Is it too little and too many tar roads in Sarawak?

My car's road tax is expiring soon and so is the coming of Sarawak GE.

The other day, I picked up the following information from YB Teo Nie Ching's blog:

Sabah & Sarawak possess 60% of land mass of the country but length of tar road is only 6,390km while West M'sia has 21,589km length of tar road

I also chanced upon the audited accounts of UBG Berhad coincidentally.





UGB Berhad has a 15 years road maintenance concession granted by the Sarawak State Government with effect from 1 January 2003 to maintain 4,600km of roads in the state. Given YB Teo's disclosure that there is only 6,390km of tar roads in Sarawak and Sabah, this Road Maintenance Agreement probably granted this happy listed company a monopoly of road maintenance for the entire state.

Source: Annual report and accounts of UGB Berhad for 2009

Source : Annual Report and Accounts of Putrajaya Perdana Berhad, 2009

Revenue recognition policy for this business segment as disclosed in UGB's accounts is"fixed rates subject to revision in accordance with the agreement".



When it is fixed, it is suppose to be fixed. If it is subject to revision then is there an incentive for the concessionaire to keep tight cost control and prevent cost overrun? How hard or how easy is it for the concessionaire to get the rates revised? If abused, this is as good as a profit guarantee or blank cheque. Who approved this Road Maintenance Agreement to be signed with UGB Berhad? Was this tabled and deliberated in the state assembly then?

Does this look like the equivalent of Semenanjung's ever controversial, very politicalized, profit guaranteeing, inflation-inducing toll highways? Before we even contemplate how much money UGB is making out of this deal, I remember in my form 6 economics class, my dear teacher Puan C. (I still remember your full name, cikgu) taught us that theoretically government collect taxes, taxes are used for providing public goods and it is of the interest of the people that such services are provided without profit-motive.

Let's have a look at the numbers in 2009 and 2008. For these 2 years alone, RM76million gross profit was earned from maintaining the roads. These "profits" I suppose were paid from taxes and instead of being channelled back to building new roads, further repairs and improvement of roads, have been channelled into hands of a plc, which may have become dividends, directors' remuneration (including retirement benefits) etc.



That RM242,593,000 worked out to be RM26,369 per year per km. Sounds like Sarawakians have the best tar roads and pavement in the world. Being a Semenanjungite, I really do not know for very sure.




On 12 May 2009, UGB sold the 2 subsidiary companies for road maintenance and pavement for a combined amount of RM75 million, instant cash generation to the holding company, to its other subsidiary Putrajaya Perdana Berhad. A simple case of left pocket to right pocket.

As Putrajaya Perdana Berhad is aggressively creating prominent landmarks in Semenanjung, I do wonder if the collection of road maintenance revenue in Sarawak can be re-invested back into Sarawak.

It is also interesting to note Mr Low Taek Jho joined Putrajaya Perdana Berhad as an advisor (and I have a hard time understanding what "Non-Independent Non-Executive" means).



All said and done, I notice among the domineering shareholder of Putrajaya Perdana Berhad includes Cahya Mata Sarawak Berhad, a company linked to the current chief minister which makes me wonder if Sarawak is not big enough for him. A partnership of Mr Low and Chief Minister Taib could prove to be redoubtable political-economic tie up.

So if UMNO did not cross over to Sarawak as they did to Sabah, Sarawak's finest export to Semenanjung seems to include Tan Sri Ting Pek Khing and Cahya Sarawak via Putrajaya Perdana Berhad then.