Part II shadow national debts and other obligations

ARCHIVES 2011

By admin-s On Jun 20, 2011

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.

By Lee Wee Tak

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 have…do 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: