PKFZ bailout: The CRONYNOMIC / EKORNOMIC rationale

You must have read by now the intense scrutiny in the blogs about the impending financial bailout of PKFZ (Port Klang Free Zone).

Screenshots: Kong Choy must explain. Kong Choy must explain?
Rocky's Bru: Bailing out disaster zone
Aisehman: Intelligence-free zone
Malaysians Unplugged: Port Klang Free Zone (PKFZ) Scandal: Stinks All the Way Up to Government and UMNO Politicians
Malaysiakini: PKFZ: Cops blamed for RM3 bil waste of funds

Business Times confirms it as follows:

THE Government will step in to rescue troubled companies only if it is in the long-term national interest to do so, a top Government official [2nd Finance Minister lah, since the 1st Finance Minister doesn't know squat about finance] said, amid growing speculation a RM4.6 billion lifeline may have been thrown to the Port Klang authority's free trade zone project.

They go on to highlight Nor Mohd's rationale for the bailout:

"We don't see the Government going out and bailing out failed entrepreneurs. That's not our policy ... has never been our policy. But sometimes we put money in to create confidence for the overall economy, and we will do that."

“Every country does it,”

And he's right, you know. Every country does do it.

I'm not saying that bailouts are the right way to manage a national economy, but nations have and are doing it... even the self-appointed protector and guardian of free economy, the USA.

But instead of shutting up when he's ahead... Nor Mohd tries to run with it... and comes up with this gem of a quote, as a rationale for bailouts:

"We didn't bail out the major shareholders, we just created value for the minority shareholders, really. So in that sense, it's not a bailout of the majority shareholders ... it's a 'bail-in' of the general public and the minority."

Ummm... okay... errr... forgive me if I seem to be struggling with his logic here. Obviously they didn't teach me cronynomics (crony-economics) in university.

How do you choose which shareholders to bailout? For example, in this case where the bailout is a soft loan, how do the proceeds and benefits of the loan accrue to the minority shareholders but not the major shareholders?

If the loan is used to stave off PKFZ's creditors, has the finance ministry checked to make sure that the directors and major shareholders of PKFZ do NOT hold any significant interests in those creditors? If they do, you are just paying them off..., leaving the minority shareholders (and taxpayers) stuck with the white elephant!

If the loan is used as working capital or funding for long term assets, it will benefit the company as a whole, including (...especially) the major shareholders. And if the turnaround succeeds, and the PKFZ becomes profitable... are the major shareholders going to forego the dividends of that subsequent profit, in favour of the minority shareholders?

'BAIL-IN' pulak...

Mr Minister, I'd like to see the finance degree hanging on the wall of your office. I suspect there might be a slight typo on it... "DEGREE in EKORNOMICS" perhaps?

The one about Ong Ka Ting, Alibaba, UMNO, PKFZ and the NEP.

In response to Ong Ka Ting's call for true JVs between bumis and non-bumis (ie. those that share both risks and rewards, as opposed to the current AliBaba ones where Ali gets his reward and Baba bears the risks), here's what some Malay politicians (read UMNO) had to say.

Jangan tunduk - Tuntutan tender terbuka MCA bercanggah dengan DEB
Oleh AZMAN IBRAHIM - Utusan Malaysia (reproduced by Malaysia-Today)

Ahli- ahli politik Melayu hari ini menggesa kerajaan tidak tunduk kepada tuntutan MCA supaya tender projek-projek kerajaan dibuat secara terbuka kerana permintaan itu bertentangan dengan semangat Dasar Ekonomi Baru (DEB).

"bukan bumiputera tidak boleh mempersoalkan hak dan kelebihan yang diperoleh oleh mana-mana syarikat bumiputera selama ini."

"Apa salahnya syarikat bumiputera dapat tender daripada kerajaan?"

Essentially, they are saying NO WAY, the status quo should be maintained ie. all govt contracts go to bumi companies. (Btw, here's the latest circular from the Malaysian Treasury directing government agencies to appoint only bumiputera consultant firms registered with the Finance Ministry for development projects under RM30 million -ref Malaysiakini).

Point 1: Apa salahnya? [What's the problem?]

WHAT'S the problem? Well... where do I start?... Generally, spoon-feeding does not encourage learning and growth. Give the man a fish, teach the man to fish... blah, blah, blah (see: Paying The Price for Freebies).

Specifically, many of the current bumi companies enjoying govt contracts are a bunch of crooks and it is costing us (the tax payer) good money, a helluva lot of it in fact, to keep this bad policy in place.

Govt's hand forced in bailout
R. Nadeswaran and Terence Fernandez - Sun2Surf

PORT KLANG (Aug 20, 2007): The government has to bail out the Port Klang Free Zone (PKFZ) because the Transport Ministry had given undertakings it was not authorised to do so. The ministry issued "letters of support" which were used by the turnkey contractor - Kuala Dimensi Sdn Bhd (KDSB) - to raise bonds and get an AAA rating from the Malaysia Rating Corporation Bhd.

The four letters were issued between 2003 and 2006 for the issuance of bonds for the RM4.6 billion cost of the project. Ministry sources argue that they merely "supported" the applications but bankers contacted by theSun said that in effect, they were letters of guarantee which only the Treasury can issue.

This is because the letters from the ministry committed the government to ensure that at all times, the Port Klang Authority (PKA) will fulfil all its financial obligations to KDSB.

"So, the government was left with little choice but to salvage the situation," said an industry source.

Read more about the PKFZ bailout here: PKFZ bailout: The CRONYNOMIC / EKORNOMIC rationale

Ahli Parlimen Johor Bahru, Datuk Shahrir Samad berkata, walaupun syarikat-syarikat bumiputera diberi kelebihan mendapatkan tender-tender kerajaan, namun syarikat-syarikat bukan bumiputera tidak terkecuali memperoleh faedah daripada sistem tender itu.

Beliau berkata, kontraktor bumiputera tetap memerlukan kerjasama syarikat-syarikat bukan bumiputera, khususnya syarikat-syarikat milik ahli perniagaan Cina, bagi mendapatkan bahan-bahan binaan dan peralatan-peralatan teknikal.

“Inilah yang dikatakan perkongsian dan ia harus diterima oleh semua rakyat sebagai sesuatu yang positif.

“Apa yang kita amalkan selama ini mewujudkan rangkaian nilai yang dapat membantu meningkatkan ekonomi negara dan dirasai oleh semua peringkat masyarakat,” katanya kepada Utusan Malaysia ketika dihubungi di sini.

Point 2: SUBCONTRACTING. It's not only building materials and technical equipment that the bumi companies are outsourcing to the Chinese ones. In many cases, it's also labour and management services.

If you've ever studied any economics, that about sums up all you need for any sort of economic activity.

So, in essence, what are the bumi companies doing? Apart from securing the govt contract, farming it out and keeping a large percentage of the contract's value?

NOTHING! Absolutely nothing.

Why the heck do you think 'over-priced and over-funded' govt buildings, bridges, computer labs that leak, fall apart, crack and breakdown etc... keep getting built in Malaysia? Over and over again, day in day out?... Because a large art of the price / funding goes towards purchasing large amounts of absolutely NOTHING!

What the subcontractors are left with... are margins so thin that it's virtually impossible to buy the quality of materials and workmanship that the original price / funding was supposed to pay for.

And you call that "perkongsian" [partnership] or "rangkaian nilai" [value chain] something that "harus diterima oleh semua rakyat sebagai sesuatu yang positif" [needs to be accepted by all Malaysians as something positive]?

POSITIVE? All those buildings leaking, falling apart, bridges cracking, billion ringgit bailouts... POSITIVE?

Helloooo! Earth calling planet NEP. Earth calling planet NEP. If there are any intelligent lifeforms, please respond!

And before anyone starts getting pissy-faced, and accuses me of being anti-Malay or anti-social contract while wringing their panties in a tight little knot, let me finish.

Point 3: Who is the NEP benefitting? Is it you, me, the man on the street, the average bumi breadwinner, the impoverished?

Remember the bumi company named Kuala Dimensi Sdn Bhd (KDSB), from the PKFZ report above?

Here's an excellent expose available at Malaysians Unplugged Uncensored. It gives us a real example of who truly benefits from the NEP. I've read it and I totally understand why UMNO politicians fight tooth and nail to retain the NEP in its current form. What I DON'T understand is WHY the average bumi salaryman trying to earn a decent, halal living - does the same??? Read: Lesson 101: How to Justify Racial Discrimination.

The UMNO and UMNO Youth Connection

Kuala Dimensi's current chairman is UMNO treasurer Datuk Azim Zabidi. The company acquired the land for the project in the 1990s for RM96 million, or roughly RM3 per sq ft. Kuala Dimensi bought the land from Pulau Lumut Development Cooperative Bhd (PLDCB).

Present PLDCB chairperson Abdul Rahman Palil is a Selangor executive councillor and Sementa state assembly person. He is the Kapar UMNO division head. When the Port Klang Authority (PKA) proposed to buy the land from Kuala Dimensi, PKA was advised to forcibly purchase the land under the country's Land Acquisition Act, which meant that the property would have been valued at around RM10 per sq ft.

But PKA IGNORED the advice from the government's Chief Legal Adviser and proceeded to buy the land from Kuala Dimensi in 2002 on a commercial basis, for RM1 billion, or roughly RM25 per sq ft.

The legal firm, Rashid Asari & Co, drafted the March 2004 land development agreement between PKA and Kuala Dimensi. The lawyer engaged to draft the agreement works for 'the other side,' ie the lawyer also works for Kuala Dimensi.

Abdul Rashid Asari who heads the legal firm also happens to be the vice-chief of the Kapar Umno division. PKA appointed Rashid Asari & Co, the firm that was, and remains today, on Kuala Dimensi's legal panel. Among Rashid's fellow Excos in the Kapar UMNO division is its permanent chairman Onn Ismail.

PKA also decided to award the now cash-flushed Kuala Dimensi SOLE rights to develop the free-trade zone.

Wijaya Baru Global Bhd (WBGB) was the the property developer and investment firm behind the sale and development of PKFZ. Faizal Abdullah is the the deputy-Chief Executive officer of Wijaya Baru Global Bhd (WBGB). He is also Onn Ismail's son in law and the Kapar UMNO division's Youth Chief.

Read here for more on UMNO and UMNO Youth's Connection in this scandalous affair.

If you still think the NEP as it stands now, is a good idea... then you and me... we've got ourselves a problem.

Will you say 'Enough is Enough"!?

Earlier, we had the RM4.6 billion PKFZ bailout (ref PKFZ bailout: The CRONYNOMIC / EKORNOMIC rationale

We all went "Damn! How bad can this shit get?"

Evidently... much worse:

Premium govt purchases:

Ref to The Star here and here.

How come nobody asked who sold RM50 car jacks for RM5,000?

How come nobody's investigating if the govt official approving these purchases is connected with the seller? It's so basic, I don't have to bloody teach you, do I?

RM23.9 billion oil pipeline project awarded to company with NEGATIVE equity:

This article is from DAP's The Rocket newsletter. Pretty interesting read for 2 bucks.

Drug screening for commercial drivers:

Commercial vehicle drivers will be tested for drugs under a medical check-up scheme when they renew or apply for new licences.

The new scheme, which will come into effect on Oct 1, will also see them being checked for other problems like alcoholism, drug addiction and cardiovascular and mental illnesses.

The move by the Road Transport Department (JPJ) is expected to affect more than 500,000 public service vehicle (PSV) licence, goods driving licence (GDL) and conductor licence (KON) holders.

JPJ deputy director-general Solah Mat Hassan said the scheme, called eKesihatan, aims to ensure that only medically-fit drivers are behind the wheel of commercial
vehicles.

He said that under the scheme, the results would be electronically transmitted to JPJ via a government-appointed gateway provider, Supremme System Sdn Bhd, while payments and registration for the tests would have to be done at post offices before a driver proceeded to the appointed panel clinic.

Those applying or renewing their goods driving, passenger service vehicle and conductors licences have to pay RM80 for the test.

Previously they paid RM50 for new applications and RM10 for renewals.

Asked about the increase, Solah said the tests were more comprehensive...

“The new medical screening will also test for designer drug abuse by drivers and conductors,” he said. - Ref: The Star

Sounds good, but let's hear what The Sun has to say about this:

What makes this venture stink of another money-making scheme involving a chosen few, is that Supremme Systems will not conduct the tests. Instead, it will be carried out by a panel of doctors selected by the company, who will be paid less than half the proposed RM85 fee – RM30; with RM20 going for laboratory tests.

The remainder – about RM35 – will go to the company.

Many medical practitioners oppose the arrangement which they feel is nothing more than a rent-seeking exercise.

The doctors claim that they had, through Koperasi Doktor Malaysia Bhd, submitted a comprehensive proposal to the ministry last year with two scales of fees – much lower than Supremme Systems’.

They argue that it is the doctor who will have to carry out the tests and take responsibility for the certification and that there is no necessity for middlemen to be involved.

"They are getting paid for doing nothing. Any monitoring must be conducted by the RTD," said one doctor, adding that fees can be kept low if such middlemen were eliminated.

"It seems that the main agenda here is to make money and not to have more competent drivers on our roads,’’ said the doctor.

Now... is it not obvious by now why the govt was so against the inclusion of govt procurement in the recently collapsed FTA negotiations with the US?

Did you really think that it was to protect the welfare of local businesses, in terms of fair access to the govt procurement market?

Think about it. It was to ensure that there will be no external scrutiny by the US and other outside parties into this blatant, widespread smorgasbord of corruption that is our country's govt procurement sector. If they let US companies into this sector,... the whole gravy train grinds to a halt. And for all those crony companies supplying the govt, that's like slaying the goddamned golden goose with their own hand.

Okay... so this is nothing new and it certainly won't end here. But to tell you the truth, I don't know what else can be done. The evidence is overwhelming that the current administration is corrupt to the core of their testicles, and yet... Malaysians are no closer to doing the right thing and vote those bastards out.

How is that? How can decent citizens 'tahan' this fucking crap?

Or should I be asking if you voters ARE decent citizens? Indeed... should I be asking if some of you voters are even genuine citizens at all?

Finance Ministry Clarifies "Everything?"

DAP had raised the question why there were differing Development Expenditure numbers for 2008 being presented recently. This, according to the Star, is the Finance Ministry's explanation:

The Finance Ministry has clarified that the 2008 Development Expenditure allocation (RM48.1bil) and estimated Development Expenditure (RM40bil) shown in the Economic Report are not contradictory figures in achieving the Government’s targeted fiscal deficit of 3.1% for next year.

A statement released by the ministry explained that the fiscal target was based on the estimated development expenditure, which represented the Government’s best estimate of actual expenditure in 2008.

At the same time, however, the Government was also proposing an allocation of RM48.1bil for 2008, the statement added.

Some simple questions from a non-Ekornomics graduate:

Why is the Govt proposing an allocation which differs from it's best estimate?

Does the govt intend to allocate an additional amount which it was unable to (best) estimate?

If they weren't able to estimate the additional allocation, how then did the govt estimate(?) that it wanted to allocate 8.1bil more than the best estimate?

Or Why is the Govt making estimates which differs from what they want to spend (allocate)?

Does the govt feel that it is good governance to make spending estimates that are not based on spending intentions (allocation)? What's the point of the estimate then?

At the end of the day, answer this: WHAT is the govt actually going to spend? What the left arm estimates (40bil), or what the right arm allocates (48.1bil)?

Read my other postings on more govt financial double talk:
PKFZ bailout: The CRONYNOMIC / EKORNOMIC rationale
What's wrong with NEP's Par Value.

Sergeant charged for jet engine theft. DO YOU SMELL WHAT I SMELL?

Do you smell what I smell?

A staff sergeant?! A sergeant doesn't even have authority to approve sick leave, much less approve a RM50 million inventory issue out from storage, give approval for heavy transport vehicles to enter military grounds, give approval for heavy transport vehicles to LEAVE military grounds while LADEN with 2 very conspicuous jet engines.

And he was acting alone??!

How can the RMAF storage superintendent, gate sentries and all the other highly trained military personnel walking around the base not see or not feel suspicious about a couple of heavily laden trucks with afterburners sticking out the end, driving out the gate?

And how did they ship it out of the country? How can the customs department or port authorities or shipping company not know when jet engines are being shipped out of the country?

I refuse to believe that something as large, heavy, hard to handle/transport and as eye-catching as 2 jet engines could be moved out of an airbase, and out via a world class shipping port without all the necessary paperwork and approvals from the higher ups. You, my friends, should not believe it as well.

Come on, Jib... you can come up with a better looking scapegoat than this, no? Why? Razak Baginda not free, isit?

Why even bother with an enlisted man? Just blame the Bangla who cuts grass at the RMAF base. He must have carted out the jet engine on the back of his bicycle.

RMAF sergeant, director to be charged with jet engines theft
TheMalaysiaInsider

KUALA LUMPUR, Jan 6 — A Royal Malaysian Air Force (RMAF) sergeant and a company director will be charged in the Petaling Jaya Sessions Court today in connection with the missing two F-5E jet engines despite cynicism that the government has covered up the scandalous theft.

Police had earlier said four men, three of them rank-and-file RMAF airmen, were the only ones involved in the 2007 theft of two General Electric J85-21A turbojet engines, said to be worth RM100 million, much to the chagrin of many that the scale of the crime suggests higher-ups were involved.

The RMAF had earlier denied that a brigadier-general and 40 others sacked for incompetence were involved in the crime.

Attorney-General Tan Sri Abdul Gani Patail said last night the RMAF airman would be charged for stealing while the company director for disposing of stolen properties.

"Investigations revealed that both F-5E jet engines were removed from the Material Udara 1 (Matra 1) godown in Kuala Lumpur as a result of a collaboration between an RMAF personnel with the rank of sergeant and a company director to dispose off both jet engines," he said in a statement issued via Bernama.

He said based on information from witnesses and documents obtained, he ordered the duo to be charged.

The sergeant will be charged under section 380 of the Penal Code to be read with section 109 of the same code, while the company director, under section 414 of the code.

The jets engines were found missing in 2007 while being taken for a routine maintenance from the 12th Squadron (Scorpion) in Butterworth to the RMAF godown in Kuala Lumpur.

The jet engines were discovered stolen by RMAF on May 22, 2008 and a police report was lodged on Aug 4 the same year.

But like the Port Klang Free Zone (PKFZ) scandal where four executives were charged for criminal breach of trust (CBT), prosecuting the airmen and company director will not abate calls for further investigations into how the jet engines ended up in South America.

Gani had said the engines powering the ageing F-5Es are now in Uruguay after police said it went through a Middle East nation to Argentina.

They have said that Malaysia will seek international cooperation to recover the engines.

But opposition leaders are asking for a royal commission of inquiry into the theft that happened when Datuk Seri Najib Razak was the defence minister.

Now prime minister, Najib has promised that there will be no cover-up but many are left pondering his words with just a serviceman and an aviation services firm director in the dock.