Thursday, March 30, 2017

Misguided analysts Tony Pua take on PM and finance minister

 Misguided analysts an idiot likeTony Pua, full of sound and fury/ Signifying nothing.”The concerns of  Tony Pua  MP for Petaling Jaya Utara and DAP national publicity secretary.'s legion of critics have all been proven plain wrong Given the disputes about the measure’s wisdom and success, however, it is time to take stock of what was said in the aftermath of 1MDB and what has actually transpired since then. “It is a tale/ Told by Pua.
Collapsing economic growth, high inflation and corruption  crushing incomes and opportunities. must be stop
The government constantly lacks funds for badly needed infrastructure.Finance Minister II Johari ’s solution is for government undertakings to routinely sell existing assets, and use the sale proceeds to finance fresh investment.So, the government can sell old roads to finance new ones; sell old ports to build new ports; and sell old power stations to build modern ones. Public sector entities can sell entire subsidiary companies, or projects, or vacant land to finance fresh projects.From a market-friendly viewpoint, the government’s role is to facilitate private enterprise.a strong case for raising the government’s share in investment, but the government lacks cash. A truly counter-cyclical approach requires bigger fiscal deficits to kickstart growth. Should the government abandon its fiscal targets to step up investment? 
The same may be said of much of the commentary on With no compelling precedent for such a move in a growing and stable economy, not one suffering hyperinflation – it was no surprise that most commentators failed to grasp its implications and many got it plain wrong. was a goal in itself, this may perhaps have been the ideal approach, but surely this was not the case in Malaysia where corruption, tax evasion and the accumulation of black wealth were instead the primary targets. Rogoff’s concern that the system lacked the logistical capability to implement. 

Tony Pua  MP for Petaling Jaya Utara had asked PM and finance minister  to justify the award of the RM55 billion East Coast Rail Link project to China Communications and Construction Company (CCCC) and why Malaysian companies were not given the opportunity to tender for the project.In the Finance Ministry’s reply, it said “to qualify for this financing offered by China Exim Bank, the project had to be executed by CCCC”.

The minister said that the Export Import Bank of China (China Exim Bank) offered a soft loan to Malaysia for the project at low interest rates. He added that the loan, for a period of 20 years, also allows for a grace period of seven years where the government does not need to repay the principal.In addition, “the government has, in principle, agreed at least 30 percent of the infrastructure work will involve local companies and contractors”.

If studied carefully, the reply carried very sinister undertones.

Malaysia now appears so desperate for foreign financing for its so-called national interest projects that it is willing to subject itself to terms and conditions of foreign powers.

Just because somebody is willing to lend you the money at seemingly favourable terms does not mean that you should accept the condition to select the product that will cost nearly double the estimated price.

This is no different from unscrupulous retailers duping Malaysian shoppers into ‘zero-interest’ financing schemes on products costing significantly higher than if you have paid for it in cash. Any financial consultant will educate you that the real cost of financing is already built into the jacked-up price of the product.

Worse, the real cost of funds for the project is now opaque because we do not know the real cost of the project as it was awarded without any open and competitive tender. We do know however, that the government’s own appointed consultants, HSS Integrated, has estimated that the cost of the 600km railway project will be less than RM30 billion.

Therefore, to pay for the project at RM55 billion just because China Exim Bank offered an “attractive financing package” is absolutely scandalous.

Worse, only 30 percent of the project will involve local companies and contractors, despite an abundance of experience and expertise which are already widely available in Malaysia. We now have many companies who have built double-tracking railway projects, dug award-winning tunnels systems and constructed the MRT. And yet, the government is awarding a standard rail link project at substantially higher cost to a foreign company with minimal local participation.

The irony is that the Finance Ministry has advised or even instructed our government-linked companies to halt their investments abroad and repatriate its foreign funds from overseas to check the drastic decline of the ringgit. Bank Negara even put in harsh measures to force private companies to convert their foreign currency receipts into ringgit.

‘Doesn’t practice what it preaches?’

However, the government clearly doesn’t practice what it preaches because the overwhelming bulk of the inflated RM55 billion cost will be paid to China despite available local options.

There can be no better example of the English saying, “penny wise but pound foolish”. What boggles the mind is, the Finance Ministry doesn’t comprise of idiots - they should know that we are paying well above what is a fair price for the project. What is the ‘real’ reason why the project has been awarded to CCCC - is the real ‘quid pro quo’ the fact that CCCC will help launder part of the astronomical profits to pay off 1MDB debts as widely speculated?

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