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Friday, December 27, 2013

New year, new hope or new fear?

December 27, 2013
FMT LETTER: From Jimmy Puah Wee Tse, via e-mail

We are only days away from ushering in 2014. New year, new hope? Or more like New year, new fear.

By now the whole of Malaysia is well aware that as of Jan 1, 2014, the electricity tariff will rise by 14.99% in peninsula Malaysia. This is followed by the recent announcement by the government that toll on up to 15 highways in Kuala Lumpur and Selangor will also see an increase of 50 sen to RM2, also effective as of Jan 1, 2014.

The bad news does not stop there. Already schoolbus operators have requested schoolbus fares to be increased up to 40%; and taxi operators have also indicated the need to increase taxi fares due to increased fuel prices and maintenance costs.

All these come hot on the heel of this year’s post-election fuel subsidy reduction and total removal of sugar subsidy as announced in this year’s Budget speech. And of course, the mother of all fear, the Goods and Services Tax (GST) will be introduced come April 1, 2015.

It doesn’t take a genius to figure it out that 2014 is shaping up to be the ‘perfect economic storm’ for Malaysians. All these increases will only lead to inevitable higher goods and services prices and conversely less net disposable income for the people. Already economists have warned of a higher inflation rate for the coming year.

The government has been quick to defend all these by saying these are painful but necessary.

I disagree with the government’s argument. I would like to add here that I am not a subscriber to populist policy. Indeed the inherent weakness of democracy system is that at times politicians tend to appease the voters to the detriment and expense of necessary and sometimes unpopular policies.

No, I am voicing my disapproval because I don’t think the people should bear the brunt for the government mismanagement of the economy. Why should we the citizens and taxpayers bail out the government for their inept and lacklustre performance? In sum, these measures are painful but NOT necessary.

For example, Tenaga Nasional Berhad (TNB) has long argued the need to adjust the electricity tariff due to rising costs. Last year TNB achieved RM4.6 billion in profit.

On top of that the government is paying RM8 billion subsidy to independent power producers (IPPs) yearly due to very lopsided agreement for production of extra power reserve electricity which bring our national electricity reserve margin close to 50 percent, which is above most nations which stand at 5-10 percent.

If government is indeed sincere in wanting to reduce government expenditure, the first step should be renegotiating existing lopsided agreement with all the IPPs. If they refuse to renegotiate, the government can always pass a law for a windfall or special tax on the IPPs. Where there is a will there is a way. But does the government have the political will and interest to antagonise their cronies?

With regard to the necessary hike in toll rates, again the root problem is that the BN government has entered into agreements with toll companies which are highly disadvantageous to the government.

Many of these toll companies are given soft loans by the government with below market-rate interest to commence construction of their respective highways. Then they are awarded extremely lucrative contract terms which allowed them to increase toll rates every certain amount of years with lengthy concession periods. Litrak’s Lebuhraya Damansara-Puchong (LDP) for example has a concession period of 34 years from 1996-2030.

The government clearly is at a disadvantage since not only must they provide some sort of financial assistance up-front but the toll charges increment should also take into account the increased number of vehicles using the highways.

A cursory glance at the financial report would reveals how profitable these toll companies are.

i PLUS Berhad total earning for the year 2011 – RM2.515 billion;

ii Litrak – Lebuhraya Damansara-Puchong (LDP) (40km) – RM180 million;

iii IJM Bhd – KM Besraya Highway (16.6km) – RM48.3 million.

The government must realise that advances in technology means people are getting information and news from wider sources than ever. People are angry because they know the government is not curing the disease in the right manner.

Every year Malaysians are still reading about enormous amounts of wastage and financial incompetency by the government in the annual Auditor-General’s Report. High-level corruption cases such as RM250 million National Feedlot Corporation (NFC) cow scandal has yet to see judicial light and even after so many years the case has yet to be finalised in court.

The cancerous cell of corruption and cronyism must be cut out before the people are convinced such painful measures are necessary to take.

Unless and until then, the BN government would have to continue justifying the unjustifiable while the rakyat brace themselves for a tough and challenging 2014. Happy New Year to all.

The writer is PKR Johor state assemblyperson for Bukit Batu

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