• FGV’s purchase of PT Eagle High Plantations (EHP) stocks from the Rajawali group is expensive and will result in the further deterioration of the FGV stock price

    Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the 15th of June, 2015

    FGV’s purchase of PT Eagle High Plantations (EHP) stocks from the Rajawali group is expensive and will result in the further deterioration of the FGV stock price

    It was announced last Friday, on the 12th of June, 2015, that Felda Global Ventures (FGV) has made a proposal to acquire a 37% stake in PT Eagle High Plantations (EHP) for US$680 million (or RM2.55 billion) in cash and stocks from the Indonesian based Rajawali Group.[1]

    In a “Flash Note” issued by CIMB yesterday, 14th of June, 2015, the acquisition was viewed as “negative” because the acquisition price of Rp775 per share was seen as expensive (EHP’s last closing price was Rp450 per share), the acquisition will not give FGV a controlling stake in EHP, the acquisition will dilute FGV’s net profit in Financial Year 2016 by 10%, the net gearing ratio of FGV will rise from 1.05X to 1.43X and the cashflow of FGV will be negatively impacted. As a result, the CIMB analyst cut the SOP target-price of FGV to RM1.69 and the call for a ‘reduce’ recommendation for FGV was maintained.

    This morning, at the time of writing (11am Malaysian time), the share price of FGV has fallen by 16 sen from RM1.86 at the opening bell to RM1.70. This represents a 63% fall in the stock price of FGV when it first listed at RM4.55 per share. While some have attributed the fall in the FGV stock price to the floods in Kelantan as well as the low Crude Palm Oil (CPO) prices, a comparison of other palm oil stocks in Malaysia will show that FGV’s stock price has dropped the most in the past one year.

    Figure 1: Comparison of stock price of FGV, United Plantations (UPL), Genting Plantations (GENP), Kuala Lumpur Kepong (KLK) and IJM Plantations (IJMP) over the past one year

    As of last Friday, 11th of June, 2015, the stock price of FGV has fallen by 56.6% over the past one year compared to a decrease of 3.2% for United Plantations (UPL), a decrease of 6.2% for IJM Plantations (IJMP), a decrease of 8.7% for Genting Plantations and a decrease of 12.6% for Kuala Lumpur Kepong (KLK).

    FGV’s strategy of purchasing plantations with younger age profiles must be justified from a costing and valuation perspective. The CIMB “Flash Note” clearly shows that the valuations which FGV is paying for EHP is expensive. Specifically, it stated that:

    “The blended acquisition price for EHP of Rp775 represents a 72% premium to its last closing market price of Rp450 and is 267% above CIMB’s target price for EHP of Rp290 per share. The pricing is also 94% above the recent 6-for-1 rights issue price of Rp400 per share for EHP, which was completed in Dec 14.”

    The FGV board and management must answer to its shareholders which includes the FELDA settlers as well as the Malaysian public (via KWSP, KWAP and Tabung Haji shareholdings). Why was this acquisition proposed and at such a high price? Will the board and management take responsibility for the negative perception from the market which has led to the continued decline in FGV’s share price?

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

    [1] http://www.thestar.com.my/Business/Business-News/2015/06/12/FGV-to-buy-37-pc-of-PT-Eagle-High-Plantations/?style=biz

  • Bank Negara Malaysia (BNM) has no business getting into the business of education

    Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the 1st of June, 2015

    Bank Negara Malaysia (BNM) has no business getting into the business of education

    It was announced in April 2015 that Bank Negara Malaysia (BNM) was entering into a 10 year business relationship with the Massachusetts Institute of Technology’s Sloan School of Management (MIT Sloan) to establish the Asia School of Business (ASB) in Kuala Lumpur.[1]

    While it is laudable that Bank Negara has the vision to turn the Asia School of Business into a “premier business school that develops transformative and principled leaders who will contribute to a better future and advance the emerging world”[2], the business of education is not and should not be the business of the central bank. Indeed Act 5 (1) of the Central Bank Act of Malaysia 2009 states that the “principal objects of the Bank shall be to promote monetary stability and financial stability conducive to the sustainable growth of the Malaysian economy”. Act 5 (2) lists down the primary functions of the Bank including (i) formulating and conducting monetary policy in Malaysia (ii) the issuance of currency (iii) the regulation and supervision of financial institutions (iv) exercising oversight over the payment systems (v) managing our foreign reserves (vi) to act as financial adviser, banker and financial agent of the Government. Nowhere in this list or in this act does it say that Bank Negara should get involved in the business of education, especially when it has no direct implications on the financial and banking sector in the country!

    While Section 48 (1) of the Central Bank Act of Malaysia 2009 allows Bank Negara to (i) establish a body corporate for the purpose of training, research and development of human resource in relation to banking and financial services and (ii) establish a body corporate for the purposes of providing financial counselling, debt management services and education on financial management, it must be noted that Bank Negara has already done this by establishing the International Center for Education in Islamic Finance (INCEIF) to develop academic expertise in Islamic Finance[3] and the Credit Counselling and Debt Management (CCDM) Agency[4] to increase public awareness of debt management.

    Even in the area of developing leaders and inculcating leadership skills, Bank Negara has already established the ICLIF Leadership and Governance Center.[5] With the establishment of all these institutes and agencies, why is there the need to set up yet another entity, the Asian School of Business, which seems to have little direct relationship to the banking and financial services sector?

    We have seen this script before. The Malaysian University of Science and Technology (MUST) had a collaboration with MIT in 2001 on post graduate programs. Once the government decided to stop funding full scholarships, the enrolment dropped significantly.[6] Ultimately the partnership was cancelled after a founding grant of RM100 million was given by the Malaysian government.

    The Perdana University also launched a much publicized graduate medical degree with the renowned Johns Hopkins School of Medicine in 2010 by none other than the then Secretary of State, Hillary Clinton. The initial batch of students were fully funded by JPA scholarships which costs almost RM1 million per degree compared to less than RM500,000 for a medical degree in a local private university. The collaboration with Johns Hopkins collapsed in 2014 arising from disputes over payments from Perdana University to Johns Hopkins.

    Bank Negara will most definitely face similar challenges in having to stump up generous scholarships in order to attract the initial batch of students, and this could create a vicious cycle which will be unsustainable.

    Starting a business school is not a cheap endeavour especially when one has to pay the salaries of high profile and highly qualified foreign academics who will comprise the faculty at the Asian School of Business (ASB) in Kuala Lumpur. The fact that Bank Negara has deep pockets should be even more worrying since this means that more money can be spent on this endeavour over the course of the 10 year collaboration.

    I call upon Bank Negara to cease this collaboration immediately rather than to invest millions of ringgit of its reserves in an area which it has no business being part of in the first place.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

    [1] http://www.thestar.com.my/Business/Business-News/2015/04/10/Bank-Negara-MIT-Sloan-to-set-up-business-school/?style=biz

    [2] http://www.asb.edu.my/

    [3] http://www.inceif.org/

    [4] Agensi Kaunseling dan Pengurusan Kredit (AKPK) http://www.akpk.org.my/my/

    [5] http://www.iclif.org/

    [6] http://www.universityworldnews.com/article.php?story=20110603183329570

  • The 11th Malaysia Plan is not rooted in reality, is not transparent and is far from being a game changer

    Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the 21st of May, 2015

    The 11th Malaysia Plan is not rooted in reality, is not transparent and is far from being a game changer

    I am completely underwhelmed by the recently tabled 11th Malaysia Plan. I was expecting a document that would chart a new course to the status of a developed nation and beyond. What was tabled was a document that is divorced from current political and economic reality, is totally not transparent and is far from being a game changer.

    One of the key economic challenges facing the country in 2015 and 2016 is the impact of low oil and gas prices on public finances. The unexpected and rapid fall in the price of oil to below US$40 per barrel at the end of 2014 forced the Prime Minister to announce some expenditure revisions at the beginning of the year. With the expectation of oil prices hovering below US$100 per barrel and low gas prices as a result of the increased production of shale gas in the United States, the revenue which the government derives from oil related sources – the petroleum tax, the income tax and the special dividend from Petronas – is expected to take a significant hit. Without a significant revision of long term government spending and without an increase in the recently introduced Goods and Service Tax (GST), I don’t see how the government can realistically expect to eradicate the budget deficit and the government debt to GDP ratio to below 45% by 2020.

    If government spending has not been adjusted to face the new economic realities of a low priced oil and gas regime, what more the other aspects of this plan?

    In my 11th Malaysia Plan wish list, published yesterday[1], I noted the importance of giving an honest picture of the country’s public expenditure and the need to highlight off-budget expenditure items as well as projected expenditure under public private partnership projects. I also asked for the full list of new development and infrastructure projects and the expected costs of each project in the 11th MP to be made available online. Sadly, no such list was produced. So we remain in the dark as to the number and location of new hospitals, schools, universities, technical and technical institutions which will be built under the 11th MP.

    The lack of transparency is all the more disappointing given that the Treasury is able to produce yearly estimates of budget expenditure by ministry during each budget session but the Economic Planning Unit (EPU) is not able to do the same in the 11th MP. In addition, I have received parliamentary replies in the previous sessions which have stated new projects and budget allocations that are specified to be under the 11th MP such as road upgrading projects. So much for more transparent government expenditure.

    Finally, the thrusts which are introduced as game changers in the 11th MP are not too far from business as usual. For example, the plan talks about ‘investing in competitive cities’ as a game changer but fails to outline specific proposals to give more power and financing to the local and city councils to achieve this aim. The plan talks about ‘uplifting B40 households towards a middle-class society” but says nothing substantive about reducing our dependence on foreign labour which continues to drag down the wages and job opportunities for low income Malaysians.

    The only positive point that is consistent with my wish list is the commitment to publish a multidimensional poverty index (MPI) in order to have a more comprehensive definition of poverty. But this is scant consolation in a context where all of the other wish list items have been ignored.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

    [1] http://ongkianming.com/2015/05/20/press-statement-wish-list-for-the-11th-malaysian-plan/

  • Wish list for the 11th Malaysia Plan

    Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the 20th of May, 2015

    Wish list for the 11th Malaysia Plan

    Prime Minister Najib Tun Razak will unveil the 11th Malaysia Plan (2016 to 2020) tomorrow in parliament. This will be the Malaysia Plan that will take us to a developed nation status by 2020. Expectations therefore are very high that this plan will not only chart the course for us to achieve a developed nation status but to show the way forward thereafter.

    Below is my wishlist for what I hope will be covered in the 11th Malaysia Plan. Unfortunately, despite the importance of this plan, none of the opposition parties and members of parliament were consulted during the preparation of this plan even though we represent 52% of the voters in the country.

    1)      Wish One: A new definition of poverty

    Idris Jala, the CEO of Pemandu, was quoted as saying that the poverty in Malaysia has nearly been eradicated with less than 1% of the population living below the Poverty Line Index (PLI) [1] which is RM830 per month in Peninsular Malaysia, RM1090 in Sabah and RM920 in Sarawak.[2]

    Putting aside some valid concerns about the accuracy and representativeness of the data collected, I would like to see Malaysia adopt a new definition of poverty. Since Idris Jala likes to use international organizations such as the OECD and the World Bank as reference points, I would point him towards the OECD definition of poverty where “the poverty line is here taken as half the median household income.”[3] Developing countries place more importance on absolute poverty lines while developed countries place more importance on relative poverty lines.[4] Since Malaysia is moving towards the status of a developed nation, it would make sense for us to adopt a relative poverty measurement.

    According to the 2012 Household Income Survey, the median household income was RM3626 a month. Using the OECD relative poverty line, this means that the PLI for relative poverty in Malaysia would be RM1813 a month. The median household income of the bottom 40% was RM1852 a month. Using this new relative poverty definition, Malaysia’s poverty rate would measure in at almost 20% i.e. half of the bottom 40%.

    At the same time, I would advocate that the Economic Planning Unit establish a Multidimensional Poverty Index (MPI), also advocated by the OECD, which takes into account measures other than income such as poor housing conditions, the lack of durable assets and an inability to meet basic needs. The inaugural Malaysia Human Development Report 2013 also advocates for other ways of measuring poverty which the EPU can customise and use.[5]

    2)      Wish Two: Subsidy Rationalisation which is transparent and makes sense

    The government has made a big deal of its subsidy rationalization program including the recent abolishment of the petrol subsidy and the cuts in the electricity subsidy. What the government has not done is to review and reform the many other government subsidies which are given in a less than transparent but very costly manner.

    For example, the Ministry of Agriculture will spend an estimated RM2.2 billion in various types of subsidies on the paddy industry in 2015. Almost half a billion ringgit is spent on subsidizing the production of ST15 rice that is meant for low income groups. But much of this subsidized rice is ‘hijacked’ by wholesalers and repackaged into more expensive variants which are then sold in the market. Those who are ‘lucky’ enough to obtain the ST15 quotas can profit doubly – from the subsidy they receive from the government and from the profits they make from repackaging and selling the rice as a more expensive variant. Even though the Public Accounts Committee (PAC) has recommended that this ST15 subsidy program be abolished, the Ministry has denied this request and refused to even review the weaknesses of the program which were identified by the Auditor General’s Report.[6]

    If the government is serious about its commitment to subsidy rationalisation, it should demonstrate its political will by tackling subsidies which are costly and not given out in a transparent manner such as the various rice and paddy related subsidies. It is inconsistent to demand that consumers face the reality of market driven petrol prices but continue to give out subsidies which are ‘captured’ by well-connected middlemen.

    3)      Wish Three: Government Spending which is transparent and not “hidden”

    One of the most important aspects of any Malaysia Plan is that it outlines the budget allocation for major infrastructure and development projects for the country in the next 5 years. Allocations for new hospitals, schools, government buildings, roads, bridges and other infrastructure upgrades will be included as part of the 11th Malaysia Plan. As part of the government’s initiative to make its spending more transparent, the lists of development and infrastructure projects under the 11th Malaysia Plan should be made publicly available.

    In addition, it is imperative that the government gives an honest and transparent account of how much these projects are expected to cost and who will pay for these projects. For example, a number of large scale and expensive projects are already ongoing but do not appear anywhere in the official budget. The LRT extension, which is expected to cost an estimated RM11-12 billion and the MRT project, which is expected to cost RM36 billion for Line 1, are off-budget expenditure items, financed by special purpose vehicles or government owned companies. Ultimately, the bonds which are issued by these SPVs or these companies will have to be serviced by the government, especially since these large scale projects cannot generate sufficient revenue on their own.

    Other large scale projects in the pipeline include the LRT 3 extension, the MRT 2 line, possibly the MRT 3 line, the high speed rail (HSR) to Singapore and two possible large scale nuclear plants.

    The government has already spent close to RM30 billion in development expenditure using Pembinaan PFI Sdn Bhd, a 100% Ministry of Finance (MoF) company. This expenditure does not appear anywhere in the past budgets and is not even listed as a contingent liability. It is likely that the money was spent this way in order to avoid spooking the markets by going over the 55% Government Debt to GDP ratio.

    For the sake of transparency, the government should declare who will pay for these projects, how the financing of these projects will be raised and possibly shortfalls in the future which will have to be covered by the government.

    4)      Wish Four: Public Private Partnerships which are transparent and not biased towards the private sector

    The record of the Malaysian government in establishing Public Private Partnerships (PPP) which are transparent, fair and beneficial to all parties is abysmal, to say the least. Many of these PPP deals have been heavily biased towards the private sector parties, most notably in the contracts signed with the Independent Power Producers (first generation) and the various toll concessionaires.

    It would not be too much to ask for the contracts of these PPPs to be made publicly available before they are signed so that there is sufficient public scrutiny by interested parties. If the pricing for the bids for new power stations can be made public by the Energy Commission, why can’t the details of all the PPPs produced and negotiated by UKAS, the unit in charge of PPPs in the Prime Minister’s Department?

    Examples of such contracts which need to be disclosed are the West Coast Expressway (WCE), the various highways which have been approved by the PPP in the Klang Valley, the contract to build and run a mega-incinerator in Kepong, and possible contracts to build and operate two planned nuclear power stations.

    5)      Wish Five: Giving more power to the state and local governments

    One of the aspects of the development expenditure allocation is that sometimes, a significant proportion is left unspent. While some of the reasons for this unspent allocation may be valid – such as the inability to find a suitable contractor – other less acceptable reasons include unnecessary delays and inefficiencies at the level of the federal government. At the same time, state and local governments are limited in the ways in which they can raise and spend taxes for local development.

    It would be a game changer for the country if the 11th Malaysia Plan would include as one of its thrusts, an ambitious program for decentralizing of more power and allocating more revenue to the state and local governments including the power to raise additional revenue through taxes. This would allow greater room for cash strapped local authorities to raise and spend money locally especially on much needed development and infrastructure projects.

    Ideally, this decentralization would be accompanied by local government elections in order to increase the accountability of the local authorities to the ratepayers who are paying taxes to the respective local authorities.

    6)      Wish Six: Making clear the hard choices we must make

    My sixth and final wish is perhaps the most demanding from the perspective of the government. As we achieve the status of a developed country, hard choices must be made in different areas of public policy. We will demand for a cleaner, healthier environment but we must be willing to pay a higher electricity price to fund renewable energy. We will want to have access to higher quality healthcare that is accessible and affordable but someone will have to pay for better equipment and higher salaries for our specialist doctors. We want to have world class local universities but we must find ways to find additional funding for research and better pay to attract good quality academics.

    Wouldn’t it be great if we had a government that could honestly tell us about these hard choices we must make, the decisions that will be made by the government and the basis of these decisions?

    At the end of the day, is it not too much to ask for the government to produce an honest and transparent 11th Malaysia Plan to chart the path for our nation for the next 5 years?

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

    [1] http://idrisjala.my/measure-poverty/

    [2] According to the 2012 Household Income Survey

    [3] http://www.oecd-ilibrary.org/sites/factbook-2010-en/11/02/02/index.html?itemId=/content/chapter/factbook-2010-89-en

    [4] http://www.unece.org/fileadmin/DAM/stats/documents/ece/ces/ge.15/2013/WP_17_OECD_D_En.pdf

    [5] http://mhdr.my/

    [6] http://www.freemalaysiatoday.com/category/nation/2012/10/15/rice-subsidies-not-working-out/

  • If Malaysia does not tolerate any form of human trafficking, why does it occupy the lowest tier (Tier 3) in the US State Department’s Trafficking in Persons 2014 Report?

    Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the 16th of May, 2015

    If Malaysia does not tolerate any form of human trafficking, why does it occupy the lowest tier (Tier 3) in the US State Department’s Trafficking in Persons 2014 Report?

    Prime Minister Najib, in a statement released yesterday, in response to the escalating Rohingya immigrant crisis, said the following:

     “Malaysia does not and will not tolerate any form of human trafficking. Anyone found to be perpetrating this injustice and contravening our laws will be held accountable.”

    The Prime Minister’s statement is a joke given Malaysia’s atrocious record on human trafficking and the lack of political will to undertake meaningful steps in order to address these serious shortcomings.

    The US Department of State’s Trafficking in Persons Report had put Malaysia on the Tier 2 Watch List from 2010 to 2013. Being on the Tier 2 watch list means that Malaysia is a country which is one of the “governments do not fully comply with the Trafficking Victim’s Protection Act (TVPA)’s minimum standards, but are making significant efforts bring themselves into compliance with those standards”.  After not showing any progress to improve its human trafficking record, Malaysia was automatically downgraded to a Tier 3 status country in 2014 which is one of the countries “whose governments do not fully comply with the minimum standards and are not making significant efforts to do so.”[1]

    Among some of the problems highlighting in Malaysia are the following:

    “Refugees in Malaysia lack formal status or the ability to obtain work permits under Malaysian law, making them vulnerable to trafficking. Many incur large smuggling debts; traffickers use these debts to subject some refugees to debt bondage.”[2]

    The issue of human trafficking and the treatment continues to be a serious one in Malaysia despite the enactment of the Anti-Trafficking in Persons and Anti-Smuggling of Migrants Act 2007.[3] The effective enforcement of this Act[4] as well as underlying weaknesses in this Act that opens itself up to abuse have not been addressed.[5]

    This problem has become so serious that Malaysia’s participation in the Trans Pacific Partnership (TPP) could be jeopardized as a result of its Tier 3 status in the Trafficking in Persons 2014 Report.[6]

    As long as the Malaysian government refuses to have an honest examination of its policies towards refugees and migrants, our human trafficking record will continue to languish. The recent humanitarian crisis involving the Rohingyas is but the tip of a much larger iceberg of the human trafficking problem in our country which the Malaysian government, led by the Prime Minister, refuses to acknowledge even exists.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

    [1] http://www.state.gov/j/tip/rls/tiprpt/2014/226649.htm

    [2] http://www.state.gov/documents/organization/226847.pdf

    [3] http://www.agc.gov.my/Akta/Vol.%2014/Act%20670.pdf

    [4] http://www.thestar.com.my/story/?file=%2F2009%2F2%2F15%2Ffocus%2F3272925&sec=focus

    [5] http://www.malaysiakini.com/letters/142533

    [6] http://www.stuff.co.nz/world/americas/68376779/malaysias-human-trafficking-may-doom-trans-pacific-partnership

Page 20 of 59« First...10...1819202122...304050...Last »