July 24, 2018
PROTON, Khazanah, Malaysia Incorporated and Harapan Prime Minister
Old Schemes and Concepts with new labels?
QUESTION TIME | Some of Prime Minister Dr Mahathir Mohamad’s economic policy pronouncements are not just puzzling but also downright alarming such as having another national car project a la Proton, steering Khazanah Nasional back to its so-called original objectives and reviving the concept of Malaysia Inc. Let’s look at each in turn and the problems that they can cause.
As I have explained in this article, another national car project would be a colossal mistake. It would distort the car market further because such a car cannot be economically produced and will result in even higher taxes on other cars.
Proton was one of Mahathir’s huge failures when he was Prime Minister from 1981 to 2003 costing taxpayers an additional RM360 billion at least in taxes since the first Proton rolled out in 1985.
As a matter of urgency, one of the new policies of the Pakatan Harapan government should be to forge ahead with a phased rationalisation of the car industry so that there will be no taxes on cars. This article explains it in more detail.
Despite a public outpouring of resistance against a third national car project, Mahathir is recalcitrant and still seems set on his pet project and reviving this failed, outdated policy of his yet again. He said he had discussed with the Indonesian President the concept of an ASEAN car on his recent visit to Jakarta.
Considering the abysmal state of cooperation within ASEAN and all the difficulties of the car industry, this will be a road to perdition if implemented. We are already suffering for 33 years already.
On to Malaysia Incorporated. Mahathir recently announced his intention to revive the Malaysia Inc concept to foster closer cooperation between the government and the private sector.
Old Cronies and New Opportunities?
What exactly is this Malaysia Inc? Let’s quote from the Economic Planning Unit, the division within the Prime Minister’s Department:
“The Malaysia Incorporated concept was first announced by the Prime Minister in 1983 and it represents a new way of approaching the task of national development. Both the public and private sectors adopt the idea that the nation is a corporate or business entity, jointly owned by both sectors and working together in pursuit of a common mission of the nation.”
If Malaysia Inc. had been done properly and executed completely above board, things might have been alright. But Malaysia Inc. and the attendant privatisation of core government assets to crony companies and individuals saw the largest exercise of government patronage and a prerogative to manufacture instant billionaires in some instances and countless smaller deals in many others.
In fact, it would not be far wrong to say that Mahathir oversaw the unprecedented transfer of wealth from government to the private sector with plum projects given to those closely associated with Mahathir and his Finance Minister then Daim Zainuddin, who is now ironically the head of the Council of Eminent Persons, as well as companies related to subsequent Finance Minister, Anwar Ibrahim.
This period saw the blossoming of the first generation independent power producers – or IPPs – with awards for massive power generation contracts to the YTL Group (Francis Yeoh), Segari (MRCB, and subsequently Syed Mokhtar Albukhary, a close Mahathir associate to this day, under Malakoff), Genting Sanyen (the Genting casino group) and to PD Power (Ananda Krishnan) amongst others.
Profits were ensured by ironclad power purchase agreements (PPAs) with the sole national power company, Tenaga Nasional Bhd (TNB) which had either “take or pay” contracts (YTL) and/or capacity charge payments where a fixed amount is paid based on fixed asset investment whether the energy is taken up or not.
Well, if you and I had got these contracts, we would have become billionaires too. None of those successful had previous power generation experience.
Not just IPPs but a whole slew of privatisation and related arrangements came up. Toll roads were pioneered via Halim Saad’s Plus Expressway in the mid-80s, a known crony of Daim who had many other cronies. Another, Tajuddin Ramli, bought over cellular operations, now Celcom, from Telekom Malaysia and was given a period to get it up and going before others were allowed in.
The Sapura Group, owned by Mahathir’s close friend Shamsuddin Abdul Kadir, got a cellular licence as well as Ananda Krishnan, tycoon Vincent Tan and the MRCB group associated with Anwar.
Other instances of awards included to Malaysia Mining Corp (Syed Mokhtar), Gamuda (Lin Yun Ling), Samsuddin Abu Hassan (a Daim crony) of Peremba and Wan Azmi Wan Hamzah (a close Daim associate). Apart from IPPs and telecommunications, other lucrative areas included water and numerous state and federal operations.
In almost all cases, there were no open bids and many of these licences were awarded for free with no payment whatsoever to the government. The government was basically giving away assets. In many cases, the awards of these contracts were blatantly and highly questionable.
Ani Arope’s tale of woe
Former TNB chairperson the late Ani Arope (known also as the man who refused Mahathir) had a tale of woe to tell regarding the award of power purchase agreements to the first generation IPPs.
He talks of delays to TNB projects which caused a massive blackout in 1992, lopsided contracts which gave sweetheart deals to privileged people at the expense of TNB and 30 percent bumiputera stakes to companies and individuals who were not clearly identified.
In an interview with The Star in 2006, after Mahathir had stepped down as Prime Minister in 2003, he described how TNB got a rather raw deal and he was asked to resign after he refused to sign the PPAs.
He said, “There was no negotiation. Absolutely none. Instead of talking directly with the IPPs, TNB was sitting down with the EPU. And we were harassed, humiliated and talked down every time we went there. After that, my team was disappointed. The EPU just gave us the terms and asked us to agree. I said no way I would.
“It was all fixed up. (They said) this is the price, this is the capacity charge and this is the number of years. They said you just take it and I refused to sign the contracts. And then, I was put out to pasture.It was grossly unfair. At 16 sen per unit (kWh) and with the take or pay situation, actually it was 23 sen per unit. With 23 sen, plus transmission and distribution costs, TNB would have had to charge the consumer no less than 30 sen per unit. If mixed with TNB’s cost, the cost would come down but that was at our expense because we were producing electricity at 8 sen a unit. We can deliver electricity at 17 sen per unit.”
Why was this done? In a 2014 interview with KiniBiz, six months before his death, Ani had this to say: “The crux of the whole thing was who got the 30 percent. The first PPA with YTL, there was a 30 percent shares (requirement) for the bumiputera. That explains the whole thing.” Subsequent PPAs also had this same clause.
If Mahathir, and Pakatan Harapan, want the return of Malaysia Inc, they should do it differently. No more cronies. Have open tenders. Have a properly constituted tender board with members whose credentials are impeccable.
Consider everyone’s bids regardless of political and other affiliations but cut out middlemen. Bids must be from those who provide the service. Pick the best one from there. Be true to the manifesto – open tenders, fairness, transparency, accountability.
Holding bumi shares
Tan Sri Azman Mokhtar–Khazanah Nasional’s Chief Executive
On to Khazanah Nasional Bhd and Mahathir’s statement about the government-owned company deviating from the role of helping the bumiputera, a rather strange statement to make when Khazanah had actually done quite a lot in terms of its transformation programme under former Prime Minister Abdullah Ahmad Badawi in 2004.
“But along the way, Khazanah decided it should take all the shares for itself and if they are good shares, well, why not acquire the shares at the time of listing when the price of shares was very low, and so they forget entirely about holding the shares for the bumiputera. They decided that they should be holding the shares forever as a part of the government companies owned by the government,” said Mahathir.
And what’s wrong with that? Imagine what would have happened to government revenues if Petronas, the national oil corporation, had been privatised many years ago. It would have gone bankrupt without the oil revenue. And what would have happened to the previous government without the GST?
Don’t sell everything. Keep some for the future benefit of the country and the people.
Note: This is the fourth part in a series of six on Malaysia post G-E14. Next: What should the government do with Khazanah Nasional? The others are:
P GUNASEGARAM says keep the good and sell the bad. E-mail: email@example.com
The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.