Archive for the 'Economy' Category

12
Aug
17

ECRL folly bound to fail and burden the nation

ECRL folly bound to fail and burden the nation

COMMENT | The East Coast Rail Line (ECRL) is being touted to Malaysians as a world-class “game changer” which will accelerate development in the East Coast states of Peninsular Malaysia. Unfortunately, there is little evidence that it will do so, and the rationale for such claims are dubious, to say the least.

We have been told that RM55 billion is being invested in ECRL, which will be completed by 2024. All over the world, such mega-projects are notorious for cost overruns, and there is no reason to believe that this project will be the exception to the rule.

The justification for the ECRL is that it will carry almost 60 million tonnes of freight yearly by 2035. This is incredible because even KTM only carries about 6 million tonnes per annum with its current nationwide network. If the projected massive surge in freight tonnage does not materialise, the project will lose even more, meaning that taxpayers for generations to come will have to massively subsidise the ECRL.

ECRL is supposed to greatly benefit the country in so many incredible ways as to defy simple logic. But will there be enough passenger traffic to support a high-speed rail link? What kind of cargo needs such a costly high-speed haulage connection. And which high-speed railway in the world stimulates so many businesses and jobs in all the towns it will pass through, as claimed.

Will the ECRL be an expensive ‘white elephant’ paid for by Malaysians for many years to come? The Kemaman-Kuantan rail link, completed several years ago, has hardly been used to date. Are we supposed to be thankful that it cost much less than the ECRL?

Even Wan Saiful Wan Jan, the libertarian chief executive of the Institute for Democracy and Economic Affairs (IDEAS) who endorsed the Forest City project in Johor Baru, found the ECRL claims difficult to swallow in a recent article arguing for improved governance generally, especially to manage investments from China.

Honest critics are already being accused of wanting to deprive the East Coast states of development. But those with longer memories know how much Kelantan has been deprived of federal funds by Putrajaya, while Terengganu has been denied petroleum revenues and its investment fund was ‘hijacked’ to become the now notorious 1MDB.

China firms to profit

Of course, the deal will be good for some Chinese state-owned enterprises. The contract was given to the China Communication Construction Company (CCCC) after direct negotiations, without any open tender, although Malaysian companies have delivered on rail projects before. CCCC will be required to subcontract to local firms, but will remain the main contractor.

As we should have learnt from earlier arrangements, foreign firms find ways and means to bring their preferred partners in with them, using local partners to fulfil such requirements as meaningful technology transfer. The international success of Ingress (e.g., in Rayong, the ‘Detroit of Thailand’) contrasts sharply with the minimal development of Malaysian technological capacity and capabilities by many other Proton vendors due to their (mainly Japanese) principals’ practices.

The ECRL will be funded by a loan from China’s state-owned Exim Bank, with the Malaysian government, i.e., taxpayers, serving as guarantor. Thus, the risk and liability will be completely borne by Malaysia.

So, Malaysia will essentially be borrowing money from a China bank to pay a China company to build ECRL. Very little of the loan will get to Malaysia as the Exim Bank loan will be used to pay CCCC. Malaysians will bear all the risks for ECRL while the China firms are guaranteed profits by Malaysians.

Whether or not the ECRL is profitable, we will still have to repay the loan with interest. Malaysia does not have to pay during the first seven years, but after that, we have to settle it within two decades. So financially, this is essentially a loan for which we Malaysians will exclusively bear all the risks.

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ECRL folly bound to fail and burden the nation
Jomo KS
11 Aug 2017 – malaysiakini

10
Aug
17

Don’t try to fool Malaysians, public funds used to settle 1MDB debts

Johari should not bluff that government has not given 1MDB public funds to settle debts, says DAP’s Pua

Media Statement by Tony Pua, DAP National Publicity Secretary and Member of Parliament for Petaling Jaya Utara in Kuala Lumpur on Wednesday, 9 August 2017:

Second Finance Minister, Dato’ Seri Johari Abdul Ghani should not bluff Malaysians by stating that the Government “has never given public funds to 1MDB to settle its debts”

According to Bernama yesterday, Second Finance Minister, Dato’ Seri Johari Abdul Ghani said that “the Finance Ministry (MoF) has never given any public funds to 1Malaysia Development Bhd (1MDB) to help settle its debt”.

The Minister must think that Malaysians are complete and utter idiots to be served what is one of biggest piece of cow dung amongst all the attempts to cover up the 1MDB scandal.

The Ministry of Finance has on so many occasions come to the rescue of 1MDB over the past 2 years involving billions of ringgit of tax-payers’ monies, and yet Dato’ Seri Johari has the cheek to tell us that the MoF “has never given any public funds to 1MDB”.

Among the most clear-cut examples are the RM800 million loan from SOCSO and another RM2.4 billion Bandar Malaysia sukuk bond which the MoF have assumed as a result of taking over TRX City Sdn Bhd and Bandar Malaysia Sdn Bhd.

The Auditor-General has reported that nearly all of the above proceeds of the 1MDB borrowings were never used for the development of the 2 property projects above. Hence when MoF agreed to take over the property projects and assumed the liabilities, MoF has effectively “settled” 1MDB’s RM3.2 billion debt problem.

What’s more, when 1MDB had originally sold a 60% stake in Bandar Malaysia to an Iskandar Waterfront Holdings (IWH) Sdn Bhd-led consortium, they had collected, and presumably spent the RM741 million deposit which has been paid upon the signing of the sale and purchase agreement in December 2015.

However, when MoF terminated the sale due to IWH payment defaults, it was MoF who coughed up the RM741 million to refund the deposit paid by the consortium. If the deposit, should have been refunded at all, it should have been by 1MDB, and not by the Malaysian tax-payers.

The above doesn’t yet include MoF subsidiary or subsidiaries which actually acquired properties from 1MDB in TRX at inflated prices. The irony is, it was MoF who sold the land to 1MDB in the first place at dirt cheap prices.

We understand the conundrum Dato’ Seri Johari Abdul Ghani is facing as the 2nd Finance Minister who has fallen out of favour and having to defend the indefensible regain the Prime Minister’s favour. It is now clear that he has been dropped by Dato’ Seri Najib Razak from handling the 1MDB imbroglio, particularly in the company’s multi-billion dollar dispute with Abu Dhabi’s IPIC.

However, the Second Finance Minister should not go to the extent to telling outright lies to pull the wool over the people’s eyes. Dato’ Seri Johari should not forget his role and responsibility to the people of Malaysia by sacrificing his own integrity and honour.

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Johari should not bluff that government has not given 1MDB public funds to settle debts, says DAP’s Pua
August 09, 2017 – theedgemarkets.com

09
Aug
17

10 reasons why we don’t need RM55 BILLION ECRL

10 reasons why we don’t need RM55b east coast rail link

A QUESTION OF BUSINESS | Why does the country need a double-tracked, electrified East Coast Rail Line (ECRL) from Port Klang on the west coast of Peninsular Malaysia to Kuantan and Tumpat on the east coast – 688 kilometres, to be built at a massive cost of RM55 billion?

Especially since the earlier double-tracking project from Padang Besar, Perlis to Johor Bharu costing a massive RM36 billion is already one of the greatest, if not the greatest, infrastructure failures in Malaysia ever?

Proceeding with such a dubious project raises many questions over the competency and integrity of the government which awarded this project without a tender process to the China Communications Construction Company (CCCC), a China state-owned company which was barred from World Bank projects in 2009 because of alleged fraudulent practices in other countries.

Also, by now, China’s efforts to further its own interests under the One Belt One Road (OBOR) project is now well-known. Many, including this writer, consider it to be a thinly disguised plan using Chinese and other concessional financings which will strengthen China’s role in international trade, industry and connectivity, often at the expense of other countries.

China’s vision for the ECRL seems to be for the link to provide connectivity via rail between Port Klang and Kuantan for cargo to be moved back and forth which will save transport costs for goods headed to and out of China. But at RM55 billion, the number of goods moved has to be astronomical for it to be economically feasible.

Here are 10 reasons why that ECRL project should absolutely not proceed.

1. Economically not feasible. At RM55 billion, it’s the largest infrastructure project ever for Malaysia. If we assume a required 10 percent rate of return on the investment, the ECRL has to generate an income, not revenue, of RM5.5 billion a year. Assuming income is even 20 percent of revenue, then revenue needs to be a massive RM27.5 billion! The impossible task ahead is illustrated by this: In 2016, Singapore’s port had a turnover of S$3.7 billion (RM11.7 billion) and a profit of S$1.2 billion.

2. Earlier RM36 billion double-tracking has failed spectacularly. Let’s look at the utter failure of the RM36 billion double-tracking venture initiated under the Mahathir regime. Rail operator KTM had a revenue of RM1.1 billion in 2016 from which it obtained a cash flow of a mere RM166 million. Revenue is only 3 percent of the cost of double-tracking while operating cash flow is a mere 0.5 percent, not anywhere near enough to cover even interest expenses. For a 10 percent return on costs, cash flow needs to rise over 20 times to RM3.6 billion a year. This is the backbone north-south route of Peninsular Malaysia. How is the ECRL going to fare any better?

3. Expensive. Not only is the ECRL extremely expensive in absolute terms, it is also very expensive in terms of cost per km at RM80 million compared to the Gemas-Johor Bharu double-tracking stretch of RM45 million per km. However, this is not strictly comparable given that the ECRL goes over hilly terrain. But analysis is seriously hampered by the lack of information.

4. Unnecessary. Such a large investment can only be justified if there is a great economic benefit. Economically it will depend on one major customer – China – which is looking to export and import goods more cheaply by ferrying goods between Kuala Lumpur and Kuantan via a rail to cut shipping costs.

5. Does not serve the country’s purpose. Such a move does not serve the country’s purpose but instead represents the diversion of badly needed and scarce resources to a project that could potentially fail and fail big and will benefit China directly.

6. Opportunity for patronage and corruption. By inflating project costs, there are plenty of opportunities for patronage and outright corruption, representing a huge risk to the country and further erosion of government governance and accountability. Reports have flourished saying that amounts from overpricing the contracts could find its way into 1MDB to fill the hole in its debt obligations. Considering that 1MDB is in a rather bad state and needs rescue, such reports cannot be dismissed outright.

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10 reasons why we don’t need RM55b east coast rail link
P Gunasegaram
8 Aug 2017 – malaysiakini

27
Jul
17

Najib pressing the panic button

Najib pressing the panic button

THAT Prime Minister Najib Razak took to running down and lambasting Pakatan Harapan in the presence of some 900 local and foreign business leaders and investors is most unfortunate and smacks of desperation. He has indeed pressed the panic button!

Denouncing Dr Mahathir Mohamad’s legacy as being rife with cronyism and corruption is most ironical. When the entire world watches how puppet master Jho Low embezzled billions of dollars from 1MDB and laundered the proceeds around the globe, Najib should have exhibited more finesse and decorum.

The “bare-faced lies and misinformation” he accused the opposition of having manufactured “to damage Malaysia’s economy” are best rebutted by the conviction of few top bank officials in jurisdiction like Singapore and Abu Dhabi.

The three complaints of the United States Department of Justice speak for all. Lest he chooses to suffer selective amnesia again, will the true MO1 please stand up!

Never mind the pernicious corruption and endemic nepotism that have been very recently exposed locally in FGV and Mar, to cite a few, and the diversion of public funds from the likes KWAP and SRC to cover debt payment gaps. That his administration has a penchant for inflating project cost beyond market norms is an open secret.

In all fairness, we perhaps have no qualm about recognising whatever he has achieved. However, truth be told, his achievement pales and really nothing to shout about, when all the “so-called reforms” were unmistakably short-lived and aborted. Regrettably, it gave way to greed and dishonesty of the oligarchy, and fear of his own party.

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Najib pressing the panic button
26 Jul 2017 – Malaysian Insight

25
Jul
17

Is MRT’s true cost RM100 billion and who benefits from it, ask critics

Is MRT’s true cost RM100 billion and who benefits from it, ask critics

TODAY, the first phase of Malaysia’s largest infrastructure project, the MRT Line 1 Sg Buloh-Kajang line becomes fully operational.

But debate continues to rage among lawmakers and the Najib administration about its true cost and whether – with its hefty price tag – it will benefit the public in the end.

As pointed out by Pandan MP Rafizi Ramli, the fact that a dispute has erupted in the first place over the actual cost of the project shows that there is little transparency over something with huge ramifications for the public.

If the Najib administration’s figures on the true cost of the MRT are questionable, what certainty is there that other mammoth projects, such as the KL-Singapore High Speed Rail and the East Coast Railway, will be priced accurately?

When Prime Minister Najib Razak announced the project in his Budget 2011 speech, he quoted a RM40 billion price tag.

It was understood that this was for all three lines – MRT SBK, Serdang-Putrajaya (MRT SSP) and the Circle Line – all of which are slated to be ready by 2020 at a total length of 141 km.

Chapter five of the 2011 Economic Transformation Plan handbook states that a preliminary cost of the whole project would be RM47 billion.

Of that total, RM36 billion would be for infrastructure and RM2 billion for expedited land acquisition. An additional RM9 billion would be needed for operating assets, such as rolling stock.

In October 2015, questions began to be raised over these early RM40-47 billion estimates, when DanaInfra Nasional Bhd (DanaInfra) said the MRT Line 2 alone was estimated at RM42 billion.

DanaInfra is the government’s special funding vehicle for infrastructure projects tasked with raising funds for them. It announced that it was raising RM50 billion through a debt programme to pay for MRT Line 1 and MRT Line 2.

But in December 2016, when Najib launched the MRT Line 1 (SBK), Rafizi said the true cost of the whole scheme would be twice the amount first quoted.

Najib said the 51km MRT Line 1 cost RM21 billion and the government had saved RM2 billion from the original price tag of RM23 billion.

Rafizi said based on calculations from publicly available documents, all three lines could cost a total of RM124 billion. This is a far cry from the RM40 billion first announced by Najib or the RM47 billion stated by the ETP.

On December 24, 2016, the owner of the MRT project, Mass Rapid Transit Corp Sdn Bhd (MRT Corp) released a statement saying that the earlier RM40 billion was “no longer relevant”.

“We wish to make clear that this figure was derived from a conceptualised proposal back in 2010. The amount did not include electric trains and related systems, as well as land acquisition,” MRT Corp said.

The RM40 billion price tag was originally submitted in a 2010 private sector proposal to the government for an MRT project to be built concurrently, based on 2009 prices, the company said.

It said in 2012 the MRT Line 1 would cost RM23 billion and that the second line was estimated at RM32 billion.

Feasibility studies for the MRT Line 3 are still being carried out.

Rafizi is sticking to his original assessment that the total cost of the project would be about RM100 billion.

MRT Corp’s own revelations showed that two out of its three lines are already costing more than the RM40-47 billion announced by the Najib administration.

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Is MRT’s true cost RM100 billion and who benefits from it, ask critics
17 Jul 2017 – Malaysian Insight

19
Jul
17

Harapan vows to scrap GST within 100 days of taking power

Harapan vows to scrap GST within 100 days of taking power

Pakatan Harapan today released its plans for the first 100 days of taking over Putrajaya.

Reading the coalition’s joint statement, newly-appointed Harapan chairperson Dr Mahathir Mohamad announced that it will abolish the implementation of the Goods and Services Tax (GST), among others.

Below is the list of things it plans to do:

  • Stabilise the price of petrol
  • Focus on efforts to alleviate the rakyat’s burdens
  • Start a thorough reform process of key institutions
  • Fight corruption to its roots
  • Form a royal commission of inquiry (RCI) into the 1MDB scandal
  • Rehabilitate the Federal Land Development Authority (Felda)

Announcing this alongside its leadership line-up, Mahathir said the coalition is committed to a common goal of toppling the Najib Abdul Razak administration.

The announcement was made at a press conference past midnight on Friday at PKR’s headquarters in Petaling Jaya.

Two-term limit for PM

The partner parties DAP, PKR, Parti Amanah Negara and Parti Pribumi Bersatu Malaysia will implement a two-term limit for the prime minister’s post.

They also agree to “cancel and correct” any breach of laws by the current government, which impact the people’s interest.

“This includes reinstating public funds which were lost through the 1MDB mega scandal,” the parties said in a declaration read out by Mahathir.

They also agreed to work towards releasing all political prisoners and drop all charges against them, as well as reforming key laws and institutions to prevent abuse of power.

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Harapan vows to scrap GST within 100 days of taking power
14 July 2917 – malaysiakini

12
Jun
17

‘Najibnomics’ is just bollocks

‘Najibnomics’ is just bollocks

COMMENT | Economics, as anyone who has had the benefit of studying it, is divided into two streams: microeconomics and macroeconomics.

Najibnomics does not understand the distinction between the two, yet jumped right in to transform Malaysia.

Not surprisingly, the transformation produced a slew of feel good numbers, what is otherwise known as ‘Syiok Sendiri Economics’ (SSE), that verges on a farce.

To begin with, inflation is not tracked holistically. Thus annually, the official inflation ranges between 4.5 percent to 5.5 percent, which effectively negates any meaningful growth of the same.

Not surprisingly, Malaysia is caught in a middle income trap, with private consumer debt of some 80 percent of the total GDP.

Invariably, the Malaysian economy is now within a whisker of being wiped out by any property burst in China, or, the explosion of the debt bomb, again in China.

By taking Malaysia closer to China, in the name of being integrated into China’s One Belt One Road, Malaysia has imported all the risks that now confront this massive project.

Indeed, Moody’s has downgraded the credit rating of Hong Kong the week before last, on the ground that Hong Kong has embraced the Belt and Road initiative without a clear sense of where the risks may be.

Malaysia, for the lack of a better word, walked where it should not thread blindly, jumped when it shouldn’t be hopping in joy.

China’s debts 250 percent of its GDP

Instead of spreading our risks, by working closely with all OECD countries, which formed the developed economy, Putrajaya hung on the coat tail of Beijing, at a time when China’s private and public debt combined have nearly reached more than 250 percent of its GDP.

At this rate, the Chinese economy is in the league of US and European economy just before 2008-2009 great recession. Lim Sian See, who remains anonymous, thus a black propagandist of Najib, argued that Najib has saved Malaysia.

How can, for instance, a debt of RM44 billion borrowed by 1MDB be used to save a country, indeed, to transform it, when all of the money now is missing, with interest needed to service the dent now verging on few billions a year and increasing?

Najibnomics is bollocks, precisely because it doesn’t know the micro and macroeconomics foundation of Malaysia.

Microeconomically, Malaysian entrepreneurs are bankrupted more easily than any laws in the world. Anyone above a debt of RM50,000 can be declared a bankrupt.

Not surprisingly, the legions of Malay and Chinese entrepreneurs, in an attempt to make a better life for themselves, end up receiving the short end of the stick.

Buy a van to sell to get involved in some cash-based food businesses. If the revenue is not more than what one can afford to repay, the bankruptcy is permanent. And, one thought that hell is eternal.

In Najib’s economic world, hell is already permanent in Malaysia, even before the angel of death comes knocking on one’s door.

Macro economically, Najib has had zero view on currency. Unlike Singapore, that made it a point to strengthen its currency in the mid-1980s, eventually allowing the Singapore currency to be as strong as the Australian and Canadian dollars, Malaysia took to allowing surplus labour from all over the world to invade the country.

Thus, stagnant wages went into a downspin, and Malaysia is now in a race to the bottom to tout its economic advantages. At this rate, it goes without saying that Malaysia has to show that it is more attractive than Myanmar or the Philippines.

Najibnomics are BSnomics pure and simple. It sought to dig a hole in the middle of Kuala Lumpur, borrowed heavily to refill the hole in the heart of the city, allowed tens of billions to be allegedly, stolen or frozen in more than six jurisdictions – all of which for criminal liabilities and money laundering – yet did nothing to repay the debt, except to go to Beijing yet again to ask for financial lifeline and redemption.

If Najib Abdul Razak had graduated in industrial economics in the University of Nottingham, one can see that he hasn’t been following his lectures with any diligence.

Not surprisingly, Najib often allows Professor Kim of the Blue Ocean Fame to tell him how to transform the country. In fact, the cabinet is so clueless, that they assume Blue Ocean implies the need to transform the maritime corridor of Malaysia.

Thus one has Port Klang, Port Carey and Malacca Gateway all within an earshot of one another. And, as if that was not enough, there are Port Tanjung Pelepas, Kuantan Port, Lumut Dockyard, Terengganu inland docking facilities and Penang Port, too.

If Najib is a quarter as wise as what Lim Sian See said, the Malaysian economy is what Hokkiens would call “sie liao” (dead already).

The fact is Najibnomics has and always been about an allegedly a land scam based on over leveraged debt, something he learned from another Larry Low, the father of Jo Lhow, both of whom would probably sink in a sea of spit, if they dared to show their faces anywhere in Penang or Malaysia.

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‘Najibnomics’ is just bollocks
Rais Hussin Mohamed Ariff
7 June 2017 – malaysiakini




Nuclear lessons for Malaysia (Part 1) (Part 2)
BN govt is directing attention to distant past and distant future, in order to distract people from present misdeeds and poor governance
Felda - A picture is worth a thousand words
How the 1MDB Scandal Spread Across the World (WSJ)
We cannot afford ridiculously expensive RM55 Billion ECRL!
All that is necessary
for the triumph of evil
is for good men
to do nothing.

- Edmund Burke
When the people
fears their government,
there is TYRANNY;
when the government
fears the people,
there is LIBERTY.

- Thomas Jefferson
Do you hear the people sing?

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