Selasa, 20 Mac 2012

Philosophy Politics Economics

Philosophy Politics Economics

MEX: Government Can Expropriate for RM400m

Posted: 20 Mar 2012 08:19 PM PDT

The MEX is the most clear-cut case of making tax-payers' pay for the construction of the highway, and subsequently allowing a BN crony to milk the tax-payers further by charging toll, in this case, over a period of 33 years.  There is no better example of how the BN Government and its cronies are conducting highway robbery in broad daylight.

Tan Sri Abu Sahid Mohamed who owns 96.8% of the highway has only effectively forked out RM60 million for the project, but with the proposed acquisition by EP Manufacturing Bhd (EPMB), he would effectively be making a NET profit of RM1.09 billion.  That works out to more than an astronomical 1,800% return on investment in less than 8 years since construction began in 2004 for MEX.

The rape of Malaysian tax-payers which made a billionaire out of Tan Sri Abu Sahid Mohamed on this exercise alone is simply outrageous and unacceptable because out of his "profit", RM976.7 million was paid for by Malaysian tax-payers.  The grant hence constitutes 74% of the total cost of construction for the RM1.32 billion highway.

In EPMB's announcement to Bursa Malaysia last Friday, the company has cited among the risk factors of the acquisition is the existence of an "expropriation" clause in the MEX Concession Agreement.  The announcement read:
Subject to giving three (3) months‟ notice, the Government may terminate the Concession  Agreement by expropriating MEX or the Concession if the Government considers such action  to be in the national interest or national security. Under such circumstances,  MEX will be entitled to compensation from the Government.
Based on the same clause applied to other highway concession agreements which were disclosed when they were declassified in 2008, the compensation terms for such expropriation would also be specified:

  1. the amount (if any) by which the Value of the Construction Works exceeds the aggregate of the amounts paid or the liabilities and obligations assumed by the Government… and all amounts as at the date of compulsory purchase or acquisition owing to the Government by the Concession Company.
  2. an amount equal to:
    1. the amount of interest which would have accrued on the moneys invested in or lent to the Concession Company by shareholders of the Concession Company as if the interest had accrued on such amounts from the relevant dates of payment to the date of payment by the Government on an accrual basis of 12%; less
    2. any net dividends or interest received by the shareholders of the Concession Company

In layman's terms, the compensation terms for expropriation is as follows:

a. "the value of construction works" (RM1.32 billion)
b. LESS "the aggregate amounts paid" by the Government (RM976.7 million)
c. LESS "liabilities and obligations assumed by the Government (Not determined)
d. ADD 12% interest per annum "accrued on moneys invested" by shareholders of the concession (RM60 million x 12% x 8 years since 2004 = RM57.6 million)
e. LESS "any net dividends or interest received by shareholders" (None)

The maximum cost of appropriation of MEX by the Government will hence be only RM400.9 million [RM1.32 billion – RM976.7 million + RM57.6 million] before taking into consideration any liabilities which the Government has to assume.  If there are outstanding net liabilities which the Government has to undertake, then the cost of appropriation will be even less.  This amount will more than adequately compensate the investment of Tan Sri Sahid Mohamed in the highway who will make very reasonable returns on his RM60 million investment.

In comparison, based on calculations made available in the announcement by EPMB, MEX has projected earnings of RM3.2 billion over the next 25 years of the concession agreement which will be milked from ordinary Malaysians.

Therefore it makes absolute sense for the Government to expropriate or buy back MEX instead of letting the highway continue to rob the man-on-the-street.  Should the Government fail to expropriate the highway, the it will certainly make true the Malaysian BN dictum of "crony first, rakyat last".

MEX - Highway Robbery in Broad Daylight!

Posted: 19 Mar 2012 09:11 PM PDT

The Barisan Nasional (BN) government's attempt to plunder the nations' coffers and impoverish the rakyat cannot be more blatant than the award of the 26km Maju Expressway (MEX) toll concession to Maju Expressway Sdn Bhd (MESB) which is 96.8% owned by Maju Holdings Sdn Bhd.  Maju Holdings Sdn Bhd is in turn wholly owned by Tan Sri Abu Sahid Mohamed.

The highway was first awarded in 1997 and the concession agreement was amended by supplemental agreements in 1998, 2003 and 2006.  The contents in the agreement are still a mystery as of today as the MEX agreements was mysteriously not included when other highways agreements were declassified by the Cabinet in November 2008.

On 16 March 2012 EP Manufacturing Bhd, a small-medium manufacturing company listed on Bursa Malaysia announced that it has proposed the acquisition of MEX for the amount of RM1.7 billion.  What was revealed since included the cost of construction of MEX was RM1.32 billion as reported in The Edge Financial Daily.

What was shocking however, was the revelation that the Government has given a grant of RM976.7 million to MESB for the construction of the highway.  Effectively, 74% of the cost of constructing the highway was borne by the tax-payers.

According to reports by the Malaysian Ratings Corporation, Tan Sri Sahid Mohamed only invested RM60 million and lent RM87 million in funds to the project.  The rest of the construction and operational cost of the highway was borne by borrowings which amounted to RM529 million at December 2010.

The question that needs to be asked is if the Government can already fund three quarters of the highway construction project, why was there even a need to "privatise" it to the private sector?  Why couldn't the government raise a further small sum of RM343 million to complete the highway without privatisation? Needless to say, the award of the contract was done via direct negotiations without any open tender.

The MEX is the most clear-cut case of making tax-payers' pay for the construction of the highway, and subsequently allowing a BN crony to milk the tax-payers further by charging toll, in this case, over a period of 33 years.  There is no better example of how the BN Government and its cronies are conducting highway robbery in broad daylight.

As my colleague in Pakatan Rakyat, Rafizi Ramli has highlighted in his press statement yesterday, Tan Sri Abu Sahid Mohamed has only effectively forked out RM60 million for the project, but with the proposed acquisition by EP Manufacturing Bhd, he would effectively be making a NET profit of RM1.09 billion.  That works out to more than an astronomical 1,800% return on investment in less than 8 years since construction began in 2004 for MEX.

The rape of Malaysian tax-payers which made a billionaire out of Tan Sri Abu Sahid Mohamed on this exercise alone is simply outrageous and unacceptable.  As highlighted above, out of his "profit", RM976.7 million was paid for by Malaysian tax-payers.

I would echo Rafizi's demand that the Prime Minister Datuk Seri Najib Razak demands that the RM976.7 million grant given must be returned to the Malaysian government.  The grant is clearly unnecessary as there were known to be at least 6 bidders seeking to acquire MEX, proving that MEX is assured of profitability.

Datuk Seri Najib Razak must live up to his call for a "transformational government" as well as his promise in the New Economic Model that he will "not tolerate the behaviour of rent-seeking and patronage".  If the Prime Minister fails to take immediate action, he can be assured that the Pakatan Rakyat will launch a relentless campaign against this highway robbery by BN and its cronies all the way to the 13th General Election.
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