Philosophy Politics Economics

Posted by Awanama | Posted on 9:05 PTG

Philosophy Politics Economics

Sweet Subsidies for Who?

Posted: 29 Jan 2012 06:24 PM PST

The Star published on its front page news yesterday with the headline "Sweet Subsidies".  It reported that the Domestic Trade, Cooperatives and Consumerism Minister, Dato' Seri lsmail Sabri Yaakob said that the government has increased subsidies from 20 sen to 54 sen per kilogramme of sugar in order to maintain the price of sugar at RM2.30 because the "global price of sugar is skyrocketing".

One would almost feel deeply moved by the Minister's kindness when he said "world prices have increased but we have decided not to raise the price here… We are doing what we can to reduce the people's burden."

The price of sugar was last increased by 20 sen in May 2011 to RM2.30 per kilogramme.  However it has increased from RM1.45 since January 2010 when translated to a 58.6% increase in the price of sugar within just 18 months as part of the government's subsidy reduction exercise.

What is extremely intriguing however, was that global sugar prices over the past 6 months since the last price hike in May 2011 had in fact declined significantly, and not the purported "skyrocket".

In fact, after hitting a peak of US$29.47 per hundred pounds in July 2011, the price of sugar has fallen consistently every month – US$28.88 (August), US$26.64 (September), US$26.30 (October), US$24.52 (November) to US$23.42 (December) per hundred pounds.  This meant that global sugar prices traded on the Sugar, Free Market, Coffee Sugar and Cocoa Exchange (CSCE) has fallen by 20.5% since July last year.

Even after taking into account the fact that the Malaysian Ringgit has depreciated against the US Dollar by 7% between July 2011 and December 2011, the global price of sugar would still have declined by 13.5% in Ringgit terms.

Therefore by maintaining sugar prices at RM2.30, the Government should in actual fact have to subsidise less, and not more, as proudly boasted by Datuk Seri Ismail Sabri.  What is more perplexing is the fact that our subsidy had to increase by 170% to cope with the non-existent "skyrocketing" global price of sugar.

Today, 99% of Malaysia's raw sugar requirements are imported.  However the sugar market is monopolised by only 2 refineries – Malayan Sugar Manufacturing Holdings (MSM Holdings) and Tradewinds Corporation Bhd.  These companies import Malaysia's raw sugar requirements.  MSM Holdings is a 71% subsidiary of FELDA-related entities while Tradewinds is 43% controlled by Tan Sri Syed Mokhtar Al-Bukhary with another 20% owned by FELDA Global Ventures Holdings Sdn Bhd.

The question then is - whether the 170% increase in sugar subsidy or approximately RM198 million a year payable to MSM Holdings and Tradewinds, is in fact a thinly disguised attempt to fatten the profits of these two politically-connected companies?

The Minister must hence clarify why there was a need to increase subsidies when the global sugar price is falling while at the same time explain who are the real beneficiaries from the extra RM198 million of supposed "subsidy".

RM7 billion New Highway Concession for Who?

Posted: 29 Jan 2012 06:33 AM PST

DAP rakes Putrajaya over RM7b highway deal
By Debra Chong January 28, 2012

KUALA LUMPUR, Jan 28 — The DAP has blasted the Najib administration for awarding a lucrative RM7 billion highway deal, to be tolled for a record 60 years, to a company known principally for making and selling granular and powder-activated carbon.

Public-listed Kumpulan Europlus Bhd (KEuro) told Bursa Malaysia late on Thursday it had also won a RM2.24 billion government soft loan and a three per cent interest subsidy on commercial loans for a period of 22 years, on top of Putrajaya paying RM980 million in land acquisition cost to join Banting in south Selangor a total 316km to Taiping in north Perak.

Industry observers have described the new highway project as the closest alternative to the congested North-South Expressway.

"This deal reeks of cronyism and this does not bode well for Najib's transformation programme," the opposition party lawmaker Tony Pua (picture) told The Malaysian Insider, speaking of Prime Minister Datuk Seri Najib Razak's New Economic Model (NEM) to make the country a high-income nation by 2020.

The PM has been seeking to burnish his credentials as a reformer and so spur Malaysia's growth as a global an investment hub.

In the filing to Bursa Malaysia, KEuro disclosed that its subsidiary, West Coast Expressway Sdn Bhd (WCE), has received an approval letter dated the same day from the federal government to build and operate the Banting-Taiping highway for the next 60 years estimated to cost RM7.07 billion.
It said the 224km of the highway will be tolled compared to 92km that will be toll-free.

The public-listed company also disclosed receiving a RM2.24 billion government soft loan starting from next year and an interest subsidy of only three per cent on commercial loans for a period of 22 years to build the highway apart from the government bearing the estimated RM980 million in land acquisition cost for the highway project.

"This is shocking! Why [did they get] such good terms?" Pua asked.

"Taxpayers are being doubly abused. First, they will have to pay for the construction of the road and then will be asked to pay for the use of the road," he said.

The DAP publicity chief pointed out that KEuro's president and chief executive Tan Sri Chan Ah Chye was also onboard the controversial housing developer Talam Corporation Bhd, and that both companies had fallen into debt in the past.

"Despite that, it has continued to win support from the Najib administration and got a sweetheart deal in order to see through the project," Pua said.

"Why is the government giving it to him [Chan]?" he asked, noting that Chan owns a controlling 27.58 per cent in KEuro, with the second major shareholder at 22.7 per cent going to multi-industry giant IJM Corporation Bhd.

Pua said that KEuro had made only RM15 million in revenue and RM5 million in profit in the first nine months of last year after racking up RM24.1 million in losses on revenue of RM20.5 million in 2010.

"Now they are awarded a highway that is expected to cost RM7.07 billion to build. It's a property developer with records of abandoned housing projects. It has no experience in building highways that I can recall," Pua said, clarifying that IJM has, but not KEuro.

"Here we are in Pakatan Rakyat putting in our common policy framework to restructure and remove tolls while the BN government is putting on their agenda privatisation policies that impose additional tolls on ordinary Malaysians and prioritise their cronies."

Pua urged the government to call off its deal with KEuro, which he said had yet to be signed; and to open the project to competitive tender so that the public will not be burdened by tolls for 60 years.

"It's the longest [toll concession] ever, longer than with PLUS," the Petaling Jaya Utara MP said.
Pua, who is among the opposition Pakatan Rakyat (PR) bloc's economic experts, related that the West Coast highway project had been mooted and first approved during the administration of Tun Dr Mahathir Mohamad — Najib's mentor — but had stalled in the late 1990s.

"Because of the Asian economic crisis, Europlus could not raise the money to build the highway," he said.

He added: "It's an old deal that should have been terminated when Europlus first failed to build the highway."

KEuro is described as an investment holding company in stock exchange records and its businesses are organised into three divisions, namely manufacturing and trading of industrial products, construction, and leasing, management services and investment holding.

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