Sweating over the direction of Malaysia's water supply

I would like to thank a dear friend of mine who pointed out another nugget to me:

In the Auditor General's 2008 Report on the state government agencies' workings, the state government of Negeri Sembilan has surrendered federal government loan of RM1.2 billion (i.e. tax collected from you and me which was spent on building and developing the state’s water public facility) and transferred it to Pengurusan Aset Air Berhad.


This means for Negeri Sembilan folks, for the next 35 years, water tariff you pay goes to PAAB and also the state coffer, insftead of just the state only like before.

Further surfing non-porn related websites revealed the following findings:

The model of our water supply will be shifted all the way from government service to private sector.






Can anybody remember any public referendum or open tender with regards to this?



The trend is disturbing if you think of the proposed selling off of the toll concessions.

The state governments are selling off some huge chunk of assets to a MOF owned debt-incurring special vehicle (now a term that raises tension in the US after Enron). There will be immediate cashflow to the federal government while some newly created monopoly will increase government/public borrowings, run the operations and by the way, does anyone know how Indah Water Konsortium arrive at the tariff rates we paying for?



You can check out PAAB in their corporate website if you are free.

A cursory review of the Annual Reports and Accounts of PAAB for year ended 31 December (notice the "0"s in the comparative years i.e. no track record whatsoever) revealed the following:

PAAB paid RM2,774,091,000 to acquire “investment properties” in 2009 for control of water facilities in Melaka, Negeri Sembilan and Johor. That works out to be about..RM102.74 per Malaysian (total 27 million); that is only the beginning.

Now how did PAAB raise the money to pay for the “investment properties”? With no track records, borrow money, of course.

I wonder if another letter of support / guarantee ala PKFTZ is floating around somewhere.....

To quote from page 27 of the Annual Report and Accounts:

“Pengurusan Aset Air Berhad (“PAAB”), a government-owned company under the Ministry of Finance (Inc.) together with CIMB Investment Bank as the Lead Arranger and Lead Manager (“CIMB”), had issued a program up to RM20bil Nominal Value Islamic Medium Term Notes Programme and Islamic Commercial Paper Programme which adopted the two Islamic concepts – Ijarah and Musyarakah on 26 October 2009.

The launch marks, the largest water related bond programme ever established in Malaysia, boosted the Sukuk in market segment reported by RAM.

..................

The establishment of PASB as a unit under PAAB is to undertake the latter’s acquisition of water assets and their accompanying liabilities in Peninsular Malaysia and Labuan. To date PAAB has acquired water assets from Melaka, Negeri Sembilan and Johor besides commencing negotiations with the other State Governments and their respective state water operators with the hope to arrive at an amicable sale and leaseback arrangement.”

Alamak! What kind of legacy are we getting from the present administration? If the bi-partisan alternatives becomes a reality one day, Malaysians will still be tied to this legacy. By comparison what is going on in Selangor is very very different........free water

Also why am I not surprised with the presence of CIMB again?

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http://www.cimb.com/index.php?ch=subch_about_cimb_group&pg=pg_acg_our_leaders&ac=42&tpt=cimb_group

Dato' Sri Nazir Razak

Non-Independent Executive Director/Group Chief Executive

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The borrowings as at the financial year end stood at

(RM4,943,150,000+RM1,548,219,000+RM174,000,000) = RM6,665,369,000 or RM246.87 per Malaysian.

Just imagine what else the RM6 billion could have been channelled into, e.g. loans to SMIs or study loans or credit guarantee scheme for SMIs etc….

When you borrow money, you pay interest and now this mean the consumers have to bear more cost.

For financial year ended 31 December 2009, revenue (money collected from you and me) was RM97 million and 46% or RM45 million went to interest payment so for what justification Malaysians suddenly have to pay interest on our water tariff?

Ask any businessman if he feels like paying half of his sales to banks as interest payment.

On page 24 of the New Economic Model Direction issued by NEAC:

“A key component of inclusiveness is the fostering of equal and fair economic opportunities. Affirmative action programmes and institutions will continue in the NEM but, in line with views of the main stakeholders, will be revamped to remove the rent seeking and market distorting features which have blemished the effectiveness of the programme.”


Well, PAAB is a monopoly recently created and how did it be chosen to run such a vital, huge undertaking which concerns the security of all and sundry of this company?

Oh by the way, the Chairman of PAAB is YB Dato’ Seri DiRaja Tajol Rosli Ghazali, formerly the Chief Minister of the State of Perak

I do ponder and wonder about the following points:

1) If the federal government is getting huge payments from selling water concessions then how come there is the proposal for GST?

- had GST come to effect on water supply, the cost structure we face as consumer could be as follow

# cost of the "investment properties" we already paid for with taxes to build up

# interest cost PAAB have to pay on our behalf to buy the assets

# additional cost of running the new structure e.g. directors' pay, professional fees to bankers for raising the bond etc
# less: cost reduction compared to being a state-own agency, if any
# profit to pay dividends to shareholders (a form 6 economy student can tell you public goods should be non-profit oriented)
# profit to show as a viable company and for re-investing purposes

# payment of corporate tax previously not needed as state agency so a case of tax on tax?

Total # = Y, revenue required to collect from consumers who do not have a choice

then we pay GST on Y, kind of a big piece of kuih lapis, no? The idea of GST ain't dead yet, I believe.

(more than a year ago, I wrote

Modern business modules advocate shorter supply chain, which would guarantee freshness, lower prices and shorter delivery time. One thing that is not transparent to all and sundry is the supply chain in Malaysia. I hope the Domestic Trade Ministry can make public the supply chain of common goods and services. We can then see how many times the goods changed hands from producers, distributors, deals, retailers and eventually to you and me

Now at least something seems clearer to me now)

2) Was the revenue generated from this sale of vital national address mentioned in the Prime Minister's budget speech for 2009 or 2010 budget?

I don't think so.

3) With this cash injection from selling off water concessions, how come we are still having national budget deficits?

Arghh....I have some more debts to pay