Sunday, January 25, 2015

You are cute, YB Ong Kian Ming

When I read MP Serdang YB Ong Kian Ming's press statement which was picked up by the media - How can PM Najib convince sceptics about his budget revisions when he himself can’t get the figures right? - I knew for sure that this can't be true. Ministry of Finance has one of the best line up of Government officials in the service. Malaysia’s Treasurer General, Tan Sri Irwan Serigar, is well known for his eye for details and extremely alert when it comes to numbers, fiscal policies, public documents and the Prime Minister's speech.

First, YB Ong claimed that PM was inconsistent in his Special Address on Budget 2015 version 2.0 when he said "PM Najib announced that development Expenditure of RM48.5 billion for 2015 will be maintained and spent. This statement by PM Najib is highly confusing since in his 2015 Budget Speech, the development expenditure was announced to be RM50.5 for 2015."

I believe YB Ong was overexcited to "say something" till he overlooked the details. The Development Expenditure (DE) can be broken down into 5 parts:


No
Development Expenditure (DE) 2015
RM  billion
1
Economic
29.3
2
Social
12.6
3
Security
4.9
4
General administration
1.7

Total DE budget and expected to be spent
48.5



Plus
Contingency
2.0

Total DE plus contingency
50.5


The Prime Minister was not wrong when he said that the DE budget of RM48.5 bil that has been allocated will be spent. This allocation has been earmarked and allocated to be spent on key projects that will generate growth.

It is important to note that the contingency budget under DE allocation is only meant for contingency situations, something I believe that the Prime Minister cannot openly say “it will be spent!” at this point in time. Just for YB Ong's sake, here's the Oxford Dictionary's definition for contingencies - "A future event or circumstance which is possible but cannot be predicted with certainty".

The commitment given by the Prime Minister, Ministry of Finance and the Economic Planning Unit that economic, social, security and other projects under the Development Expenditure will be spent should be lauded. It is a sign that should be taken positively because the Government is not sacrificing economic development in these challenging times.

Next, YB Ong went on to say that Treasury's Estimates of Government Revenue 2015 document calculated oil price at USD 105 per barrel however the Prime Minister used the figure USD100 per barrel in his Special Address/Budget 2015 version 2.0 on Tuesday. I doubt Tan Sri Irwan Serigar will make this blunder so I checked the documents. Let's compare the two:

Estimates of Government Revenue 2015 by Treasury (Page 7, Item 31)
…. Anggaran yang lebih rendah disebabkan jangkaan purata harga minyak mentah (Tapis) yang sederhana daripada USD110 setong pada 2014 kepada USD105 setong pada 2015….


PM's Special Address/Budget 2015 version 2.0
In 2014, Dated Brent reached its highest level at USD115 per barrel on 19 June. Global crude oil prices have since plummeted by more than 50%. Consensus among economists is that the forecast price of USD100 per barrel used in the 2015 Budget is no longer realistic. They now estimate the average oil price in 2015 to range from USD40 to USD70 per barrel. The Government has therefore revised downwards its forecast for the average baseline oil price to USD55 per barrel for 2015.


This is a case of using Brent vs Tapis blend oil prices.

It seems to me that the Prime Minister was being consistent in his speech when he used Brent crude oil estimates (USD100 per barrel) which is normally 6% to 7% lower than the Tapis blend (USD105 per barrel) as used in the earlier 2015 Treasury document.

So why did YB Ong decided to mislead the public into thinking that our Prime Minister and the Ministry of Finance failed to get the figures right? Is this a case of “must say something, no matter what” or “any publicity is good publicity”? You are cute, YB Ong.

Wednesday, August 13, 2014

Trust, deception and betrayal in Selangor

With all the issues in Selangor, Pakatan Rakyat strategists know that the numbers don't look good. Pakatan Rakyat will want to avoid State Elections now.

Lim Kit Siang is right when he said that the day PAS Central Committee members meet on Aug 17 to decide whether or not to support Khalid Ibrahim as MB Selangor, it is actually D-Day for Pakatan Rakyat's future.

If PAS supports Dr Wan Azizah, then Pakatan Rakyat will avoid State Elections but if PAS supports Khalid Ibrahim, State Elections can happen with the help of Barisan Nasional and DAP's Hannah Yeoh.

Yes, it is true. PAS, BN and Hannah Yeoh.

Recently, PKR's Saifuddin Nasution and DAP's Tony Pua said Khalid Ibrahim no longer had the support to continue as MB. They want Khalid Ibrahim to prove that he has the support of the majority of the assemblymen. Perhaps Saifuddin and Tony should ask themselves if they are sure that Khalid has lost the support of the majority of the assemblymen.

DAP has 15 seats, PKR 13, PAS 15, BN 12 and of course 1 independent (Khalid Ibrahim himself).

Do not forget, DAP's ADUN Hannah Yeoh is also the Speaker of the State Assembly. The Speaker of the House cannot vote unless there is a tie. Even if Saifuddin and Tony are both confident that their ADUNs like Teng Chang Khim will toe the line, there are only 27 votes against Khalid Ibrahim (14 from DAP and 13 from PKR).

Both Saifuddin and Tony know that PAS has yet to decide whether or not it would support Khalid as MB. PAS will only decide on August 17. What will PAS do? If PAS agrees to back Dr Wan Azizah, Khalid Ibrahim's career is over. This way, Pakatan Rakyat will remain in power and Selangorians will have to wait for GE14 in 2017/18 to punish Pakatan Rakyat.

But if PAS decides to go with Khalid Ibrahim, then BN must think carefully if they want to team up with PAS and Khalid Ibrahim. BN has nothing to gain and much to lose. Unless of course, BN wants to gamble and hope that Hannah Yeoh will resign to force Khalid Ibrahim to dissolve the State Assembly.

Let us assume that Khalid Ibrahim, BN and PAS do form an alliance.

PAS, BN and Khalid Ibrahim will have 28 votes out of a maximum possible 55 votes in the State Assembly (Speaker can't vote). That should be sufficient for Khalid to command the confidence of the majority of the State Assemblymen (28 vs 27, Speaker stays out).

But the drama doesn't end here.

The fate of Khalid Ibrahim and Pakatan Rakyat then lies in the hands of Speaker Hannah Yeoh.

If Hannah Yeoh resigns as Speaker of the House and return to the DAP bench, DAP - PKR will have 28 votes vs the 28 votes from the PAS - BN - Khalid Ibrahim alliance. This is a 'hung assembly'.

Not only that, Standing Order 3 states that "whenever there is vacancy in the office of Speaker whether as the result of a dissolution of Assembly or otherwise the Assembly shall, as soon as a quorum is present, proceed to elect a Speaker".

The State Assembly must choose a new speaker in the next State Assembly meeting.

Both sides are expected to nominate one candidate each to replace Hannah Yeoh but neither is likely to win. When that happens, the State Assembly's Standing Order 4 (6) (c) comes into the picture. The rule states that "Where at any ballot between two candidates the votes are equal, another ballot shall be held and if at such subsequent ballot the votes are equal, the determination shall be by lot which shall be drawn in such manner as the Clerk shall decide".

Whoever wins will not command support from the other side and we are back to square one.

There is no way Khalid Ibrahim will see his "legacy" go down to this political impasse especially in the State Assembly. The State Government is at risk of facing a shutdown especially when the State Budget is coming up in November. I doubt the Palace will allow this to happen.

Khalid Ibrahim will have no choice but to dissolve the State Assembly and his career is as good as over. Of course, he will also drag Pakatan Rakyat down with him.

Pakatan Rakyat will have to face the full wrath and fury of the Selangor voters for the political circus and issues that have been haunting us for years.

Now, do you think Hannah Yeoh will resign for these to happen? What will DAP tell her to do?

Interesting days ahead and one thing is for sure, politicians have the ability to display the finest art of trust, deception and betrayal.

Tuesday, August 12, 2014

Why spend RM1.3 bil on EDL, YB Wong Shu Qi?

The Eastern Dispersal Link (EDL) is an 8.1km expressway that connects the end of the North-South Expressway (NSE) at Pandan Interchange to the new Bangunan Sultan Iskandar, Custom, Immigration and Quarantine (CIQ) in the city centre. From Pandan Interchange to Bakar Batu Interchange, is a 4.1km dual three lanes at-grade, and from Bakar Batu Interchange to the CIQ, is the elevated 4km dual three lanes with wide shoulders.

The total construction cost of RM1.3 billion did not receive any public funds, except for a few reams of paper and printing ink that were incurred by the Works Ministry and the local authorities which shouldn't exceed RM1000.

This project had some challenges and high costs along the way. It wasn't so straight forward. A total of 146 lots covering about 59 hectares had to be acquired to make way for the project. The land acquisition cost incurred by the concessionaire, MRCB Prasarana Sdn Bhd, was approximately RM254 million.

To avoid any potential Excel error and further embarrassment to DAP, I must help Shu Qi to calculate this. The average land acquisition cost per hectare is RM4.3 mil. Break it down further, that is approximately RM40 per square foot.

But that's not all. There were villagers and squatters which MRCB had to manage. There were 424 families who were affected. MRCB allocated RM13,680 per family that was sufficient to cover some rent for a couple of years. On top of this, the families were also given a one-off RM2,000 in moving out expenses. That's another RM6.65 million added on to the project cost. I know that's not much to DAP. So, let’s laugh it off, shall we, Shu Qi?

From what I understand, the EDL project which costs RM1.3 billion has two liabilities – senior sukuk at RM845 mil and junior sukuk at RM199 mil. The monthly loan repayment should be approximately RM 10 mil per month. I stand corrected on this but let’s assume that it is true for argument’s sake.

Assuming that the annual toll-able traffic is 11 mil vehicles and they all pay an average of RM15 (both ways), the toll revenue collection should be approximately RM165 mil.

Less annual debt repayment of RM120 mil and O&M costs of RM10 mil (assume), EDL should be earning approximately RM35 mil per annum only.

I was told that the Service Concession Asset (SCA) of EDL is now valued at RM1.32 bil. If that’s true, with my limited accounting knowledge, the return on SCA is just 2.6%.

The ratio will drop if the toll-able traffic in EDL falls but of course, that’s not the Government’s problem since it is a private entity.

Should the Government buy EDL?

In 2012, the Government made an announcement that they are in the negotiations stage to take over EDL from the concessionaire, MRCB Prasarana Sdn Bhd. The Prime Minister said that there is a possibility that EDL will be a freeway.

They wanted to but clearly they have abandoned it. Question is, why?

If you are the Finance Minister, Shu Qi, will you approve RM1.3 billion to benefit 50,000 people who use the EDL to work in Singapore and earn Singapore dollars? That’s an average of RM26,000 per person.

If one can afford to drive a car all the way into Singapore, the incremental toll rate of RM13.60 (from RM2.90 to RM16.50) is less than the cost of a plate of chicken rice in Singapore. If you are taking the bus, the incremental cost is just RM11.00 per bus or RM0.42 per pax (both ways) in a 26 seater bus.
We are better off spending the money elsewhere and I am sure the users of EDL will understand this too

In his article - “Who is to blame for Selangor water woes?”, YB Khairy Jamaluddin said “Under the recent MoU, signed on Feb 26, the Federal Government agreed to provide a sum of RM9.65bil to acquire the water companies and release all water assets to the Selangor Government to operate.”

Don’t you think the RM1.3 billion is better spent in helping Pakatan Rakyat to resolve the water crisis in Selangor? Perhaps, that’s where the money really went to but you and I will never know, Shu Qi.