• Disappointed that the Minister of International Trade and Industry (MITI), Mustapha Muhamed, failed to take up my challenge to set up a special parliamentary committee to monitor the implementation of the TPPA

    Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the 27th of January, 2016

    Disappointed that the Minister of International Trade and Industry (MITI), Mustapha Muhamed, failed to take up my challenge to set up a special parliamentary committee to monitor the implementation of the TPPA

    During my speech on the TPPA this morning, I challenged the Minister of International Trade and Industry to set up a special parliamentary committee to monitor the implementation of the TPPA during the 2 years leading up to possible ratification after the TPPA is signed on the 4th of February, 2016.

    Unlike other Free Trade Agreements (FTAs), the TPPA will involve 27 amendments for 17 acts before it can be ratified by the participating countries. This special parliamentary committee would have monitored and given input for these amendments in order to ensure that they are consistent with international best practices. It would also have monitored changes in rules and procedures under the various ministries which do not require parliamentary approval. It would also have played the role of ensuring that the certification process which will be conducted by the United States is done in a way which is fair and does not privilege special interests which may try to influence the process. Finally, this committee should have the power to recommend to the Minister that Malaysia pull out of the ratification process if they find that it is not in the best interests of our country to go through with the TPPA.

    Sadly, in his winding up speech, the Minister failed to even address this suggestion. This means that the process of ratifying the TPPA would be done in a less than fully transparent and accountable manner. This would undo much of the credibility which the Minister and his Ministry has built up through their public engagements to explain the TPPA.

    It is not too late however for the Minister to take up this suggestion. I urge the Minister to announce the setting up of this special parliamentary committee before the signing of the TPPA in Auckland, New Zealand on the 4th of February, 2016.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

  • Remaining concerns regarding the TPPA

    Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the TPPA Part 2 on the 15th of January, 2016

    Remaining concerns regarding the TPPA

    In my statement yesterday, I praised Minister of Trade and Industry, Mustapha Mohamed and his team at MITI for their efforts in public engagement and in allowing public access to the documents related to the Trans Pacific Partnership Agreement (TPPA). But despite the efforts of the Minister and his team at MITI, there are some key concerns regarding the TPPA which have not be adequately addressed. I will highlight 5 areas of concern here.

    (i)                  Exemptions for Public Private Partnership (PPP) contracts and the BERNAS monopoly on importation of rice

    Malaysia was very successful in negotiating for a number of carve-outs, exemptions and exceptions for itself in the TPPA especially in the areas of government procurement and state-owned enterprises. While some of these carve-outs are useful in providing an adjustment period for the government and Malaysian companies to prepare for the full impact of the TPPA, a few carve outs have a negative effect on Malaysians. Public Private Partnerships (PPP) are not subjected to the government procurement provisions under the TPPA. This means that the practice of awarding lopsided contracts via direct negotiation such as toll concessionaires will continue unabated. The government could have made a stronger argument for Malaysians to support the TPPA if it had subjected PPPs to more open and transparent competition but sadly this was not the case.

    Similarly, the carve out which Malaysia negotiated for Bernas to remain as the sole importer of rice in Malaysia decreases the potential benefits of the TPPA to the Malaysian consumer. The National Impact Assessment (NIA) produced by the Institute of Strategic and International Studies (ISIS) highlights the benefits of additional food security and access to supply of imported rice via Vietnam which is a member of the TPPA. The TPPA will limit the use of export restrictions on rice by countries such as Vietnam, which took place in 2008 when the price of rice experienced a sudden and significant rise. The ISIS report also highlights the potential huge savings of billions of ringgit by the government as a result of having a more stable supply of imported rice. Sadly, such savings will not materialise as a result of BERNAS maintaining its monopoly on the importation of rice. The “large net welfare gains and a significant reduction in Government expenditures” which “are likely if all forms of Government interventions were to be eliminated and a free market allowed” will not take place.[1]

    When I highlighted these two carve-outs to the Minister at the recent TPPA dialogue organised by MITI, he explained that the reason for these carve-outs is because Malaysia wanted to maintain flexibility in these areas. This is a poor excuse for maintaining policies which are beneficial to a select and politically connected few but which hurt the average Malaysian in the pocketbook. A TPPA which forced BERNAS to relinquish its monopoly position would have been easier to support.

    (ii)                The possible impact of unionization, especially of foreign workers in certain sectors such as the plantation sector

    The Labour chapter in TPPA has a positive impact on the ability of workers to form unions, to organize strikes and to affiliate with international bodies. Indeed, Malaysia was one of the four countries singled out (together with Brunei, Vietnam and Mexico) by a group of senior Democratic senators where protection of labour rights needed to be increased as part of the TPPA. The possibility of the increase in the frequency of strikes by workers were highlighted in both the ISIS as well as the PwC reports. The TPPA will force Malaysia to amend its laws so that we can be in line with the International Labour Organization’s (ILO) best practices.

    The ISIS NIA report states that the following laws will have to be amended in order to comply with ILO best practices:

    1. Employment Act 1955;
    2. Trade Union Act 1959;
    3. Child and Young Persons (Employment) Act 1966;
    4. Passport Act 1966 (implementing regulations);
    5. Industrial Relations Act 1967;
    6. Sabah Labour Ordinance (Cap. 67);
    7. Sarawak Labour Ordinance (Cap. 76);
    8. Private Employment Agencies Act 1981; and
    9. Workers‘ Minimum Standards of Housing and Amenities Act 1990.

    NGOs and political parties which are supportive of labour rights should welcome the provisions of the labour chapter in the TPPA. It is likely that labour rights will be one of the key focus areas in the process of ‘certification’ by the United States, especially if a Democrat wins the White House in 2016, since pro-labour groups which are seen to be closer to the Democrats will continue to put pressure on the President and Democratic Senators to ensure compliance on the protection of labour rights.

    Where there are concerns is the process by which new unions are formed and the composition of these unions. For example, the National Union of Plantation Workers currently represent the shrinking number of Malaysians who are working in the plantation sector. What if the foreign workers who currently dominate the plantation sector decides to form a separate plantation workers union where they hold all the power positions of leadership? Will this result in a situation where non-Malaysian plantation workers are able to negotiate a better deal from their employers than their Malaysian counterparts because of their strength in numbers relative to the number of Malaysians who are still in this sector? Will such a demarcation also apply to other sectors and industries which are currently dominated by foreigners? The officers at MITI said that they will speak to each sector and the relevant ministry to chart out the path towards unionisation but I do not feel confident that there is a clear roadmap ahead in terms of ensuring equal labour protections for both Malaysians as well as foreign workers.

    (iii)               The higher possibility of American corporations using the Investor State Dispute Settlement (ISDS) against the Malaysian government

    My concerns regarding the Investment Chapter of the TPPA which allows foreign companies to sue sovereign governments in international arbitration courts is very specific. Many people may be unaware that there are already Invest State Dispute Settlement provisions in a number of Malaysia’s Free Trade Agreements (FTAs) and bilateral investment treaties (BITs). For example, Lynas, an Australian company, can bring ISDS proceedings against the Malaysian government if its license to import unprocessed rare earth from Australia is cancelled, even if it was based on environmental concerns or non-compliance. This is because Malaysia is part of the Australia-New Zealand-Asean Free Trade Agreement and we have also signed an Investment Protection and Promotion Agreement (IPPAs) with Australia.[2]

    It must also be stated that ISDS cases are not as common as one may think. Over the past 30 years, there has only been one ISDS case involving Australia which is the often cited Philip Morris plain packaging tobacco case. Recently, an international arbitration court in Singapore ruled in favour of the Australian government.[3] In addition, tobacco has been explicitly carved out from the ISDS provisions in the TPPA.[4]

    It must also be recognized that the ISDS provisions also accords protection to Malaysian companies who have made significant investments in other countries. A former counsel at an international organisation handling ISDS cases refers to this specific point in an opinion piece published by the Malaysian Insider.[5]

    With all this being said, my main concern surrounding the ISDS provisions in the TPPA is the higher likelihood that the Malaysian government will be dragged for international arbitration by an American company. Under the North American Free Trade Agreement (NAFTA) involving the US, Canada and Mexico, a total of 35 ISDS lawsuits have been filed against the Canadian government, a total of 22 against the Mexican government and a total of 20 against the US government. Canada has lost or settled six claims with a total payout of US$170m in damages while Mexico has lost five cases and paid out U$$204m in damages. In comparison, the US has never lost a NAFTA ISDS case or any ISDS case, for that matter.

    On the other hand, US companies have used ISDS 132 times or 22% of global ISDS claims since 1987 and US companies have won or settled 48 cases, lost 35 and have 37 cases pending.[6]

    The evidence shows a clear trend that US companies are far more effective in using ISDS in their advantage compared with non-US companies. It is this asymmetry which raises the most concern since Malaysia has very little experience in fighting against the might of the law firms which represent the big US multinationals.

    (iv)              The unknown effect on the future prices of medicines that fall under the ‘biologics’ category

    Again, my concern on the possible impact on the price of medicines as a result of the TPPA is very specific. It would be wrong to assume that the price of your Panadol at the local pharmacy, or other currently available generic drugs, would suddenly experience a significant increase as a result of the TPPA. This is simply untrue since the patent protection for the ‘original’ drugs have already expired. Furthermore, it is not as if Malaysia has no current patent protection for pharmaceuticals.

    Table 1 in the ISIS NIA report summarizes the main differences in terms of intellectual property protection for pharmaceutical products (See below). The main difference is that under the TPP, a period of patent protection of between 5 to 8 years will be given to large molecule or biologic drugs, which is not currently available under Malaysian law. The ISIS NIA report indicates a negative impact on Malaysia in terms of the price of medicines but the type and number of medicines which will be affected by the extra protections afforded by the TPPA remains unclear. The ISIS NIA report cites the figures from the Pharmaceutical Association of Malaysia which says that between 5-10% of total pharmaceutical sales comprises of biologic medicines. It is unclear whether or not the percentage of drugs that fall under the biologic medicines category will grow in the future. If it does, then the effect of the TPPA on the price of medicines could increase over time. More clarification is needed on this point especially from the Minister of Health and officials representing the Ministry of Health who have been very quiet on this aspect of the TPPA.


    Source: ISIS NIA Report

    (v)                Copyright extension from 50 years to 70 years under the TPPA

    My final area of concern is in the extension of copyright provisions from the currently existing 50 years to 70 years under the TPPA. The ISIS NIA report indicates that this will have a negative impact on the country. Malaysian consumers will have to fork out an estimated US$115 million a year over the long term as a result of this copyright extension (Think Micky Mouse, Disney and Hollywood related products!). This is a clear indication of the lobbying power of a small number of powerful US based companies who will reap the bulk of the rewards of this copyright extension.

    There has been a lot of misinformation and inaccurate information being circulated regarding the potential negative effects of the TPPA. Here, I have highlighted 5 concerns using evidence and analysis from the ISIS and to a lesser extent, the PWC report, both of which were commissioned by the government of Malaysia. If these concerns are not properly and honestly addressed by the Minister of Trade and Industry, they would constitute sufficient grounds not to support the TPPA.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

    [1] The ISIS NIA report quoting the study of Vengedasalam, et.,al, 2011, Malaysian Rice Trade and Government Interventions, University of Sydney.

    [2] http://dfat.gov.au/trade/topics/pages/isds.aspx

    [3] http://www.smh.com.au/federal-politics/political-news/australian-government-wins-plain-packaging-case-against-philip-morris-20151218-glqo8s.html

    [4] http://healthaffairs.org/blog/2015/11/10/trade-health-and-tobacco-exceptionalism-the-tpp-tobacco-carve-out/

    [5]http://www.themalaysianinsider.com/sideviews/article/setting-the-record-straight-on-tpps-investor-state-dispute-settlement-shaun

    [6] http://www.thirdway.org/memo/trade-q-and-a-whats-the-deal-on-isds

  • TPPA Part 1 – Mustapa Mohamed and MITI should be praised for their public engagements

    Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the Trans Pacific Partnership Agreement (TPPA) on the 14th January, 2016

    TPPA Part 1 – Mustapa Mohamed and MITI should be praised for their public engagements

    On Tuesday, 12th of January, I, together with my colleagues from parliament on both sides of the political aisle, attended a special briefing arranged by Minister of Trade and Industry, Mustapa Mohamed, and his team at MITI on the Trans Pacific Partnership Agreement (TPPA). As far as I know, this was the first time since the 13th general election that a Minister had arranged for a bipartisan briefing for all MPs for a motion or a bill which we would vote on in parliament.[1]

    The Minister fielded questions from all MPs during the plenary session. He also said that he would propose that a vote be taken on the TPPA during the special parliamentary debate that will take place on the 26th and 27th of January, 2016. He should be commended for organizing this special session especially since the TPPA does not require legislative approval in order to be passed. This special parliamentary session will allow MPs from both sides of the aisle to raise important questions and concerns surrounding the TPPA, of which there are many.

    After the plenary session, MPs were invited to choose from one of the following four workshops on hot-topic items: “Intellectual Property and Access to Medicines, Investor State Dispute Settlement (ISDS), Government Procurement (GP) and State-Owned Enterprises (SOEs) and Market Access / Labour / Environment”. I attended the workshop on Market Access / Labour / Environment and I commend the civil servants from MITI and other Ministries for their willingness to answer all of the questions posed to them by MPs from both sides. Their answers were comprehensive and showed a deep familiarity with the issues at hand.

    At the same time, the Ministry should be commended for giving public access to the materials associated with the TPPA. This was the first time that two studies – the PriceWaterhouseCoopers’ (PwC) Cost Benefit Analysis (CBA) and the Institute of Strategic and International Studies’ (ISIS) National Impact Assessment (NIA) – were commissioned to evaluate the impact of the TPPA. While these two studies painted a largely positive picture of the TPPA, they also highlighted areas of concern as well as some negative impact that would arise as a result of the TPPA. Both studies were in English but the Ministry recently made available a Bahasa Malaysia (BM) version which is a summary of both studies. The Final Text of the TPPA was also printed for all the MPs and distributed on the final day of the parliamentary session last year (16 volumes in total). Copies of the CBA and the NIA were also given to MPs. A BM summary of the TPPA final text was distributed to MPs on Tuesday. All of this information is available for download from the MITI website on the TPPA.[2] Other relevant information, including past presentations and dialogue sessions conducted by MITI can also be found on this website.

    While I have still many existing concerns about the TPPA, which I will raise in a following statement, Mustapa Mohamed and his team at MITI should be commended for their efforts in public engagement, not just with MPs, but also with state governments, industry groups as well as NGO representatives. It is still a learning process especially for the civil servants, in terms of public outreach, but this is a good lesson and a good benchmark for the government moving forward. Such engagements must continue as part of the process of implementing the TPPA, assuming it receives majority support in the upcoming special parliamentary session on the 26th and 27th of January.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

    [1] I had previously attended a bipartisan briefing on the revamp of the National Service that was arranged by the Ministry of Defense. But this was not in connection with any bill or motion which needed to be passed in parliament.

    [2] http://fta.miti.gov.my/index.php/pages/view/71

  • Is the RM20 price hike by KLIA Express justified after an estimated RM89m increase in annual revenue post KLIA2 extension?

    Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the 7th of December, 2015

    Is the RM20 price hike by KLIA Express justified after an estimated RM89m increase in annual revenue post KLIA2 extension?

    I was shocked to read about Deputy Transport Minister, Datuk Abdul Aziz Kaprawi trying to justify the RM20 increase in the price of KLIA express tickets from RM35 to RM55 starting 1st of January, 2016 by saying that it was necessary to cover the losses experienced by the company since the beginning of its operations in 2002. I was equally shocked to learn that KLIA Express stated that it is allowed to increase its fare to RM64 under the concession agreement.

    According to statistics given by the Ministry of Transportation (MoT), the ridership on KLIA Express increased by 42% from 2,062,223 passengers in 2013 to 2,928,302 passengers in 2014. The ridership on KLIA Transit increased by 44% from 4,373,220 in 2013 to 6,310,323 in 2014. Total ridership increased by approximately 44% from 6,436,443 in 2013 to 9,238,625 in 2014. This increase in ridership can be attributed to the opening of the rail link from KLIA to KLIA2 on the 6th of May, 2014. (Table 1 below) This 44% increase in ridership from 2013 to 2014 can be translated into an additional estimated revenue of RM64 million for KLIA express.[1]

    The ridership for KLIA Express from Q1 to Q3 2015 has increased by 26.3% compared to Q1 to Q3 2014 and by 9.0% for KLIA Transit during this period. If this trend continues in Q4 2015, this means that the additional estimated revenue from 2014 to 2015 comes up to RM25 million.

    This means that as a result of the KLIA2 extension, the estimated additional revenue earned by Express Rail Link Sdn Bhd is approximately RM89 million in 2015 compared to the baseline year of 2013.

    Given that ERL Sdn Bhd did not have to foot a single sen of the construction cost of the KLIA2 extension and that the additional costs of operations for the KLIA2 extension is marginal, why was ERL allowed to increase its fares by such an exorbitant amount? Wouldn’t the increase in revenue as a result of the increase in ridership be sufficient for ERL to make a reasonable profit and recover its capital expenditure?

    It is normal practice for a concession holder to sign a supplementary agreement with the government whenever there is a major change to the original concession agreement. For example, BESRAYA signed a supplementary agreement with the government in 2011 as a result of the BESRAYA Eastern Extension (BEE) to Ampang. The concession holder for the KLIA Express and KLIA Transit, ERL Sdn Bhd, would also have signed a supplementary agreement with the government as a result of the KLIA2 extension. This supplementary agreement would have included details such as the allowable fare increase over time. Was the government negligent in allowing for a huge fare increase for ERL Sdn Bhd in the supplementary agreement knowing that the KLIA2 extension would bring about a significant increase in ridership? Why didn’t the government squeeze the concession holder to limit or even prevent a fare hike given that the KLIA2 extension was fully paid for by the government?

    I call upon the government to disclose the concession agreement involving ERL Sdn Bhd so that all Malaysians can evaluate for themselves on whether the fare hike is justified or if the government was negligent is allowing the concessionaire to enjoy exorbitant profits at the expense of ordinary Malaysians.

    Dr. Ong Kian Ming
    Member of Parliament for Serdang

    [1] Assuming a fare of RM35 for passengers on KLIA Express and an average fare of RM17.50 for passengers on KLIA Transit, some of whom use this service to go to Putrajaya and Cyberjaya.

  • Minister of Transportation, Liow Tiong Lai must explain why he allowed “daylight robbery” by not stopping KLIA Express from increasing its one way fare to KLIA from RM35 to RM55

    Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the 2nd of December, 2015

    Minister of Transportation, Liow Tiong Lai must explain why he allowed “daylight robbery” by not stopping KLIA Express from increasing its one way fare to KLIA from RM35 to RM55

    It was announced yesterday that starting on the 1st of January, 2016, the fares for KLIA Express will be increased. A one way ticket from KL Sentral to KLIA / KLIA2 will cost RM55 starting 1st of January, 2016, an increase of RM20 or a 57% increase from the current RM35. It is not only the passengers who are travelling to KLIA and KLIA2 who will feel the hit of the rise in the price of tickets. Passengers going from KL Sentral to Putrajaya / Cyberjaya will also experience a price hike of RM4.5, from RM9.50 to RM14, an increase of 47% (See full fare increase comparison in Appendix 1 below).

    This exorbitant price increase must be explained by the Minister of Transport, Liow Tiong Lai especially in the light of the following facts.

    Firstly, KLIA Express has seen an estimated increase of 40% in ridership since the opening of the KLIA2 extension so much so that 6 new train units were ordered at the end of 2014.[1] The increase in ridership would surely have increased the revenue as well as profits of KLIA Express[2]. In addition, I want to remind the public that the cost of constructing the KLIA2 extension, which was RM100 million, was paid for totally by the government.[3] This means that KLIA Express gets to enjoy the monetary benefits of the increase in ridership without having to spend any additional capital expenditure.

    Secondly, KLIA Express has signed a long term lease with the Railway Asset Corporation (RAC) / Perbadanan Aset Keretapi (PAK) to use the railway link connecting KL Sentral and KLIA and KLIA2. I highly doubt that the leasing rates which KLIA Express is paying RAC has increased by more than 50% in order to justify this upcoming fare increase. In fact, I highly doubt that the leasing rate has increased at all. Liow Tiow Lai should disclose the terms of the leasing agreement between RAC and KLIA Express as a matter of public interest.

    Thirdly, KLIA Express receives money from part of the airport tax which is collected by Malaysia Airports Holding Berhad (MAHB). In a parliamentary reply in 2009, then Transport Minister Ong Tee Keat confirmed that RM5 from the airport tax of RM51 for international flights was paid to KLIA Express. The airport tax is now RM65 for international flights.[4] Does KLIA Express continue to receive payments from part of the airport tax? Has this increased as a result of the increase in the airport tax? If so, why must KLIA Express still increase its fare by such an exorbitant amount? Liow Tiong Lai must explain.

    Finally, I hope that the Transport Minister has not forgotten that the express rail line to KLIA was built with significant government support including a RM940m loan from the Bank Pembangunan dan Infrastruktur Malaysia Berhad. I also hope that the Minister has not forgotten that one of the members of the consortium which was awarded the RM2.4 billion contract to construct the railway link to KLIA was Syarikat Pembenaan Yeoh Tiong Lay Sdn Bhd (SPYTL), a wholly owned subsidiary of YTL Corporation Bhd. YTL Corporation is also the majority owner of KLIA Express. This means that YTL Corporation would have reaped at least some profits from the building of the railway link to KLIA.

    This exorbitant fare increase by KLIA Express is yet another example of the socialization of costs and the ‘piratization’ of profits which occurs in many projects in Malaysia.

    I call upon Liow Tiong Lai to suspend indefinitely the proposed fare increase by KLIA express and to conduct an open inquiry as to what a reasonable fare revision may entail. To do this, the Minister must disclose the full contents of the 30 year concession agreement with KLIA Express, any supplementary concession agreements which were signed as a result of the KLIA2 extension, all of the maintenance contracts which KLIA express has with other companies such as its wholly owned subsidiary ERL Maintenance Support Sdn Bhd and the long term lease between KLIA Express and the Railway Asset Corporation.

    Dr. Ong Kian Ming
    Ahli Parlimen Serdang

    [1] http://www.railwaygazette.com/news/traction-rolling-stock/single-view/view/express-rail-link-orders-cnr-trains-for-50-capacity-increase.html

    [2] The company which runs the ERL trains is Express Rail Link Sdn Bhd. When I use KLIA Express in this press statement, I am referring to the  company, Express Rail Link Sdn Bhd.

    [3] http://www.thestar.com.my/news/nation/2014/05/01/erl-construction-cost-to-be-borne-by-govt-says-hisham/

    [4] http://english.astroawani.com/malaysia-news/klia2-mahb-and-govt-agreed-rm100-mil-erl-deal-analyst-34934

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