Penang financial management: An unsustainable bloat?

Expanding on the analysis of Mr Calvin Sankaran from his article here.  Additional graphs. tables and commentary in blue italics are mine.

When Pakatan Rakyat (PR) wrested control of five states in the 2008 General Election, it provided a perfect platform for the Opposition coalition to showcase its ability to govern. Many Malaysians were eager to see how PR would perform, especially in Penang and Selangor, two of the most economically advanced states in the country.

Within a few years, reports of outstanding financial management in Penang by the DAP-led state government started to emerge. Media organisations, both local and foreign, reported that under new Chief Minister Lim Guan Eng, the PR government had cleaned up the books, eliminated debts and corruption, boosted revenues and increased state coffers by several folds.

Speaking at the 7th Annual Corporate Governance Summit, Lim revealed the secret behind the success – the state government’s Competency, Accountability and Transparency (CAT) principles. He proudly pointed out that since PR took over the state, it had recorded budget surpluses every year.

The PR state government, according to Lim, had transformed Penang into a shining model of good governance and one far superior to other Barisan Nasional-led state and Federal governments.

So how did Penang manage to achieve stellar results within such a short period of time? What are the important lessons that can be learnt from Penang in managing public finances? This analysis attempts to answer all these questions by studying Penang’s financial performance from the year 2007 to 2014 based on the state’s financial statements and the Auditor-General’s audit reports.

In particular, we will examine three key elements of the state’s financial statement – Revenue, Expenditure and Consolidated Revenue Account. We will use the year 2007 as the baseline for comparison since it was the last full year of administration by the previous BN state government. For the current state government, 2014 data is used as the benchmark as it is the latest fully-audited financial statement available at this point of time.

Revenue

For the year 2007, the state’s revenue stood at RM 295.9 million and by 2014, it rocketed to an astounding RM 799.7 million. This translates to an increase of RM 503.8 million over seven years and a Compound Annual Growth Rate (CAGR) of 15.26%. This is indeed an impressive achievement by any standard.

Let’s dive deeper into the state’s financial statements to understand how Lim was able to engineer such an outstanding feat of financial management.

When we analyse the revenue, two particular items immediately stand out – land sales and quit rent. It quickly becomes apparent from these numbers that the state government has been selling public lands to private developers at unprecedented rates over the last several years. These massive land sales alone contributed hundreds of millions of ringgit to the state annually.

For example, for the years 2012, 2013 and 2014, land sales brought in RM206.1 million, RM210.8 million and RM300.2 million respectively. 

In a complete contrast to this, there were no land sales in the year 2007.

LELONG! LELONG! Land mostly sold or traded away. Unfortunately, the Penang State Govt has mostly run out of prime state land to sell and that is why they are pushing so hard for massive land reclamation deals at all cost.

In their relentless effort to boost revenue, the state had also tripled infrastructure development charges, doubled the rezoning fees to 50%, hiked the land conversion premium and drastically increased the density for property development (plot-ratio).

All these measures contributed significantly to the state’s revenue stream – in the last several years quit rent and land conversion premium charges added another RM150 million annually to the state’s coffers.

Scrutinising the financial statements further, we discovered several highly irregular transactions and practices. 

For example, in the 2011 Financial Statement, there was a transaction which many might have interpreted as “creative accounting”. The state, for some unknown and unexplained reasons, had closed the Trust Account and transferred the monies (RM176.12 million) into its Revenue Account, thus artificially inflating the revenue numbers. 

Dodgy one-off accounting trick to transfer funds from a state trust fund to the state govt for a one-off gain in revenue. If not, the year 2011 would be in deficit for Penang. There is a reason why you keep money in trust fund - so the govt cannot simply use it - but it appears DAP state govt could not resist the temptation to take it.

This is not an isolated case, for there were several other questionable transactions.

Expenditure

Looking at the expenditure of the Penang state government, the numbers appear to be even more striking than the data for revenue. From RM252.3 million in 2007, it ballooned to RM745.54 million in 2014 – equivalent to a three-fold increase.

If you compare the growth in spending by the Penang State Govt vs the Federal Govt spending, this abnormal trend is even more pronounced. Detractors will say that Penang is spending on growth but what if Federal Govt similarly hikes yearly spending by 300% and also claims it is for growth?

When questioned about this, Lim responded that with the increase in revenue his government “was able to spend more on projects that benefitted the people”.

However, financial statements do not support the chief minister’s claim. The data clearly shows that the state spends far more on administrative charges than on development projects. The total administrative cost has sky-rocketed from RM192.5 million (2007) to RM625.5 million (2014) – an increase of 3.25 times. The current government spends almost 75% of its revenue on administration while their predecessors only spent around 65% of the revenue on administration.

Despite frequently repeated claims that Pakatan can eliminate corruption and wastages to reduce govt spending, not once have they ever managed to reduce spending. In fact, Spending has almost quadrupled in just 7 years.

The frequently repeated lies of the previous Penang BN govt selling land for RM1 psf are also easily disproved here. - but it doesn't stop Penang DAP to continually repeat the same lies. It was NEVER RM1psf. 

Here is a recent news report for the so-called RM1psf reclamation deal where Lim Guan Eng has quietly extended this so-called RM1psf  reclamation deal by 3 more years. You can clearly see that 191 acres will be handed back to the Penang State Govt as per the original agreement in 1990 - of which 110 acres of these super-prime land worth RM6.3 billion will be used for payment by the state government to the Penang Tunnel concession company. 

I wish DAP would stop with these RM1psf lies once and for all.

At the same time, the expenditure for development projects increased by a mere 1.5 times (RM129.4 million to RM192.3 million) over the last seven years. Taken as a percentage of revenue, the current state government spends far less on development than their predecessors (PR’s 24% vs BN’s 44%). In fact, instead of increasing, the state has actually reduced development spending in 2014.

As such Lim’s claim that the state had increased spending on people-centric projects in tandem with the rise in revenue was clearly wrong and misleading.

Further deep-diving into the bloated administrative spending throws out more surprises. Emolument, which includes the salaries, bonuses, allowances and other fees paid to state leaders and public servants, doubled to a massive RM142.3 million in 2014.

Even more worrying was that fixed expenses had increased by a stunning 4.5 times to RM481.1 million. The financial statements do not provide details on this spending, though the A-G’s report indicated that some of the increase came from increases in salaries, allowances and additional new expenses.

This big jump in fixed state expenses is particularly worrying as the normal operating revenue for Penang ie. Hasil Cukai and Terimaan bukan Cukai is only half of this at about RM200 million per year. 

Normal operating revenues (less Hasil Bukan Cukai which are mostly land sales) is not enough to sustain Penang fixed expenses of RM400mil anymore

This means that from now on, Penang have no choice but to either sell more state land (if there are any left) or allow revenues from land reclamation.

In a nutshell, this is what Penang DAP govt has been doing these past 7 years

Consolidated Revenue Account

Consolidated Revenue Account is the term used for the public sector’s Profit and Loss Account and it shows the total revenue, total expenditure and the nett balance. For Penang, the account shows a remarkable increase over the last seven years. From RM373.6 million in 2007, it has risen to RM880.6 million in 2014.

While the CM is correct in saying that the state has been recording surpluses every year since 2007, this is also true for his predecessor as well. As such, the claim that Penang was almost bankrupt when Lim took over is too evidently inaccurate as the state had RM373.6 million at the end of 2007.

Summary and Conclusion

Penang has seen a rapid increase in its revenue and significant expansion of its Consolidated Revenue account balance since Lim Guan Eng became Chief Minister. However, detailed analysis of the state’s financial statements reveal that these achievements were not due to excellent management skills, the much-touted CAT principles or policy-making but rather to some highly questionable financial practices.

The revenue is being driven by the unsustainable and irresponsible action of selling public land to private companies. Most of these land sales were made to housing and commercial project developers and resulted in disastrous socio-economic consequences such as over-development, severe environmental degradation, sky-rocketing property prices, traffic congestion, destruction of heritage, decline in quality of life, etc.

While Lim and his fellow Pakatan leaders have criticised the Federal government for its bloated public service and irresponsibility in spending public funds, Penang’s own financial statements show the state government to be even more bloated and wasteful.

For example, it was reported that the CM himself has 20 Special Officers. The state also created numerous new agencies and institutes or expanded existing ones, filling them mainly with political members and supporters.

The state had expanded the JKKK (Village Development and Security Committee) from 149 to 291 areas while at the same time significantly increasing their salaries and allowances. It was reported that the state allocated RM12.6 million for JKKK alone last year. This appears to be a politically motivated move as most, if not all, JKKK members are said to belong to political parties under Pakatan Harapan.

The state government also upgraded the official cars for state leaders (including a luxurious S-Class Mercedes Benz for the CM) and more than doubled salaries and allowances for elected representatives and executive councillors. Mind-bogglingly, it also handed out welfare aid to the state’s notorious taxi and rickshaw drivers, an action that critics slammed as “vote buying”.

Questions also were asked about the RM305 million the state spent merely to do a “feasibility study and detailed design” on the Penang Tunnel project.

I believe these are merely the tip of the iceberg as a more detailed examination of the state’s books would reveal more such cases of mismanagement and wasteful spending.

In conclusion, the claim of outstanding economic stewardship of Penang appears to be a mirage carefully engineered by the state government. Worse, the current financial practices and policies of the state government, if not reversed, can cause irreparable long-term damage to the state.

If selling state assets to fund an increasingly growing yearly state spending and operating budget deficit is your definition of good governance then almost everyone can be a good government. 

It doesn't take a genius to sell assets off.

Unfortunately, there is a limit of how much more you have to sell and it seems that the Penang state govt had reached that limit - which is why the big push on land reclamation deals.

If the land reclamation deals are stopped or suspended, you will soon see a humongous state budget deficit soon.

If you take out the revenues from land sales from the past few years accounts, this is what you will see.

All numbers are based on the official Auditer-General Reports that you can find here:

2014: https://www.audit.gov.my/images/pdf/LKAN2014/Siri3/NEGERI/KEWANGAN/ppinang%20-%20laporan%20ketua%20audit%20negara%20penyata%20kewangan%202014.pdf

2011: https://www.audit.gov.my/docs/BM/LKAN2011/Negeri/Penyata%20Kewangan/PULAU%20PINANG%205.10.2012.pdf

Feel free to come dispute my numbers. 

You won't find anything wrong with it though.

Note: Don't be fooled by the often-repeated claim that the Auditor-General has said Penang govt finances is managed well. Auditors can only tell you if your accounts and finances are in order or in surplus or growing - they cannot comment on your business model - in this case, the selling of state assets.

If you don't believe me, see how hard that Penang govt and DAP will fight for the land reclamation projects in the coming months.

They will not yield to anyone (not even their fellow PKR ADUNS whom they will call traitors) - even if it means big environmental disaster for Penang. 

Not pushing ahead with the land reclamation projects would mean depleting revenues for Penang that will no longer cover their bloated yearly state expenses - meaning a big deficit that current reserves may not be large enough to cover.

Their current motto should really be summarised as this:

Don't believe me? See how hard and desperate Penang DAP will fight for this. They have no more choice.

Anyway, I will win this bet as DAP Penang's State EXCO Chow Kon Yeow has already admitted on Jan 7th 2016 that the Penang state govt has run out of valuable land to sell.and have no choice but to do land reclamation.

Penerangan Abdul Wahid Omar mengenai sidang kemuncak TPPA 9 Jan 2016

Assalamualaikum rakan-rakan. Pada hari Sabtu 9 Januari 2016, saya telah hadir di Sidang Kemuncak TPPA anjuran Bantah TPPA & Kongres Rakyat di IDCC, Shah Alam. Saya mendaftar secara online hari sebelumnya setelah mendapat persetujuan Menteri Perdagangan Antarbangsa dan Industri (MITI), Datuk Seri Mustapha Mohamed (Tok Pa). Miti turut menghantar beberapa orang pegawai. Tok Pa berada di Pulau Pinang untuk program penerangan TPPA.

Tujuan kehadiran saya adalah untuk mendengar sendiri isu-isu yang dibangkitkan oleh ahli-ahli panel yang terdiri daripada Saudara Nizam Mahshar, Cikgu Azmi, Prof Gurdial Singh & Pn Chee Yoke Ling, sementara moderator adalah Saudara Rizal Jaafar. YABhg Tun Dr Mahathir turut hadir tetapi tidak memberikan ucaptama kerana kurang sihat. Kita doakan agar Tun segera sembuh.

Sidang dibuka oleh Saudara Azlan Awang (Majli Tindakan Ekonomi Melayu -MTEM). Saya sampai jam 8.50am kerana poster sidang menyatakan acara diadakan 9.00am-1.00pm. Setelah sampai barulah saya diberitahu bahawa Majlis dijadualkan hanya bermula 10.00am. Silap saya kerana tidak mendapat pengesahan waktu. Walau bagaimanapun Majlis hanya bermula pada jam 10.30 pagi setelah ketibaan Tun.

Pelbagai isu telah dibangkitkan termasuklah kajian kos dan manfaat, soalan mengapa perlu tergesa-gesa, rundingan sulit, perlindungan harta intelek, kemungkinan kenaikan kos ubat, kedaulatan negara, perolehan Kerajaan, syarikat milik Kerajaan dan kepentingan Bumiputera.

Saya berpendapat banyak kebimbangan atau kegusaran mereka tidak benar. Sebagai contoh, ada yang menyatakan kedaulatan negara tergadai sehingga Kerajaan negeri akan kehilangan kuasa untuk menetapkan syarat-syarat penukaran kegunaan tanah; menghalang negara untuk menetapkan piawaian halal; dan dakwaan TPPA mengatasi Perlembagaan Persekutuan.

Ini tidak benar. Antara lain, artikel 4(1) Perlembagaan Persekutuan memperuntukkan “Perlembagaan ini ialah undang-undang utama Persekutuan dan apa-apa undang-undang yang diluluskan selepas Hari Merdeka yang tidak selaras dengan Perlembagaan ini adalah tidak sah setakat ketidakselarasan itu.”.

Ada juga yang membangkitkan kebimbangan tentang peruntukan mekanisma penyelesaian pertikaian Pelabur-Negara (ISDS mechanism). Sebenarnya mekanisma ISDS melalui tribunal arbitrasi antarabangsa telah lama digunakan.

Saya sendiri pernah terlibat ketika menerajui Telekom Malaysia (TM) tahun 2004-2008 di mana TM telah memfailkan kes ‘expropriation’ terhadap Kerajaan Ghana yang telah melanggar perjanjian dan mengambil alih penguasaan Lembaga Pengarah dan Pengurusan syarikat Ghana Telecommunications daripada TM. Ini berlaku akibat pertukaran Kerajaan di mana Presiden Kufour telah menggantikan Presiden Rawlings.

Proses arbitrasi tersebut telah mendorong Kerajaan Ghana menyelesaikan pertikaian dan memberi pampasan setimpal kepada TM. Walaupun peruntukan ISDS dalam TPPA ini akan mengikat Kerajaan, tuntutan akan hanya berkuatkuasa setelah proses perundingan selama 6 bulan dijalankan sebelum dirujuk ke tribunal arbitrasi antarabangsa.

Ia juga akan memberi perlindungan kepada syarikat-syarikat Malaysia yang kini telah melabur lebih RM600 billion ke luar negara termasuklah dalam negara-negara TPP.

Berbalik kepada prosiding Sidang Kemuncak TPPA, setelah panel selesai membuat pembentangan, saya telah memohon untuk bercakap dan memberi sedikit pencerahan. Malangnya permintaan saya ditolak atas sebab kesuntukan masa.

Setelah beberapa kali mengulang permintaan, akhirnya saya akur dengan keputusan penganjur. Kita perlu hormat majlis orang.

Izinkan saya menyentuh 3 perkara iaitu isu Penjajahan, Kos & Manfaat dan isu Rundingan Perjanjian.

1. Penjajahan :

Perjanjian TPPA melibatkan 12 buah negara iaitu 5 dari benua Amerika (Amerika Syarikat, Kanada, Mexico, Peru & Chile), 4 dari ASEAN (Malaysia, Singapura, Brunei & Vietnam) dan 3 dari Pasifik (Jepun, Australia & New Zealand).

Tiada negara yang dipaksa untuk menyertai TPP. Semuanya termasuk Malaysia menyertai TPP kerana percaya akan manfaat bersama (mutual benefits) yang bakal dinikmati. Malaysia sedar kita merupakan negara kecil dengan penduduk seramai hanya 31 juta dan saiz KDNK (GDP) sekitar USD300 billion. Sebab itulah kita menjuarai penubuhan Komuniti Ekonomi ASEAN bermula 31 Disember 2015 yang membolehkan saiz pasaran kita berkembang menjadi 620 juta penduduk & saiz KDNK USD2.5 trillion.

Dengan menyertai TPP, saiz pasaran akan lebih meluas lagi dengan jumlah penduduk 800 juta & saiz KDNK USD27.5 trillion iaitu 40% daripada saiz ekonomi dunia.

2. Kos & Manfaat :

Dalam menyertai mana-mana blok atau perjanjian perdagangan, memang ada kos dan ada manfaatnya.

Selain analisa dalaman, Kerajaan telah meminta Institut Kajian Strategi & Antarabangsa (ISIS) untuk melaksanakan Analisa Kepentingan Nasional dan PriceWaterhouse Coopers (PWC) untuk melaksanakan Kajian Kos dan Manfaat.

ISIS telah membuat kesimpulan bahawa penyertaan Malaysia dalam TPP adalah demi kepentingan negara. Manakala PWC membuat kesimpulan TPPA bakal memberikan manfaat bersih kepada ekonomi Malaysia dengan potensi peningkatan ekonomi atau KDNK antara USD107-211 billion dalam jangkamassa 2018-2027 atau peningkatan 0.60%-1.15% pada tahun 2027.

Bank Dunia juga dalam lapuran ‘Global Economic Prospects January 2016’ mereka telah menyentuh tentang potensi implikasi ekonomi makro TPP dalam mukasurat 219-233. Antara lain, Bank Dunia telah menyatakan bahawa Vietnam dan Malaysia adalah antara negara TPP yang bakal menikmati manfaat terbanyak dengan peningkatan KDNK masing2 sebanyak 10% dan 8% menjelang tahun 2030.

Peningkatan ekonomi yang berterusan akan membolehkan rakyat mendapat peluang perniagaan dan pekerjaan yang lebih baik yang seterusnya akan meningkatkan pendapatan isirumah rakyat Malaysia. Jadi berdasarkan kajian yang telah dijalankan, adalah jelas bahawa penyertaan Malaysia dalam TPP lebih mendatangkan manfaat.

3. Rundingan Perjanjian :

Sejak awal lagi Perdana Menteri telah memberi jaminan bahawa Malaysia hanya akan menyertai TPP atas terma-terma yang boleh kita terima.

Saya, Datuk Seri Ahmad Husni (Menteri Kewangan II) dan Datuk Seri Idris Jala (Pemandu) adalah antara menteri-menteri ekonomi yang telah membantu Tok Pa dalam rundingan TPPA. Penglibatan saya bermula 2 tahun lalu setelah menyertai Kabinet.

Memang sukar untuk memuktamadkan perjanjian sebesar ini yang melibatkan negara2 kuasa besar. Pelbagai usaha telah dibuat untuk memastikan pihak AS memahami kedudukan & keperluan Malaysia. Ini termasuk mengadakan sesi penerangan kepada Wakil Perdagangan AS tentang polisi Bumiputera & peranan syarikat2 berkaitan Kerajaan.

Saya percaya Tok Pa & pasukan MITI dengan sokongan lain2 Kementerian & agensi telah membuat yang terbaik mendapatkan terma-terma yang perlu untuk memelihara kepentingan negara. Ini termasuk pengiktirafan polisi Bumiputera dalam perjanjian TPP. Perkara ini tercapai kerana Malaysia telah menyertai rundingan awal.

Sekiranya Malaysia tidak termasuk dalam senarai 12 negara awal TPP, Malaysia akan terpaksa menerima terma-terma perjanjian sedia ada kemudian.

Kemungkinan ini adalah benar (a real possibility) kerana 3 buah negara ASEAN lain iaitu Indonesia, Thailand dan Filipina telah menyatakan hasrat mereka untuk menyertai TPP selepas ini.

Akhir sekali, Kerajaan akan membentangkan perjanjian TPP untuk kelulusan Dewan Rakyat pada 26 & 27 Januari dan Dewan Negara pada 28 Januari.

Apa juga kegelisahan atau kebimbangan boleh diutarakan oleh Ahli-ahli Parlimen dan akan dijawab oleh Tok Pa pada sesi Parlimen tersebut.

Marilah kita bersikap membina & bersiap sedia untuk memastikan syarikat2 dan rakyat kita dapat memanfaatkan TPPA yang bakal kita tandatangani setelah kelulusan Parlimen nanti.

Terima Kasih.

Abdul Wahid Omar,
Menteri di Jabatan Perdana Menteri
10 Januari 2016

Note: Earlier, Wahid had told the media that he was hoping the organizers would give him the opportunity to clarify certain matters regarding the TPPA.

Commenting on the matter, the organizers gave the excuse that they were only aware of the minister’s presence at the eleventh hour and due to hectic schedule, and despite the cancellation of Dr Mahathir’s speech (on health reasons), they were unable to arrange time for Abdul Wahid.

Dear Tony: This is not your father's land

I really wanted to tell you "This is govt land and not your father's land" - exactly what Lim Guan Eng recently scolded the Chew Jetty residents in Penang, but I shall refrain since it is rude for non-Tokong class people to say such things. 

But it is a nice phrase so I shall keep it as the blog post title

Tony Pua is good at misleading his followers with hyperbole, hypocrisy and selective facts. He is doing what he is doing best - to mislead those followers of his who placed their blind trust in Tony allowing him to easily dupe them.

Let me pick-apart Tony Pua's latest attack on 1MDB titled "Only the financially illiterate will believe that there is no bailout for 1MDB"

His allegations in Red italics, My reply is in Blue:

TONY: In an interview with The Edge this week, 1MDB President Arul Kanda boasted that 1MDB was not bailed out by the government like in the cases of national carrier Malaysian Airline System Bhd (MAS), or national carmaker Proton.

In the case of MAS, the bailout already cost upwards of RM20 billion of losses - money that will never be recovered and it is still not over yet as we embark on yet another bail-out run which started from Tun Mahathir's ill-advised decision to privatized to his crony and bail him out at double the market price.

In the case of Proton, the company was built on the backs of the Rakyat suffering from high car prices due to high duties and taxes. Besides the human lives costs that was incurred if Malaysian had been able to afford safer cars in the past, it is estimated the actual losses from the Rakyat in terms of financial costs is estimated at upwards of RM300 billion - not inclusive of higher interest charges arising from financing a higher amount than necessary.

Again, this is money that will never be recovered.

Now what Proton's sales have plummeted in recent years due to stronger competition from cheaper car prices as a result of Najib's policies, Proton is now needing free money from the government - up to RM2 billion, which Najib has so far refused to give despite Mahathir being made the Chairman in April 2014.

In 1MDB's case, other than guarantees and a higher than normal return from land profits, not a single sen of Rakyat's money was used in any bail-out of 1MDB.

Only a politician who is willing to deceive himself and deceive the rakyat would even dare say that 1MDB is worse than MAS or Proton.

In fact, after these 3 major rounds of rationalization, 1MDB is left with an estimated asset value (net of debts) of RM13 billion which is poised to grow further. 

You are free to dispute these hard numbers here.

TONY: He claims, “now that we have legally binding agreements for the IPIC swap, Edra sale and Bandar Malaysia, we don’t need to take any money from the government. There is no question about a bailout.”

Arul Kanda perhaps has been a little too quick to forget that the Najib administration granted RM950 million of emergency credit to 1MDB in February last year, despite having promised the Parliament that the Government would not bailout 1MDB.

Then a month later, the Government provided 1MDB with another “letter of support” to borrow another US$150 million (RM650 million) from Bank Exim.

I am not quite sure how you would term letter of support and a line of credit as a bail-out. These are financial assistance for sure - unless you forgot that 1MDB has always been 100% owned by the government and that the total actual cash investment by the govt in 1MDB is only RM1 million.

Letters of support is necessary to allow 1MDB to borrow at the best rates. In fact, such letters of support were also used for all those infrastructure projects you see such as the MRT and LRT extensions. It is normal for the govt to help out their own 100% owned companies (which are essentially part of govt too) to reduce borrowing costs.

Lines of credit and loans received using support letters have to be repaid. In the case of the RM950m and USD150m lines of credit, both can already be repaid - if not already done so by 1MDB already.

Not an additional sen of hard cash from your GST money or from govt finances was given to 1MDB to repay these loans.

Then in last August, Tenaga Nasional (TNB) took over a 2,000MW power plant concession from 1MDB which the latter failed to deliver, after the Government allowed TNB to revise upwards the electricity tariffs to be paid for power supplied by the new plant.

This is the part that I find most shameful. Because of continuous attacks by you and Tun Mahathir, TNB was asked to take-over the 2000MW Jimah East power-plant projects as 1MDB was unable to get loans to finance the project nor able to get injections of capital from the govt to continue with it.

1MDB had spent RM83.68mil on developing this project and Tenaga took it over for a mere RM46.98mil. - causing a loss to 1MDB. 

If 1MDB had been able to finance this project, it would certainly be worth much more than  a mere RM46.98mil for a 2000MW IPP project which 1MDB won fair and square against YTL in an open tender.

And to add insult to injury, TNB also requested and got an upward revision of tariff as TNB believed they could not make money as the tariff awarded to 1MDB was too low.

I AM GLAD YOU ADMIT THIS NOW AND I HOPE YOU HOLD UP YOUR HANDS AND TAKE RESPONSIBILITY FOR BEING PART OF THIS.

The final tariff for this 25 years concession to TNB will be 26.67 sen/kwh which is 1.34 sen higher than the initial tariff of 25.33 sen/kwh awarded to 1MDB.

I estimate this increase to eventually cost the rakyat a total of RM8.6 billion - all thanks to the political attacks on 1MDB.

Would you be compensating any of this RM8.6b loss to the rakyat?

And if 1MDB had given in to your rants in early 2013 (USD1=RM2.96) to bring back the USD2.31 billion Cayman funds (which forms part of the IPIC-1MDB asset-debt swap) to Malaysia, today (USD1=RM4.33) 1MDB would have been looking at a forex loss of up to RM3.2 billion too.

Would you also be compensating for that potential loss?

For its entire existence, 1MDB's energy division was always the lowest qualified bidder for each new and every new or renewal power purchase agreements. 1MDB wanted to make less money so that the Rakyat does not have to pay more. 

There is no doubt that 1MDB has transformed the Malaysian IPP industry since they entered this area in later 2011 and until its exit - in the process, saving billions of ringgit each year for the govt. 

The subsidized gas price (RM/mmBTU)_for electricity generation from Petronas went up from RM10.70 in 2010 to RM18.20 to 2016, a 70% increase. The market price is above RM40. 

Traditionally, about 60% of Malaysia's electricity generation is from gas. 

For the first time in history, Malaysia had an open tender for PPA in Sept 2012. 1MDB was able to participate in this due to its entry into the industry in late 2011. 

In Oct 2012, Maybank Investment bank commented that this PPA open tender  resulted in the end of IPP "sweetheart deal" where the IRR have dropped to mid single digits. 

A tariff difference by even a single sen makes a huge difference over a 20-year concession period, for one IPP plant a single sen difference can reduce tariff costs by RM2.9 billion. 

These savings from better IPP deals have gone to reduced gas subsidies and increased gas revenues (in the billions per year) for Petronas without a similarly high increase in electricity prices. 

There is little doubt that 1MDB had helped shake up the IPP industry with it's aggressive bidding in the first ever open tender for PPA in 2012 and also subsequent IPP bids where 1MDB was always the lowest qualified bidder for every IPP project it went into.
These savings from paying the previously very lucrative IPPs were then channeled into higher revenues for Petronas and eventually to the government instead of to the profits of the IPP private owners. 

The Life-Line Tariff for consumers who use up to 200 kWh/month affecting 70% of households have not changed since 1997. It is also GST-free.
Any change in your electricity bill is probably because you use much more electricity compared to before. 

From the year 2010 onward, households with electricity bills below RM20 no longer pay a single cent.  This benefit is still on-going. 

Those are the facts.
--
Pro-Rakyat (the group formerly known as Pro-Tun M) and Pakatan people will keep asking "Who you sell the IPPs to?" 

They will not ask who you buy the IPPs from? 

To all ordinary Malaysians, I think it is better that foreigners own the IPPs but with much lower power tariffs than it is for local cronies to own the IPPs with much higher tariffs.

TONY: How can Arul Kanda say with a straight face that there hasn’t been a bailout?

In fact, even his argument that 1MDB did “not take any money from the government” because 1MDB has “legally binding agreements” with IPIC for the debt-asset swap, the Edra sale and Bandar Malaysia is glaringly flawed.

The projected RM18 billion debt-asset swap with IPIC hasn’t been completed and there is no certainty that 1MDB would be able to cough out RM18 billion of assets to swap the equivalent amount of debt with IPIC by June 2016.

In fact, the debt-asset swap agreement signed in June 2015 was only possible because the Ministry of Finance indemnified IPIC of any losses. In effect, the Government has provided an indirect guarantee to IPIC to bail out 1MDB – if 1MDB fails to fulfil its part of the obligations, the Malaysian tax-payers will have to fork out cash to compensate IPIC. Will that not be a bailout?

First of all, how does Tony Pua know that 1MDB does not have the financial assets to complete this swap deal?

In fact, in your PAC inquiry of 1MDB, the largest auditing firm in the world clearly told you that they stand by their valuation of 1MDB's financial assets.

“Deloitte told us that they have seen the bank statements pertaining to the RM13.4bil of assets in BSI Bank. They can verify the value of the assets in question as they did a test on whether the assets were at fair value at that point in time for FY14,” PAC chairman Datuk Nur Jazlan said at a press conference after the inquiry. 

“As of March 31, 2014, Deloitte said they had gotten independent valuation of these assets of RM13.4bil and the valuations tallied. Deloitte had not done any work for FY15, as they only did it up to March 31, 2014,” PAC member Tony Pua, who was also present, said.

And here is where you neglected to mention the "vice-versa" term and that this is a standard contract term - all in the hopes of misleading your follower:

"YB Tony Pua has deliberately misled the public by failing to mention the crucial 'and vice versa' clause in relation to the 'indemnity', i.e. the indemnity applies both ways – to IPIC as well as 1MDB – in relation to performance of obligations by the parties. 

"Such a two-way indemnity is a standard clause in commercial transactions to ensure neither party is 'out of pocket' for non-performance by the other. 1MDB confirms that it fully intends to perform its obligations under the binding term sheet."

Absolutely disgraceful of you.

TONY: The Edra Global sale cannot, by any measure, be deemed a success because 1MDB suffered at least RM2.2 billion of losses on the investment. 1MDB acquired the power companies for RM12.1 billion and sold them for RM9.83 billion. If that is good business, then I’m not sure what Arul Kanda would describe as bad business.

This is the easiest of all to dispute. Edra bought for RM12.1b and sold it for RM9.83b 4 years later.

Don't tell me during these 4 years that there was NOT A SINGLE SEN in profit from Edra?

Of course there was, easily RM2.2billon worth. If there was no profit, no one would be paying billions to buy these assets off 1MDB.

Which is why, on top of helping transform the IPP industry as mentioned earlier, Arul Kanda clearly said that 1MDB essentially broke-even on Edra.

There is no need for Tony Pua to mislead on this. A clear examination of the Profit-and-loss statements of Edra over the past few years would clearly show this.

Unless of course Tony says that accountants and auditors cannot be trusted.

TONY:  Furthermore, the sale of Bandar Malaysia at a massive profit only happened because the Federal Government sold the land to 1MDB at heavily discounted bargain basement prices. 1MDB bought the land parcels for RM1.6 billion in 2012, and recently sold 60% of the land for a purported RM7.41 billion despite not having laid a single brick on the land.

The money received from the sale should have gone into the national treasury to help the man-on-the-street cope with rising costs of living. Instead, it went to 1MDB to help 1MDB pay down its debts.

This Bandar Malaysia part was where I really really wanted to say "This is not your father's land", just like CM Lim Guan Eng - but I MUST resist.

Anyway, this is an amazing statement from Tony. Just six months ago in June 2015, Tony Pua had claimed very loudly that the govt's RM11b valuation for the Bandar Malaysia land was massively over inflated!

“We want to know if the second minister of finance was spewing gibberish and just plucked these new outlandish valuations out of thin air to present an optimistic picture of 1MDB. 

“How were these new valuations arrived at? Or are there more sinister reasons why the values have been massively inflated?” asked Pua just 6 months ago.

Very strange. At that time Tony Pua said the valuation was massively over-inflated and now today he is questioning if the price paid by the 60% buyer via an international open tender is lower than announced.

What exactly do you want, Tony Pua? Price too high, you complain and scold others (giberrish, outlandish, pluck from thin air) . Price is lower you complain and scold others "boo hoo and liar".

There is no doubt that the Bandar Malaysia land sale price - which was entirely determined via open-tender based -  is higher and had allowed 1MDB to make profits and completely pay off the RM42b debts.

1MDB had paid RM1.6 billion and also had to buy the land for, build and equip eight military bases as part of the sale price - it wasn't just cash alone.

But then again, there would be very few private companies in Malaysia willing to spend billions on this project, relocate the 8 military bases then and still not able to get vacant possession of the land for at least 5 years until the bases are completed and the Sg Besi airfield was relocated.

And remember that these are military bases so giving such a project to private companies would be a tricky defense situation.

Not to mention that 1MDB had to fund the interest costs for these 5 years and take-up the construction risk and delay risk too.

And while true, to say that 1MDB did not lay a single brick on this land is very misleading as 1MDB did work on the other 8 military bases where many bricks were laid - something that Tony failed to mention.

1MDB also had to spend money to design the development, make sure the HSR and MRT stations are properly situated and get development approval on top of any land conversion or legal costs attached to it.

And get this: 1MDB is a 100% govt company and is in fact ALLOWED to make money on projects such as these as it brings the vision of the project nearer to its vision.

Even today, 1MDB still owns 40% of the project and will reap returns way into the future - which the govt will be the beneficiary too.

Earlier, you and your colleague Liew Chin Tong had accused 1MDB of selling the country to the Chinese even though the China company's stake is only 24%.

I then asked DAP why then wasn't the 100% ownership sale of 20 acres of Penang land and also a 49% stake sale of a RM11b GDV penang project to Singapore's Temasek by the Penang State Govt's 100%-owned Penang Development Corp company was not similarly called selling the country by you people and you had all kept quiet about it.

And now, Lim Guan Eng had just confirmed my accusations but said although the land was sold at cost price, it was necessary to draw foreign investments and create jobs (as if the Bandar Malaysia project doesn't draw foreign investments or create jobs - it does too).

Perhaps then you could also help me ask these questions to your DAP boss if you are truly for the Rakyat :

1) How much did PDC pay the Penang State Govt to buy the 20 acres of land sold to Jebel and for the 6.8 acres of land for the Temasek project?
2) How much money did PDC receive from Temasek in order to give Temasek a 49% ownership of the land?
3) Was the valuation and sale price of these pieces of land determined via international open tender - just like how the Bandar Malaysia valuation was determined? Why did you have to sell it at "cost price"?

TONY: Indeed, President Arul Kanda might be right that 1MDB was not bailed out by the government like in the cases of national carrier Malaysian Airline System Bhd (MAS) or national carmaker Proton. 1MDB’s case is far worse, far bigger as it involves tens of billions of ringgit, far more devious, and much more opaque.

Only the financially illiterate would believe Arul Kanda or any of the Cabinet Ministers that rescuing 1MDB did not involve taking money from the tax-payers.

As can be seen from my explanations above which clearly busted all your accusations, I put it to you that only the knowledge-impaired and naive DAP leaders and supporters would believe Tony Pua's continued attacks on 1MDB.

And only a politician with a personal agenda wishing to mislead others would write what you wrote today.

I strongly believe you are not happy that 1MDB's RM42b debt has been solved. But live with it as it is now reality. 

Arul and PM Najib had delivered on their promise and your current attacks now are really looking like a whole bunch of sour grapes that were probably grown on the top floor of Penang Komtar.

PS. By the way YB Tony, shouldn't you be spending more time to prepare to defend your defamation suit by PM Najib over your 1MDB allegations instead of throwing out even more allegations?

The next hearing is just 8 days away on Jan 18th, 2016 where you strangely want to strike out the defamation case instead of taking this opportunity to "grill" Najib in court over 1MDB?

Did Lim Guan Eng really go to jail for defending a Malay girl?

A common line used by DAP is that "Lim Guan Eng went to jail for defending a Malay girl who was raped".

Unfortunately, it is not exactly all true - not even by half. Maybe 10% true.

Did you know that Lim Kit Siang and Lim Guan Eng used to hate the guts of Gopal Sri Ram, Anwar's lead counsel in the Sodomy II final appeal?

This is what actual happened.

In 1997, Lim Guan Eng (LGE) was sentenced by the Malacca high court for maliciously printing false news under the Printing Press and Publications Act 1984 and under the Sedition Act 1948.

LGE was found to have been guilty of spreading allegations that the then Melaka Chief Minister Rahim Tamby Chik had raped an under-aged girl.

His original sentence was just a fine of maximum RM5,000 fine for the sedition charge and RM10,000 fine for "false news" charge  but no jail term.

At this point, LGE could have paid the RM10k fine now and need not go to jail. But to do so would mean he would be barred from contesting for 5 years and more importantly, be seen as lying which would destroy his and DAP's reputation.

Thus he did not pay the fine and choose to appeal.

The case then went to the Court of Appeals.

In 1998, the Court of Appeals' head Judge Gopal Sri Ram then said "It is time that the court sends a clear message that it cannot tolerate any attack on the judiciary" 

(Interestingly, years later Gopal Sri Ram was also the head counsel for Anwar Ibrahim in the Sodomy II Federal court case in early 2015 - which he lost and Anwar went to jail.)

Probably unhappy at the alleged contempt of how LGE and his lawyers defended the case, Judge Gopal thus increased the sentence from the total RM15,000 fine to 36 months in jail.

And thus LGE went to jail. But not for 36 months.

After a series of appeals, Lim was sentenced to 18 months imprisonment. He was, however, released after 12 months on 25 August 1999.

Therefore LGE went to jail for distributing false news and sedition for using the case of Rahim Tamby Chik to incite the people.

But was the rape case real and should Lim Guan Eng have pursued it then?

DAP continued to paint this picture of Lim Guan Eng being in jail because he defended a Malay girl who was raped.

Thus Rahim Tamby Chik then sued DAP for defamation which he won and this is what happened - as explained by DAP in their Oct 21, 2003 statement.

Former Malacca Chief Minister, Tan Sri Rahim Tamby Chik this morning withdrew his defamation suit against the DAP in connection with the DAP book “Lim Guan Eng – MP in Jail” and the Sympathy, Support and Solidarity with Lim Guan Eng Poster after DAP defence counsel Karpal Singh read out the following statement by and on behalf of the DAP. There was no order as to costs in the consent settlement.
Statement by the Democratic Action Party 

We, the Democratic Action Party, hereby refer to the Book published by us entitled “Lim Guan Eng – MP in Jail” (“Book”) and to the Poster (“Poster”) campaign which we embarked on relating to the Plaintiff, Tan Sri Abdul Rahim Bin Datuk Tamby Chik, and we hereby make the following statements: 

(1) We must stress we made the allegations relating to Tan Sri Abdul Rahim Bin Datuk Tamby Chik contained in the Book and Poster as we believed them to be true at the material time based on the statements made by Pendek binti Amhad to Mr Lim Guan Eng and by Noryati Binti Mohamad Yusop and ACP Mok at the High Court, Melaka, in Criminal Trial Nos: 45-2-1995 and 45-3-1995 (Pendakwa Raya v Lim Guan Eng). 

(2) However, in view of subsequent events, in particular
a) the retraction of the allegations by Noryati Binti Mohamad Yusop under oath by way of a Statutory Declaration; and
b) the fact that similar allegations made by Time Magazine and Asiaweek have resulted in an apology being given to Tan Sri Abdul Rahim Bin Datuk Tamby Chik;
We now realize that the basis for the allegations we made against Tan Sri Abdul Rahim Bin Datuk Tamby Chik in the Book and Poster no longer exists and in view of this, the said allegations are wholly unfounded. 

(3) Accordingly we acknowledge that these unfortunate events have caused all parties concerned, including Tan Sri Abdul Rahim Bin Datuk Tamby Chik and family, great distress and anguish.                                                          

(21st October 2003)

So it was clear that Asiaweek and Time Magazine had apologized to Rahim Tamby Chik.

And DAP also withdrew the rape allegation and read out the statement in open court.

Thus, subsequent events show that LGE was indeed wrong to spread false news and incite the people with that rape allegation (which was eventually withdrawn and various parties apologized for it) - thus the court conviction at that time was proven correct.

However, whether this deserved 12 months in jail instead of just a fine or not is another matter but that was for the courts and judge to decide.

Jailed for contempt of court and spreading false news

LGE did not go to jail for defending a Malay girl who was raped (since this allegation no longer exist) but for distributing false news and inciting the people based on a faulty allegation.

Do you really think he was "defending the girl" or he was trying to make it into a political issue to score votes because it had links to a BN politician?

Ask yourself this:

There are many Malay girls who got into trouble before this and after this. How many of these girls has LGE defended?  

None.

Of course LGE, being a DAP politician would use whatever issue that they have at that time to fight the government - but unfortunately for them, this issue was later proven to be wholly unfounded in the eyes of the law and admitted to by DAP themselves in their open court statement.

But of course, DAP will continue to spread this "proud claim" that Lim Guan Eng went to jail for defending a Malay girl although it is not entirely correct.

If you are still not convinced, you can read the written judgement on why Lim Guan Eng went to jail in the case of G.E. Lim - vs - Public Prosecutor

Sarawak Report confirms PetroSaudi's and Anwar Ibrahim's relationships

Sarawak report made a new post today titled "How Najib Used PetroSaudi To Wage Black Propaganda Against Anwar - EXCLUSIVE" alleging the close ties between PetroSaudi and PM Najib was used to bad-mouth Anwar Ibrahim and taint him as a person linked to terrorists.

But I fear Sarawak Report has backfired BIG TIME with this post.

Sarawak Report had then reproduced an email between Nawaf Obaidi, the brother of Tarek Obaid, the CEO of PetroSaudi, with the Deputy National Security Advisor for International Economic Affairs in the US National Security Council (NSC), Michael Froman.

This was one of the many tens of thousands of emails that they took from PetroSaudi's Xavier Justo :

Warning to Hilary Clinton
We reproduce that email in full, because it makes plain that its purpose was to prevent the then US Secretary of State, Hilary Clinton, from meeting with opposition leader Anwar Ibrahim, by alleging that he was supporting terrorism:

From: nawafobaid@aol.com
To: Michael_B._Froman@nsc.eop.gov
Sent: Tue, Oct 26, 2010 8:00 pm
Subject: CONFIDENTIAL Alert

To: Mr. Michael B. Froman
Deputy National Security Advisor for International Economic Affairs
US National Security Council
Washington DC.
—–Original Message—–
From: nawafobaid@aol.com
To: Michael_B._Froman@nsc.eop.gov
Sent: Tue, Oct 26, 2010 8:00 pm
Subject: CONFIDENTIAL Alert 

Michael :- 

I was just reading the morning papers and came across an article talking about Secretary of State, Hillary Clinton’s, upcoming visit to South-East Asia and to Malaysia in particular. 

In the spirit of our openness and deep trust that we have developed over the past two years of working together on various economic and financial issues dealing with the IMF/World Bank,G-20 and Energy in the context of the wider US-Saudi special “strategic” bilateral relationship, I think I should alert you on a possible deeply embarrassing situation that Secretary Clinton could find herself in. 

The confidential secret assessment that I had come to see you about two weeks ago is nearly complete and I hope to be able to pass you a copy with a lot of hard supporting intelligence next week when we meet. Basically, this assessment has uncovered beyond any doubt the existing close ties between Malaysian controversial politician Anwar Ibrahim and the Muslim Brotherhood network. 

More alarmingly, we have found proof of Mr. Ibrahim’s ties with some of the leading brotherhood ideologues and financiers around the globe, such as Youssef Al Qaradawi, Yassin Qadi, Youssef Nada and others. The International Institute of Islamic thoughts in Virginia that was raided on numerous occasions by the federal authorities in the past several years and the nerve center of brotherhood financing in the US has Mr. Ibrahim as a founding member. 

This came to our attention through a friendly country who informed us that the Malaysians were concerned that senior Saudi officials and the Saudi government were involved in supporting and funding Mr. Ibrahim’s political agenda. After a thorough investigation this has of course proven to be completely untrue and we were able to trace these misleading claims and their purposes. But the issue is that he has got himself involved with basically a lot of the names that were investigated by the US government after 9/11 with “potential ties to terrorism funding” and we have a trove of evidence to support this. 

So, as this assessment will be shared with various governments as the data is collected from various countries (including the US, especially from the 9/11 investigation reports), I am concerned that the substance of the report or most of the report will be made public at some point which could cause embarrassment for Secretary Clinton and other senior US officials who might ask to see him publically. 

I do not think I will be able to turn over the entire assessment and supporting evidence before the end of next week, so I just thought it prudent to send you this very confidential email to alert you and your colleagues. 

I that you will treat this email and the content with full secrecy when you pass it on. 

I am available to talk if you about this issue whenever you want. I look forward to seeing you next week. 

Respectfully,
Nawaf

In its haste to paint Najib black, Sarawak Report has accidentally confirmed yet again the close ties that PetroSaudi has with the Saudi royalty.

And worse, Sarawak Report also reconfirms and brings back into attention jailed opposition leader Anwar Ibrahim's close ties to known terrorist organizations and personalities.

Not everyone can write to the Deputy Director of the USA's National Security Council and to get them to stop the USA Secretary of State to meet anyone.

You need to be very highest circles of powers to able to reach these USA big-wigs and get them to act on it - further proof of PetroSaudi's royalty and international diplomacy links.

This is the USA's National Security Council itself!  - not, Angkatan Muda Keadilan.

And the NSC is also not going to simply believe anyone and probably reconfirmed with their own military intelligence on those allegations in the Obaidi email.

Tarek Obadi and his brother thus got what they wanted - which was to stop USA Secretary of State Hillary Clinton from meeting Anwar Ibrahim.

But were the allegations made by Obaidi to the USA National Security Council Deputy Director about Anwar Ibrahim's links with terror organizations fair and valid?

Please look at those words in blue in the email sent by Obaidi to the NSC:
Muslim Brotherhood network.
Youssef Al Qaradawi,

Yassin Qadi, 

Youssef Nada

The International Institute of Islamic thoughts

The Muslim Brotherhood was indeed banned in Egypt for 85 years and also banned in a few other countries as a terrorist organization.

The next three names of Youssef Al Qaradawi, Yassin Qadi and Youssef Nada are all Muslim Brotherhood leaders.

And Anwar does indeed have links with these people -close links too as you can see in these pictures obtained off the internet.

Of of many photos taken of Qardawi from Anwar Ibrahim's own blog when Qardawi endorsed Anwar in GE13 

Although I could not find any pictures of Anwar Ibrahim with the second name, Yassin Qad but their links were also detailed in this 2003 expose by Australian TV program Dateline and also in numerous other articles online over the years including this one in 2006 and this one in 2007.

And here is a picture of Anwar and his family with Youssef Nada who was one of the Muslim Brotherhood leaders, financier and instigator of the deadly Arab Spring in Egypt that resulted in the deaths of tens of thousands and brought Egypt to chaos until today.

1995 picture of Anwar Ibrahim and his family with Youssef Nada taken from Nada's own book

As for the The International Institute of Islamic Thoughts, Anwar Ibrahim is indeed one of the key founders.

And yes, as confirmed by the leaked email from PetroSaudi to the USA NSC, that institute has been raided by the USA authorities many times due to terrorist activities.

Thus Sarawak Report in a very ill-advised and very desperate attempt to attack PM Najib again has exposed one of the PetroSaudi email that again re-confirms that PetroSaudi is a Saudi Royal family company which has links at the highest international levels - further confirming that the 1MDB and PetroSaudi Joint-venture was a government to government initiative.

And worse, Sarawak Report has reconfirmed what the US National Security Council believes and brought back into attention Anwar Ibrahim's long-rumoured links with known terrorists.

Oh dear, Clare Brown. What have you done now?

Were you trying to attack Najib or were you trying to nail Anwar Ibrahim?

Now the new Pakatan Harapan (born from the ashes of the now-dead Pakatan Rakyat) has to explain why they still want Anwar Ibrahim as Prime Minister.