• 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.

  • Minister in charge of the Economic Planning Unit (EPU), Abdul Rahman Dahlan, should ask for a statistics lesson from the Department of Statistics rather than asking the Khazanah Research Institute (KRI) to explain their latest report to the Perak state government

    Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the 5th of September, 2016

    Minister in charge of the Economic Planning Unit (EPU), Abdul Rahman Dahlan, should ask for a statistics lesson from the Department of Statistics rather than asking the Khazanah Research Institute (KRI) to explain their latest report to the Perak state government

    It was reported yesterday that Minister in charge of the Economic Planning Unit (EPU), Abdul Rahman Dahlan, had said that it was “unreasonable” and “not logical” for the Khazanah Research Institute (KRI) State of the Households II Report to place Perak as the 2nd poorest state in Malaysia.[1] It was further reported that the Minister had said that reports and statistics which are accurate needed to be supplied to KRI so that its report can be corrected.[2] Abdul Rahman also said that he had directed the EPU director general to call for a meeting between KRI and the Perak government to explain the statistics in the report.

    I am truly appalled at the ignorance of the Minister in charge of the EPU as demonstrated by his statements on the KRI report.[3] The data showing that Perak had the 2nd highest percentage of households earning less than RM6000 a month was obtained from the Household Income and Basic Amenities Survey 2014 which was carried out by the Department of Statistics (See Chart and source below).

    The same Household Income and Basic Amenities Survey also shows Perak having the 2nd highest number of households earning less than RM2000 a month at 21.3% (after Kelantan at 31.4%) (See Figure below)

    Source: Household Income and Basic Amenities Survey 2014, Department of Statistics

    Abdul Rahman Dahlan may be right in saying that Perak may not be the 2nd poorest state in Malaysia since there are other ways of measuring income per household or per person such as mean and average household incomes (Perak comes in at 3rd from the bottom in 2014) and median wages (7th from the bottom in 2015) and average wages (5th from the bottom in 2015).

    But to question the KRI report which is based on statistics sourced from the Department of Statistics (which is under the Minister in charge of the EPU’s purview, the last time I checked) shows a level of ignorance and incompetence that is astounding, even by Abdul Rahman Dahlan’s standard.

    Instead of asking the DG of the EPU to call for a meeting between KRI and the Perak state government, the Minister should instead ask the Department of Statistics to brief him on the Household Income and Basic Amenities Survey 2014 and how to understand the statistics in this survey. In fact, I am confident that one of the Perdana Fellows interning under the Minister can brief him on the basics of statistics and how to understand such reports.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

    Department of Statistics – Household and Income Survey 2014

    Khazanah Research Institute – The State of Households II

    [1] http://english.astroawani.com/business-news/khazanah-report-perak-unreasonable-rahman-dahlan-115860 and http://www.bernama.com/bernama/v8/bm/ge/newsgeneral.php?id=1279527

    [2] http://www.utusan.com.my/berita/politik/rahman-sangkal-laporan-perak-negeri-miskin-1.378193#sthash.Bx2Z3e9D.dpuf

    [3] http://www.krinstitute.org/assets/upload/KRI_State_of_Households_II_280816.pdf

  • Mismatch in demand and supply of civil service positions shows that many Malaysians have not escaped from the middle income trap

    Media Statement by Dr. Ong Kian Ming, Member of Parliament for Serdang, on the 24th of August 2016

    Mismatch in demand and supply of civil service positions shows that many Malaysians have not escaped from the middle income trap

    When the Economic Transformation Program (ETP) was first launched in 2010, one of its key performance indicators was the creation of an additional 3.3 million jobs by 2020 over 60 percent of which will be in the medium-income or high income salary brackets. Last week, PEMANDU CEO, Datuk Seri Idris Jala, was reported as saying that Malaysia has moved out of the middle income trap.[1] A deeper analysis and understanding of some of the job figures say otherwise.

    If the ETP was successful in creating a vibrant and growing economy that is driven by the private sector, this should result in the creation of many desirable and well-paying jobs in the private sector. But according to figures released by the Public Service Commission (or Suruhanjaya Perkhidmatan Awam (SPA)), the demand for public sector jobs is at an unbelievable high level and far outstrips the supply of such jobs.

    From 2011 to 2015, the SPA received more than 1 million applications for jobs in the civil service. This figure reached a high of 2.1 million in 2013 before falling to 1.59m in 2014 and increasing to 1.63m in 2015 (See Table 1 below). These are very high figures especially considering that the number of civil servants in Malaysia was 1.6m in 2015. While jobs in the civil service will continue to be desirable because of job security and other perks (such as medical care, various allowances and government pensions), this high demand is an indicator that the private sector is not offering enough well-paying jobs to stem the demand for public sector jobs.

    What should be equally worrying is that the number of civil service jobs being offered has decreased from 46,503 in 2011 to 30,964 in 2015. This means that only a small handful of applications are successful in entering into the civil service and this % has decreased from 4.1% in 2011 to 1 mere 1.9% in 2015. This raises the question of what jobs the unsuccessful applicants end up doing.

    Among those successful applicants, a majority (plurality, in some years) of them have only up to a certificate level qualification at most. For example, in 2015, 54% of the successful applicants were hired for jobs which required only a PMR, SPM or Certificate level qualification (See Table 2 below).

    This is a clear indicator that those who desire civil service jobs the most are also those with the lowest qualifications. This is not surprising given that many jobs at the bottom of the economic ladder have been taken up by foreign labour. The only place where foreign labour cannot hold jobs is in the civil service, hence the high number of applications and also appointments at this level.

    This can be seen from the statistics from job application for specific jobs which are taken from the Public Service Commission website.[2] Chart 1 shows the applications and appointments for the position of a general assistant at the Grade 11 level which pays approximately RM1200 as a monthly salary and requires a minimum of PMR as an academic qualification. There were 87281 applicants for 16 positions (0.02%).

    Chart 2 shows the number of applicants and appointments for the position of a food preparation assistant at the Grade 17 level which pays approximately RM1400 as a monthly salary and requires a minimum of SPM as an academic qualification. There were 65041 applications for 24 positions (0.04%).

    Chart 3 shows the applications and appointments for the position of an IT officer at the Grade 41 level which pays approximately RM2300 a month and requires a minimum of a degree as an academic qualification. There were 17895 applicants for 61 positions (0.34%).

    Charts 1 to 3 shows that the demand for public sector jobs far outstrips supply and that the mismatch between demand and supply is at its most acute at the level which requires the lowest academic qualification.

    From a GDP per capita standpoint, Malaysia may have escaped the middle income trap. But those who have benefitted from this increase are the top 20% to 30% with high wages and also businesses which earn large profits but don’t share their earnings with their workers, especially those at the bottom of the ladder.

    For the bottom 40%, the struggle to get out of the middle income trap continues and many of them are still hoping to obtain the security of a public sector job which are becoming more and more scarce.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

    Chart 1: Applications for General Assistant Grade 11

    Chart 2: Applications for Food Preparation Assistant N17

    Chart 3: Applications for an IT officer Grade 41

    [1] http://www.thestar.com.my/business/business-news/2016/08/17/idris-jala-malaysia-no-longer-in-middle-income-trap/

    [2] http://online.spa.gov.my/online/index.php. It is possible that some of the applicants would have applied for multiple jobs thereby inflating the application statistics e.g. people who apply for the N41, N17 and even N11 jobs. If this was the case, it would only highlight the lack of opportunity in the job market if even those who are qualified to apply for graduate level entry positions would also want to apply for positions which only require a SPM or PMR qualification.

  • Possible appointment of Tan Sri Dr. Irwan Serigar as the next Bank Negara Governor raises concerns

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

    Possible appointment of Tan Sri Dr. Irwan Serigar as the next Bank Negara Governor raises concerns

    I read the disturbing news reported by the Wall Street Journal on Saturday that Tan Sri Dr. Irwan Serigar bin Abdullah, the current Chief Secretary of Ministry of Finance, will be named as the new Central Bank Governor of Malaysia after Tan Sri Zeti Akhtar Aziz.[1]

    I want to raise some concerns regarding Dr Irwan’s role in multi-billion ringgit debts of Pembinaan PFI Sdn Bhd, a 99% Ministry of Finance owned company. Pembinaan PFI first rose to prominence when the 2013 Auditor General’s report showed that it had accumulated liabilities of close to RM28 billion at financial year end 2012, putting it only behind Petronas and Khazanah among government owned entities (See Figure 1 below).

    Figure 1: Three government owned companies with the highest amount of liabilities in financial year 2012

    Source: Auditor General’s Report 2013

    Dr. Irwan was appointed to the board of Pembinaan PFI in 2012 when he was the Deputy Secretary in charge of policy in the Ministry of Finance (MoF). After he was promoted to Chief Secretary of the MoF, Dr. Irwan remained as a director of Pembinaan PFI.

    The Auditor General’s report prompted a Parliamentary Accounts Committee (PAC) investigation into Pembinaan PFI. The PAC report was released in March 2015, a copy of which can be downloaded from the parliament’s website.[2] The testimony of the witnesses, including Dr. Irwan, clearly showed the spending incurred by Pembinaan PFI is nothing more than a creative way to hide development expenditure from the official budget and in doing so, artificially keep Malaysia’s debt to GDP ratio at below the 55% mark. Pembinaan PFI is not funding expenditure through private finance initiatives (which its name implies) since there is no private money involved in these projects.[3]

    Indeed, during the PAC meeting, Dr. Irwan admitted as much when he said the following to the Chairman of the PAC:

    “Ini Tuan Pengerusi, your understanding is very clear. That you know this is off-budget. It doesn’t come in to the government so that why you know our debt level and rating and everything we can maintain.”

    Dr. Irwan’s role in relying on off-budget expenditure items in order to maintain our official debt levels and ratings raises concerns about his responsibilities as the next Bank Negara Governor. Will he also rely on creative accounting for other sensitive economic data such as BNM’s official reserves? Will he paint an unrealistically positive account of the Malaysian economy via BNM’s economic reports and fail to flag areas of concern such as the possibility of a growing fiscal deficit?

    When asked by The Edge TV on the specific issue of Pembinaan PFI, Dr Irwan gave a misleading answer.[4] He likened the projects under Pembinaan PFI with the MRT project, stating that the payback period is over a very long horizon while in actual fact, most of the projects under Pembinaan PFI are not capable of revenue generation. This kind of obfuscation is also worrying especially during these economically challenging times when clarify of thought and explanation are needed in order to assure the jittery markets.

    The markets are looking for a steady pair of hands to replace Dr. Zeti as the next BNM governor. Any of the three current Deputy Governors would have sent a strong signal to the markets that the independence of BNM will be maintained. The appointment of Dr. Irwan, if true, does not give any reason for the markets to be assured and in fact raises more questions about the independence of our central bank moving forwards.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

    [1] http://www.wsj.com/articles/malaysia-finance-ministry-official-to-be-new-central-bank-chief-1457721640

    [2] http://portal.parlimen.gov.my/ipms/modules/risalat/res/risalat/2015/Laporan%20Jawatankuasa%20Kira-Kira%20Wang%20Negara%20Parlimen%20Ketiga%20Belas%20-%20Prosedur%20Kawalan%20Pengurusan%20Syarikat%20Pembinaan%20PFI%20Sdn%20Bhd%20(Kementerian%20Kewangan).pdf

    [3] The building of schools, for example, is usually financed through the development expenditure of the government budget. The projects, including the building of schools, financed through Pembinaan PFI, are all off-budget expenditure items which means that the government doesn’t have to officially borrow money to finance these projects. Pembinaan PFI, as a 99% MoF owned company, borrowed the money from EPF and KWAP. The Malaysian government has to help Pembinaan PFI service these loans to EPF and KWAP through its operating expenditure or OPEX.

    [4] https://www.youtube.com/watch?v=6HlN7ygkN-c

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