Wong: Contracts Contrary To Privatisation Spirit
By KOK SU CHIN, Sin Chew Daily
MCA Youth Legal Affairs & Parliamentary Legislation Research Bureau Chairman Wong Nai Chee said the various highway privatisation contracts signed by the government since late 1980s had been contrary to the privatisation spirit.
He said those in the prime minister's department economic planning unit responsible for negotiations on the contracts back then had the obligation to explain to the public.
He said the concept of privatisation mooted by former British prime minister Mrs Margaret Thatcher in late 1970s was meant to help the private sector raise funds, absorb losses and loan risks while cutting back on red tapes and corporatising engineering projects, thus providing high quality services to the public by imposing reasonable charges. "The private sector would then hand over the completed projects to the government several years later, allowing the government to harness public funds to maintain the infrastructure. And this is the spirit of privatisation."
Wong said during an exclusive interview with Sin Chew Daily that the legal affairs bureau discovered after conducting initial inspection on the five highway contracts Tuesday that:
1. The government was to bear the risks of highway concessionaires' loans. In the case of LDP, the highway concessionaire applied for the loans but the government had to bear the risks.
2. To some extent, the government was to ensure that highway concessionaires were making profits. The government had to compensate the highway concessionaires if they were not allowed to increase toll rates.
He said the two points above had clearly shown that our highway contracts had gone against the original spirit of privatisation, i.e. the private sector did not have to bear the risks of loans, but the government.
He added that if the highway concessionaires were cash-rich, experienced, capable and financially sound, they did not even need the government to bear the risks or make profit assurances.
"In general, the five highway contracts we have seen do not have the basic characteristics of privatisation. The contracts have very powerful elements of government-sponsored companies assured of profits by the government."
He said if the highway concessionaires had made losses, there would only be one reason to explain it--poor management and misjudgement of vehicular volume.
"It is not hard to see that in many areas, highways have been designed in such a way that local residents are forced to use the tolled highways. Therefore, more and more people will be using highways. Under such circumstances, highway projects should be profitable."
On the signing of the highway contracts, Wong said representatives from the prime minister's department economic planning unit conducted the "bargains" and negotiated the conditions and details with highway concessionaires. Now that the highway contracts have been declassified, those involved in the negotiations should stand out and explain to the public.
"We want to know under what conditions, and under what spirit did we sign such contracts. We need some clear explanations. Of course we also know that some of the people involved in the negotiations back then are now retired, but where political duty is concerned, they should still explain to the public.
He nevertheless refused to speculate whether the contracts had incorporated elements of cronyism, but said understandably there would be all kinds of guesses after the contracts have been made public.
"In legal perspectives, if someone thinks he has the evidence, he has the right to report to the Malaysian Anti-corruption Commission (MACC) so that investigations could be initiated." (Translated by DOMINIC LOH)
Government waived Elite highway's interest payments on RM100m loan
By Lee Wei Lian, The Malaysian Insider
The government waived interest payments on RM100 million worth of loans it made to Elite highway, which is operated by Plus Expessways Bhd (Plus), as part of the deal to lower toll rates, a DAP delegation revealed today after inspecting recently declassified documents today.
In total, the company took RM390 million in financing from the government. As of last year, the company had already collected RM1.2 billion in toll charges.
The disclosure, the latest since the DAP and other political parties started inspecting the volumes of contract documents at the Works Ministry this week, provides a glimpse into the kind of deals struck, which were once cloaked in secrecy, and which critics say have been extremely favourable to private highway concession holders.
Highway concession holders will certainly come under immense public pressure not to raise toll charges, as the documents have also revealed huge profit margins, and has prompted calls for the government to buy back the various concessions.
In disclosing the Elite's interest waiver, Petaling Jaya Utara MP Tony Pua said, however, that the amount of interest rate was not specified as the loan agreement was not released for public inspection. It was revealed however, that Elite drew down RM90million of the initial loan.
Elite highway, which was built mostly by 1994, to connect the New Klang Valley expressway to KLIA and Nilai was still receiving government financing as late as 2003. The company took a total of RM390 million in government financing and RM800 million in Islamic bonds. It has collected RM1.2 billion in toll revenues by 2008.
The original concession period for Elite highway was also extended from 24 years to thirty years to the current 36 years. It was extended for various reasons such as for new interchanges built and in exchange for lower toll rates.
He said this at the conclusion of a weeklong study of about a dozen toll concession agreements by the DAP team, which included Teh Chi Chang and Teo Nie Ching.
Teh is economic advisor to the DAP secretary general and former executive director of investment reseach at Citibank Asia Pacific and covered toll highways and Independant Power Producers for 13 years.
Teo is DAP's member of parliament for Serdang. Some of the other findings by the DAP team are:
Plus is facing problems with efficiency as it is paying maintenance fees of RM50,000 which is double what other operators are paying.
"If Plus can improve its efficiency, they can cut toll rates, still maintain profits and everyone wins," said Teh.
The agreements contain no service level protection for consumers. "The whole reason for having toll highways is faster traffic flow. But there are still traffic jams, for example along the LDP. Consumers are suffering but still paying toll," Teh points out. "They should offer discounted toll rates to compensate for poor service quality."
There is no standard formula to calculate profit sharing. "The profit sharing ratios range from 50:50 to 80:20 in favour of the toll concessionaire in the case of the SILK highway," says Teo. Almost all loan agreements are effectively guaranteed by the government as if the toll concessionaire defaults on loans from the private sector, the government will assume the liabilities. "The concessionaires have nothing to lose," notes Teo.
Declassified documents only extended as far as general agreements and do not include appendices. Appendices are important as they contain projected revenues, agreements on toll rates over the next few years as well as the physical design documents. Loan agreement and novation agreements were also not made available.
"Novation agreements detail the manner in which concession rights are transferred from one company to another, for example, the transfer of the Penang Bridge concession from Mekar Idaman Sdn Bhd to Penang Bridge Sdn Bhd," says Pua. "We appreciate that the minister declassified these agreements but it is still not a full and frank disclosure."
Teo adds: "Concessionaries use confidentiality clauses but as these are big projects that come with big profits, the government is in a position to bargain. If an open tender was used, they could have kicked out any party that insisted on having a confidentiality clause."
A RM300 million government loan was contained in the original agreement with SILK highway but the loan was deleted in the supplementary agreement throwing the status of the loan into question. "Has it been drawn down? Was the loan cancelled? Was it a gift? It was not properly explained," says Teo. Pua adds however, that it could have been deleted as part of the restructuring of the agreement.
A DAP study committee, called "Operation Restore," is being created to come up with a comprehensive report on the toll concession agreements.
The committee will comprise of Pua, Teh, Teo, Anthony Loke, Charles Santiago and Lim Lip Eng.
Loke, Santiago and Lim are members of parliament for Rasah, Klang and Segambut respectively.
They expect to submit a preliminary report next week to the Works Minister, which will contain their findings and their recommended actions.
.
By KOK SU CHIN, Sin Chew Daily
MCA Youth Legal Affairs & Parliamentary Legislation Research Bureau Chairman Wong Nai Chee said the various highway privatisation contracts signed by the government since late 1980s had been contrary to the privatisation spirit.
He said those in the prime minister's department economic planning unit responsible for negotiations on the contracts back then had the obligation to explain to the public.
He said the concept of privatisation mooted by former British prime minister Mrs Margaret Thatcher in late 1970s was meant to help the private sector raise funds, absorb losses and loan risks while cutting back on red tapes and corporatising engineering projects, thus providing high quality services to the public by imposing reasonable charges. "The private sector would then hand over the completed projects to the government several years later, allowing the government to harness public funds to maintain the infrastructure. And this is the spirit of privatisation."
Wong said during an exclusive interview with Sin Chew Daily that the legal affairs bureau discovered after conducting initial inspection on the five highway contracts Tuesday that:
1. The government was to bear the risks of highway concessionaires' loans. In the case of LDP, the highway concessionaire applied for the loans but the government had to bear the risks.
2. To some extent, the government was to ensure that highway concessionaires were making profits. The government had to compensate the highway concessionaires if they were not allowed to increase toll rates.
He said the two points above had clearly shown that our highway contracts had gone against the original spirit of privatisation, i.e. the private sector did not have to bear the risks of loans, but the government.
He added that if the highway concessionaires were cash-rich, experienced, capable and financially sound, they did not even need the government to bear the risks or make profit assurances.
"In general, the five highway contracts we have seen do not have the basic characteristics of privatisation. The contracts have very powerful elements of government-sponsored companies assured of profits by the government."
He said if the highway concessionaires had made losses, there would only be one reason to explain it--poor management and misjudgement of vehicular volume.
"It is not hard to see that in many areas, highways have been designed in such a way that local residents are forced to use the tolled highways. Therefore, more and more people will be using highways. Under such circumstances, highway projects should be profitable."
On the signing of the highway contracts, Wong said representatives from the prime minister's department economic planning unit conducted the "bargains" and negotiated the conditions and details with highway concessionaires. Now that the highway contracts have been declassified, those involved in the negotiations should stand out and explain to the public.
"We want to know under what conditions, and under what spirit did we sign such contracts. We need some clear explanations. Of course we also know that some of the people involved in the negotiations back then are now retired, but where political duty is concerned, they should still explain to the public.
He nevertheless refused to speculate whether the contracts had incorporated elements of cronyism, but said understandably there would be all kinds of guesses after the contracts have been made public.
"In legal perspectives, if someone thinks he has the evidence, he has the right to report to the Malaysian Anti-corruption Commission (MACC) so that investigations could be initiated." (Translated by DOMINIC LOH)
Government waived Elite highway's interest payments on RM100m loan
By Lee Wei Lian, The Malaysian Insider
The government waived interest payments on RM100 million worth of loans it made to Elite highway, which is operated by Plus Expessways Bhd (Plus), as part of the deal to lower toll rates, a DAP delegation revealed today after inspecting recently declassified documents today.
In total, the company took RM390 million in financing from the government. As of last year, the company had already collected RM1.2 billion in toll charges.
The disclosure, the latest since the DAP and other political parties started inspecting the volumes of contract documents at the Works Ministry this week, provides a glimpse into the kind of deals struck, which were once cloaked in secrecy, and which critics say have been extremely favourable to private highway concession holders.
Highway concession holders will certainly come under immense public pressure not to raise toll charges, as the documents have also revealed huge profit margins, and has prompted calls for the government to buy back the various concessions.
In disclosing the Elite's interest waiver, Petaling Jaya Utara MP Tony Pua said, however, that the amount of interest rate was not specified as the loan agreement was not released for public inspection. It was revealed however, that Elite drew down RM90million of the initial loan.
Elite highway, which was built mostly by 1994, to connect the New Klang Valley expressway to KLIA and Nilai was still receiving government financing as late as 2003. The company took a total of RM390 million in government financing and RM800 million in Islamic bonds. It has collected RM1.2 billion in toll revenues by 2008.
The original concession period for Elite highway was also extended from 24 years to thirty years to the current 36 years. It was extended for various reasons such as for new interchanges built and in exchange for lower toll rates.
He said this at the conclusion of a weeklong study of about a dozen toll concession agreements by the DAP team, which included Teh Chi Chang and Teo Nie Ching.
Teh is economic advisor to the DAP secretary general and former executive director of investment reseach at Citibank Asia Pacific and covered toll highways and Independant Power Producers for 13 years.
Teo is DAP's member of parliament for Serdang. Some of the other findings by the DAP team are:
Plus is facing problems with efficiency as it is paying maintenance fees of RM50,000 which is double what other operators are paying.
"If Plus can improve its efficiency, they can cut toll rates, still maintain profits and everyone wins," said Teh.
The agreements contain no service level protection for consumers. "The whole reason for having toll highways is faster traffic flow. But there are still traffic jams, for example along the LDP. Consumers are suffering but still paying toll," Teh points out. "They should offer discounted toll rates to compensate for poor service quality."
There is no standard formula to calculate profit sharing. "The profit sharing ratios range from 50:50 to 80:20 in favour of the toll concessionaire in the case of the SILK highway," says Teo. Almost all loan agreements are effectively guaranteed by the government as if the toll concessionaire defaults on loans from the private sector, the government will assume the liabilities. "The concessionaires have nothing to lose," notes Teo.
Declassified documents only extended as far as general agreements and do not include appendices. Appendices are important as they contain projected revenues, agreements on toll rates over the next few years as well as the physical design documents. Loan agreement and novation agreements were also not made available.
"Novation agreements detail the manner in which concession rights are transferred from one company to another, for example, the transfer of the Penang Bridge concession from Mekar Idaman Sdn Bhd to Penang Bridge Sdn Bhd," says Pua. "We appreciate that the minister declassified these agreements but it is still not a full and frank disclosure."
Teo adds: "Concessionaries use confidentiality clauses but as these are big projects that come with big profits, the government is in a position to bargain. If an open tender was used, they could have kicked out any party that insisted on having a confidentiality clause."
A RM300 million government loan was contained in the original agreement with SILK highway but the loan was deleted in the supplementary agreement throwing the status of the loan into question. "Has it been drawn down? Was the loan cancelled? Was it a gift? It was not properly explained," says Teo. Pua adds however, that it could have been deleted as part of the restructuring of the agreement.
A DAP study committee, called "Operation Restore," is being created to come up with a comprehensive report on the toll concession agreements.
The committee will comprise of Pua, Teh, Teo, Anthony Loke, Charles Santiago and Lim Lip Eng.
Loke, Santiago and Lim are members of parliament for Rasah, Klang and Segambut respectively.
They expect to submit a preliminary report next week to the Works Minister, which will contain their findings and their recommended actions.
.
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