Part II shadow national debts and other obligations

Last week, after pointing out the relatively obvious Hutang Dalam Negeri Kerajaan Persekutuan that was not commented in PM’s trumpet blowing, the trick is to identify where else our liabilities are hidden.

Firstly, some economics 101:

Public goods – goods and services that should preferably be provided by public sector rather than private entrepreneurs at no profit. It is a social responsibility to ensure equity (fairness) in a free economy market. Traditionally these items are provided by the state from tax payers’ contribution for the common good where the rich subsidise the poor and not at a profit. Examples of such goods and services are public roads, utilities, postal services, health and education services.

Another reason is that it is not practical for private sector to provide such services e.g. police and security forces. (Although Malaysian defense contracts have famous ways – all the way to France - of going about such things)

In Malaysia, Mahathir administration started an irreversible tsunami of privatization like Indah Water, Tenaga, Telekon, Alam Flora etc. One argument is that corporate taxes is lowered by such privatization because the government is relieved of its duty to provide them.

Fine, then how come successive Badawi and Najib administrations have tried so hard to widen tax collection via GST, raised the service tax percentages and introduced credit card taxes?

I have taken a cursory examination of hidden national debts as a result of the above mentioned privatization trend. If a good or service was and still can be provided by the state at no profit, and this function has been taken over by private sector, then borrowings incurred by these companies are repaid by consumers who have no choice but continue to purchase these goods and services.

Base on the limited research I could do with published audited accounts and common knowledge, I have identified some well known private companies who took over various state functions at a profit and incurred borrowings.

Some of them are self explanatory and obvious like Pos Malaysia, Tenaga and Telekom. Proton is something that Mahathir should never tried in the first place but we have to pay for it while Ahmad Zaki Berhad gets most of their revenue from JKR projects, Faber Group are steep in health care, facilities management of LRT while KUB’s role is revealed further below.

Base on my previous articles, PAAB and MyEG are probably going to increase their borrowings very significantly to RM20 billion and RM100 million respectively.

My very crude calculation is that every Malaysian is saddled with RM1,750 worth of national debt hosted by private companies which are basically more costly government function. This debt can increase up to RM2,228 per person, excluding interest and related professional charges associated with huge syndicated borrowings such as legal fees, consultancy fees and bank charges.

I have barely scratched the surface. Further hidden from the public are examples like Indah Water Konsortium, Puspakom (which is consolidated under MRCB), Pharmaniaga etc as well as those sendirian berhads functioning as custodian of UMNO’s business interest like Temasek Padu Sdn Bhd.

Maybe readers out there can add onto the list like UEM, Peremba, Gamuda, Prasana, Alam Flora etc. It is endless and quite frightening to think about it.

Without a change of federal government, there is no way to get most of the picture out for public scrutiny and examination.

Price of goods and services the man and woman in the street have to pay for needs to cover the fat executive salaries*, principal and interest of the hidden nation debts, compliance cost of a listed company, market-base salaries with no retrenchment, advertisement costs, rent seekers (like the IPPs) so that the companies will have enough money to pay dividends and re-invest.

* example of Tenaga's director remuneration (click on the pix for a better view & see how much a director can get and see how many directors they we need so many of them?) :

Privatisation also means the profits of the companies are taxed so in fact Malaysians are actually being taxed at a higher level as these companies have to factor in corporate taxes in their pricing structure.

All the above would actually more than offset cost of the previous structure where civil servants who are entitled to pensions but considerably less salaried and there is no profit and no corporate tax.

To illustrate what I am trying to say, see below:

In the extreme case of Plus, in 2009, the dividend it paid shareholders amounted to some RM800 million, equal to the amount of “compensation” paid by the Barisan Nasional administration on our behalf.

Take a look at the level of retained earnings kept in the fat pockets of my selected samples and the level of retained profits/fats in Proton make my stomach churn.

Below: why do we need to pay so that these chaps below can have such a big piggy bank? (the numbers are in RM'000)

And in cases of non-listed privatization, the general public will never know the true extend of the amounts involved.

I am not against private entities taking a risk, make a profit and provide job opportunities but I am against excessive profits derived from sheltered crony dominated environment. Lee Kuan Yew told the chief of Singapore Airline upon commencement of operations that he either make profit within 3 years or get shut down hence SIA become an internationally reputed airline...the same can not be said about MAS.

Being a listed company with shares also means it can be bought and sold unlimited times and every time when some one purchased a company with multi million deals, such investments (and interest on borrowings) would have to be repaid, hence the cost of goods and services would have to be raised, again.


2. Material Contracts Involving Directors and Major Shareholders

(a) a Share Sale agreement dated 28 august 2009 between Tradewinds (M) Berhad (“TWS” or the “Company”) and Wang Tak Company Limited (“WT”) for the acquisition of 148,281,100 ordinary shares of RM1.00 each in padiberas Nasional Berhad (“Bernas”), representing 31.52% of the total issued and paid-up share capital of Bernas from WT for a total purchase consideration of RM308,424,688.00. The said acquisition was completed on 2 November 2009.


Why can’t we tax payers just pay some dedicated civil servants to be at their station and retire at their jobs, avoid paying for all the above? If the civil servants love their country, they should be able to provide adequate service and negate the nonsense about a profit crazy private entity always do better than civil servants.

Then again, if we talk about the civil servants' attitude moulded by more than 50 years of Alliance /BN administration, then it is another can of worms.


“Govindan sees Malaysia’s huge and largely ethnic Malay civil service, completely loyal to Umno, but increasingly incompetent, as PM Najib’s largest obstacle.

“He commented that the civil service has a very narrow worldview and will oppose, even refuse to implement, reforms perceived as damaging ethnic Malay interests, even if convinced of the long-run gains for Malaysia,” it said.


And base on this exclusive here about KUB, dividends and further burden on rakyat do come hand in hand:

Polisi dividen: Petanda UMNO-BN semakin kesempitan wang?
Neo Chee Hua Jun 16, 2011 05:36:13 pm

KUB Malaysia Bhd yang mempunyai hubungan rapat dengan UMNO dan Kementerian Kewangan memaklumkan pada 14 Jun 2011, bahawa syarikatnya merancang untuk melaksanakan polisi dividen mulai tahun 2013 - ….

….., dua pemegang saham terbesar KUB Malaysia Bhd adalah Gaya Edisi Sdn Bhd (29.62%) dan Kementerian Kewangan (22.55%). ….. pemegang saham terbesar Gaya Edisi Sdn Bhd adalah Temasek Padu Sdn Bhd, dan Temasek Padu kini adalah pemegang harta parti pemerintah terbesar, UMNO.

Najib Razak telah menstruktur semula harta parti UMNO setelah mengambil alih tampuk pimpinan. Harta UMNO telah dimasukkan ke bawah Temasek Padu, dan syarikat ini dikuasai oleh orang rapatnya, Zulkifly Rafique, pengasas firma guaman Zul Rafique & Partners, dan seorang lagi peguam dari firma guaman ini, Tunku Alizan Raja Muhammad Alia.

Seandainya KUB Malaysia Bhd melaksanakan polisi dividen pada tahun 2013, ….. UMNO dan Kementerian Kewangan akan mendapat dividen pada kadar yang tetap dari KUB Malaysia Bhd setiap tahun.

….. KUB Malaysia dijangka bakal mendapat satu projek hospital kepakaran kanak-kanak yang bernilai RM3 bilion bersama IJM Corporation Bhd. Di bawah kontrak yang sama, KUB Malaysia bersama IJM bakal mendapat kontrak konsesi untuk mengendalikan hospital tersebut selama 30 tahun.

…. KUB Malaysia juga berniat untuk mendapatkan projek pembinaan lapangan terbang antarabangsa Kuala Lumpur kedua, yang bernilai RM250 juta, termasuk pembinaan landasan kapal terbang ketiga dan landasan teksi.

.... syarikat joint venture antara KUB Malaysia Bhd dengan Malaysia Steel Works (KL) Bhd juga berjaya mendapat satu projek inter-city commuter train bernilai RM1.23 bilion di bawah Wilayah Pembangunan Iskandar Malaysia.


Another interesting example is found within Ahmad Zaki Berhad. Take a look at the notes to accounts no 44 for year ended 31 December 2010.

We all know about the hoo haa about no open tender and non-competitive bidding and bail outs waste of public fund,

Point a) and point c) quite clearly indicate the performance of the Company is not satisfactory and yet point b) clearly also shows a direct award of further project funded by tax payers to this company. Surely there are other more competitive bumi contractors around?

We will never ever know, the true extent of how much we tax payers really owe.


  1. Dear Sir,
    1. If there is good dividend potential in these companies, why not buy a piece of share?
    2. The govt had distributed such dividend via Amanah Saham where 60% of the population are allocated for.
    3. What I agree with your comment is the public listed company cannot distribute dividends until they have paid back what the govt had input, in this case PLUS where prior to profitablity, the govt had loaned a substantial sum. Dont know whether fully paid?

  2. Dear Anom

    thank you for your questions and here are my answers

    1) my piece is about higher cost of living...I prefer all Malaysians to have cheaper cost of living and not certain wealthy Malaysians who can afford and know how to buy shares to enjoy their life

    as for my personal finance, it is fine thank you and I do not own any of the counters I mentioned above

    2) are u sure every single 60% of the Malays own Amanah Saham? by the way, they have to pay first to get a 10% back whereas I prefer cost of living of all Malaysians is not subject to any unnecessary addition owing to rent-seekers, deliberate placing of middle men etc

    if all listed companies are open to competitive bidding then the cost of projects will come down and any dividend pay out is base on competitive profits and not churned out despite inefficiency, patronage and what not....

    3) PLUS have not finish servicing their loans yet. Under our Companies Act 1965, companies can pay dividend as long as they made profit so whether or not they fully repay their loans is not the decisive factor.


    Lee Wee Tak

  3. Parts 1 & 2 sums up what's happening in the country. Evil will fall, one day.

  4. Thanks Broad

    Wee Tak