While the large corporations can arm themselves with the latest and finest expertise from each and every industry with their expansion and profits earned, government tend to relied heavily on available resources and manpower within the ranks and file of it’s civil services. This is not to say they could not afford such professionals with the required experiences, but being in government, the mentality of ownership, a nurturing sentimental value to the entity and to work out the best deal for the benefits of the nation, seems to be lacking during negotiations on privatization projects and the closing of deals are but a way considered successful once it is off their hands. Not to forget that money exchanges hands and hidden offset deals made away from public scrutiny.
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It's a win-win situation alright. A sure-win for the corporation securing a already monopolised industry and a sure-win for the government to relinquish their responsibilities albeit with surplus funds from the deal and could most likely be utilize for other mammoth projects. But it goes much further. It's actually a win-win-lose. The people and mandatory consumer loses because charges and rates are at the mercy of these corporations.
Welcome to Malaysia, land of the sweetheart deal
THE FINANCIAL INSIDER
First, take a one-sided concession agreement, in favour of yourself of course. Then get a federal government guarantee. Throw in an enormous profit margin, of say 50 per cent over 30 years, and you've got yourself a triple-A rated sweetheart deal.
Welcome to Malaysia, where privatisation has often favoured concessionaires over consumers and taxpayers, and indeed the federal government itself.
Water assets, toll highways, power plants: the list of infrastructure deals with deliciously generous terms handed out under the previous administration of Tun Dr Mahathir Mohamad just grows longer.
Yesterday, for example, it was revealed that Express Rail Link Sdn Bhd effectively collects a toll from every passenger who goes through the Kuala Lumpur International Airport.
It does not matter if these passengers use the high-speed KLIA Ekspres service to Kuala Lumpur Sentral or take a cab: ERL is paid a portion of whatever Malaysia Airport Holdings Bhd collects in passenger service charges.
Even passengers at the Low-Cost Carrier Terminal (LCCT) pay ERL.
Like several lucrative highway concessions, including one for the Lebuhraya Damansara Puchong, such deals protect the operators from falling traffic through subsidies, either direct or indirect.
According to declassified concession documents, the LDP concessionaire has to date received compensation from the government equivalent to about half the highway's construction cost.
It was either that or a guaranteed rate hike, take it or leave it. So far, the federal government has mostly taken it.
The same kind of ultimatum has been put to the Selangor state government by the private water companies. Basically, if the state government doesn't buy them out by April, Selangor's households will pay more for water. Of course, this situation is the product of a combination of factors, and not of the water concessions alone.
Years of cumulative privatisation, nice, easy terms and, finally, a last desperate attempt to rationalise Peninsular Malaysia's water system, have put a loaded gun to the Selangor state government's head, wielded by companies such as Puncak Niaga Bhd, which controls Syarikat Bekalan Air Selangor (Syabas), and Syarikat Pengeluar Air Selangor Holdings Berhad (Splash).
And don't even mention sewage company Indah Water Konsortium, whose failed existence might one day need yet another sweetheart deal.
There's nothing wrong with privatisation in itself. But these deals seem to show that everything that should have been done was not, and everything that should not have, was.
There was the first-come-first-served policy. Whoever came up with the first privatisation proposal of its kind pretty much got the deal. This of course begat a surge in half-baked, badly-priced, poorly designed proposals of any and all kinds. Build over the Klang River and call it the Kuala Lumpur Linear City? Sure. Charge households individually for sewage treatment? Why not, eh?
Then this was aggravated by the sometimes complete absence of oversight. Infrastructure development is an old, well-established game, and pricing in construction, materials, expertise and the odd consultant or two is not rocket science.
There are rules of thumb, formulas, guidelines, set pieces of negotiations even. Except in those heady days, Mat Salleh financiers fell over each other trying to lend money to the then United Engineers Malaysia Bhd and its North-South Expressway project because the deal was so yummy.
So juicy were the terms that it just had to be kept a deep, dark national secret, and taken just over 20 years for Malaysian motorists, consumers and taxpayers to be told what exactly those terms and guarantees were.
So with humongous loans hanging over your head, with repayments stretched out over your remaining lifetime, and money collected in small change every day, where's the profit to be made?
That's why you should always award the construction of the dam, highway, treatment plant, power plant, fill name of infrastructure project here, to a parent or sister construction company for the first round of short-term profit. Then float your company on the then-booming Kuala Lumpur Stock Exchange and sell a chunk of it to the Employees Provident Fund, and there's your second round. Rinse, repeat.
Leave all the risk to the Government of Malaysia and its shareholders, the taxpayers. Much like KLIA's passenger throughput, it doesn't matter if you drive, or bathe, or fly, or don't. You're paying anyway.
Welcome to Malaysia, land of the sweetheart deal
THE FINANCIAL INSIDER
First, take a one-sided concession agreement, in favour of yourself of course. Then get a federal government guarantee. Throw in an enormous profit margin, of say 50 per cent over 30 years, and you've got yourself a triple-A rated sweetheart deal.
Welcome to Malaysia, where privatisation has often favoured concessionaires over consumers and taxpayers, and indeed the federal government itself.
Water assets, toll highways, power plants: the list of infrastructure deals with deliciously generous terms handed out under the previous administration of Tun Dr Mahathir Mohamad just grows longer.
Yesterday, for example, it was revealed that Express Rail Link Sdn Bhd effectively collects a toll from every passenger who goes through the Kuala Lumpur International Airport.
It does not matter if these passengers use the high-speed KLIA Ekspres service to Kuala Lumpur Sentral or take a cab: ERL is paid a portion of whatever Malaysia Airport Holdings Bhd collects in passenger service charges.
Even passengers at the Low-Cost Carrier Terminal (LCCT) pay ERL.
Like several lucrative highway concessions, including one for the Lebuhraya Damansara Puchong, such deals protect the operators from falling traffic through subsidies, either direct or indirect.
According to declassified concession documents, the LDP concessionaire has to date received compensation from the government equivalent to about half the highway's construction cost.
It was either that or a guaranteed rate hike, take it or leave it. So far, the federal government has mostly taken it.
The same kind of ultimatum has been put to the Selangor state government by the private water companies. Basically, if the state government doesn't buy them out by April, Selangor's households will pay more for water. Of course, this situation is the product of a combination of factors, and not of the water concessions alone.
Years of cumulative privatisation, nice, easy terms and, finally, a last desperate attempt to rationalise Peninsular Malaysia's water system, have put a loaded gun to the Selangor state government's head, wielded by companies such as Puncak Niaga Bhd, which controls Syarikat Bekalan Air Selangor (Syabas), and Syarikat Pengeluar Air Selangor Holdings Berhad (Splash).
And don't even mention sewage company Indah Water Konsortium, whose failed existence might one day need yet another sweetheart deal.
There's nothing wrong with privatisation in itself. But these deals seem to show that everything that should have been done was not, and everything that should not have, was.
There was the first-come-first-served policy. Whoever came up with the first privatisation proposal of its kind pretty much got the deal. This of course begat a surge in half-baked, badly-priced, poorly designed proposals of any and all kinds. Build over the Klang River and call it the Kuala Lumpur Linear City? Sure. Charge households individually for sewage treatment? Why not, eh?
Then this was aggravated by the sometimes complete absence of oversight. Infrastructure development is an old, well-established game, and pricing in construction, materials, expertise and the odd consultant or two is not rocket science.
There are rules of thumb, formulas, guidelines, set pieces of negotiations even. Except in those heady days, Mat Salleh financiers fell over each other trying to lend money to the then United Engineers Malaysia Bhd and its North-South Expressway project because the deal was so yummy.
So juicy were the terms that it just had to be kept a deep, dark national secret, and taken just over 20 years for Malaysian motorists, consumers and taxpayers to be told what exactly those terms and guarantees were.
So with humongous loans hanging over your head, with repayments stretched out over your remaining lifetime, and money collected in small change every day, where's the profit to be made?
That's why you should always award the construction of the dam, highway, treatment plant, power plant, fill name of infrastructure project here, to a parent or sister construction company for the first round of short-term profit. Then float your company on the then-booming Kuala Lumpur Stock Exchange and sell a chunk of it to the Employees Provident Fund, and there's your second round. Rinse, repeat.
Leave all the risk to the Government of Malaysia and its shareholders, the taxpayers. Much like KLIA's passenger throughput, it doesn't matter if you drive, or bathe, or fly, or don't. You're paying anyway.
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