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Sabah only produces 10% of Malaysian oil production

This piece of news caught our eye today:

Kota Kinabalu: Increasing cash payments – often called oil royalty – for Sabah will have an adverse effect on the national oil and gas industry and possibly render it no longer viable.

Petronas Senior Vice President (Upstream Malaysia) Datuk Mohd Anuar Taib said investors might think twice to come to Malaysia and invest in the oil and gas sector, which is already becoming a highly competitive industry among the oil producing countries.

In a special briefing for the Sabah media, Mohd Anuar together with Vice President of Malaysia Petroleum Management, Adif Zulkifli, said many of the major oil companies from US were also returning to their country.

They said that if the cash payments of five per cent to the Sabah State Government were to be increased it would result in Petronas and its Production Sharing Contractors (PSC) being left with a smaller portion to be divided between them.

The breakdown of the revenue from oil fields is 10 per cent (five per cent each for the State and Federal governments), 70 per cent for cost recovery and only 20 per cent profit.

Out of the 20 per cent, Petronas has to pay 38 per cent to the Federal Government in oil income tax.

“Therefore, Petronas and its PSC would only divide the remaining 52 per cent out of the 20 per cent, normally 50:50,” they said.

Therefore, if the cash payment is increased to 20 per cent like what Sarawak is asking, it means Petronas and its PSC only share 10 per cent of the profit after deduction of income tax.

“This is surely not attractive to investors and they may just shy away from Malaysia,” they said.

Adif said Sabah was actually producing about 180,000 barrels or oil equivalent per day (boe/d) which is only 10 per cent of the total national oil production.

Most of the oil produced was in the peninsula side, he said, adding Sarawak mostly produces gas.

However, Sabah’s production is expected to grow to 16 per cent over the next few years.

According to Adif, out of the 333 oil platforms in Malaysia, 53 were in Sabah.

Sabah currently has 14 oil fields and three gas fields in production while 41 oil and 47 gas fields had been discovered.

Petronas has 27 active PSCs in Sabah involving 12 companies or players. Petronas’ cumulative upstream investments up to 2013 plus commitments amounted to approximately RM179 billion while for downstream the figure was RM6 billion.

Adif said Petronas was not paying oil royalty to Sabah but as stated in the Petroleum Development Agreement, it was paying cash payment.

“This is our top priority and according to the agreement, Petronas must pay the five per cent whenever there is production regardless if there is a profit or not,” he said.

Oil and gas industry have become more costlier, he said, adding that Petronas had to attain expertise from other companies and this was done through the PSC.

The cost of exploration alone starts at RM4 billion, he said.

Nonetheless, he said compared with other oil producing countries, Petronas’ cash payments of five per cent to Sabah were relatively higher.

Source – Daily Express

The opposition in Malaysia have been feeding lies to the people of Sabah and generally to the people of Malaysia regarding the oil royalty. It is now made known that Sabah only produces 10% of the total national oil production.

Therefore, what is the justification of Sabah and Sarawak in saying that people in West Malaysia are living on their oil wealth?

First and foremost, we are fed up with politicians who uses Petronas and petroleum industry as a chess piece in their political agenda. Using oil royalties to entice the people to break the strong harmony that we have as Malaysians.

The opposition had done a massive damage on to the psyche of East Malaysians just because they want to create hatred for the central government and steal more votes for them in the process. Although the Federal government had done so much for East Malaysians, it seems the opposition is teaching the people not to be grateful about the developments and progress achieved.

But the Federal government would still help them..

KOTA KINABALU: A formula is being worked out to address the call to increase oil royalties for Sabah, Prime Minister Datuk Seri Najib Tun Razak said.

The Government, he said, together with Petronas, would decide on various methods to improve Sabah’s economy.

“We have been concerned about the issue of oil royalties in Sabah and as an immediate solution, Petronas will increase its corporate social responsibility (CSR) programmes in Sabah,” he said.

“We will be announcing several other approaches which can help Sabahans in the oil royalties issue,” he added.

Najib explained that there were many approaches which could be applied to it, but not necessarily increasing the percentage of oil royalties as mooted by the Opposition.

He said Petronas would help more rural students, provide more scholarships and increase its funding in its CSR programmes here, among others.

“This is not about getting contracts. It’s about giving and creating value,” he said at the breaking of fast with Sabah Barisan Nasional members at a hotel here yesterday.

In the first place, does Dato Sri Najib Tun Razak know that Sabah is not entitled to receive 20% oil royalty based on the state oil production? Can someone please let him know, before he wrongly reapportioned our country’s precious funds to people who wrongly thought they deserve more than their fair share of contribution?

Thank you.

“The Importance of Being Earnest” by Dr. Awang Puteh

Just like the great masterpiece of Oscar Wilde, this article which was published in The New Straits Times today and written by one who calls himself Dr. Awang Bin Puteh revealed how comical double standards, ‘lupa daratan’, vanity, arrogance and hypocrisy thrive in the corporate world and among billionaires. And we thought these people living in the upper echelons of society could at least be humble, reciprocal and more reflective about their social standing and how they came to be.

A recommended read indeed.

The Importance of Being Earnest

CRONY CAPITALISM? It’s time for YTL boss to walk the talk and show ethical leadership by example

APPARENTLY, the negative trait of Melayu mudah lupa is not only confined to the Malays, but also to other ethnic groups in Malaysia. This is evident from the statement by YTL Corporation Bhd managing director Tan Sri Francis Yeoh when he commented  on crony capitalism a few days ago.

Yeoh’s claims that he is successful because he is not a crony and doesn’t depend on government contracts.

He also went further, which seems tantamount to fanning the flame of racial provocation, by stating that non-Bumiputera small-and-medium enterprises (SMEs) “absolutely have no chance” to even fight “for the crumbs” as they are already at the low end of the food chain.

He delighted in lecturing us, delivered with a straight face and an affectation of pious conviction, that Malaysians are not taking advantage of our ethnic diversity, and we must introduce more open competition and encourage greater transparency in business.

Not unexpectedly, his statement evoked negative reaction from the public, and many reacted in disbelief to Yeoh’s hypocrisy given his companies’ close links with the government in the past as well as in the present.

Tan Sri Ramon Navaratnam summed it up aptly when he said that “people who live in glass houses, should not throw stones”. He further correctly stressed that Yeoh’s talking about getting rid of cronyism doesn’t sound right while his companies bagged lucrative government contracts through direct negotiations rather than open tender exercises.

Why the repetitive mantra by Yeoh despite YTL receiving all the government’s love and special attention all these times? We know that great wealth buys great political influence, but to insult the people’s intelligence with his sermon borders on brazen arrogance.

Maybe these kinds of people live in a bubble, and not surpassingly, those inside the bubble sometimes think that they can pull the wool over our eyes.

Nonetheless, let us address Yeoh’s arguments specifically.

Yeoh is adamant that YTL is successful because he is not a crony and doesn’t depend on government contracts. That is a bold statement.

Without government contracts, YTL would still be a small-time contractor. In fact, it is continuously the beneficiary of government assistance. For instance, in 1990, YTL was awarded an almost RM1 billion contract to build public hospitals.

Unless Yeoh suffers from amnesia, he could not possibly forget his big break in 1992 when the government awarded him the first licence to build, operate and manage power plants.

Without this lucrative concession, his company would probably be stuck as Syarikat Pembinaan YTL Sdn Bhd, a relatively small construction and property development company. This foray into the power sector vaulted YTL into the big league, where its pre-tax profit last year alone amounted to RM2.5 billion, versus RM30 million in 1991 before contributions from power operations began flowing in.

Importantly, most of the projects given to YTL were and still are heavily subsidised by the rakyat. His power agreement with Tenaga Nasional Bhd was so lopsided and utterly unjust that Tan Sri Ani Arope, the then TNB chief executive officer, submitted his resignation after refusing to accept YTL’s terms.

His “take or pay” agreement with TNB obligated it to take up YTL’s power output — priced much higher than what TNB could easily produce — whether the utility needed it or not, for 21 years.

Maybe that’s what Yeoh meant when he stated that YTL became successful via “innovation”, which ripped off billions in taxpayers’ money.

Has he also conveniently forgotten how he was recently awarded a RM10 billion contract by the Education Ministry to provide, among others, laptops to schools, despite YTL not being a computer maker, nor expert in education services? The contract irked member of parliament Zaril Khir Johari, who raised questions on this issue in Parliament. His 1BestariNet programme, which is to install 4G high-speed broadband to all schools, indirectly means that the rakyat are actually funding the commercial expansion of YTL’s YES 4G network. So much for innovation.

Yeoh was also borderline malicious when he said the non-Bumiputera SMEs had been discriminated by the government.

Well, I wonder where he got his statistics from. Analyses done by the Economic Planning Unit show that non-Bumiputera businesses, especially Chinese companies, took 80 sen for every RM1 in government contracts.

Even funding for SMEs benefited non-Bumiputeras the most, as data shows that Bumiputera companies accounted for about 30 per cent of the entire funding for SMEs last year.

To put things in perspective, the value of the contract YTL secured from the Education Ministry alone, for providing only laptops to students, exceeds the entire funding for all Bumiputera SMEs for the entire period of last year!

It is heart-warming to learn that YTL supports national unity. Let us, for a second meditate upon and closely scrutinise these nationalistic statements from Yeoh: “We should leverage on our different ethnic races in the nation and should start working together. We have been working for a long time like we’re in a tunnel. We have not learnt to work together. We have been separated and not looked at each other’s strengths. We do not celebrate our diversity.”

Such enlightened view should indeed be emulated by other companies! However, in the name of transparency, would YTL be willing to make public the ethnic diversity figures in YTL workforce, its board of directors, exco, senior management, mid-management and low-level positions?

YTL should also make public how much was sub-contracted to Bumiputera and Indian companies, compared to Chinese-owned companies.

Similarly, in the name of transparency, would YTL also make public its power agreements, which had enabled YTL to make astronomical returns at the expense of the people? Please allow public scrutiny of the agreements, as suggested by MP Tony Pua from DAP not too long ago.

Yeoh also argued that he is a true patriot, for he has “defended the present government’s concerted efforts to introduce more open competition and encourage greater transparency in business”.

This is commendable, but flies in the face of facts. How does YTL explain its willing participation in direct negotiations with the government on some of the most lucrative contracts? It was only last week that a YTL Corp wholly-owned subsidiary was awarded a power plant project by the Energy Commission via direct tender!

Maybe YTL can make a declaration to the public that it will no longer participate in direct-negotiations and cease altogether from seeking contracts from the government.

There is still time for redemption for a devout man like Yeoh to walk the talk. I am sure he would like to show ethical leadership by example.

Moving forward, we have to help Yeoh from backsliding from his recent epiphany, and to become the born-again corporate leader that he aspires to be.

I would urge the government to be kind to him by avoiding any dealings with YTL group, either in providing contracts, or using its products and services. The government should also exclude YTL from participating in any way whatsoever in the KL-Singapore High Speed Rail project, if the project is yet to be awarded to him. He sorely needs help from the government to wean him away from his old habits.

As for me, I will also do my little part. I will stop patronising YTL hotels, shopping malls and Internet service provider, among others. I am boycotting YTL and I suggest the rest of Malaysia follow suit.

After all, Yeoh proudly claimed that his company gets 85 per cent of revenue from overseas operations.

Oh, by the way, the deafening silence from some of the most vocal critics of crony capitalism in Malaysia is really puzzling.

Imagine if the same statement was made by a Malay tycoon, I am sure the deafening silence will become a raging tropical thunderstorm.

Maybe when a Bumiputera businessman gets a contract, it’s cronyism and unfair privileges. But when people like Yeoh gets it, it is innovation, market forces and meritocracy.

 

Impact of Pakatan Rakyat’s mindset onto the people’s intelligence

On Labour Day last Thursday, a demonstration organised by Pakatan Rakyat to protest the implementation of GST (Goods and Services Tax) were held in Dataran Merdeka.

And as we all know, most people who take part in demonstrations do not actually know what they are protesting. Some even got their information backwards while others don’t even know why they are there in the first place.

Kudos to Pakatan Rakyat leaders who had successfully stupefied some of the rakyat.

As per the video below, we can now see the extend of stupidity Pakatan Rakyat leaders like Rafizi Ramli, Ong Kian Ming, Nizar Jamaluddin etc had done onto the average people on the street.

Enjoy.

A guide on what not to do during the #MH370 crisis

There are so many speculations on the recent crisis pertaining flight MH370 which could distract and hamper the search and rescue activities currently underway in the South China Seas.

Fortunately, the management of this crisis has been handled very well by Malaysia Airlines and the relevant authorities. With the Department of Civil Aviation taking charge of the search and rescue missions, it is commendable on the part of the agencies involved to remain professional in their duties.

The management of the crisis could have gone either way and it is a mark of true professionalism that Malaysia Airlines so far is on the dot in the proper procedures in handling this serious incident. Below is an article from the Business Insider which could have been taken as a case study on what not to do during an aviation crisis.

Asiana Airlines Needs Serious Help With Crisis Management

As the FAA and NTSB continue to investigate the July 6th accident in which 3 were killed and 182 were injured at San Francisco International Airport (SFO), crisis management experts are scratching their heads at the perplexing response of Asiana Airlines.

Crisis Management protocols

When there is a crisis, the proper procedure is for PR-savvy company representatives to talk with the public through the media to reassure them that everything is being done to investigate the cause and insure the safety of the airline and the wellbeing of its passengers.

The idea is to get ahead of the story and make current and future customers as comfortable as possible in doing business with the Airline. As Korea’s second biggest airline, Asiana needs to make every effort to take care of its passengers and protect its reputation while allaying the fears of the flying public.

Asiana’s response

Asiana, however, has done the opposite of what crisis management protocols suggest. With the exception of a brief apology to victims and families a day after the crash, Asiana has been largely silent. When CEO Yoon Young-doo arrived at SFO airport 3 days after the accident, he declined to comment. Even more surprising, the airline did not have a trained public relations representative accompany the CEO to address the media either. The following day, six of twelve flight attendants appeared at a news conference, but none of them said a word, and some hid their faces. It appears they don’t know that when you are silent, many in the public think you are hiding something. While lawyers often recommend you don’t talk, marketers know that silence is the opposite of what a company faced with such a crisis should do.

Attempt to silence passengers

What’s even worse is the Airline has instructed passengers not to talk with anyone. On Wednesday, CBS This Morning featured a story about the Xu family who told reporter Carter Evans in an interview he taped on his iPhone that the Airline controlled nearly every aspect of their lives and told them not to speak with the media. In fact, when the reporter arrived at their hotel, airline security tried to prevent him from speaking with the family. Since these efforts to stifle the media appeared on camera on a major news broadcast, they supported what the Xu family was saying and raised further suspicions about Asiana.

Pointing fingers

Even though the pilots involved in the crash were novices landing and supervising the landing of a Boeing 777 at SFO, they pointed the finger at the automatic speed controls of the plane. According to the head of the NTSB, there are no signs of failure of the automatic speed controls or other automatic flight equipment on the plane that crashed. Such accusations by the pilots do nothing to inspire public confidence – especially since the early evidence points to pilot error as a potential cause of the accident. Also, the fact that this is the first fatal accident involving a Boeing 777, which has a record of being one of the safest planes in the sky, makes the finger-pointing even more suspicious.

Risky Business

While flying is the safest form of travel, it is a risky business for those involved in making and flying the planes. When bad things happen, the best companies can do is to quickly figure out the problem and be forthcoming with customers. What can any business learn from this latest incident involving Asiana Airlines? Employ the fact procedure to protect your reputation.

    • Admit the problem, and apologize if necessary (do not “point the finger” at others because it is likely to compromise your credibility).
    • Limit the scope (in this case put the incident in perspective and provide data that shows that flying on a Boeing 777 from Asiana is very safe).
    • Propose a solution so it will not happen again (if it is found to be the cause, a more rigorous training and pilot supervision program would be the solution).

If implementing the fact procedure is premature

In a case such as this when the cause of the accident is not yet known with certainty, the airline should not be silent as Asiana has been. And, it should not try to control what the passengers say to the media. This just fuels suspicion. It should make it clear to the flying public that it (1) is doing everything in its power to cooperate with the investigation and (2) will continue to do whatever is necessary to insure the safety of its airline and the wellbeing of its passengers.

Since Asiana has proven to be inept in this crisis, and some believe this may be a cultural issue, it should hire US crisis management experts for advice to protect its reputation going forward.

Read more: http://www.businessinsider.com/asiana-airlines-accident-response-continues-to-be-just-plane-stupid-2013-7#ixzz2vY1AbuMP

How Pakatan Rakyat aspire to finance itself

Most people think that Pakatan Rakyat politicians are human beings with excellent moral values and integrity. They portray themselves as the people’s saviour against Barisan Nasional politicians which they accuse as the corrupt devils greedy for riches.

In actual truth, the politicians in Pakatan Rakyat are as greedy and as corrupt as the ones they are accusing. And since they always arrogate themselves as the epitome of goodness, this hypocrisy renders them even worse than their Barisan Nasional nemesis.

Take for instance Rafizi Ramli’s overzealousness in trying to create the perception that the LRT extension project, which had been awarded to George Kent – Lionpac consortium, was dubious and it should have been awarded to Balfour Beatty consortium instead.

And it was later discovered and exposed by this blog that Balfour Beatty’s main partner is Ingress Corporation Bhd whereby the main player in the latter is a close crony of Anwar Ibrahim.  Luckily, the motive of Rafizi Ramli’s incessant accusations were uncovered and since then, he has been quiet about this issue.

Another example is how Tony Pua is belittling 1MDB and backed YTL over the tender of a power project. The blatant  support for a corporation to win a multi billion was so unashamedly done, eyebrows were raised as to why a senior DAP politician would do that. Ironically, DAP which is very much known for its principles on socialism is now seem to be capitalist in nature. Are they shifting their raison d’etre when big money is involved?

Hypocrites rule the roost and Pakatan Rakyat’s lust for money and opulence can be seen openly. Otherwise, why would DAP politicians in Selangor who should be a socialist in nature, demand near 300% hike in their salaries?

The latest incident involve water crisis in Selangor will raise more eyebrows. For a start, this is the chronology of the whole fiasco:

BheD-z-CAAAD6PC.jpg-large

PKR politics as we all know is very much a carbon copy of Umno’s but in one huge difference – they do everything much worse.

On Wednesday, the Federal and Selangor governments signed a Memorandum of Understanding that will facilitate the implementation of the Langat 2 water treatment plant project and the takeover of water assets in the state.

The MoU breaks a five-year impasse that has stalled the implementation of water projects in the country’s most industrialised state. - Source

However, PKR strategy director Rafizi Ramli had claimed the party was in the dark about the MoU, and said the state executive councillors would be asked to explain.

PKR deputy president Azmin Ali said the Mentri Besar would be summoned to brief Opposition leader Datuk Seri Anwar Ibrahim once he returns from Japan.

“We want to hear Khalid’s side of the story as many are still in the dark about the details. We are concerned over whether there would be an increase in water tariff prices and whether there would still be free water for Selangor,” he said yesterday.

Anwar’s official Facebook page showed that the Permatang Pauh MP is currently in Japan.

It has been reported that several PKR leaders were not informed before the state signed the memorandum on the water restructuring exercise while it is unclear if Khalid has the backing of the top Pakatan Rakyat leaders over the deal. - Source

Zaid Ibrahim had a different take on why top PKR politicians was in the dark about the deal:

Kajang by-election contestant Datuk Zaid Ibrahim said that PKR adviser Datuk Seri Anwar Ibrahim got “checkmated” by Selangor Mentri Besar Tan Sri Khalid Ibrahim on the water deal.

Zaid said it was too late for Anwar – who is apparently setting his sights on the office of mentri besar – to influence the deal that has just been struck between the Federal and state governments.

“It is too late. It is a checkmate for Anwar,” he told a packed press conference at his residence here yesterday.

However, PKR strategy director Rafizi Ramli had claimed the party was in the dark about the MoU, and said the state executive councillors would be asked to explain.

But Zaid believed Anwar knew the MoU would be signed.

“I am sure Anwar knew about the deal …in the event a new mentri besar takes over from Khalid, he cannot do anything to ruin the deal.

“I think what Khalid did was right and I agree with him.

“At least the future of the Selangor people would be more secure with the end of the privatisation of water supplies,” he said. - Source

Zaid Ibrahim’s press conference can be seen as below. There are many sneak peaks on what Anwar Ibrahim intend to do once he will become Menteri Besar of Selangor inside the video.

And today Khalid Ibrahim told the public on why the water deal was made in such clandestine manner. Basically, he did not want the trio of vultures – Anwar Ibrahim, Rafizi Ramli and Azmin Ali to take over the water deal for their own benefit. This triad of political schemers had been working against Khalid Ibrahim since day one of the Kajang plot.

Some PKR top brass wanted to set price of water assets, says Khalid

SHAH ALAM: Selangor Mentri Besar Tan Sri Khalid Ibrahim disclosed that there were party leaders from PKR who were trying to influence the valuation of the water assets in the state.

He said some party leaders had introduced him to a few people who were trying to make their case as to why the pricing of the water assets should be higher.

“I have been an investment banker for so long that I look at the principle of valuation before determining the price (of the assets). I stood by my principle of valuation and set the price at RM9.65bil.

“These people wanted to set the price and wanted the valuation to justify their price,” he said in an interview with The Star yesterday.

Khalid also explained why the mechanics of the deal could not have been revealed to all and sundry in and outside of the party before the agreement with the Federal Government was signed on Wednesday.

He pointed out that the information, if revealed, would have an impact on the price of the stocks related to the water assets.

“I was also concerned about possible abuse of information and insider dealing. These are reasons why PKR leaders were not informed ahead of the signing on the water deal between the Selangor state government and the Federal government,” he said.

Khalid said he did not inform his party leaders due to those reasons to ensure that the implementation of the transaction was right and adhered to proper corporate governance.

Like George Orwell’s Animal Farm – the ones who think could be the saviour, will eventually become worse than the alleged oppressors once they have tasted power.

The snapshot on global economy and the local economy

If anyone of the readers here haven’t read the Confessions of an Economic Hitman book, here is a Youtube video where the author summarily describes the content of the book in about 11 minutes.

Locally, our own economy is floundering.

None of the great economic consultants employed by the Prime Minister are able to find the right formula to revitalise the local economy yet. Today, the blogger Darah Tuah wrote a snapshot on the economic position of this country right now particularly the economic relationship between the bumiputera and the non-bumiputera. The blogger gave recommendations as well.

Maybe PEMANDU and other advisers can learn a little bit of something about it too.

Please have a read HERE.

Thank you.

Paintings and credit cards of Khazanah Nasional

The Prime Minister’s pride and joy, the invulnerable Khazanah Nasional was under the microscope of Auditor General as well.

Thank you to a commentator by the name Wanita Bukit Tinggi who highlighted the Auditor General’s findings on this company where Dato Sri Najib Tun Razak is also the Chairman

AG’s Report: Contractor failed to deliver RM46m component of shrimp project

PETALING JAYA (Oct 1): The Auditor-General Report 2012 has revealed that the contractor for the Integrated Shrimp Aquaculture Park (iSHARP) in Setiu, Terengganu, has failed to deliver the sea water intake system which cost RM46 million.
 
The contract was awarded to Ranhill Engineers and Constructors Sdn Bhd by Khazanah Nasional Bhd’s subsidiary Blue Archipelago Bhd, which manages iSHARP, to construct its biggest component for the shrimp aquaculture park.
The audit revealed that the project was not completed by Ranhill and the termination notice was issued on Aug 16, 2012. The contract termination notice was issued to Ranhill on Dec 3 last year with immediate effect.
On Nov 15, 2011 Ranhill claimed that work progress was at 97.5% although Blue Archipelago stated that the work progress by Dec 3, 2012 was only at 92.1%. Up till Dec 3, Ranhill has received RM42.21 million in interim payment.
Blue Archipelago’s explanation to the auditor-general was that the contractor lacked equipment, had financial difficulties, the main contractor did not pay the sub-contractors and the scope of work required specialist sub-contractors.
To make matters worse, on Sept 8, 2011, a functional test found that an underwater pipe had burst and Blue Archipelago had to install a temporary structure for sea water intake in order for the shrimp aqua culture farms to operate.
“Since the date of the audit, they are still using the temporary structure. The audit has also uncovered that due to the delay in completing the project, the project site was left without adequate security which has led to cables being stolen at the pump house and is a danger to the public,” the report stated.
Khazanah’s reply to the auditor-general stated that it had utilised its performance bond against Ranhill on Dec 2012 for the sum of RM2.3 million.
Legal action has also been taken against Ranhill for breach of contract and liquidated ascertained damages claim was due to be completed by June 30 this year.
Strangely, Blue Archipelago continued to hire Ranhill as a subcontractor to complete the security fencing surrounding the project site and the nearshore manhole. This section of the project was expected to be completed by Aug 30 this year.
Physical examination at the sea water intake system pump house also revealed that there were several items in the Bill of Quantity worth RM83,966 that were not completed by the contractor.
The consultant claimed that it was a variation order (VO) omission, but further investigation by the auditors revealed that there was no such VO issued to Ranhill.
Khazanah has informed the auditor-general that Blue Archipelago and Ranhill had begun discussing the final accounts which was expected to be completed by June 30, 2013.

If Khazanah Nasional cannot even complete a shrimping project, do we honestly think they can make money in other ventures? Remember the Air Asia – MAS share swap? That apparently was the pinnacle of their intelligence.

The point is, although Khazanah Nasional was given the thumbs up by Auditor General for achieving profits every year, they gain most of their income from dividends of their shareholding in 86 companies. This business model does not need much brain power. How to increase our profit this year? Just sell Proton!

But we believe getting profits every year will be the main lullaby for the Khazanah Nasional to lull the easily impressed Prime Minister into his slumber.

But what the Prime Minister doesn’t know that there are a pile of stench under his nose which had escaped his attention but unfortunately didn’t escape the people’s notice.

Too bad because he was supposed to be the Chairman and ultimately responsible for the propriety Khazanah Nasional’s management staff.

RM1.26mil in charge card use by Khazanah staff

Certain individuals in the government’s financial arm, Khazanah Nasional Bhd, are still allowed to use its corporate charge card despite Khazanah failing to declare its expenses from the earlier months.

As a result, unrecognised expenses on charge cards issued to Khazanah Nasional accumulated to RM1.26 million last year alone, the highest amount in four years.

This comprises unpaid balance in excess of one month at RM487,317; a sum of RM291,400 for two months and RM485,187 over a period of two to six months.

In 2009, the amount of unpaid dues was RM610,902; while in 2010 it dropped to RM270,330 and it hiked to RM726,462 in 2011.

The audit report states that based on a financial communication note dated June 1, 2006, American Express charge cards were issued to directors and the chief executive of Khazanah Nasional. As of Dec 4, 2012, there were 106 such charge cards issued by Khazanah, with no limit on the usage.

The report also says that the charge card users have been reminded to prepare an analysis of their monthly expenditures, verify the expenditures with the receipts attached and to get approval from their heads of department.

“If the expenditures are not approved, the payment will be obtained from the card holders by cutting their salaries. Failure to provide an analysis and verification for three times would result in such privileges being revoked,” the report says.

The auditor-general also found there were some Khazanah staff who failed to send or declare their monthly expenses, resulting in the unpaid RM1.26 million in card charges.

According to explanations from the Khazanah officer responsible, the balance has been settled by Khazanah despite the staff not declaring their expenses.

Khazanah further explained that it had conducted an internal audit on the expenditure claims between 2011 and 2013, and the failure by those responsible to send in their lists of expenses was also discussed.

The staff may use the corporate credit card even though they failed to declare the expenses for the month before. There is minimum risk in this, since Khazanah can cut the salary of the individual concerned to recover the expenditure.

Khazanah added that it would take action to stop the use of the corporate charge card of staff who keep failing to declare his or her expenses.

However, the auditor-general said failure to file the monthly expenses declaration was improper.

Artworks not properly kept.

The report also found that Khazanah had purchased 93 artworks worth RM6.4 million.

Of the amount, 55 works of art costing RM3.05 million that were purchased since 2005, have not been properly displayed or kept in a proper manner and there are concerns that these could be damaged.

Khazanah in its reply in May and June this year said it was planning to place the artworks at a proper room on the 32nd floor of its office block and also in its new offices overseas.

It also plans to change the location of the existing paintings and for all the artworks to be placed after renovations to the interior decoration of its office, which was approved this year.

The renovations should be completed by the end of the year.

The auditor-general also said all the Khazanah assets needed to be fully utilised to justify their purchase.

On a positive note, the auditor-general commended Khazanah for making profit for the fourth consecutive year.

The bosses in Khazanah Nasional thinks the people’s money that we pay every month as income tax are something which they just can burn in a blink of an eye. RM64 million for 93 paintings?!

That is averaging about RM69K per painting! On whose God given right was it that they can just buy expensive paintings and waste it by not keeping it properly?

If that doesn’t make your blood boil, then the fact that 106 credit cards with unlimited ceiling are issued with impunity must take the cake.

This is a disgrace. Apparently, dishonourable men with no qualms in burning money can be held in high esteem by our Prime Minister.

So what are they going to do with the credit cards and the paintings? Business as usual? Issue more bonuses to the credit card users, painting buyer and the Board of Directors of Blue Archipelago Bhd?

That was precisely what they did. After all, they achieved profitability every year.

Thank you.

Brief Outlook on AG Report 2012

The much awaited Auditor General Report was published recently and the nation is gripped with unearthed stories about mismanagement (again), unrealistic purchases (what’s new?), inefficiencies as well as wastage.

We should really brand the momentous AG announcement as a national transparency day of sorts when discoveries like the ones exposed recently are highlighted for all can see.

What dumbfounded the nation is the fact that these findings are nothing new and had been going on for years but astonishingly, nobody in the audited government agencies learnt anything from past mistakes! Is the AG Report being treated as a insignificant memo by the misbehaving departments? Won’t the junior officers take heed of the mistakes made by their senior management about these gross mismanagement?

Leading the pack for inefficient spending would probably be the Ministry of Education:

Security in schools sees RM2bil go down the tube

The 2012 Auditor-General’s Report has revealed severe mishandling of RM2.051 billion with regard to hiring security contractors for schools between 2010 and 2012.

From poorly prepared contracts to hiring of septuagenarians as security guards, the auditor-general said the management of security services in 35 schools and hostels surveyed was generally unsatisfactory.

The audit, which involved schools in Selangor, Perlis and Sabah, found that the contracts were not uniform and did not state specific requirements set by the Education Ministry.

In some schools, the audit found that contractors had breached the terms of their contracts by hiring security guards who are too old, unfit, dressed inappropriately, ill-equipped and had not been subjected to background checks.

Nineteen of the 35 facilities visited by the audit team did not have anyone guarding the entrances and people were seen entering and exiting freely.

The audit team found that the Education Ministry was not keeping proper tabs on the implementation of the security project and failed to penalise errant contractors.

Now who is the contractor? We would think that those who are manning the tender and the contracts department in the ministry would have been a seasoned disciplinarian by now and is aware that the audit department will be breathing down his/her neck just to ensure that the security contracts are running efficiently. But obviously, we cannot train the civil servants in charge of this important task to be honest and diligent. In the end, payments are duly made without any regard to the delivery of services.

Another governmental arm which wasn’t performing was the police:

Police lose weapons, Customs men lose shoes

The Auditor-General’s 2012 report reveals that the Royal Malaysian Police Force recorded a total of 309 missing items in the form of weapons, handcuffs and cars.

It also reported that the Royal Customs Department wasted a whopping RM600,000 on 7,659 pairs of shoes that were not according to specification and were then badly damaged during prolonged storage.

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The items missing from the police force were recorded between 2010 and 2012, resulting in losses amounting to RM1.33 million.

The auditor-general reports that handcuffs topped the list of missing items at 156, followed by 44 weapons and 29 police vehicles.

Although the amount is small, the fact that weapons can be missing from the police force shows that there is a severe lack of controls in the police department and this doesn’t just involve money but it involves public security issue as well. Where did all the weapons go? How could they have lost it? From now onwards, KDN should really look into their SOP because if from 2010 to 2012 we lost 44 weapons, imagine how many had sifted through the cracks in years before that.

Then there is this incinerator project which not many know of:

Incinerator projects cause millions to go up in smoke

The National Solid Wastes Management Department (JPSPN) spent RM199 million on incinerators over the last four years, and then found there was no expertise to operate such machines in Malaysia.

All four incinerators at tourist spots in the islands of Langkawi, Pangkor and Tioman and in Cameron Highlands saw construction delays of two to three times their original schedules.

And even after completion, the Auditor-General’s 2012 Report says, three of the incinerators were not operated for 223 to 642 days, all because of the lack of expertise.

A fifth incinerator planned for Labuan was scrapped.

So basically RM200 million was spent on something we don’t really know about. On top of that, it was unused for up to two years because the person in-charge do not know how to find ways to operate it. For two years they presumably tried to find people who can make the incinerator worked, but alas the search was futile. Yes they could find people who can build it, but they couldn’t learn or find people who can operate it. Two years.

Bear in mind all this money wasted came from Budget 2012 which was made in 2011. May we suggest the Treasury to look into the numbers again and prepare a much lower budget for the agencies above for Budget 2014? From the lackdaisical attitude and their cavalier approach towards handling other people’s money, surely they should not hold a lot of money to begin with.

Next is the issue on the police force again:

Costly planes, but grounded because no funds

Between June 2008 and December 2010, the Malaysian police purchased five Beechcraft King Air 350 aircraft for a whopping US$58.25 million (RM175.24 million) for their Air Wing.

The planes were supposed to facilitate the upgrading of the nation’s air security.

However, within less than five years of usage, one of the planes had to be grounded for eight months, between September 2011 and April 2012, while another could not be used between June and November 2012.

Furthermore, out of the five, only three aircraft have been delivered so far.

The project was awarded after direct negotiations with Hawker Pacific Airservices Ltd, through its agent  EZ Aviation Sdn Bhd.

5 planes costing RM175 million that means each plane is averaging RM35 million. We could understand if the cost includes maintenance for the next 10 years but if it doesn’t then RM35 million for a twin turboprop aircraft at a base price of USD6 million (according to the plane’s website) is way too much.

But that is not the least of the problem. The fact that two aircrafts have not been delivered until now should ring some alarm bells from the police’s procurement department. But obviously someone was sleeping on the job.

Of course the mother of it all is the fact that some people in RTM thought they could get away with this:

Clocks, scanners and “miscellaneous items” cost RTM RM9m, up to 7,200 times over budget

The Broadcasting Department blew its budget spending RM120,210 on clocks and scanners alone, thus overpaying for these items by thousands of times beyond its actual cost.

Despite budgeting RM100 per unit for a clock and RM200 per unit for an A4-sized document scanner, the Auditor-General found that the Broadcasting Department spent RM3,810 per unit for “branded” wall clocks and RM14,670 per unit for the scanners.

In the 2012 AG Report, it found the department bought 20 branded wall clocks and three scanners for national broadcaster RTM’s offices in three states.

The department paid RM76,200 for the clocks, which was 3,810% above its estimated budget, and RM44,010 for the scanners, which was 7,235 times more than its initial budget.

The department also bought five scanners for A3 sized documents at an inflated price of RM20,630 each, 103,150% more than its estimated budget of RM1,000 each.

Although the ministry had explained on the use of those clocks, they were silent on the RM20,000 scanners. Anyone would be hard pressed to explain what kind of nuclear powered scanner they have bought.

Heads of department should really take leaf on how private companies are saving money. They treat their money like their children’s money. We have known so many stingy CEOs, prudent CFOs, very strict tender committees and a well disciplined procurement department. All in small, medium, and large private companies. Do you think the CFOs in YTL, Hong Leong Group, throw money just like that?

We need to look at ourselves and learn the concept of saving money which doesn’t belong to us.

Lastly is the bonus payouts by the GLCs. Although this is not mismanagement per se, but it is worth mentioning.

Bonus for losses, the GLC way for rewarding employees

Seven government-linked companies (GLCs) rewarded its employees with fat bonuses despite recording a combined loss of close to RM2 billion in 2011.

The Auditor-General Report today stated that Syarikat Prasarana Negara, an infrastructure company which had the highest recorded deficit of RM763 million among the group, gave its employees between one-and-a-half and two months bonus each.

The report also found that MIMOS, the country’s research centre, was the most generous of the group, by giving out between two and three months bonus to its employees, despite making a RM4.6 million loss in 2011.

Meanwhile, employees of KTM received the least with the railway operator distributing ex-gratia payments of a half-month’s salary or a minimum of RM500 in the same year. The company made losses of RM103 million.

The other companies which lavished its employees with bonuses despite making losses were Amanah Raya, Jambatan Kedua, Indah Water Konsortium (IWK) and Cyberview.

Now this is a catch 22 situation. The GLCs which provide services to the people are generally working under the pretext of ‘social responsibility’. Obviously they can’t make enough money otherwise the best possible way to increase the profits is to just charge the customers more.

In other words, IWK will just need to increase their rates, Prasarana and KTM just need to increase their fares. Since customers are a bunch of easily annoyed creatures, the costs were never truly borne by the public (Prasarana for instance have not reviewed fares for more than 10 years).

Realistically, GLCs need to reward staff who are performing really well despite the outcome of the financial accounts otherwise these companies will unable to motivate and retain good workers. They will move elsewhere if their contribution are not recognise.

And as mentioned in the tweets of Prasarana’s CEO, Datuk Shahril Mokhtar (the only CEO so far who took to twitter to briefly explain the AG Report findings) – Prasarana’s financial position is automatically handicapped by depreciation and financial costs amounting to RM700 million annually which greatly contributed to the RM763 million loss. Not surprising since Prasarana is an asset and infrastructure based company.

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No explanation have come forth from IWK, KTM, MIMOS, Jambatan Kedua etc.

The Treasury however, did issue a brief response:

The treasury said these GLCs were not set up for the sake of making huge profits but to fulfill its social responsibility and nation-building objectives.

Hence, it was up to the Ministry of Finance to determine if these companies had achieved its key performance indicators

Why is Khazanah Nasional in San Francisco?

Just a few days ago, we tweeted:

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The answer is found in a newsfeed by Bernama:

Najib opens Khazanah office in San Francisco

SAN FRANCISCO: Datuk Seri Najib Tun Razak officiated Khazanah Nasional Berhad’s regional office for the Amerikas, Khazanah Americas Incorporated (KAI), in San Francisco Sunday.

He hoped that the opening of this office would help propel Malaysia into a developed nation status by the year 2020.

The Prime Minister said Malaysia’s visionary ambitions to reach a developed nation status by 2020 could be achieved by moving up the value chain and creating an economy driven by knowledge, innovation and technology.

Najib said this when officiating the office located at the 45th Floor, 101 California Street, San Francisco, the third Khazanah’s regional office after Beijing and Mumbai.

Also present were his wife, Datin Seri Rosmah Mansor, Communication and Multimedia Minister Datuk Seri Ahmad Shabery Cheek; Second Education Minister Datuk Seri Idris Jusoh; Science, Technology and Innovation Minister Datuk Dr Ewon Ebin; Johor Menteri Besar Datuk Seri Mohamed Khaled Nordin and Director, San Francisco Mayor’s Office of International Trade and Commerce Mark Chandler.

The Khazanah Americas Incorporated office has a scenic view of the Golden Gate Bridge, the world’s longest and tallest suspension bridge when the bridge was completed in 1937, to connect San Francisco with Marin County across the 1,600 metre-wide strait known as the Golden Gate which links the San Francisco Bay with the Pacific Ocean.

Complimenting Khazanah for “the great choice of sparkling office with a nice view”, Najib said Khazanah had made the right choice to be in San Francisco as the city is the centre of innovation in the United States – one of the most dynamic regions in the world, home to the most admired and innovative businesses and institutions.

Najib, who is also Khazanah Nasional Berhad chairman, said the opening of the office has shown that the Malaysian government fully supported and underpinned its seriousness on creating a competitive, sustainable and innovation-friendly environment and encouraged private and government entities to invest in key sectors abroad.

The Prime Minister also said Malaysia was keen to invest in exciting high-value areas such as life sciences, green technology and cutting-edge innovation that could help Malaysia’s transformation efforts.

Najib said Malaysia hoped to learn from the United States its remarkable culture of innovation, risk-taking and entrepreneurship to spur Malaysia’s own economic growth.

He said he was looking forward to see the innovation that would emanate from this regional office initiative.

He said that over the years, Malaysia’s business and economic interests had expanded across the globe and hoped that the Khazanah office would be able to identify potential partners and get the people in innovation in Americas to partner with those in Malaysia.

Najib also said that Iskandar Malaysia in Johor had established itself as a high value innovative centre and its Pinewood Studios, an integrated media production studio facility, are expected to be completed and opened next year.

He said Malaysia had a lot to offer to investors such as big economic growth number of 4-5 per cent a year, its Vision 2020 efforts on track and a low inflation rate of 2 per cent, which was not bad considering the current external factors affecting the world economy.

“With Khazanah Americas, we can further strengthen our presence and build strong networks with businesses here and I hope we can identify potential partners in America to help propel Malaysia into a developed nation status by 2020,” he said.

In his welcoming speech, Khazanah Nasional Berhad Managing Director Tan Sri Azman Mokhtar said the opening of the Khazanah Americas Incorporated office would be a hub for Khazanah into innovation and technology as well as a bridge between the two countries and regions.

Najib, who arrived in San Francisco with his wife early Sunday, is on a working visit here until Sept 24, prior to his visit to New York to lead Malaysia’s delegation to the 68th session of the United Nations General Assembly (UNGA) from Sept 25 to 29.

He is scheduled to deliver a statement at the High Level Meeting UNGA on Nuclear Disarmament on Sept 26, and Malaysia’s statement during the General Debate on Sept 28. – Bernama

And this is an opinion on what Khazanah Nasional is really doing in San Francisco (taken from the Facebook page of Kijangmas Perkasa, who often writes in the blog Demi Negara:

… and the CONmen go marching in.

This time a lavish Khazanah Nasional rep office in one of the most expensive downtown office towers in very expensive San Francisco. Where the in-building parking (if you can find one) charges run at U$3 (RM10) per 15 minutes or US33 (RM110) per day. That would be RM3,300 per month for one car in a dingy basement — the rental rate of a very comfortable KL apartment.

While being fawned head-over-heels by CONmen from Frost & Sullivan and likeminded parasites, PM Najib reportedly complimented the breathtaking view of the Golden Gate Bridge and praised Mr. Non-Performer Royale, Azman Mokhtar for making “the great choice of sparkling office with a nice view.” Yes indeed. A million dollar view that will captivate many a heart. But is Khazanah promoting Malaysia or Northern California?

Who will staff this luxurious office? How many Malaysians? From where and based on what criteria? Another bunch of cocky 26-year olds “selected on merit” who will splash scenes of their wild parties and sinful weekend getaways — this time in exciting SF — on FB? Don’t be surprised if some of the PEMANDU party animals get recycled and sent here to liven up the wild Bay Area LGBT nightlife.

So how much are the rakyat (yes, Malaysian taxpayers) paying these people? Let me guess ………… a lot. Yes, a lot because San Francisco is one of THE most expensive cities in the U.S., with rental rates three times the U.S. average. The median rent for a 1-BR, yes one bedroom apartment in this city is about US$3,300 (almost RM11,000) per month. In preferred neighbourhoods, 1-BR rentals — if you can actually find one — would be US$3,600-4,500. For 2-BRs? You’re staring at US$5,000-8,000 per month. 3-BR? Don’t ask. And we have not even looked at other costs in a city ranked in the top 3 most expensive in the U.S.

How I know all these? I have a SF rep office as well. You pay through your nose in rental, parking and staff costs but as long as you make money, lots of it, its fine.

So will Azman Mokhtar and the merry-men and -women of Khazanah actually “make money” to cover this yet another splurge of the rakyat’s hard earned ringgits?

How?

By bringing in investors? Isn’t that job already done by the likes of Mida, Matrade and Miti? Seriously, what can Khazanah do that Mida and Matrade cannot do or has not already done? Mida has six offices across the U.S. — Los Angeles, San Jose, New York, Boston, Chicago and Houston. Martrade has offices in Los Angeles, Miami and New York. And we have investment minister-counselors in our Washington, D.C. embassy and consulates general in New York and Los Angeles. Throw in Tourism Malaysia and Malaysia Airlines and you’ll have a heck of a lot of “rep offices” offering the same thing again and again to confused Americans.

So what exactly is Khazanah’s role in SF? To attract investments? Again, that’s Mida and Miti’s job. To expand trade? That’s Matrade’s job. To secure tourist dollars? That’s Tourism Malaysia’s job. To play a hand in diplomacy? That’s the foreign office’s job via the embassy and consulates.

Oh, I forgot ….. Khazanah is supposed to SPEND money, NOT make money. While part of the fat budget has been blown on expensive office rental and staff costs, there must be quite a chunk left for a Silicon Valley spending spree. Najib reportedly said in SF, “Malaysia [is] keen to invest in exciting high-value areas such as life sciences, green technology and cutting-edge innovation that could help Malaysia’s transformation efforts.”

Huhh?

What exactly do all those Powerpoint jargons mean?

I’m sure Mr. Kool wannabe here would throw in “value proposition” and “value chain” and “leading edge” and “next-gen” and “ears and eyeballs” and other so-very-90s-lah CON-sultant bullsh*t somewhere in his speech.

As for stopping the spending spree, its too late lah people. The depleting chequebook’s out. Khazanah must be seen to spend on something somewhere to justify their SF office adventure. You see, their No.1 KPI is “to spend money, lots of it” and No.2 KPI is “to lose money, most of it” and No.3 KPI is “blame others, all of them.”

I’m just waiting for some announcement of a “strategic investment” in some “new economy” scam involving solar powered green-coloured multiheaded dildos or something like that run by a couple of Taiwanese H-1B visa abusers out of a Sunnyvale garage repackaged, of course, into some sustainable eco-friendly healthy green technology gizmo that purportedly will yield a financial windfall for Khazanah and propel Malaysia to new heights of economic ecstasy ….. blah, blah, blah. Sounds familiar? A sucker born every minute? Remember InventQjaya? Remember E-Village in the Dengkil boondocks? And don’t let me get into cow farms and such. Just finished a late dinner meeting with some old ex-ministers and the possibility of regurgitating the horrendous raw sturgeon wrapped in salty seaweed and boiled cabbage is very real indeed.

Oh, ….. saw in the newsfeed that Najib had just committed the rakyat’s money into yet another new fund management company, Putra Eco Ventures Inc. The report said: “The company will channel the investments and provide business consultancy services to green technology companies.” Now, that’s a triple whammy of oxymoronia. “Channel the investments”? “Provide business consultancy services”? These types of phrases have scam and leakage and abuse and misadventure written all over them. Throw in “green technology” and you are looking at a financial trainwreck in the making.

So people, another little chapter of the follies of GLC Malaysia unfolds away from the public radar. While the rakyat bicker about twenty sen fuel price hikes and lack of decent affordable housing, the jet-setting chimps-in-suits of Khazanah (… and soon PEMANDU and TalentCorp and 1MDB and other disasters) throw our tax money into bottomless pits in faraway America.

My problem with Najib is that every time he launches or announces or officiates something somewhere, I get an overpowering sense of mindless, needless wastage of the rakyat’s money. And this Khazanah rep office in San Francisco is no different. Again, I just don’t understand the logic. To attract investments, Mida, Martrade and Miti and our embassy and consulates have already done that for umpteen years. No need expensive, lavish office overlooking the Golden Gate Bridge in SF. On the other hand, if you just want to throw money at American companies, to invest in their business schemes or scams, they couldn’t care less about your office. They just want your money, lots of it. Heck, they wouldn’t give a hoot even if you work out of a Motel 6 by the 101 freeway …. as long as you give them money.

So again, what’s this “great choice of sparkling office with a nice view” in San Francisco really about? Is this a necessary strategic move to oversee the deployment of our sovereign funds — our children’s money — in foreign-based ventures crucial to our economic competitiveness, ……. or is this yet another expensive stupid out of control ego trip by some chimps-in-suits condoned by a weak, gullible Prime Minister easily fooled by meaningless CONsultant jargons liberally dished out in slick Powerpoint presentations?

We value second opinion. Please share what you think.

Thank you.

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Blogger Din Turtle wrote his opinion about it here >> http://dinturtle.blogspot.com/2013/09/najib-buka-satu-lagi-pejabat-milik.html?m=1

Malaysia Airlines cuts down its Q1 2013 loss

Now this is a piece of news that might slightly appease former YB Wee Choo Keong. This ardent scrutineer of Malaysia Airlines have been slightly pacified by the fact that the misadvised share-swap between Air Asia and MAS (in substance, it was actually a takeover of MAS by Tony Fernandes and his cronies) had been reversed exactly a year ago.

Today, MAS announced its Quarter One 2013 financial results:

Malaysia Airlines Halves Operating Loss in Q1 2013 with 17% Traffic, 14% Revenue Improvement & Positive Cash Balance

Wednesday, 29 May 2013, Kuala Lumpur – National carrier Malaysia Airlines registered a significant improvement in its operations by reducing operating loss by 46% to RM165 million for the first three months ended 31 March 2013 compared with RM307 million in the same quarter in 2012.

The improved performance was delivered in the face of poor economic conditions in which the airline delivered 17% increase in passenger traffic, 14% increase in revenue, and a higher seat load factor of 76.6%. This performance demonstrates that the continued focus to improve revenue and passenger loads is working. For the first quarter of 2013, the Group increased available seat capacity by 11% and increased flight frequencies by 9%.

Malaysia Airlines registered a RM147 million positive cash balance from its operating activities in the first three months of 2013, compared to a negative cash position of RM202 million in the previous corresponding period. This is the third consecutive quarter of positive cash contribution from operating activities.

“Our operating statistics are strong and recording encouraging traction to build up our passenger numbers and growth. These have enabled our Group to generate positive cash balance, and essentially stop the bleeding. However we still have a lot of work to do to align costs to revenue, to increase productivity and efficiency, and improve yields”, said Ahmad Jauhari Yahya, Malaysia Airlines Group Chief Executive Officer.

“The conclusion of the Rights Issue is a milestone for Malaysia Airlines. With the cash injection and capital restructuring, our balance sheet is now on a very strong footing. This gives us wider options to implement a growth strategy for this challenging business environment”, added Ahmad Jauhari.

Malaysia Airlines’ recent Rights Issue exercise to raise RM3.1 billion from shareholders received an over-subscription of 41% valid acceptance and excess applications for the 13.36 billion new shares on offer. The Rights Issue is part of efforts to ‘reset, reboot and rebuild’ Malaysia Airlines which includes redefining business strategies, rebuilding its balance sheet strength to regain and build up its market position.

Traditionally the first half of the year sees weaker performance for airlines. Coupled with increased pressure on yields from intensifying competition and higher costs, Malaysia Airlines group registered a Net Loss after Tax was RM279 million for the first quarter of 2013 compared to a loss of RM172 million previously. This was mainly attributed to an unrealized forex loss of RM21 million in Q1 2013 compared to a forex gain of RM200 million in the previous year. Higher financing costs for its fleet renewal programme also contributed to the overall net loss.

“The continued high jet fuel prices, added capacity in the market and increased competition, put pressure on our yields. The business environment is tough, but Malaysia Airlines is now able to respond faster to changes in the market”, added Ahmad Jauhari.

Malaysia Airlines group revenue for Q1 2013 rose 14% to RM3.55 billion from RM3.11 billion previously. Expenditure for Q1 2013 was RM3.71 billion, 8% higher than the previous corresponding period, mainly attributed to high jet fuel costs, handling and landing costs, flight-related and leasing expenses. Depreciation also rose with the arrival of 6 A380s, 7 A330s and 8 B738s into its fleet over the last 12 months.

Jet fuel prices remained high at an average USD135 per barrel in the first quarter of 2013 compared to USD130 per barrel in the corresponding period last year. The Group’s fuel bill was 37% of total expenditure.

The Group carried 3.6 million passengers in Q1 2013, an improvement of 16% quarter-on-quarter (q-o-q). For the airline itself, passenger revenue was up 11% to RM2.47 billion, however yield decreased 5% to 24.2 sen per RPK.

Externally, the aviation environment saw strong growth in the first quarter of 2013 with both the International Air Transport Association (IATA) and Association of Asia Pacific Airlines (AAPA) reporting improvements in monthly passenger traffic in tandem with better business conditions.

The Asia Pacific region is expected to be the future growth centre of aviation demand, and Malaysia Airlines is well-positioned to tap this future growth. In addition to strengthening its footprint in Asia Pacific with increased frequencies to more business and leisure regional destinations, Malaysia Airlines now offers a wider international network with its membership of oneworld which it joined on 1 February 2013.

Whilst it is still early days to quantify the benefits, the carrier saw interline revenue jump 40% in the period February to March. “We expect interline revenue to increase further as more guests get to know about Malaysia Airlines through oneworld. Joining the alliance is a good platform to widen our reach and brand”, added Ahmad Jauhari.

In other operational matters, On Time Performance (OTP) was maintained at 85.1% for the first quarter of 2013.

Its fleet renewal programme is on-going. By end March 2013, all 6 A380s ordered had been delivered. By flying twice daily Kuala Lumpur-London, and once daily Kuala Lumpur-Paris and Kuala Lumpur-Hong Kong, Malaysia Airlines is optimizing aircraft utilization to average 17 hours daily. This is the said to be the highest, if not one of the highest in the world, A380 aircraft utilization.

It is quite a relief to see our national carrier is showing signs of improvement. Although they are not out of the woods yet, the exponential increase in revenue sees greater hope in cutting down their net loss after tax for the whole 2013. In 2012, they suffered RM433 million in losses while back in 2011, the loss was even higher at RM2.52 billion.

But what is troubling is the non-operating expenditure MAS is incurring such as depreciation, forex losses and financing costs. Stating the obvious, if these items are not managed and streamlined properly, it will eat up the revenue gained in each and every quarter. The only silver lining is the positive cash balance. And even that was helped by the rights issue.

However, this is much better than all the ‘turnaround exercises’ done by previous managements of MAS to window dress its financial statements. Asset unbundling, asset flipping, forex gains, fuel hedge initiative and all other short cuts conjured by the consultants etc.

What MAS needs is a more organic growth. And hopefully its top management can perform their duties that we all can be proud of.

By the way, kudos to MAS for bringing back a stranded mother and her sick child from Vietnam last week. Now that is a humane effort that will be remembered for a long time.

In other news, Felda Global Ventures Holdings Berhad posted a remarkable revenue in Q1 2013.

KUALA LUMPUR: Felda Global Ventures Holdings Berhad (FGV), the world’s third largest oil palm plantation operator, posted a 55.9 per cent increase in revenue to RM2.68 billion for its first quarter ended March 31, 2013.

But its profit before zakat and taxation for the quarter declined by 22.2 per cent to RM218.51 million, from RM280.81 million in the corresponding quarter last year.

Net profit dropped by 25.2 per cent to RM167.06 million from RM223.21 million in the same period previously, FGV said in a statement Wednesday.

The company said the decline in profit primarily reflected the effects of lower average crude palm oil (CPO) price realised by the group of RM2,264 per tonne compared with RM3,205 per tonne in 2012.

Malaysian CPO prices have been trading at around RM2,315 per tonne since December 2012 compared with last year’s average of RM3,190 per tonne, which was aggravated by reduced palm products purchases as well as high inventory holdings in the edible oil consuming countries such as India and China, it added.

FGV Group President Datuk Sabri Ahmad said that in line with other plantation companies, FGV’s plantation division had also been adversely impacted.

“However, as an integrated organisation, FGV has the flexibility to utilise cheaper feedstock in the refineries to offset the effect of reduced pricing and at the same time compete with other edible oil producers,” he said.

He added that the palm oil industry was expecting a price correction by the middle of the year, especially during the upcoming fasting month as demand rises.

Sabri said the decline in profit was also attributed to other factors, including higher fair value changes in the land lease agreement liability of RM54.60 million and provision for impairment which amounted to RM13.66 million related to a joint controlled entity.

Sabri said that the government’s decision to launch the B10 biodiesel programme in its effort to stabilise the CPO price was also timely.

“Taking on this opportunity, FGV had entered into an agreement to acquire a biodiesel refinery located in Kuantan, Pahang and expects the plant to be fully operational by mid-2013,” he added.

“With our resilient integrated business model and new businesses developed in the recent years as well as strong asset base, we are reasonably confident that we will overcome the difficult environment, and barring any unforeseen circumstances, we are optimistic of the prospects for the rest of the year,” added Sabri.

There’s nothing much that can be said about FGVH since that industry is at the mercy of global prices. Even Genting Plantations is suffering a dip of their quarterly profits.

PETALING JAYA: Genting Plantations Bhd’s net profit for the first quarter 2013 (1Q13) fell 44% to RM44mil from RM78.7mil a year ago, due to lower palm product selling prices and a RM31mil contribution for charity purposes.

However, its revenue for the quarter has increased 26% to RM343mil from RM272.6mil a year ago, notably due to stronger sales in its property segment. Earnings per share were lower at 5.8 sen versus 10.38 sen a year ago.

“In 1Q13, the group achieved average crude palm oil and palm kernel selling prices of RM2,293mt and RM1,165mt, down 28% and 40% respectively from the corresponding period of 2012,” it said.

Genting said its softer palm product selling prices outweighed the impact of higher crop yields during the quarter, adding that its fresh fruit bunches output had increased 32% year-on-year (yoy) mainly from its Sabah estates, which had recovered from favourable weather and additional planted areas are moving into higher yielding brackets.

On the other note, the firm noted its property division earnings had quadrupled, posting an increase of profit to RM25mil from RM5.9mil a year ago backed by strong demand for properties in Genting Indahpura.

Genting said it would continue to leverage its presence in Johor, particularly in the burgeoning Iskandar Malaysia region.

Felda moved to financially punish lying politicians

There is something very telling about the legal suit by Felda today:

Felda sues ANAK president and 6 others for defamation

KUALA LUMPUR — The Federal Land Development Authority (Felda) today filed a defamation suit against Felda Settlers’ Children Association (Anak) president Mazlan Aliman, PAS secretary-general Datuk Mustafa Ali and five others over allegations that Felda sold its palm oil to Israel.

The writ of summons was filed through Mssrs Hafarizam Wan & Aisha Mubarak at the High Court Registrar’s Office here.

Felda named Mazlan and Mustafa as the first and second defendant, while Harakah editor-in-chief Ahmad Lutfi Othman, editor Taufek Yahya, writer Mohd Arif Atan and publisher Angkatan Edaran Ent Sdn Bhd, as well as Parti Keadilan Rakyat (PKR) secretary-general Datuk Saifuddin Nasution Ismail, as the third to seventh defendants.

According to the statement of claim, Felda claimed that Mazlan had uploaded a defamatory statement on his Facebook page on Nov 19 last year and had also made defamatory statement during a gathering in front of Felda office four days later (Nov 23).

Felda claimed that the statement was republished by the second to sixth defendants through several articles in Harakah newspaper between Nov 26 and 29 last year.

Felda also claimed that the statement had affected Felda’s reputation and that all defendants had done so with the intention to achieve their personal agendas to destroy people’s faith in Felda.

The plaintiff is seeking general and exemplary damages, cost as well as other relief deemed fit by the court.

Felda is also applying to the court for an injunction to stop Mazlan and his agents from talking about or publishing the defamatory statement in the Internet and print media.

The plaintiff is also demanding a written apology from Mazlan in local newspapers and magazines.

Meanwhile, Felda’s lawyer Wan Azmir Wan Majib told reporters that they would send the writ of summons to all defendants within this week. -BERNAMA-

This suit came about two weeks after Felda had sent them a notice of claim for the lies and misinformation they spread to public, as news on 13th December 2012 below had shown:

Felda serves notice of claim to Mazlan and opposition publications

KUALA LUMPUR – Felda has sent a notice of claim to Mazlan Aliman, Harakah and Suara Keadilan newspapers over Mazlan’s accusation that the conglomerate is selling its palm oil produce to Israel and the statement was reported in both publications.

The statement was also published on Mazlan’s Facebook account.

Mazlan, in his statement, accused Felda of selling its palm oil produce to Israel.

Felda in an official statement has denied the allegations made by Mazlan.

“These allegations are not true and are malicious in nature, in fact it has tarnished Felda’s image as an international conglomerate,” it said.

Due to this, Felda has decided to take action against Mazlan and the two newspapers via Messrs Hafarizam Wan & Aisha Mubarak.

The notice of claim has been sent by Felda’s lawyers to Mazlan, Suara Keadilan and Harakah on Dec 10 and 11.

The same legal notice has been given to Harakah, naming its writer, news editor and chief news editor, publisher and printer as defendants involved in the libellous article on Felda.

Meanwhile, Parti Keadilan Rakyat which is responsible for publishing the Suara Keadilan newspaper has also been served with a notice.

Felda has given the defendants 14 days to apologise and retract the statement that has been made and published.

The defendants are also expected to offer to compensate Felda for the damages they have caused, failing which, Felda’s lawyers will proceed with the legal suit after the 14 days.

Obviously, Mazlan Aliman and his ilk in Pakatan Rakyat did not have the proof to back their allegations hence the lawyers in Felda moved to sue them. Otherwise, the matter would have not been pursued by Felda at all. The question now is, will Pakatan politicians who are prone to lying, will learn their lesson and stick to facts when conveying their political agenda?

I doubt it.

After recent political events had really, really exposed Pakatan Rakyat’s politicians to be corrupt and dirty, we could only extrapolate that if they gain powers as Federal government, the magnitude of corruption they immerse themselves in would be bigger than we could imagine.

Let’s see what happens next.

Tussle between two MAS unions

A reader sent this through the comment section:

______________________________________

PRESS RELEASE
Urgent 28th December 2012

Protest Against Secret Ballot Exercise On MAS Cabin Crew & Claim of Recognition By National Union of Flight Attendants Malaysia (NUFAM)

MASEU has been informed or given to understand that NUFAM has been registered and had sought recognition from Malaysia Airlines (MAS) to represent its cabin crew.

MASEU is of the view that it is highly improper or right for recognition to be given by Malaysian Airlines to entertain NUFAM’s claim for recognition due to the following reasons:-

(1) A “general recognition” had long been accorded by MAS to MASEU as a general body to represent its non-executive employees including its cabin crew (i.e. graded staff) since the establishment of MASEU as an in-house union in 1979, after the Airlines Employees’ Union, Peninsular Malaya (AEU), (which represented most of Malaysia Airlines’ employees including those of foreign airlines that operated to Peninsular Malaysia) was deregistered.

(2) Giving recognition to two unions to represent the crew is not in the spirit of good industrial relations and would cause industrial disharmony among the cabin crew who are members of MASEU and members of NUFAM. This will conflict with the objective of the Industrial Relations Act 1967.

(3) MASEU cabin crew are well represented for 33 years in its central Committee since 1979 and currently is represented by four duly elected Cabin Crew. MASEU had successfully concluded Collective Agreement (CA) covering all its graded employees including cabin crew from the time of its establishment including the 2012 CA which MASEU had concluded with MAS on 12.12.2012.

After almost one year, we are puzzled to receive a circular via MH internal mail dated 20th December 2012 from Secretary General of NUFAM to MAS Cabin Crew that NUFAM and MAS have signed a Voting Memorandum of Understanding (MOU) which will allow the National Union of Flight Attendant (i.e. NUFAM) to conduct a secret ballot exercise in MAS and this secret ballot exercise will determine whether NUFAM will be allowed to manage MAS Cabin Crew’s CA.

MASEU protest to the proposed secret ballot exercise and MASEU request that the following action be taken by the Industrial Relations Department:-

a) To permit MAS not to entertain any claim of recognition by NUFAM to representatives cabin crew members on the grounds given above and it is improper for MAS to sign a Voting MOU with NUFAM on 19th December 2012 especially when there is already an existing in-house union i.e. MASEU that governs MAS Cabin Crew’s CA successful for 33 years,

b) To seek the good office of Director General of Trade Union / Minister of Human Resources to direct the NUFAM to amend its constitution to prohibit MAS cabin crew to join NUFAM on the ground that there is IN EXISTENCE an in-house trade union to represent MAS cabin crew, as evident from the Collective Agreements concluded with MAS SINCE 1979 and WHICH had been taken cognizance by the Industrial Court,

c) To advise the Director General of Trade Union to withdraw or cancel the certificate OF registration of NUFAM, under Section 15 (2)(a) of the Trade Unions Act 1959 (Act 262) as MASEU has the largest number of MAS employees as members of MASEU if NUFAM refuses to amend its constitution,

d) To cancel the proposed secret ballot exercise involving MAS Cabin Crew, as by allowing this exercise, would cause a conflict of interests or division of loyalty among MAS Cabin Crew, who are members of MASEU if they are invited to participate in the secret ballot.

e) To advise MAS to revoke the Voting MOU where MAS and NUFAM signed on 19th December 2012 as this contravenes Article 8 of the Collective Agreement (CA) between MAS and MASEU. An extract of Article 8 is reproduced below:-

“Article 8 – UNION RECOGNITION AND SCOPE OF REPRESENTATION

The company recognized the Union as the sole collective negotiating body representing its permanent employees in Peninsular Malaysia referred to in the Employees Classification Table set out in Schedule IV.”

MASEU views this matter seriously as the action of MAS management in signing the Voting MOU is tantamount to inducing MASEU Cabin Crew to refrain or resign to be a member of MASEU and this contravenes Section 5.1. (e) of the Industrial Relations Act 1967 which is reproduced below:-

“SECTION 5 – PROHIBITION ON EMPLOYERS AND THEIR TRADE UNIONS IN RESPECT OF CERTAIN ACTS

5.1. No employer or trade union of employers, and no person acting on behalf of an employer or such trade union shall:-

(e) Induce a person to refrain from becoming or to cease to be a member or officer of a trade union by conferring or offering to confer any advantage on or by procuring or offering to procure any advantage for any person.”

MASEU believe that since the registration of NUFAM was under political pressure, we also believe that the secret ballot exercise is subsequently under political pressure to grant recognition to NUFAM to represent MAS Cabin Crew is an attempt to annihilate sustainability/survival of MASEU. This practice is highly undesirable and bad for fostering good industrial relations.

MASEU object strongly to the stand of the Ministry action and demand the Ministry to act rightly within the legal framework of the Industrial Relations Act 1967 and the Trade Union Act to foster good industrial relations in not only MAS but in the Country.

MASEU further believe if such practice is condoned or continued, it would encourage other categories of MAS graded employees to form another National Union in MAS, which would not be in the interest of MAS and its employees.

MASEU request that DG industrial Relations and DG Trade Union to take immediate action to accede to our request.

_________________

The reader further said, – MAS does not want to recognise NUFAM but was forced by DEP MOHR to bear all costs for NUFAM exercising secret ballots inside MAS so NUFAM can recruit MAS cabin crew as members. Current number NUFAM has is 58 only since the inception of nUFAM on 27th January 2012. Dep MOHR is the one responsible for approving NUFAM even though in-house union already existed for mas cabin crew. REPORTS to SPRM on NUFAM President for misused of fund already been lodged.

Why should there be two unions within one company? This matter was also highlighted by The Star here.

Proton and its hybrid misadventures

Back in February 2012, I wrote about the generous funds being given to Proton for the past few years in order for it to develop a national hybrid car.

Bringing up to the speed on the little facts that we have gathered so far from the previous article I wrote:

a) In 2010, Proton obtained a RM270 million grant to develop hybrid cars

b) Mass production of hybrid cars are scheduled to commence in 2012.

c) 30 hybrid cars were to be delivered by end 2011 and even this promise was hardly kept.

d) Proton has cash balance of RM1.2 billion in March 2011.

e) Consequent press statements revealed that 200 hybrid cars were scheduled to be delivered only in 2013.

f) Proton is in a joint venture with Fraser – Nash Research Ltd (FNR) to develop this technology and it seems that FNR were fully paid upfront without any regards for its deliverables.

I asked 4 questions pertaining this matter:

1) What is the status of these hybrid cars which are currently being used by the government officials? The Energy, Green Technology and Water Ministry or Proton needs to state the road worthiness of the cars. Are all those 30 units doing perfectly well? This is important since RM270 million of government’s money were given to Proton to develop it.

2) Since RM270 million was a grant and not a soft loan, the cost of each car (at R & D stage) is roughly about RM9 million. Slightly more expensive than a Bentley Continental. Is this justified?

3) Proton has cash balance of RM1.2 billion as at March 2011. Why would it need a further GRANT from the government of RM270 million? Surely RM270 million can be used elsewhere other than the cash rich Proton.

4) How much of this RM270 million being paid to third party such as Fraser – Nash and others?

 This is the latest news as of yesterday:

Proton electric car coming in 2014, Parliament told

Proton will be selling electric vehicles by 2014, International Trade and Industry Minister Datuk Seri Mustapa Mohamed told Parliament yesterday. The national car company is currently collaborating with UK-based Frazer-Nash Research to develop its own EV.

In a reply to Gombak MP Azmin Ali, the MITI minister said that Proton had allocated RM500 million for research and development in green technology and is expected to gain profits after commercialising EVs in 2014, The Star reported.

The PKR man asked MITI to state the rationale of investment by Proton through Frazer-Nash, to which Mustapa replied that Proton’s R&D spend is much smaller than other car manufacturers.

It was pointed out that GM invested about US$1.2 billion to develop its Chevrolet Volt while Nissan-Renault has allocated US$5.6 billion for the same purpose. Allegations that Proton spent some RM270 million to test 30 cars and each cost about RM9 million were untrue, Mustapa said.

Meanwhile, Bernama reports that the government is ready to allocate RM120 million next year to Proton for the development of an EV before it can be commercialised mid-2014.

The government allocated RM100 million this year for Proton to develop a hybrid and electric model and will consider an allocation of RM120 million next year for research and development. All this depends on Budget 2013 which will be tabled by the Prime Minister tomorrow (today) and on Proton meeting its key performance index target,” Datuk Seri Mustapa Mohamed said.

So, apart from RM120 million they will provide next year, Proton had already been given RM100 in 2012. This is on top of the RM270 million grant given in 2010. This is a total of  RM490 million of grants given to Proton in the span of 4 years in order to mass produce hybrid cars in 2014.

The deadline had been pushed further and further as the years goes by. Basically a two year plan has now been stretched to 4 years with unsuccessful piecemeal products being manufactured during the period.

Word has it that those 30 pilot cars were not up to standard and are no longer running due to breakdowns. In other words, they are not road worthy. Proton and FNR failed in  their job and yet we reward them with more money.

After the takeover of Proton from Khazanah Nasional last May, Proton is now under the ownership of DRB Hicom. Why would the government pump more money to a privately owned company where the ultimate owner is already cash rich and could definitely stand on its own two feet?

The purpose of Proton shares being sold was to limit its dependence from the government. And yet, Proton is still being treated with silver spoon eventhough it is no longer the direct responsibility of the government.

Dato’ Lukman Ibrahim, the current boss of Proton has so much to answer for this slush of funds coming in.

Is there no key monitoring process being done within the Proton management whereby a hybrid cars R & D of this magnitude has been deemed a failure and yet, they still continue with this venture regardless?

The Proton management will be held accountable for this lack of willpower to call a spade a spade and make the hard choice of terminating any joint venture with a 3rd party research company which could not deliver.

The RM120 million allocated to them in the national budget should have been allocated somewhere else which could be more useful to the rest of the people instead of being invested in a wild goose chase where the cost has begun to outweigh its benefit.

4 years and RM490 million down the road with only 30 lousy cars to show for is definitely a joke.

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