin – multi-billion losses in the making?
The Star on 19 August reported Danajamin Nasional Bhd, the national financial guarantee insurer, has received 2 applications for credit enhancements to raise RM8.4bn of bonds.
Danajamin was set up in May 2009, as part of the “RM60bn” stimulus package announced by the government in March, to ensure that businesses continued to have access to bond market financing.
Here’s what an interested reader says:
“This Danajamin is a disaster waiting to happen.
Bank Negara governor Tan Sri Dr Zeti says "it provides credit enhancements for viable corporations to raise financing from the bond market". But in that, there is a contradiction. If it is viable, then why need enhancements?
This sort of credit enhancement features are typically for bad companies, which cannot access the loan or the bond markets by themselves. The REASON they cannot access these 2 markets is because they are NOT credit worthy.
Banks are experts in credit analysis. In fact, that is the bread-and-butter of lending-based banking. If the banks themselves, who are experts, deem the companies not suitable for loans, then what extra expertise or knowledge does Danajamin have to decide to bear that risk?
There are 9 local banks in Malaysia, 3 Arab banks, 2 Spore banks and 4-5 foreign banks (HSBC, ABN, StanChart etc etc). Collectively, 20 banks can’t be wrong, and Danajamin correct. Secondly, since these companies are not credit worthy, they are prone to default if there is any downturn in the economy.
As such, Danajamin will be laden with non-performing loans (NPLs). Banks have the means to monitor and modify NPLs. How will Danajamin do so?
As I said above, unless Danajamin can claim that they have a better form of credit enhancement than all the 20 banks in the system and that their risk management of potential and actual NPLs is also superior, this is a disaster waiting to happen. Assuming a 20% NPL rate of MYR 18.4 billion is a massive number. Let us cross our fingers that there is no double dip recession in the US.”
To which I would add, Dr Zeti herself was quoted as saying, ““The recent narrowing of spreads between benchmark issuances and triple A rated papers indicates that risk aversion has now eased,” and demand for higher-yielding securities was also beginning to rise, ahead of the recovery in the global economy.
Danajamin might have been justified when markets were frozen. But if markets are recovering and functioning again, it has no raison d’etre.
Note that the RM8.4bn was just for two deals – so we’re talking a massive RM4.2bn size per issue. From my experience, any issue of this size would would be inundated with bankers vying for a slice of the action – for the sizeable fees and the bragging rights.
Danajamin was set up in May 2009, as part of the “RM60bn” stimulus package announced by the government in March, to ensure that businesses continued to have access to bond market financing.
Here’s what an interested reader says:
“This Danajamin is a disaster waiting to happen.
Bank Negara governor Tan Sri Dr Zeti says "it provides credit enhancements for viable corporations to raise financing from the bond market". But in that, there is a contradiction. If it is viable, then why need enhancements?
This sort of credit enhancement features are typically for bad companies, which cannot access the loan or the bond markets by themselves. The REASON they cannot access these 2 markets is because they are NOT credit worthy.
Banks are experts in credit analysis. In fact, that is the bread-and-butter of lending-based banking. If the banks themselves, who are experts, deem the companies not suitable for loans, then what extra expertise or knowledge does Danajamin have to decide to bear that risk?
There are 9 local banks in Malaysia, 3 Arab banks, 2 Spore banks and 4-5 foreign banks (HSBC, ABN, StanChart etc etc). Collectively, 20 banks can’t be wrong, and Danajamin correct. Secondly, since these companies are not credit worthy, they are prone to default if there is any downturn in the economy.
As such, Danajamin will be laden with non-performing loans (NPLs). Banks have the means to monitor and modify NPLs. How will Danajamin do so?
As I said above, unless Danajamin can claim that they have a better form of credit enhancement than all the 20 banks in the system and that their risk management of potential and actual NPLs is also superior, this is a disaster waiting to happen. Assuming a 20% NPL rate of MYR 18.4 billion is a massive number. Let us cross our fingers that there is no double dip recession in the US.”
To which I would add, Dr Zeti herself was quoted as saying, ““The recent narrowing of spreads between benchmark issuances and triple A rated papers indicates that risk aversion has now eased,” and demand for higher-yielding securities was also beginning to rise, ahead of the recovery in the global economy.
Danajamin might have been justified when markets were frozen. But if markets are recovering and functioning again, it has no raison d’etre.
Note that the RM8.4bn was just for two deals – so we’re talking a massive RM4.2bn size per issue. From my experience, any issue of this size would would be inundated with bankers vying for a slice of the action – for the sizeable fees and the bragging rights.
Wednesday, August 19, 2009
It’s expensive keeping up with the Joneses in the Barisan Nasional
The passionate enter politics to make their ideals of a better nation reality. They enter to serve. Some suffer imprisonment, personal injury or even death in pursuit of their beliefs. They pay the highest price of all.
Things are better in the BN. High prices also have to be paid, but these are merely in ringgit terms. Chow Kum Hor, aide to Transport Minister Datuk Seri Ong Tee Keat, wrote in the New Sunday Times on 16 August that he “… spent a fortune changing my wardrobe and even stopped going to the neighbourhood barber” as he does not want to “… make the boss look bad.”
I guess we shouldn’t be surprised at Chow’s sartorial upgrading. When your boss flies private jets (business class is not good enough?), and your coalition counterparts swan around in handsomely-tailored Italian suits and luxurious Swiss watches one could be forgiven for feeling a little bit insecure.
That’s the BN for you. A preoccupation with style over substance. It doesn’t matter that 400,000 households – about 2 million Malaysians - still live in poverty. Our government must look good!
It also betrays a lack of true self-confidence. What’s important is your ideas and character. Gandhi lead India to independence in a dhoti. Fine, Gandhi is perhaps too ideal an example for our politicians to aspire to. President Barack Obama, leader of the most powerful nation in the world, wears US$1,500 suits which can be bought in department stores. And here at home, DAP leaders look just fine in their regular outfits.
I agree, clothes make the man and first impressions are important. I wouldn’t want our leaders presenting themselves in rags and tatters. But there is no need to spend a small fortune to look good. Consider the picture below, from Malaysiakini.
The DAP elected representatives look smart enough to me. By the way, Tony Pua (far right) didn’t change his wardrobe when he was elected as MP for PJ Utara. In fact, he downgraded. Following a price hike at the Lake Club barber, he now patronises the neighbourhood barber just downstairs of his service centre. And as far as I can remember, Kit Siang and the rest have dressed the same.
Great leaders are often described as having great vision, passion and character. A snappy wardrobe is rarely mentioned.
I’m not saying the DAP leaders carry all the positive qualities. But at least they live and dress like most Malaysians.
The BN in contrast, considers the neighbourhood barber low-class. It’s good enough for millions of Malaysians but not enough for them. If they’re so divorced from the average Malaysian, can they really lead us to a better future?
Things are better in the BN. High prices also have to be paid, but these are merely in ringgit terms. Chow Kum Hor, aide to Transport Minister Datuk Seri Ong Tee Keat, wrote in the New Sunday Times on 16 August that he “… spent a fortune changing my wardrobe and even stopped going to the neighbourhood barber” as he does not want to “… make the boss look bad.”
I guess we shouldn’t be surprised at Chow’s sartorial upgrading. When your boss flies private jets (business class is not good enough?), and your coalition counterparts swan around in handsomely-tailored Italian suits and luxurious Swiss watches one could be forgiven for feeling a little bit insecure.
That’s the BN for you. A preoccupation with style over substance. It doesn’t matter that 400,000 households – about 2 million Malaysians - still live in poverty. Our government must look good!
It also betrays a lack of true self-confidence. What’s important is your ideas and character. Gandhi lead India to independence in a dhoti. Fine, Gandhi is perhaps too ideal an example for our politicians to aspire to. President Barack Obama, leader of the most powerful nation in the world, wears US$1,500 suits which can be bought in department stores. And here at home, DAP leaders look just fine in their regular outfits.
I agree, clothes make the man and first impressions are important. I wouldn’t want our leaders presenting themselves in rags and tatters. But there is no need to spend a small fortune to look good. Consider the picture below, from Malaysiakini.
The DAP elected representatives look smart enough to me. By the way, Tony Pua (far right) didn’t change his wardrobe when he was elected as MP for PJ Utara. In fact, he downgraded. Following a price hike at the Lake Club barber, he now patronises the neighbourhood barber just downstairs of his service centre. And as far as I can remember, Kit Siang and the rest have dressed the same.
Great leaders are often described as having great vision, passion and character. A snappy wardrobe is rarely mentioned.
I’m not saying the DAP leaders carry all the positive qualities. But at least they live and dress like most Malaysians.
The BN in contrast, considers the neighbourhood barber low-class. It’s good enough for millions of Malaysians but not enough for them. If they’re so divorced from the average Malaysian, can they really lead us to a better future?
Wednesday, August 12, 2009
Legoland Iskandar – another bailout on the way?
Legoland Malaysia is coming up in the Iskandar Development Region in Johor. Some 30 million Lego bricks will reportedly be used in the RM750 million theme park, which will boast more than 30 rides, shows and attractions, from roller coasters and boat rides to adventure walks.
Developer Iskandar Investment Berhad (IIB), says the entrance fee will be “affordable for a family of six”. It is so is convinced that Malaysia's first theme park will do well that it has revised projected visitors numbers upwards — from 1 million a year to 1.4 million. Malaysians are expected to make up half of these, with foreigners — mostly Indonesians and Singaporeans — making up the other half.
There is also some good news for adults: The theme park is reportedly expected to create some 5,000 jobs. Production director Tim Burnell of Merlin Entertainments, which will manage the park, was in Johor in July to recruit for some of the jobs. The company was looking to hire model makers, who can earn anywhere between RM1,400 and RM5,000 each.
Sounds well and good. But the financials don’t quite add up:
1. MYR 750 million project cost. Say it is funded 50-50 with equity and debt, ie RM375m each.
2. If they reach the targeted 1.4m visitors a year, and assuming RM100 per person, that is RM114m revenue per year.
3. Interest and salary costs alone will be RM119m! This is based on: Interest RM19m (assuming 5% interest on RM375m borrowings); salaries RM120m (5,000 employees * RM2000 per month * 12 months).
4. That leaves nothing to pay back the borrowings, and we have not even incorporated depreciation, maintenance, utilities ….and what about profits for the shareholders who have put up RM375m?
5. Note that RM100 per person = RM600 for a family of 6. Which is probably too high too be “affordable”. So revenues will be even lower than RM114m.
Developer Iskandar Investment Berhad (IIB), says the entrance fee will be “affordable for a family of six”. It is so is convinced that Malaysia's first theme park will do well that it has revised projected visitors numbers upwards — from 1 million a year to 1.4 million. Malaysians are expected to make up half of these, with foreigners — mostly Indonesians and Singaporeans — making up the other half.
There is also some good news for adults: The theme park is reportedly expected to create some 5,000 jobs. Production director Tim Burnell of Merlin Entertainments, which will manage the park, was in Johor in July to recruit for some of the jobs. The company was looking to hire model makers, who can earn anywhere between RM1,400 and RM5,000 each.
Sounds well and good. But the financials don’t quite add up:
1. MYR 750 million project cost. Say it is funded 50-50 with equity and debt, ie RM375m each.
2. If they reach the targeted 1.4m visitors a year, and assuming RM100 per person, that is RM114m revenue per year.
3. Interest and salary costs alone will be RM119m! This is based on: Interest RM19m (assuming 5% interest on RM375m borrowings); salaries RM120m (5,000 employees * RM2000 per month * 12 months).
4. That leaves nothing to pay back the borrowings, and we have not even incorporated depreciation, maintenance, utilities ….and what about profits for the shareholders who have put up RM375m?
5. Note that RM100 per person = RM600 for a family of 6. Which is probably too high too be “affordable”. So revenues will be even lower than RM114m.
Wednesday, August 5, 2009
Malaysia’s lead is evaporating
I spent most of the last two weeks in Hanoi and north Vietnam, with a short stop in Singapore. Singapore is as efficient as usual, Hanoi was an eye-opener. Malaysia is not as advanced as we think it is. Or put another way, the rest of Asia is far catching up.
The experience starts with the taxis. Getting one is a breeze, even at the airport. No need to brave touts, nor buy coupons and endure long waits for “official airport taxis”. Just walk straight out and into a regular cab. The cab, by the way, is a nice, spacious newish 1.6-litre Japanese car. Not a cramped, rattling Proton which should have been long-retired.
To help keep cabbies honest, the taxi meters don’t just click off the increasing Dong fare, they also show the distance traveled and time taken, so you know if you’re being taken for a ride. Such a simple solution to meter-rigging. I wonder why we don’t implement this in Malaysia.
The hotel was a pleasant surprise. We’d booked the 3-star Classic Hotel for US$35 (RM130) per night. It looked pretty good on the website, but we were prepared to be disappointed. We weren’t. We got a nice, clean spacious room complete with minibar and flat-screen tv. But what took the cake was a computer, together with free internet access!
I couldn’t help but think of my last local 3-star experience, at an exotically-named hotel in Langkawi. It was so exotic, there was no washbasin in the bathroom! We had to spit straight onto the bathroom floor. One wonders how a ‘hotel’ like that got final operating approvals. Malaysia boleh.
Moving on to the food, any hesitancies we had about street food vanished when we saw the hawkers. The stalls and surroundings were generally cleaner than in Malaysia. Little litter, no obvious rats or cockroaches. And that goes for their markets too.
There are issues of course, including rogue taxi drivers. We were advised to use only a few specific taxi companies. We did, and encountered no problems. Service in the shops and cafes was, in our experience, generally surly or at best, not friendly. But there were gems, including one nice hole-in-the-wall café-owner who took a dish back and waived the charge when we said it wasn’t to our liking.
I can’t help but think it won’t be long before the tables are turned, and travel guide-books to Malaysia become fraught with the warnings we’d become accustomed to when visiting our our less-developed neighbours. Beware of the taxi drivers; street crime is a problem – don’t carry handbags; be very careful with the local food and water – eat only well-cooked food and drink bottled water ….
And one final observation - while some Malaysians are still uncomfortable with the English language, many Vietnamese are eager to pick it up. One cannot accuse them of being unnationalistic. This is a nation that defeated invaders ranging from the Chinese to the French and the Americans. Yet it is enthusiastically embracing the language of its most recent enemy. There is no emotional baggage associated with English. It is the language of commerce and science, and if you want to pursue the path of material success mastery of English is the way to go.
The experience starts with the taxis. Getting one is a breeze, even at the airport. No need to brave touts, nor buy coupons and endure long waits for “official airport taxis”. Just walk straight out and into a regular cab. The cab, by the way, is a nice, spacious newish 1.6-litre Japanese car. Not a cramped, rattling Proton which should have been long-retired.
To help keep cabbies honest, the taxi meters don’t just click off the increasing Dong fare, they also show the distance traveled and time taken, so you know if you’re being taken for a ride. Such a simple solution to meter-rigging. I wonder why we don’t implement this in Malaysia.
The hotel was a pleasant surprise. We’d booked the 3-star Classic Hotel for US$35 (RM130) per night. It looked pretty good on the website, but we were prepared to be disappointed. We weren’t. We got a nice, clean spacious room complete with minibar and flat-screen tv. But what took the cake was a computer, together with free internet access!
I couldn’t help but think of my last local 3-star experience, at an exotically-named hotel in Langkawi. It was so exotic, there was no washbasin in the bathroom! We had to spit straight onto the bathroom floor. One wonders how a ‘hotel’ like that got final operating approvals. Malaysia boleh.
Moving on to the food, any hesitancies we had about street food vanished when we saw the hawkers. The stalls and surroundings were generally cleaner than in Malaysia. Little litter, no obvious rats or cockroaches. And that goes for their markets too.
There are issues of course, including rogue taxi drivers. We were advised to use only a few specific taxi companies. We did, and encountered no problems. Service in the shops and cafes was, in our experience, generally surly or at best, not friendly. But there were gems, including one nice hole-in-the-wall café-owner who took a dish back and waived the charge when we said it wasn’t to our liking.
I can’t help but think it won’t be long before the tables are turned, and travel guide-books to Malaysia become fraught with the warnings we’d become accustomed to when visiting our our less-developed neighbours. Beware of the taxi drivers; street crime is a problem – don’t carry handbags; be very careful with the local food and water – eat only well-cooked food and drink bottled water ….
And one final observation - while some Malaysians are still uncomfortable with the English language, many Vietnamese are eager to pick it up. One cannot accuse them of being unnationalistic. This is a nation that defeated invaders ranging from the Chinese to the French and the Americans. Yet it is enthusiastically embracing the language of its most recent enemy. There is no emotional baggage associated with English. It is the language of commerce and science, and if you want to pursue the path of material success mastery of English is the way to go.
Wednesday, July 15, 2009
Barisan Nasional is the marriage-of-convenience
Some Malaysians are falling for the mainstream media’s portrayal of the Pakatan Rakyat coalition as a marriage-of-convenience, as it relentlessly highlights the disagreements between the coalition partners. Recent differences that come to mind are the Kedah PAS-DAP quarrel and the disunity over PAS’ proposed unity talks with UMNO.
No marriage is perfect. Partners will have disagreements. They may settle it discreetly, argue quietly or fight publicly, but it is a fact, normal adults in normal relationships will have different opinions. And that is what Pakatan Rakyat is going through as the partners work through their relationships to make it even stronger in coming years.
In a marriage-of-convenience on the other hand, one partner has the upper-hand. There is no striving for a greater good. One partner may want a green card or financial security so he or she just grins and bears it, no matter what nonsense the other partner gets up to.
Which quite aptly describes the situation at the Barisan Nasional (BN). There is the façade of unity because the component parties don’t quarrel too much. The reality is that happens because UMNO calls the shots and the others just fall into line.
Take the Port Klang Free Zone scandal. Two weeks ago, Transport Minister Datuk Seri Ong Tee Keat made a principled move by directing Port Klang Authority to withhold payment until studies were completed. A few days later, the Ministry of Finance “instructed” PKA to pay up. This was a clear case of over-stepping boundaries. PKA is part of the Ministry of Transport. The Ministry of Finance did not even have the courtesy of working through the Transport Minister - it sent the “instructions” directly to the PKA board!
And what did the Transport Minister do? Not a peep. His authority has been completely undercut and yet he continues working with UMNO and the BN. Quite unlike the coalition of real partners in Pakatan, where the parties will stand up for their principles and express their real opinions.
So, which is the marriage-of-convenience?
PS. I’m taking a break. Off on a holiday to rest and recharge. Next posting will be on Wed, 5 Aug.
No marriage is perfect. Partners will have disagreements. They may settle it discreetly, argue quietly or fight publicly, but it is a fact, normal adults in normal relationships will have different opinions. And that is what Pakatan Rakyat is going through as the partners work through their relationships to make it even stronger in coming years.
In a marriage-of-convenience on the other hand, one partner has the upper-hand. There is no striving for a greater good. One partner may want a green card or financial security so he or she just grins and bears it, no matter what nonsense the other partner gets up to.
Which quite aptly describes the situation at the Barisan Nasional (BN). There is the façade of unity because the component parties don’t quarrel too much. The reality is that happens because UMNO calls the shots and the others just fall into line.
Take the Port Klang Free Zone scandal. Two weeks ago, Transport Minister Datuk Seri Ong Tee Keat made a principled move by directing Port Klang Authority to withhold payment until studies were completed. A few days later, the Ministry of Finance “instructed” PKA to pay up. This was a clear case of over-stepping boundaries. PKA is part of the Ministry of Transport. The Ministry of Finance did not even have the courtesy of working through the Transport Minister - it sent the “instructions” directly to the PKA board!
And what did the Transport Minister do? Not a peep. His authority has been completely undercut and yet he continues working with UMNO and the BN. Quite unlike the coalition of real partners in Pakatan, where the parties will stand up for their principles and express their real opinions.
So, which is the marriage-of-convenience?
PS. I’m taking a break. Off on a holiday to rest and recharge. Next posting will be on Wed, 5 Aug.
Monday, July 13, 2009
Najib’s “11 people-friendly measures” mere crumbs
The New Sunday Times yesterday was expectedly all agog with its boss’s prime minister Datuk Seri Najib’s 100-day milestone. In addition to 6 National Key Result Areas, he announced 11 people-friendly measures. Really, more smoke than substance. Here’re the 11 measures, and my critique:
1) Increasing taxi permits by 3,000 to be approved over the next three months
Hmm .. who decides who gets the permits? And doesn’t this increase competition for all the other taxi drivers who are still forced to rent permits from influential rent-seeking individuals? They are going to find it even harder to make ends meet. Has anyone even done a proper study on what’s a sustainable number of taxis in KL ie balancing commuter convenience with taxi drivers’ rights to earn a decent, honest living?
Actually, on the subject of permits, it is Najib’s Prime Minister’s office that gets to issue the permits! In a recent reshuffling, the Commercial Vehicles and Licensing Board was transferred to the Prime Minister's office whereas the Transport Ministry should have appeared a more suitable home.
So, right now, as Tony Pua points out, Public Transport, which is one of the 6 National Key Result Areas is a complete recipe for disaster. We have the Prime Minister himself taking care of taxis and public buses, the Finance Ministry championing RapidKL, the Transport Ministry in charge of KTM and LRT, and the Works Ministry overseeing the road transport network.
2) 20% discount for SmartTag and Touch & Go cardholders who pay toll 80 times or more in a month
Great headline and great discount. But meaningless to most people. Do the math.
A worker who works five days a week and pays toll to-and-fro = 5 day week * 2 toll payments per day * 4 weeks a month = 40 toll payments/month.
On weekends, he takes his family out and pays toll a total 8 times per weekend = 32 times per month.
Total = 72 times per month only!
3) Introduction of new Amanah Saham 1Malaysia with an initial size of 10 billion units
You are investing your own money! And bear in mind, this is not capital-guaranteed. It is fund like any other fund, with the usual caveat, “The value of your investment can go up, as well as down”.
4) Drastic measures to reduce crime and fight corruption
Haven’t we heard this before? I’ll believe it when I see it, and I’ll be relieved when this happens and ordinary civic-conscious citizens no longer need to turn criminal to protect their own families. In the meantime, the crime rate is soaring, as Tony Pua highlights.
5) Construction of additional roads in Sabah and Sarawak
6) Upgrading of water and electricity supply in rural areas of Sabah and Sarawak
7) Improving efforts in registering births in Sabah and Sarawak.
52 years after Merdeka, and 46 years after Sabah and Sarawak joined the Federation, a birth-registration system is still not in place and roads, water and electricity are still privileges ???!!!
8) Increasing by RM150m the allocation for Tekun Nasional, with RM15m for young Indian entrepreneurs.
9) Fee for learning to ride motorcycles of Calls B2 and below reduced to RM211
10) 50% discount on licence renewal fee for hawkers in Kuala Lumpur
11) Sale of 44,000 public housing units to people renting them in Kuala Lumpur
Mere crumbs to distract the public while big money continues to be wasted elsewhere.
Just last week, the one-year old Aquatic Centre in Batu Buruk was shut down after it was found to have too many flaws. This centre alone cost RM18m.
Of course, there’s a whole range of other huge money scandals, with the current pinnacle being RM13.5bn and counting at PKFZ. Transport Minister Ong Tee Keat tried to do the right thing by stopping payment, but he was overruled by his UMNO colleagues at the Treasury.
1) Increasing taxi permits by 3,000 to be approved over the next three months
Hmm .. who decides who gets the permits? And doesn’t this increase competition for all the other taxi drivers who are still forced to rent permits from influential rent-seeking individuals? They are going to find it even harder to make ends meet. Has anyone even done a proper study on what’s a sustainable number of taxis in KL ie balancing commuter convenience with taxi drivers’ rights to earn a decent, honest living?
Actually, on the subject of permits, it is Najib’s Prime Minister’s office that gets to issue the permits! In a recent reshuffling, the Commercial Vehicles and Licensing Board was transferred to the Prime Minister's office whereas the Transport Ministry should have appeared a more suitable home.
So, right now, as Tony Pua points out, Public Transport, which is one of the 6 National Key Result Areas is a complete recipe for disaster. We have the Prime Minister himself taking care of taxis and public buses, the Finance Ministry championing RapidKL, the Transport Ministry in charge of KTM and LRT, and the Works Ministry overseeing the road transport network.
2) 20% discount for SmartTag and Touch & Go cardholders who pay toll 80 times or more in a month
Great headline and great discount. But meaningless to most people. Do the math.
A worker who works five days a week and pays toll to-and-fro = 5 day week * 2 toll payments per day * 4 weeks a month = 40 toll payments/month.
On weekends, he takes his family out and pays toll a total 8 times per weekend = 32 times per month.
Total = 72 times per month only!
3) Introduction of new Amanah Saham 1Malaysia with an initial size of 10 billion units
You are investing your own money! And bear in mind, this is not capital-guaranteed. It is fund like any other fund, with the usual caveat, “The value of your investment can go up, as well as down”.
4) Drastic measures to reduce crime and fight corruption
Haven’t we heard this before? I’ll believe it when I see it, and I’ll be relieved when this happens and ordinary civic-conscious citizens no longer need to turn criminal to protect their own families. In the meantime, the crime rate is soaring, as Tony Pua highlights.
5) Construction of additional roads in Sabah and Sarawak
6) Upgrading of water and electricity supply in rural areas of Sabah and Sarawak
7) Improving efforts in registering births in Sabah and Sarawak.
52 years after Merdeka, and 46 years after Sabah and Sarawak joined the Federation, a birth-registration system is still not in place and roads, water and electricity are still privileges ???!!!
8) Increasing by RM150m the allocation for Tekun Nasional, with RM15m for young Indian entrepreneurs.
9) Fee for learning to ride motorcycles of Calls B2 and below reduced to RM211
10) 50% discount on licence renewal fee for hawkers in Kuala Lumpur
11) Sale of 44,000 public housing units to people renting them in Kuala Lumpur
Mere crumbs to distract the public while big money continues to be wasted elsewhere.
Just last week, the one-year old Aquatic Centre in Batu Buruk was shut down after it was found to have too many flaws. This centre alone cost RM18m.
Of course, there’s a whole range of other huge money scandals, with the current pinnacle being RM13.5bn and counting at PKFZ. Transport Minister Ong Tee Keat tried to do the right thing by stopping payment, but he was overruled by his UMNO colleagues at the Treasury.
Sunday, July 12, 2009
Since when is “Politician sits with people” news?
Politicians in most mature democracies practice the common touch naturally. They take public transport, kiss babies, mingle with the people they represent…. All that is standard practice which hardly deserve news coverage.
But, in Najib’s 1-Malaysia, the headline on prime page 3 space in the New Sunday Times today is “Najib mingles with the rakyat”. The crux of the article was prime minister Datuk Seri Najib Razak decided to deliver his 100th-day speech at the Kuala Lumpur Convention Centre rather than from his office in Putrajaya. PM Najib, in turn, was appreciative that the coterie of Tan Sri, Datuk Seri and Datuk ministers present deigned to sit together with the people.
That’s a useful reminder of the heights of Barisan Nasional arrogance. It is a noble step for all those titled politicians to “give up protocol” and mix with us, the rakyat they are supposed to serve. It is a sacrifice that we, the rakyat, must appreciate!
Still, I will grant that’s a step in the right direction. Unfortunately, like many Barisan initiatives, it looks skin-deep rather than a DNA-change. Elsewhere, when boss Najib is not present, the lordly instincts revert. Page 13 of today’s New Sunday Times is telling. Kelantan UMNO chief Datuk Mustapa Mohamed said he has “to advise his VIP friends to be extra cautious” and not come and go in flashy cars with police outriders that would annoy the villagers in Manik Urai.
Contrast that with the Pakatan-led state governments. Chief Minister, plain old Encik Lim Guan Eng flies economy class. On a regular basis as he fulfils his duties as Chief Minister and Member of Parliament. Unlike the former BN Menteri Besar of Selangor, who spent RM1.7m visiting Disneyland and lives in an exclusive community, in a house valued at between RM3.5m and RM24m, depending on whom you believe.
Similarly, the 11 people-friendly measures are skin-deep rather than deep-rooted change. More to come …
PS: The print edition of New Sunday Times today captions this as "PM ... mobbed by the crowd ... yesterday". The people in the background seem more interested in something else - notice they are all looking away from the PM!
But, in Najib’s 1-Malaysia, the headline on prime page 3 space in the New Sunday Times today is “Najib mingles with the rakyat”. The crux of the article was prime minister Datuk Seri Najib Razak decided to deliver his 100th-day speech at the Kuala Lumpur Convention Centre rather than from his office in Putrajaya. PM Najib, in turn, was appreciative that the coterie of Tan Sri, Datuk Seri and Datuk ministers present deigned to sit together with the people.
That’s a useful reminder of the heights of Barisan Nasional arrogance. It is a noble step for all those titled politicians to “give up protocol” and mix with us, the rakyat they are supposed to serve. It is a sacrifice that we, the rakyat, must appreciate!
Still, I will grant that’s a step in the right direction. Unfortunately, like many Barisan initiatives, it looks skin-deep rather than a DNA-change. Elsewhere, when boss Najib is not present, the lordly instincts revert. Page 13 of today’s New Sunday Times is telling. Kelantan UMNO chief Datuk Mustapa Mohamed said he has “to advise his VIP friends to be extra cautious” and not come and go in flashy cars with police outriders that would annoy the villagers in Manik Urai.
Contrast that with the Pakatan-led state governments. Chief Minister, plain old Encik Lim Guan Eng flies economy class. On a regular basis as he fulfils his duties as Chief Minister and Member of Parliament. Unlike the former BN Menteri Besar of Selangor, who spent RM1.7m visiting Disneyland and lives in an exclusive community, in a house valued at between RM3.5m and RM24m, depending on whom you believe.
Similarly, the 11 people-friendly measures are skin-deep rather than deep-rooted change. More to come …
PS: The print edition of New Sunday Times today captions this as "PM ... mobbed by the crowd ... yesterday". The people in the background seem more interested in something else - notice they are all looking away from the PM!
Wednesday, July 8, 2009
Is the taxpayer paying for AirAsia’s marketing costs?
I received an email from AirAsia recently, proclaiming “No Airport Tax”.
Quite ironic, considering that Prime Minister and Finance Minister Datuk Seri Najib Razak on June 23 in a written reply to Wee Choo Keong (Wangsa Maju – PKR) said Malaysia Airports is negotiating with AirAsia on RM65m of airport taxes that Air Asia owes. “Drastic action cannot be applied … on AirAsia as it would affect the operations at the low-cost carrier terminal (LCCT) and cause a negative result on MAHB as operator and manager of the airport.”
Subsequently, the Edge Daily on June 25th reported the government had appointed a consultant to find a middle path in the dispute between AirAsia and Malaysia Airports. Another consultant? Why? PM Najib has confirmed AirAsia is in arrears to the tune of RM65m.
What is there to discuss? Airlines collect airport tax from passengers just like your restaurant charges you the 5% government service tax. It is a tax collected by the private sector on behalf of the government. The Customs and Excise department quite rightly goes after restaurants and other businesses who charge that 5% but don’t remit the sum to the government. No negotiations. You remit what you collected. Why the special treatment for AirAsia? Its passengers had all paid the airport tax when booking their flights. It is money that they believed was going to the airport, not to AirAsia.
Now Air Asia is offering a “No Airport Tax” promotion. Is AirAsia really absorbing the airport tax? Or is it going to tell Malaysia Airports later on that it cannot afford to pay? In which case, this promotion is being sponsored by the taxpayer!
Air Asia already benefits from extremely one-sided contract terms which are unfair to consumers. Let’s not add taxpayer support .
Thursday, July 2, 2009
Economic reforms – One step forward, one step back .. and watch the implementation
The mainstream media has been trumpeting liberalization measures announced by Prime Minister Datuk Seri Najib Razak at the InvestMalaysia Conference on Tuesday.
Amid the plethora of measures, the one that stands out is removal of the 30% bumiputera quota for companies seeking listing in Malaysia. It is a bold political move indeed, to eliminate this “something for nothing” crutch.
Having said that, the actual impact to bumiputeras is minimal. The pipeline of new listings has hardly been inspiring in recent years. I challenge you to name even one recently-listed prominent company. Also, the policy had been a huge failure in terms of its intention to build bumiputera wealth. PM Najib said RM54bn had been allocated to bumiputeras (I think it is a lot more), but only RM2bn remains. So, bumiputeras kept less than 5% of the amounts allocated to them!
But it is good news, in that it removes a huge impediment to listing. Many owners of successful businesses shied away when told they had to offer 30% of their company to a new “partner” at a large discount. Let’s hope this results in more and better quality listings on Bursa, which would make the stock exchange more attractive and help fuel trading volume.
I am dismayed though, that replacing this 30% quota is another new fund. The RM10bn Ekuinas fund is supposed to invest in “bumiputera companies and entrepreneurs, based on merit”. Such government-run funds have awful records. And what is Ekuinas going to do that existing institutions do not?
A better approach would be to work with the private sector. For example, the government could offer to share the risks of such loans and investments with banks and venture capitalists. It could agree to bear, say, half the losses if the entrepreneurs fail. That way, the process of credit allocation is still primarily private sector driven, which should be more efficient and it saves the government having to build a duplicate infrastructure of officers to administer and monitor the investments.
As for “watch the implementation”, I am referring to the “stern” directives to:
1. Government-investment corporations (GICs) to reduce their stakes in the government-linked corporations (GLCs), in the name of raising free-floats and market liquidity; and
2. The GLCs to divest non-core businesses.
All sensible reasons, and if properly done, will be good for the economy. “Properly” is of course the crucial word. In particular, I want to see:
1. Transparency in the appointments of the brokers and the fees and commissions paid when the GICs reduce their stakes; and
2. Similarly, transparency when the GLCS sell their non-core businesses. Valuations must be fair – the businesses must not be sold at unduly cheap prices to influential parties – and all the costs, including commissions and advisory fees disclosed.
Amid the plethora of measures, the one that stands out is removal of the 30% bumiputera quota for companies seeking listing in Malaysia. It is a bold political move indeed, to eliminate this “something for nothing” crutch.
Having said that, the actual impact to bumiputeras is minimal. The pipeline of new listings has hardly been inspiring in recent years. I challenge you to name even one recently-listed prominent company. Also, the policy had been a huge failure in terms of its intention to build bumiputera wealth. PM Najib said RM54bn had been allocated to bumiputeras (I think it is a lot more), but only RM2bn remains. So, bumiputeras kept less than 5% of the amounts allocated to them!
But it is good news, in that it removes a huge impediment to listing. Many owners of successful businesses shied away when told they had to offer 30% of their company to a new “partner” at a large discount. Let’s hope this results in more and better quality listings on Bursa, which would make the stock exchange more attractive and help fuel trading volume.
I am dismayed though, that replacing this 30% quota is another new fund. The RM10bn Ekuinas fund is supposed to invest in “bumiputera companies and entrepreneurs, based on merit”. Such government-run funds have awful records. And what is Ekuinas going to do that existing institutions do not?
A better approach would be to work with the private sector. For example, the government could offer to share the risks of such loans and investments with banks and venture capitalists. It could agree to bear, say, half the losses if the entrepreneurs fail. That way, the process of credit allocation is still primarily private sector driven, which should be more efficient and it saves the government having to build a duplicate infrastructure of officers to administer and monitor the investments.
As for “watch the implementation”, I am referring to the “stern” directives to:
1. Government-investment corporations (GICs) to reduce their stakes in the government-linked corporations (GLCs), in the name of raising free-floats and market liquidity; and
2. The GLCs to divest non-core businesses.
All sensible reasons, and if properly done, will be good for the economy. “Properly” is of course the crucial word. In particular, I want to see:
1. Transparency in the appointments of the brokers and the fees and commissions paid when the GICs reduce their stakes; and
2. Similarly, transparency when the GLCS sell their non-core businesses. Valuations must be fair – the businesses must not be sold at unduly cheap prices to influential parties – and all the costs, including commissions and advisory fees disclosed.
Thursday, June 25, 2009
Top leaders engrossed in child’s play as economy wanes
Deputy prime minister Tan Sri Muhyiddin Yassin and Khazanah Nasional managing director Tan Sri Azman Mokhtar took time out from their busy schedules on Tuesday to launch Kidzania, a RM50 million “educational theme park from Mexico” that will create 400 jobs, reported the Business Times.
Strip away the usual marketing hyperbole and Kidzania appears to be just a glorified play centre and property development project.
“Theme park” for me conjures visions of acres and acres of space a’la Disneyland and Universal Studios. The Kidzania “theme park” will take up merely 60,000 square feet of space in a new mall. That’s equivalent to about 40 modest terrace (link) houses. Not 40 bungalows or mansions, just normal terrace houses.
Also, the project entails
the construction of a seven-storey new building. Khazanah is in an 80:20 joint-venture with Boustead Holdings to develop this project. Boustead, developer of the Mutiara Damansara area and owner of the Curve mall in Selangor, will build a seven-storey structure to house KidZania (Picture from Malaysia Insider). KidZania needs only two floors of space, Petaling Jaya really does not need another mall. So why build a completely new property?
Furthermore, I am sure the bulk of the 400 jobs will likely be low-skilled and low-paid. Those who have been to Disneyland, whether at your own or taxpayer expense, know most of the jobs are routine, menial and fulfilled by young people on a temporary basis. Hardly highly-skilled and certainly not creatively or intellectually challenging nor highly-paid.
Still, a job is a job, But, in this case, does it warrant the attentions of not one, but two luminaries? None less than our deputy prime minister himself and the MD of Khazanah, who presides over TENS of billions of investments saw it fit to launch this project. In the meantime, tens of thousands of Malaysians are being thrown out of work, the government deficit is expected to hit a high 10% and sorely-needed capital is fleeing Malaysia, just to name a few items of great import.
On the subject of Khazanah and its multi-billion portfolio, I have three key questions:
1) Khazanah, in its own words, is “committed to building a globally competitive Malaysia by developing the right human capital”. What human capital does Kidzania really develop?
2) Why is Khazanah taking such a large 80% stake in this project? I doubt whether children’s play-centres can be considered among the “sectors that are deemed strategic to the nation's economy” that are supposed to be Khazanah’s focus.
3) What is Khazanah’s expected investment return on this project?
Strip away the usual marketing hyperbole and Kidzania appears to be just a glorified play centre and property development project.
“Theme park” for me conjures visions of acres and acres of space a’la Disneyland and Universal Studios. The Kidzania “theme park” will take up merely 60,000 square feet of space in a new mall. That’s equivalent to about 40 modest terrace (link) houses. Not 40 bungalows or mansions, just normal terrace houses.
Also, the project entails
the construction of a seven-storey new building. Khazanah is in an 80:20 joint-venture with Boustead Holdings to develop this project. Boustead, developer of the Mutiara Damansara area and owner of the Curve mall in Selangor, will build a seven-storey structure to house KidZania (Picture from Malaysia Insider). KidZania needs only two floors of space, Petaling Jaya really does not need another mall. So why build a completely new property?Furthermore, I am sure the bulk of the 400 jobs will likely be low-skilled and low-paid. Those who have been to Disneyland, whether at your own or taxpayer expense, know most of the jobs are routine, menial and fulfilled by young people on a temporary basis. Hardly highly-skilled and certainly not creatively or intellectually challenging nor highly-paid.
Still, a job is a job, But, in this case, does it warrant the attentions of not one, but two luminaries? None less than our deputy prime minister himself and the MD of Khazanah, who presides over TENS of billions of investments saw it fit to launch this project. In the meantime, tens of thousands of Malaysians are being thrown out of work, the government deficit is expected to hit a high 10% and sorely-needed capital is fleeing Malaysia, just to name a few items of great import.
On the subject of Khazanah and its multi-billion portfolio, I have three key questions:
1) Khazanah, in its own words, is “committed to building a globally competitive Malaysia by developing the right human capital”. What human capital does Kidzania really develop?
2) Why is Khazanah taking such a large 80% stake in this project? I doubt whether children’s play-centres can be considered among the “sectors that are deemed strategic to the nation's economy” that are supposed to be Khazanah’s focus.
3) What is Khazanah’s expected investment return on this project?
Wednesday, June 24, 2009
The startling lack of integrity at the very top
Should a scholarship defaulter even be considered for the position of director of Petronas, our national oil company?
PM Datuk Seri Najib Razak seems to see no problem. He is reportedly seeking to appoint his special officer, Omar Mustapha, to the board of Petronas. But, the appointment hit a snag when the board of Petronas raised reservations as Omar had reneged on his scholarship obligations.
Omar apparently graduated from Oxford on a scholarship from Petronas in the mid-1990s and worked briefly with the national oil corporation and another government-linked corporation before moving on to join prestigious global consultants McKinsey & Co.
Malaysia Insider carries the article.
Not fulfilling scholarship obligations betrays a lack of integrity and ethics. The scholar owes his fancy degree to contributions from the rakyat. The least he can do is repay that obligation, making good on his debt to the people of Malaysia. Instead, he gallivants of to more lucrative pastures.
Omar can hardly plead financial constraints for reneging on his scholarship commitments. McKinsey consultants are famously well-paid. So, what can the reason be? A misplaced sense of entitlement? Such is the quality of people advising our very top leadership …
PM Datuk Seri Najib Razak seems to see no problem. He is reportedly seeking to appoint his special officer, Omar Mustapha, to the board of Petronas. But, the appointment hit a snag when the board of Petronas raised reservations as Omar had reneged on his scholarship obligations.
Omar apparently graduated from Oxford on a scholarship from Petronas in the mid-1990s and worked briefly with the national oil corporation and another government-linked corporation before moving on to join prestigious global consultants McKinsey & Co.
Malaysia Insider carries the article.
Not fulfilling scholarship obligations betrays a lack of integrity and ethics. The scholar owes his fancy degree to contributions from the rakyat. The least he can do is repay that obligation, making good on his debt to the people of Malaysia. Instead, he gallivants of to more lucrative pastures.
Omar can hardly plead financial constraints for reneging on his scholarship commitments. McKinsey consultants are famously well-paid. So, what can the reason be? A misplaced sense of entitlement? Such is the quality of people advising our very top leadership …
Thursday, June 18, 2009
PKFZ – Should we throw good money after bad?
As it stands, the cost of PKFZ is RM7.5bn.
Where do we go from here? The emotional will say we have spent too much to abandon the project.
But rational, standard investment practice is to look forward. Forget the costs already incurred. They are already sunk. What matters is what you can get in the future. And the future, based on Port Klang Authority’s “optimistic” assumptions is a further outlay of RM8.5bn over the next 42 years. We will start making money only in 2051.
Is it worth it? I can’t imagine any sane businessman, or government, for that matter, embarking on an investment with a 42 year payback period, and that too on optimistic projections.
So, the government really should consider an exit strategy. There are many alternatives for RM8.5bn. RM8.5bn is sufficient to build 340,000 low-cost houses. Or 30,000 students can have full scholarships for overseas studies. Or PLUS and LITRAK can be privatized, saving the government billions in compensation to the toll concessionaires and reducing the burden on motorists.
Transport Minister Ong Tee Keat, who is away in France for unspecified reasons, has characterized the proposal that the government cut losses and close down PKFZ as “a premature statement by politicians who think they can make well-informed financial decisions based on a few hours of looking through the PKFZ report”. He said he will let “the financial consultants and management experts work out a more viable solution based on further in-depth studies before a more structured approach and solution is implemented”.
So, another round of studies and fees. But you can’t conjure money from nothing. The fact is based on Port Klang Authority’s own forecasts, a cashflow deficit to 2051 is projected, and that is based on assumptions deemed ‘optimistic’ by reporting accountants PricewaterhouseCoopers.
The core problem is PKFZ was built too fast and at inflated costs. So you have underutilized facilities and punitive interest payments, including on the instalments due to turnkey developer Kuala Dimensi Sdn Bhd (KDSB). The cost base could be addressed if turnkey developer KDSB is taken to task. I would expect the legal team to comb through the various agreements and find a way to reduce the payments due to KDSB.
Doing so, though, would likely result in KDSB not being able to meet its own debt obligations. Bondholders will scream because these bonds were rated investment-grade “AAA” based on the government “guarantees”. But they can seek redress from the bankers and rating agency. We have established that the “guarantees” were really “letters of support” signed by the Minister of Transport. No doubt, they could be “construed as guarantees” but the Ministry of Transport has no authority to issue government guarantees. Only the Ministry of Finance can do that. Surely the bankers and rating agency were aware of this fact? Without the “guarantee”, the bonds would have warranted a much lower rating.
For newcomers, click here for earlier posts on the PKFZ scandal.
Where do we go from here? The emotional will say we have spent too much to abandon the project.
But rational, standard investment practice is to look forward. Forget the costs already incurred. They are already sunk. What matters is what you can get in the future. And the future, based on Port Klang Authority’s “optimistic” assumptions is a further outlay of RM8.5bn over the next 42 years. We will start making money only in 2051.
Is it worth it? I can’t imagine any sane businessman, or government, for that matter, embarking on an investment with a 42 year payback period, and that too on optimistic projections.
So, the government really should consider an exit strategy. There are many alternatives for RM8.5bn. RM8.5bn is sufficient to build 340,000 low-cost houses. Or 30,000 students can have full scholarships for overseas studies. Or PLUS and LITRAK can be privatized, saving the government billions in compensation to the toll concessionaires and reducing the burden on motorists.
Transport Minister Ong Tee Keat, who is away in France for unspecified reasons, has characterized the proposal that the government cut losses and close down PKFZ as “a premature statement by politicians who think they can make well-informed financial decisions based on a few hours of looking through the PKFZ report”. He said he will let “the financial consultants and management experts work out a more viable solution based on further in-depth studies before a more structured approach and solution is implemented”.
So, another round of studies and fees. But you can’t conjure money from nothing. The fact is based on Port Klang Authority’s own forecasts, a cashflow deficit to 2051 is projected, and that is based on assumptions deemed ‘optimistic’ by reporting accountants PricewaterhouseCoopers.
The core problem is PKFZ was built too fast and at inflated costs. So you have underutilized facilities and punitive interest payments, including on the instalments due to turnkey developer Kuala Dimensi Sdn Bhd (KDSB). The cost base could be addressed if turnkey developer KDSB is taken to task. I would expect the legal team to comb through the various agreements and find a way to reduce the payments due to KDSB.
Doing so, though, would likely result in KDSB not being able to meet its own debt obligations. Bondholders will scream because these bonds were rated investment-grade “AAA” based on the government “guarantees”. But they can seek redress from the bankers and rating agency. We have established that the “guarantees” were really “letters of support” signed by the Minister of Transport. No doubt, they could be “construed as guarantees” but the Ministry of Transport has no authority to issue government guarantees. Only the Ministry of Finance can do that. Surely the bankers and rating agency were aware of this fact? Without the “guarantee”, the bonds would have warranted a much lower rating.
For newcomers, click here for earlier posts on the PKFZ scandal.
Wednesday, June 17, 2009
PKFZ scandal – Printer-friendly report available
The PricewaterhouseCoopers (PwC) report on the PKFZ debacle is now available at Kit Siang’s blog (in the right-hand side panel). This version is more user-friendly and in accordance with the principles of accountability and transparency than the one that was available at the Port Klang Authority (PKA) for 2 weeks only. The PKA version did not allow for hard-copies to be printed.
Reminder: PLUS can be privatized at ZERO incremental cost to the taxpayer
Someone is circulating a story, staying PLUS cannot be privatized because it will “anger East Malaysian Barisan Nasional component parties which control 40% of the coalition.” (Edge Daily June 10)
May I remind you of the DAP proposal to privatize PLUS, at zero cost to the tax-payer, and which we have offered completely free for the benefit of the public. No fees a’la PKFZ.
By the way, the RM8.5bn it will take to keep PKFZ running over the next 42 years is sufficient to privatize PLUS, and Litrak! Based on Port Klang Authority’s own assumptions, which reporting accountants PricewaterhouseCoopers has termed ‘optimistic’, PKFZ will be cumulative cashflow positive only in 2051. I don’t know about you, but I will most likely be dead by then. I would take a toll-free North-South Expressway and LDP which I can enjoy immediately over PKFZ, which may or may not actually make money in 2051.
May I remind you of the DAP proposal to privatize PLUS, at zero cost to the tax-payer, and which we have offered completely free for the benefit of the public. No fees a’la PKFZ.
By the way, the RM8.5bn it will take to keep PKFZ running over the next 42 years is sufficient to privatize PLUS, and Litrak! Based on Port Klang Authority’s own assumptions, which reporting accountants PricewaterhouseCoopers has termed ‘optimistic’, PKFZ will be cumulative cashflow positive only in 2051. I don’t know about you, but I will most likely be dead by then. I would take a toll-free North-South Expressway and LDP which I can enjoy immediately over PKFZ, which may or may not actually make money in 2051.
Sunday, June 14, 2009
Irony: Former chairman of scandal-hit PKFZ launches standards boards!
Deputy Finance Minister Datuk Chor Chee Heung launched Malaysian Institute of Accountant’s new standards boards on June 9.
Datuk Chor had once been chairman of scandal-hit Port Klang Authority (PKA). But, he said, “Other than visiting the PKFZ and receiving reports pertaining to the development of the PKFZ … at every board meeting … I was never involved in any other activities on the PKFZ.” (Edge June 10).
A strangely hands-off approach given that the Auditor-General himself had raised warning points as early as May 2004 and as the cost ballooned 6-fold from under RM2bn to RM13bn and counting … And this man is now Deputy Finance Minister.
Directors are supposed to exercise diligence and oversight, even more so in the case of government bodies like PKA which ultimately belong to the taxpayers. Yet, Datuk Chor seems to think merely receiving reports is sufficient fulfilment of his director duties.
Somewhat ironic then that he officiated at the launch of the Audit and Assurance Standards Board and Ethics Standards Board of the Malaysian Institute of Accountants at no less than the headquarters of the Securities Commission.
“Honesty, integrity, transparency and accountability are the key words in good corporate governance,” said Chor according to the Sun on June 10.
Those words ring hollow in the wake of PKFZ.
Besides fulfillment, or the lack of, of his director duties, Datuk Chor was also in a conflict of interest situation. Reporting accountants PricewaterhouseCoopers noted Datuk Chor was also deputy chairman of Wijaya Global Sdn Bhd, which was linked to a key beneficiary of contracts signed with PKA when he was PKA chairman.
Datuk Chor had once been chairman of scandal-hit Port Klang Authority (PKA). But, he said, “Other than visiting the PKFZ and receiving reports pertaining to the development of the PKFZ … at every board meeting … I was never involved in any other activities on the PKFZ.” (Edge June 10).
A strangely hands-off approach given that the Auditor-General himself had raised warning points as early as May 2004 and as the cost ballooned 6-fold from under RM2bn to RM13bn and counting … And this man is now Deputy Finance Minister.
Directors are supposed to exercise diligence and oversight, even more so in the case of government bodies like PKA which ultimately belong to the taxpayers. Yet, Datuk Chor seems to think merely receiving reports is sufficient fulfilment of his director duties.
Somewhat ironic then that he officiated at the launch of the Audit and Assurance Standards Board and Ethics Standards Board of the Malaysian Institute of Accountants at no less than the headquarters of the Securities Commission.
“Honesty, integrity, transparency and accountability are the key words in good corporate governance,” said Chor according to the Sun on June 10.
Those words ring hollow in the wake of PKFZ.
Besides fulfillment, or the lack of, of his director duties, Datuk Chor was also in a conflict of interest situation. Reporting accountants PricewaterhouseCoopers noted Datuk Chor was also deputy chairman of Wijaya Global Sdn Bhd, which was linked to a key beneficiary of contracts signed with PKA when he was PKA chairman.
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