• Sarawak Chief Minister Datuk Amar Abang Johari Tun Openg should show proof that the North Korean workers who were and are still in Sarawak are specialist workers

    Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the 10th of March, 2017

    Sarawak Chief Minister Datuk Amar Abang Johari Tun Openg should show proof that the North Korean workers who were and are still in Sarawak are specialist workers

    On the 8th of March, 2017, Chief Minister of Sarawak, Datuk Amar Johari Tun Openg was reported to have said that the North Koreans who are working in Sarawak are “mostly specialist workers in coal mining, bridge and hydroelectric dam projects”. [1] I received a parliamentary reply on the 17th of June, 2015 to my question on the number of North Korean workers who was then working in Malaysia. The reply stated that all of the North Korean workers in Malaysia were working in the construction and mining industries (See Figure 1 below)

    Figure 1: Parliamentary Reply received on the 17th of June, 2015

    I visited the Selantik coal mine in the Sri Aman district on the 25th of September, 2015. I did not speak to the North Korean coal miners because of concerns of safety and the language barrier. I did see that the living conditions of these workers were very basic. I also saw a woman who looked Korean coming out from one of the run-down accommodations at the mine to wash some plates. My guess at that time was that she was a cook for the North Korean workers. (See Pictures below)

    I also asked the villagers living near the coal mine and they all said that they had very little interaction with the workers there. I find it hard to believe that ‘specialist’ coal miners from North Korea would be willing to live in such basic and inhospitable living conditions which I saw at the mine. There is also nothing from my parliamentary reply to indicate that these coal miners were ‘specialist’ workers.

    Chief Minister Amar Johari can convince the public that these were indeed specialist workers by releasing information about the background, qualifications and work experience of these specialist workers as well as proof that the company employing them had advertised for these positions and were unable to fill them with Sarawakian workers.

    At a time when relations between Malaysia and North Korea is at an all-time low and with the global media’s attention focused on Malaysia because of the recent assassination of Kim Jong Nam, it is imperative that we demonstrate to the global community that proper operating procedures were followed in the employment of the North Koreans in Sarawak. Failure to do so would put Malaysia in a negative light and may even cause the downgrade in Malaysia’s position in the US state department’s Trafficking in Persons (TiP) report.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

    Picture 1: Coal Mining operations in Selantik, Sri Aman in Sarawak

    Picture 2: One of the accommodation housing the North Korean workers in Selantik, Sri Aman in Sarawak

    Picture 3: One of the accommodation housing the North Korean workers in Selantik, Sri Aman in Sarawak

    Picture 4: One of the accommodation housing the North Korean workers in Selantik, Sri Aman in Sarawak

    Picture 5: A Korean looking woman coming out of one of the accommodation at the Selantik coal mine in Sri Aman to wash some dishes

    [1] http://www.thestar.com.my/news/nation/2017/03/08/north-koreans-in-no-rush-to-go-home/#4grlAk1YbeqsO6oV.99

  • Budget 2017: Reading Between the Lines

    Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the 22nd of October 2016

    Budget 2017: Reading Between the Lines

    To the layman, the budget can be a very confusing thing. There are a slew of programs and expenditure items announced, many of which costs millions and some of which costs billions of Ringgit. Sometimes even the financially literate among us may be confused by the large number of items announced in the budget speech and also listed in the budget estimates (which is over 700 pages long).

    It is often necessary to dig deep into the budget in order to understand the financial and policy implications of some of these items. I call this ‘reading between the lines’ of the budget. To make this exercise easier to understand, I have divided these spending items into different categories. For each of the items listed below, I will also explain their impact on the target groups.

    Category 1: Existing expenditure items with very little change in allocation

    Given the size of the budget (RM261 billion for 2017), it is not surprising that there are thousands of expenditure items which are listed in the budget estimates document that accompanies the budget speech.

    But the majority of these items, even if the amount is big, they are usually items which were already in existence in previous budgets.

    For example, line 225 of the budget speech outlines a number of assistance programs to poor children in primary and secondary schools such as RM1.1 billion for the Hostel Meal Assistance Program and RM300 million for the 1Malaysia Supplementary Food Program for primary school students (Figure 1 below).

    The Budget Expenditure Estimates for the Minister of Education show that all of these are pre-existing programs and that the 2017 budget allocation is not significantly different from the 2016 allocation. The Hostel Meal Assistance Program’s budget has been reduced by RM15 million, the 1Malaysia Supplementary Food Program’s budget has been increased by RM50 million, the transport subsidy for students in hostels has been reduced by RM3.6m while the text book budget has been increased by RM25 million. The food subsidy and the per capita grant for pre-school remains at the 2016 level (Figure 2 below)

    Figure 1: Programs to reduce children’s schooling expenses

    Figure 2: Line Items in the Minister of Education’s Budget Expenditure Estimates (2016 & 2017)

    Category 2: Items which have experienced significant budget cuts

    The Prime Minister also announced an allocation of RM7.4b for the 20 public universities and RM1.4 billion for the 4 teaching hospitals. While this allocation may seem like very large figures, the budget expenditure estimates tell a very different story.

    The operating expenditure of the public universities have been reduced by more than RM1.4 billion from RM7.6 billion in 2016 and RM6.2 billion in 2017. At the same time, the budget allocation for the 3 teaching hospitals of PPUM, PPUKM and HUSM has been reduced by more than RM150 million from RM1.18 billion in 2016 to RM1.02 billion in 2017.

    The expenditure cuts to the public universities are just one of the many line items which have experienced significant allocation reductions. A more thorough analysis of the budget estimates will reveal more of such items. This clearly shows the underlying situation of a government under tremendous financial strain.

    Category 3: Allocations which are no longer in the budget

    While many people will pay attention to the items which are announced by the Prime Minister, perhaps as much care needs to be given to items which are NOT announced and have been taken off the budget entirely.

    For example, in the 2016 budget, a ‘one-off’ payment of RM593 million was allocated to compensate the toll concessionaires for deferred toll hikes under the Minister of Works. However, this item has totally disappeared from the 2017 budget!

    This can be seen in the significant drop in the fixed charges and payments expenditure from RM603m in 2016 to a mere RM385,000 in 2017. This means that there will almost certainly be more toll hikes including on the PLUS owned North South Highway in 2017, a contravention of BN’s GE2013 manifesto promise.

    Another item which has disappeared from the budget estimates is the cooking oil subsidy. The Cooking Oil Stabilisation Scheme (COSS) subsidy is under the Ministry of Commodities and Plantations but there is no such line item for this program in the 2017 budget. So contrary to the promise of the Second Finance Minister, Datuk Johari Abdul Ghani, there is no indication that this subsidy program will continue under the 2017 budget.[1]

    It is almost certain that there are other items which have been taken out of the budget entirely which will have a direct impact on the cost of living of voters.

    Category 4: New allocations which are ‘dubious’ in nature

    There was much speculation that our health care budget would be cut in the 2017 budget. I was pleasantly surprised when I saw that the operational expenditure for the Minister of Health was actually increased from RM21.4 billion in 2016 to RM 23.4 billion in 2017, an increase of RM2 billion.

    But when I examined the budget estimates for the Ministry of Health, I was shocked to find a special program called “Privatisation of Hospital Support Services” costing RM2.01 billion for 2017! As far as I know, the Ministry has not made any announcements on the privatisation of support services (much of which is sub-contracted out now anyways). And the Prime Minister did not make any mention of this new item in his budget speech. How can such a large expenditure item make its way into the budget without any further clarification? How many other such items will we find in the budget estimates?

    Category 5: Announced expenditure which are not in the 2017 budget

    Many of the big ticket expenditure items announced in the budget speech are actually not found in the budget estimates. For example, the proposed 600km East Coast Rail Line from Tumpat to Kuala Lumpur, which is estimated to cost RM55 billion, is not listed as an expenditure item. Just like the expenditure on the MRT Line 1 and the LRT Extension, these infrastructure projects will be funded by special purpose vehicles (SPVs) which will borrow money under their own balance sheet.

    The problem which such a model of financing is that it hides the true burden of expenditure on the government. Many of these projects will not be able to pay for the capital expenditure and the related interest expenses. Which means the government will eventually have to step in to service the debt of these SPVs. When that happens, the squeeze on the government will likely result in a steep increase in the GST rate in order to help the government ‘bail-out’ these SPVs.

    An initial reading between the lines of the 2017 Budget has already raised many questions regarding items which are present as well as those which are absent from the budget estimates. I am sure that other items will be discovered as more MPs analyse and investigate the details of the 2017 ‘stealth’ budget.

    Dr. Ong Kian Ming
    Ahli Parlimen Serdang

    [1] http://www.freemalaysiatoday.com/category/nation/2016/10/20/johari-subsidy-for-cooking-oil-will-continue/

  • GERAKAN should attend a basic Economics 101 course before it can lecture the Penang State Government

    Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the 17th of October 2016

    GERAKAN should attend a basic Economics 101 course before it can lecture the Penang State Government

    I refer to the Star newspaper report “Ask Rahman Dahlan for help, Penang told”[1] and “Learn economics from Rahman Dahlan, GERAKAN tells Guan Eng”[2] from last week in reference to GERAKAN Secretary General, Liang Teck Meng’s press conference on the GDP per capita figures for Penang. In this press statement, he criticized the Penang state government for the low % growth rate in the state’s GDP per capita figures since 2007. He also suggested that Penang Chief Minister Lim Guan Eng should learn economics from the Minister in charge of the Economic Planning Unit (EPU), Rahman Dahlan. I want to make the following three points in response:

    1) GERAKAN Secretary General should learn how to use the correct figures and calculations

    The calculations in Figure 1 below was used by Liang in order to show that the % growth in GDP per capita for Penang from 2007 to 2015 was the lowest among all the states in the country.

    Figure 1: Liang’s calculations show the absolute and % increase in GDP per capita by state, 2007 to 2015

    I am not sure why Liang used the Department of Statistics (DOS) data from 2011 rather than the updated DOS data from 2014 which is shown in Figure 2 below. I want to highlight, in particular, the GDP per capita figures in 2007 for Terengganu and Sabah were 19,476 and 14,104 which is higher than the 17,284 and 13,067 figures used by Liang.

    Figure 2: GDP per capita by state, 2005 to 2013, Department of Statistics

    When the DOS statistics in Figure 2 were used, the state with the lowest % growth in GDP per capita from 2007 to 2015 was Terengganu (36.2%) followed by Sabah (40%) and not Penang (43%). Indeed, one wonders why Liang didn’t use the starting year at 2008 (rather than 2007) since this was when there was a change in the state government in Penang. If the GDP per state growth rate from 2008 to 2015 was used, then Sabah would be clearly at the bottom of the rankings at 13% followed by Sarawak at 19% and Terengganu at 26% with Penang coming in at 33%.

    2) GERAKAN should praise the Penang state government for leading the state out of a serious economic recession in 2008

    Liang also fails to acknowledge that one of the main reasons why GDP per capita in Penang did not grow, in percentage terms, as fast as some of the other states is due to the 2008 global financial crisis which hit Penang particularly hard. In 2009, Penang’s economy contracted by 10.5% as a result of the 2008 global financial crisis, of which the Penang state government had no control over. Penang’s economy was the worst hit out of all states because of Penang’s much higher exposure to global trade. The overall Malaysian economy only contracted by 1.5% in comparison (See Figure 2 below).

    The Penang State government had to work hard to recover from this serious crisis which it did with impressive results. From 2010 to 2015, Penang’s GDP growth rate was higher than the Malaysian growth rate in all years except for 2012 (See Table 1 below). Penang’s GDP growth rate was also higher than Sabah’s growth rate in all years from 2010 to 2014.

    Figure 3: GDP Growth Rate for Penang, Sabah and Malaysia, 2008 to 2015

    3) GERAKAN should ask Rahman Dahlan why Sabah’s GDP and GDP per capita growth figures rank among the lowest in the country

    The GDP per capita figures post 2008 global financial crisis tell a very different story. The GDP per capita growth rate for Penang from 2010 to 2015 was 33% or an absolute increase of RM11,250 from RM33,597 in 2010 to RM44,847 in 2015. Penang ranked 6th out of all states. In contrast, at the bottom of the pile was Sabah with an absolute increase in GDP per capita of only 11%, from 17,831 in 2010 to 19,734 in 2015. (See Table 2 below)

    At the same time, Penang’s GDP per capita was the 3rd highest in the country in 2015 – after WP Kuala Lumpur at RM94,722 and WP Luan at 58,577 – while Sabah was third from the bottom after Kelantan at RM12,075 and Kedah at RM18,249.

    Rather than asking Lim Guan Eng to take economics lessons from Rahman Dahlan, Liang should ask Rahman Dahlan to explain why the GDP and GDP per capita growth figures for his home state of Sabah ranks at the bottom or near the bottom of the pile.

    It is sad to see GERAKAN, which used to pride itself as being an ‘intelligent’ party, use bad statistics and poor economics to criticize the Penang State government on its economic performance when the facts on paper and the situation on the ground tell a completely different story. If the people in Penang were not satisfied with the performance of the state government, they would not have given the Pakatan state government an overwhelming level of support (67%) during the 2013 general elections.

    I suggest that Liang attend a basic Economics 101 lesson before he issues any further statements on economic issues. I would be happy to give him and his GERAKAN leaders a free lesson.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

    [1] http://www.thestar.com.my/news/nation/2016/10/13/ask-rahman-dahlan-for-help-penang-told/

    [2] https://www.malaysiakini.com/news/358895

  • Is PERMATA expanding its reach just like the Prime Minister’s Department?

    Statement by Dr. Ong Kian Ming, MP for Serdang, on the 7th of October 2016

    Is PERMATA expanding its reach just like the Prime Minister’s Department?

    My colleague, Liew Chin Tong, MP for Kluang, and Dr Dzulkefly Ahmad, Strategy Director for Parti Amanah Negara, highlighted how the budget for the Prime Minister’s Department had doubled from RM10b in 2009 to RM20b in 2016. At the same time, the jurisdiction reach and programs under the Prime Minister’s Department also expanded significantly under Najib’s tenure. Almost any new large scale spending program whether it is PR1MA housing or the Pan-Borneo Expressway was parked under the Prime Minister’s Department.

    It seems that the same kind of over reach has been emulated by the PERMATA program which is also parked under the Prime Minister’s Department. From its initial humble beginnings to provide a conducive learning environment for gifted students aged below 5 years of age, PERMATA has significantly expanded its reach and also the number of programs under its jurisdiction.

    For example, in six years, the number of Permata childcare centers or Pusat Anak Permata Negara (PAPN) has increased to a total of 88 centers in every state around the country.[1]

    Picture 1: Official Visit by the Patron of PERMATA, Datin Seri Rosmah, to the Putrajaya PERMATA center accompanied by the wife of the President of Indonesia, Ibu Iriana Joko Widodo [2]

    A Kolej PERMATA Pintar was built in UKM in order to cater to ‘gifted’ students from ages 9 to 15 at a cost of RM83m (RM20m for Phase 1 and RM63m for Phase 2). Summer camps are run, in collaboration with the Center for Talented Youth, Johns Hopkins University, for some of these gifted children.

    Picture 2: Site Visit to PERMATA Pintar by the Patron of PERMATA

    The PERMATA Seni program was then established in order to identify talented children in the area of arts including singing, dancing and music. A total of RM17.5m was allocated to this program from 2010 to 2014.

    Table 1: Allocation for PERMATA Seni from 2010 to 2014

    Year Allocation (RM million)
    2010 1.5
    2011 4.2
    2012 3.9
    2013 4.2
    2014 3.7
    Total 17.5

    Source: PERMATA website

    Picture 3: Patron of PERMATA at one of the performances of PERMATA SENI

    Perkasa Remaja was then established for the purpose of reaching out to ‘at risk’ youth by introducing them to community-based preventive programs (called PERKASA@community) and through a curative camp-based intervention program (called PERKASA@camp).[3]

    Picture 4: Patron of PERMATA at a closing ceremony for a Perkasa@Remaja camps

    The total allocation for Perkasa Remaja from 2010 to 2014 was RM6.4m.

    Table 2: Allocation for PERKASA Remaja from 2010 to 2014

    Year Allocation (RM million)
    2010 1.4
    2011 0.8
    2012 0.7
    2013 1.4
    2014 2.1
    Total 6.4

    PERMATA Kurnia was established as an outreach initiative for autistic children via an autism center as well as through research and training.[4] An RM10m autism center was built through the PERMATA Kurnia initiative in 2014.

    Picture 5: Opening of the PERMATA Kurnia Autism Center

    PERMATA Insan is an initiative to identify gifted children in the area of Quranic and Islamic studies and is parked under the Islamic Science University of Malaysia (USIM) with the intention of nurturing these talents as future Islamic scholars.

    A total of RM24m was allocated to PERMATA Insan including RM18m for a new building at USIM.

    Table 3: Allocation to PERMATA Insan from 2010 to 2014

    Year Allocation (RM million)
    2010 1.28
    2011 0.8
    2012 0.79
    2013 1.449
    2014 19.6*
    Total 24.0

    (* including RM18m for the building of a PERMATA Insan Center at USIM)

    Picture 6: Visit by PERMATA Patron to the students of PERMATA Insan

    Finally, a speciality children’s hospital called the Hospital Kanak-Kanak PERMATA is currently being constructed. The projected cost of this project Is RM600m and is financed via a build-lease-maintain-transfer (BLMT) Private Finance Initiative (PFI) model. According to PERMATA’s website, this hospital was inspired by its Patron, after she had visited many children’s hospitals around the world.[5] The expected completion date for this hospital is in 2017.

    Picture 7: Ground breaking of the HKK PERMATA attended by the PM and his wife, the Patron of PERMATA

    All in all, a total of RM518m has been allocated to PERMATA for its various programs, out of which RM190m was spent on development expenditure i.e. the building of the various centers and another RM328m was spent on operating expenditure, the majority of which goes towards paying the salaries of teachers at the Permata Negara early children learning centers and the staff at the PERMATA division under the Prime Minister’s Department. (See Table 3 below)

    Table 4: OPEX and DEVEX of PERMATA, 2009 to 2016

    Year Operation Expenditure Development Expenditure Total
    2009                    30,659,637                          20,000,000     50,659,637
    2010                    43,820,262  –     43,820,262
    2011                    38,511,245                          63,926,800   102,438,045
    2012                    30,981,604                            8,000,000     38,981,604
    2013                    39,029,950  –     39,029,950
    2014                    40,360,800                          28,000,000     68,360,800
    2015                    52,000,000                          41,737,500     93,737,500
    2016                    52,298,400                          29,200,000     81,498,400
    Total                  327,661,898                       190,864,300   518,526,198

    Source: PERMATA

    While these initiatives may not be bad initiatives in themselves, the following questions must be raised:

    • Why are the other ministries or departments not stepping in to lead some of these initiatives e.g. the Ministry of Health for the Children’s Hospital and the Ministry of Education for the identification and training of Gifted Children rather than leaving this for PERMATA to drive?
    • To what extent has the various PERMATA programs been able to achieve its goals?
    • What is to stop PERMATA from further expanding into other areas which concern the youth and children and over reaching into more areas?

    In the interest of future sustainability, shouldn’t these programs be parked under existing ministries and / or the relevant government agency or department? Without any checks and balances, PERMATA may continue to expand in the same manner as what has been happening in the Prime Minister’s Department over the past 8 years under the leadership of Prime Minister Najib.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

    [1] http://www.programpermata.my/en/negara/centres
    [2] http://www.programpermata.my/en/negara/photo_gallery/lawatan-rasmi-indonesia
    [3] http://www.programpermata.my/en/remaja/about
    [4] http://www.programpermata.my/en/kurnia/about
    [5] http://www.programpermata.my/en/hpkk/about

  • Disclose details of the new ERL concession agreement to assure the public

    Press Statement by Dr. Ong Kian Ming, MP for Serdang, on the 14th of September, 2016

    Disclose details of the new ERL concession agreement to assure the public[1]

    If you have taken a flight out of KLIA or KLIA 2 recently, did you know that you paid RM1 if you took a domestic flight and RM5 if you took an international flight to Express Rail Link (ERL) Sdn Bhd, the company which operates the high speed train from the airport to KL Sentral? These ERL charges, which started in 2002, have cost passengers a total of RM583.66 million, as of June 2015.

    Did you also know that under the existing concession agreement, the price of a one-way ticket from KL Sentral to KLIA would increase to RM97 in 2019 and RM126 in 2024? The fourfold increase in the initial starting price of RM31 in 1999 to RM126 in 2024 translates to an annual increase of 5.8% (at a compounded rate) which is far higher than the annual inflation rate of approximately 3%.

    Finally, would it surprise you that ERL Sdn Bhd sent a bill to the Federal Government for RM2.9 billion in 2015? for compensation because of deferred ticket price increases?

    These are some of the reasons which led the Auditor General to conclude that the government did not get the ‘best value for money’ for the lopsided concession agreement with ERL Sdn Bhd.

    Figure 1: The Auditor General concluding that the concession agreement did not represent the ‘best value for money’ for the government

    Almost all of the problems with the pricing of and compensation to ERL has to do with the fact that the concession agreement was negotiated in secret and without any scrutiny and transparency.[2] The concession holder can then negotiate for steep price increases in the ticket price knowing that the government won’t feel any public pressure when the concession is initially signed since this information won’t be disclosed publicly. The only reason why I was able to obtain the schedule for the ERL’s ticket price schedule from 1999 to 2027 was because it was disclosed in the Auditor General’s report! (See Figure 2 below)

    Figure 2: Ticket Schedule for the 30-year concession for ERL Sdn Bhd (from 1999 to 2029) for KLIA Express and KLIA Transit

    There may be little to no justification for the ticket price increases in the concession agreement e.g. what is an acceptable internal rate of return (IRR) for the concession holder, what KPIs they have to meet before the ticket price increases are approved, and so on.

    There is another dirty little secret involving concession agreements that was revealed in the AG’s report. The concession holder has a perverse incentive to inflate the projected number of passengers which leads to a higher projected revenue. This is because a higher projected revenue means the government has to pay a higher level of compensation to the concession holder in the event that government does not give approval for the concession to increase its ticket prices.

    Figure 3: Projected and Actual Revenue of the ERL, 2012 to 2014

    For example, according to Figure 3 above, ERL’s projected revenue in 2014 was RM905m while its actual revenue was only RM124.3m or 13.7% of the projected total. The concession holder will then use the shortfall between actual and projected revenue as the basis to ask for government compensation. This is the reason why ERL Sdn Bhd has an outstanding claim of RM2.9 billion on the federal government.

    The federal government has a unique opportunity to renegotiate the terms and conditions of the ERL concession agreement. The government paid for the entire construction cost of the ERL extension from KLIA to KLIA2 worth RM100 million. The KLIA extension to KLIA2, which started in May 2014, resulted in a 43% increase in ERL’s ridership from 6.44 million passengers in 2013 to 9.23 million passengers in 2014.

    Figure 4: Increase in the number of passengers from 2013 to 2014 after the opening of the KLIA extension to KLIA 2

    The AG’s report states that the government has, in principle, agreed to sign an extension to the ERL concession agreement for another 30 years which means the deal will expire only in 2059. This extension is supposed to be signed this month, September 2016. This is an excellent opportunity for the government to not only sign an extension which is fair and transparent but also presents the government an opportunity re-negotiate the existing agreement which is supposed to last until 2029. Indeed, what the government should do now is to re-negotiate for a new concession agreement given that the projected number of passengers should increase significantly as a result of the extension from KLIA to KLIA2. The new concession agreement must ensure that ticket price increases are reasonable and justified, that the methodology for projecting passenger and revenue growth is accurate and profits to the concessionaire must be capped at an agreed upon rate. The passenger service charge should be scrapped since not all outbound passengers use the ERL to get to the airport.

    To ensure the public that the government as well as the consumer / user is getting a fair deal out of this new concession agreement, I call upon the government to disclose the concession agreement by publishing it on a government website and also for the Minister in charge of re-negotiating the concession agreement to explain the new agreement in a press conference.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

    [1] All of the figures and charts showed in this statement is obtained from the Auditor General’s Report, 2015 Series 1, Activities of Ministries and Departments of the Federal Government

    [2] Similar to other concession agreements involving pricing and compensation such as toll concession agreements.

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