Sunday, May 24, 2015

1MDB saved us money?

I've not penned my thoughts down in an article about 1MDB since this circus began.

Most of us are short of filing for a missing persons report on 1MDB management. You run the operations on a daily basis, not the Prime Minister. Leaving the Prime Minister and the Government alone when under attacked for your mess is definitely not professional, what more to say with the flip-flop Parliamentary replies that were based on points submitted to the Ministry.

Anyway, after reading the arguments written by independent parties who 'defended' 1MDB recently on online news portals and social media, my fingers became itchy and here I am typing this.

I read that the arguments supporting 1MDB's existence and its hands in the takeover of the IPPs were:

a) 1MDB bought the IPPs.

b) There is a revised power purchase agreement.

c) TNB registers higher profit as a result

d) Malaysian consumers benefit from lower tariff

e) Petronas will not have to incur higher subsidy which benefits only these private companies

f) Consumers are the ultimate winner

g) We should thank 1MDB for saving our country from excessive subsidy granted to IPPs from the earlier regime


I'm not sure if these people are actually experts or consultants but as much as I know with my amateurish knowledge, PETRONAS subsidies do not benefit only these private companies or IPPs. The Government subsidises gas at approximately RM10bil a year annually, depending on gas prices, through Petronas by keeping gas prices below market rates. These subsidies are enjoyed by everyone who uses gas such as the manufacturing sector and of course including TNB and the IPPs.

What's the agenda of these people by singling out that only the IPPs benefited with words like 'mistake done since 1990s' and throwing shots at Tun?

I will give in if you say the point of controversy here is the quantum which TNB pays to the IPPs.

The electricity sector is broken down into three parts - generation, transmission and distribution. Back in the 1990s, Tun wanted to break down the monopoly of electricity generation by TNB after the nationwide blackout.

The only issue was, who was willing to come in to a highly regulated industry? Let's not beat around the bush. When we mix government regulations, politics, and the magic word "demi rakyat" together, it's a no-go zone basically for any investors. I think some of the telco CEOs are hating their jobs now, if you know what I mean.

I've read somewhere that the IPPs were allowed to have returns on investment of 20%. Was that excessive or fair I leave it to you. But just to highlight, the average lending rate in the 1990s were between 8-12% and investors were able to get annualized returns of about 18% from investing in stocks. I don't even want to talk about opportunity costs in construction and properties at a time when Malaysia was booming. While we are on this, isn't it true that TNB also owned shares in the IPPs?

Going back to the 1MDB argument, it seems to me that 1MDB has two objectives only -

(1) to buy over IPPs, sell electricity cheaper to TNB, TNB make more profits

(2) properties such as the development of TRX


I will leave point 2 for another day.

I find it rather amusing to see how 1MDB is being marketed or positioned to be the saviour of the energy sector. Hilarious when I read that because of 1MDB's takeover of the IPPs, the Government saved money and 1MDB charges lower rates to TNB which then increased TNB's net profits. And along the way, the rakyat enjoyed low electricity tariffs.

If that is the case,

(a) At what rates are the IPPs (under 1MDB now) selling to TNB? I take it as 'at a lower rate', but what is it? Cost price, with a profit?

(b) Why are IPPs and Tun branded as though they are the devils while 1MDB are the saviors and TNB the model GLC company? Why do we need to go so far? So, can the rakyat enjoy even cheaper electricity tariffs since TNB is making more money nowadays?

(c) What did 1MDB tell their institutional investors - both local and foreign - whom they sold their bonds to and whom they borrowed money from? Did 1MDB tell them that they are taking their money for them to buy power plants just to earn lesser (kalau ada lah) by selling energy at a cheaper rate to another unrelated company so that it makes more profits and the rakyat pays the same tariff as before? If not, that's a crime. What's that called, intentional criminal breach of trust?

(b) Why did we raise funds by selling bonds to KWAP, EPF and others? So, we actually borrowed money from the rakyat, to buy IPPs, charge lower rates to TNB, suffer losses and liquidity issues, so that TNB makes more profits and maintain the tariff for the rakyat's benefit? I don't get it.


Perhaps a consultant, preferably a financial consultant, and the Treasury can enlighten us on how do we expect to raise funds by selling securities - MGS, GLC bonds, Sukuk etc - in future?

Go back to the drawing back, you. And come back with better answers and argument.

Otherwise, all of us should just shut up and wait for the Auditor General's Report, the single most credible voice in this country which the Prime Minister has tasked to leave no stone unturned in this mess. That's when we talk.

Tuesday, April 14, 2015

I believe

I believe Tun Dr Mahathir had noble intentions when he raised a few questions publicly to the Prime Minister. At his age, what else could he possibly want? Tun spent 3 decades of his life in Government (22 years as PM) and continue to give advice on issues even after his retirement. He only wants what is best for the party and the soil that we stand on today - Malaysia.

I believe the Prime Minister still has the highest level of respect for Tun, judging from his tone and angle during the Soal Jawab. The sacrifices and contributions Tun made in developing unity and growing our economy throughout his years as Prime Minister are engraved in the hearts and memories of many of us. He gave the good years of his life to this country.

I believe Tun's questions on 1MDB were fair. Many are confused with what's happening. But the confusion stem from the complexity of the topic (money markets and corporate finance are dry topics to many) and further complicated by the many statements out there. There have been too many contradicting statements including those from the Treasury and 1MDB CEO. Let's not forget the fact that people also read Sarawak Report and The Edge's stories on this topic. I wonder why the Government or Treasury hasn't setup a 1MDB Taskforce (Comms) just like we always do with other issues. If we are gonna talk, shouldn't we have just one source, one voice and one storyline with solid facts?

I believe that the RM50 billion assets and RM42 billion liabilities are on the table as audited. But we must understand also that 1MDB is losing money with these assets and investments. Soon, the net assets will become net liabilities if we do not restructure not just the debt but also the subsidiaries and the operating procedures soon enough. We cannot depend only on monetizing some of the 'idle' assets quickly, such as Tun Razak Exchange. We must never forget those companies and transactions that cause 1MDB to be in the red. Otherwise, profits from TRX will just end up covering the losses elsewhere. I know we have the expertise in Government, Treasury and other investment arms to help turnaround this into a success and I believe we can.

I believe the Prime Minister has taken bold steps and was being transparent in his actions on 1MDB. He made the right move when he ordered the Auditor General to verify 1MDB accounts after which the report will be passed on to the Public Accounts Committee which comprises of Opposition leaders like Tony Pua. Let's be fair and honest here. Did you expect the Prime Minister to make this move? Surely not if you think he has something to hide. Whatever reasons or explanation the Prime Minister gives on 1MDB will never be accepted by critics now. As supporters of the Government, the party and as concerned citizens, we should wait for the Auditor General's Report on 1MDB before we comment further.

I believe we should applaud the Prime Minister when he agreed with UMNO Youth's request that the audit should be thorough and completed as soon as possible. This is the single, most credible piece of document that could answer all questions out there, hopefully, and we must have it on the table fast.

I believe the Economic Planning Unit of both Federal and State Government of Johor should come out publicly to share and explain the cost benefit analysis for the proposed crooked bridge (within the borders of Malaysia). The Government can afford a bridge but the benefits must far outweigh the costs for anyone to invest in it. Besides environmental and legal issues, of course. Surely someone has done some studies on this project, no? We have heard the argument that the bridge will allow ships of certain sizes to pass the Straits of Johor and it could boost the shipment volume in Tanjung Pelepas, Pasir Gudang and perhaps Kuantan. But there might be other issues and challenges that we don't know and the agencies should not leave the Prime Minister in the shooting range. Speak up!

I believe the Prime Minister when he said that he did not order anyone to kill Altantuya and he has never met or known her. Swearing on the Quran is not a small matter. It is a grave and heinous sin if the truth is otherwise. And there is not a shred of evidence which links the victim to the Prime Minister. The closest we have seen was the doctored photo by an Opposition leader.

I believe Tun still cares for the Prime Minister and perhaps wanted to see a different side of him. The Prime Minister and Barisan Nasional must enter into the combative mode - attack and not back paddle to defend ourselves all the time. We must make a stand on policies and key issues, make it loud and clear. We need to focus on the details in whatever we do and whenever we communicate. After all, in this age of digital and social media where information flows freely and perception is key in politics, we should be detailed, fast, strong and articulate or risk falling behind.

I believe with Tun's vast experience in politics and Government, if both could still work with each other, Barisan Nasional will be at its strongest when that happens.

Saturday, March 21, 2015

11 Days from GST

We are 11 days away from the implementation of GST. You might think that the Government is going to make more money out of you. But did you know that, as a trade off, the Government stands to lose about RM20 bil from you for the implementation of GST? I will explain more later.

Actually, we have been talking about introducing a new, fairer tax system since the days when "someone" was Finance Minister in 1990s but I guess he had other ambition and priorities.

It stayed as nothing more than mere talk till one day in 2013.

On 29 August 2013 in Securities Commission, Treasurer General Tan Sri Irwan Serigar's announcement set off a media frenzy and those of us who were there saw journalists and analysts busy typing on their smartphones.

I can still recall the exact words. Tan Sri said, "GST is a must, no longer an option."

Ever since then, there are so many tax experts and web portals out there explaining about GST. I did a quick search and found the following links. Some are newcomers with easy to understand graphics:

a) www.apaitugst.com (newbie and trilingual, makes you understand from the simplest perspective)

b) www.gst.customs.gov.my (all that you need to know, textbook-ish)

c) www.loanstreet.com.my/learning-centre/GST-In-Malaysia-Explained

d) www.imoney.my/articles/why-malaysia-needs-gst

e) www.gst.com.my

There's no excuse in terms of implementation or knowledge. Every single piece of info, in whatever form, they are all out there.

From the point that it was formally announced in Parliament in Oct 2013 till today in March 2015, the entire economy and population had more than 500 days or 17 months to learn about GST and to adjust to the forthcoming GST.

It is either you want to do it and understand it, or you just can’t be bothered and prefer to be abusive and grumpy.

Over the past week, I saw and heard so many excited chatter among friends and relatives about the holiday they just booked in MATTA Fair and when the conversation moved on to politics, it was all guns blazing at GST.

It shows how ignorant we Malaysians are. The countries that you are traveling to have GST too, you know? China’s GST rate is at 17%, Korea (10%), Indonesia (10%), Thailand (7%), Vietnam (10%). Even Burkina Faso and Burundi have GST!

A total of 6.3 billion people lives under a GST regime in the 169 countries. Surely, there’s a reason why countries implement this tax system.

In Malaysia, we have over 6 mil registered taxpayers but only less than 2 mil actually pay taxes. We have over 500,000 registered tax paying companies but less than 110,000 pay taxes,

Any country in our position would have thought about GST. But it wasn't an easy move for the Government in today’s political climate.

The Government had to give something back in return for people to accept GST and these are not small sums. Take a look:

(a)   Government will abolish the Sales and Services Tax (SST). And did you know that in 2014, Government received RM17.8 bil from SST? They are gonna lose this.

(b)   Those who earn RM4,000 per month and below will no longer need to pay income tax. For the rest, it will be a 1-3% reduction in tax rate. The Government received RM26.7 bil in 2014 and just a 2% reduction means the Government is letting go RM530 million.

(c)   Government is reducing corporate, cooperative and SME income taxes. In 2014, the Government received RM68 bil. At 1% reduction, that's another RM680 million gone from Government revenue.

Welfare and cash handouts have also gone up. Just BR1M alone costs the Government RM4.9 bil for over 7 mil people.

We have not even touched public hospitals and education costs borne by the Government. They are not cheap. Medical services and facilities cost the Government RM23.3 bil per year.

Government must pay these bills. How?

There’s no other option but to re-engineer the wealth of the society and channel taxes from high end consumers back to the bottom 40% households. The more you consume, the more you pay, the more the Government has to give back to the bottom 40% households.

GST is a must, no longer an option.