Analysing Malaysia’s Development Expenditure (DE) in the Federal Budget

Media Statement by Dr. Ong Kian Ming, Head of the Penang Institute in Kuala Lumpur, and Darshan Joshi, Research Analyst at the Penang Institute in Kuala Lumpur, on the 21st of February 2018

The recent call[1] by noted economist KS Jomo to slash the development expenditure (DE) allocated to the Prime Minister’s department and to scrutinize big infrastructure projects such as the East Coast Rail Line (ECRL) is a timely reminder of an issue that has been previously raised by opposition members of parliament. But what has been lacking thus far is a more systematic analysis of the details of the development expenditure, especially under Prime Minister Najib’s tenure as Finance Minister, and specifically, the DE allocated to the Prime Minister’s Department.

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The government must increase financial incentives to grow the demand for Solar PVs in Malaysia

Media Statement by Dr. Ong Kian Ming, Member of Parliament for Serdang and Assistant National Director for Political Education for the DAP, on the 29th of January 2018

Despite Prime Minister Najib’s visit to the White House in September last year, which some touted as a success[1], it was not able to prevent the United States from slapping a 30% tariff on solar photovoltaics (PVs) which are made in Malaysia.[2] This decision, announced on the 22nd of January, will no doubt be challenged in the World Trade Organization (WTO). But the extent of reliance of Malaysian-based solar PVs manufacturers on the US market also reveals the sad fact that the domestic market for solar PVs have been seriously held back by the inability of the Ministry of Energy, Green Technology and Water (KeTTHa) as well as the Sustainable Energy Development Authority (SEDA) from providing the right financial incentives to grow the local demand for solar PVs.

According to the SEDA website, the total installed capacity for solar PVs in Malaysia currently stands at 357 MW which is approximately 1.3% of the total installed energy capacity of approximately 27,000MW. Those in the solar PV industry regularly complain about the shortage of the Feed-in-Tariff (FiT) quota for solar PVs. Customers who want to install solar PVs on the roofs of their homes or factories regularly are disappointed when the solar PV installers tell them that they failed to obtain the FiT quota. The move to Net Energy Metering (NEM), implemented in 2017, was supposed to ‘solve’ the shortage of the FIT for Solar PVs by allowing consumers with solar PVs to sell directly into the grid to Tenaga Nasional Berhad (TNB) without needing to have an FIT quota. Sadly, KeTTHa only allocated 500MW from 2016 to 2020, with a maximum of 100MW per year, as the maximum allowable capacity to be installed under NEM.

According to SEDA’s NEM website[3], as of today (29th of January, 2018), the total amount of the NEM quota taken up is a disappointingly low 8.69 MW for Peninsular Malaysia and Sabah (Figure 1 below).

Figure 1: Net Energy Metering (NEM) Quota Balance and Quota Taken up for Peninsular Malaysia and Sabah (as of 29th of January 2018)

Source: SEDA NEM Monitoring website (https://services.seda.gov.my/nem/auth/login)

The reason for this low uptake in the NEM applications is two-fold.

Firstly, the rate at which we can ‘sell back’ energy produced by the solar PVs is extremely low at 31 sen per kWh. (The FIT rates start at 67 sen for installations less than 4kW) By comparison, we have to ‘buy’ energy from TNB at a tiered tariff rate of 21.8 sen (first 200kWh), 33.4 sen (next 100kWh), 51.6 sen (next 300kWh), 54.6 sen (next 300kWh) and 57.1 sen (above 900kWh).

Since the net billing formula is the amount of electricity we used * the TNB tariff rate (which averages 38 sen per kWh) minus the amount of electricity we generate via the Solar PV * the tariff rate we sell back to TNB (or other wise known as the displaced cost which is 31 sen per kWh), as long as we use more than 300kWH per month, we will likely have to pay TNB rather than TNB paying us for generating electricity. (See Figure 2 below)

Figure 2: Net Billing formula under NEM

Secondly, in the event that the value of electricity generated by the solar PV system in a month is more than the value of electricity consumed i.e. net billing is positive, this amount will be credited into the TNB account of the consumer. The consumer cannot ‘take out’ this credit from the TNB account and use it as cash to, let’s say, pay off the cost of installing the solar PV system. And this credit can only remain in the account for a period of 24 months, after which the credit will be forfeited.

Imagine a situation of an energy efficient household which uses less than 200kWH per month and which has installed a 12kWh system. This household may be able to generate a significant amount of energy via the solar PV system and hence, accumulate a significant amount of credits of thousands of Ringgit a year. Basically, under the current system, all of these credits be ‘wasted’ and flushed down the drain after 2 years.

For both of the reasons outlined above, the rate of return for installing solar PVs under the NEM is very low which means there is little incentive for consumers in Malaysia to install solar PVs in large numbers. The low take-up of the NEM for solar PVs means that companies selling solar PVs and companies which install solar PVs have very little business in Malaysia. This translates into a lower number of jobs which should have been created as a result of the expansion of the solar PV market in Malaysia. The New York Times wrote the following in an article evaluating the impact of the Trump tariff on foreign made solar PVs[4]:

“Solar manufacturing now represents just a fraction of the overall jobs that have developed around the solar industry. More than 260,000 Americans are employed in the sector, but fewer than 2,000 of those employed in the United States are manufacturing solar cells and modules, according to the Solar Energy Industries Association.

Far more workers are employed in areas that underpin the use of solar technology, such as making steel racks that angle the panels toward the sun. And the bulk of workers in the solar industry install and maintain the projects, a process that is labor-intensive and hard to automate.(bold and italics are mine)

By restricting the amount of the quota under the NEM and having such a low price for solar PV generated electricity which is sold back to TNB and for not allowing the credits to be converted into cash, KeTTHa is protecting the profits of TNB and restricting the growth of good quality jobs in solar PV sales, marketing and installation that can employ skilled Malaysians at good wages.

While the domestic market in Malaysia cannot currently replace the US market for made in Malaysia solar PVs of 3,789 MW a year[5], one of the concrete steps which the government can take in the meantime to lessen the impact of the hike in the US tariff is to increase the financial incentives for solar PVs in Malaysia so as to grow the domestic market.

Many people scoffed at the promise by Pakatan Harapan’s Youth Wings to create 1 million good quality jobs in 5 years of a new PH government. This is a clear-cut case of how some of these 1 million good quality jobs can be created under a PH government which does not protect the excessive profits of monopolies like TNB but values the welfare of consumers and the creation of jobs which pay good wages and are not easily automated.

 

[1] http://www.themalaymailonline.com/malaysia/article/why-najibs-washingtoon-visit-was-a-success#KEquypP12SBRxc5K.97

[2] https://www.thestar.com.my/business/business-news/2018/01/25/malaysia-pv-exporters-to-be-impacted-by-us-tariffs/

[3] https://services.seda.gov.my/nem/auth/login

[4] https://www.nytimes.com/2018/01/23/us/politics/trump-solar-tariffs.html

[5] https://www.thestar.com.my/business/business-news/2018/01/25/malaysia-pv-exporters-to-be-impacted-by-us-tariffs/#xZ8cixcwjFrQ0pTc.99

Will other nefarious ways be used by the Election Commission (EC) or the Prime Minister to pass an unfair Selangor delimitation plan?

Media Statement by Dr. Ong Kian Ming, Member of Parliament for Serdang and Assistant National Director for Political Education, on the 18th of January 2018

Will other nefarious ways be used by the Election Commission (EC) or the Prime Minister to pass an unfair Selangor delimitation plan?

Even though the 2nd Notice (Syor 2) of the Delimitation Exercise in Selangor did nothing to make the number of voters in the parliament and state seats approximately equal[1] and even though the Election Commission (EC) was guilty of ethnic gerrymandering in a number of state seats in Syor 2[2], it was still somewhat surprising that the EC reverted to the electoral boundaries used in the 13th general election for most of the seats in Selangor. This raises the question of what motivated the EC to do so?

Is it possible that the EC actually took into account some of the viewpoints of the objectors who presented their views in the public hearing after the 1st Notice (Syor 1)? I am sceptical of this viewpoint because many of the complaints highlighted the differences in the number of voters between state and parliament seats under Syor 1. The EC would have followed up on these complaints by equalizing the number of voters between the Seri Serdang (74,563 voters) and Kinrara (34,910 voters) state seats (both of which are under the Puchong parliament seat), for example. But the EC chose to maintain the GE13 borders of both state seats and allow this discrepancy to continue to exist.

Given that the EC has a very poor record of responding positively to feedback from the public and opposition politicians (and most of the objections were filed / organized by opposition politicians), there must be other reasons behind the EC’s partial U-turn in Selangor.

One possibility is that the EC is concerned that a court case filed by either the Selangor state government or by a voter in Selangor will delay the delimitation exercise in Selangor (and hence the entire delimitation exercise for Peninsular Malaysia) if it maintains the boundaries proposed in Syor 1. The act by the EC to increase the size of discrepancies in the number of voters between parliament and state seats was too obvious and subject to legal challenge. The Selangor state government could pursue a fresh injunction against Syor 2 or it could be successful in its appeal in the Court of Appeal against Syor 1. The EC wanted to pre-empt this by reverting back, mostly, to the GE13 boundaries for most of the seats, especially for the more egregious cases involving the PJ Utara and PJ Selatan parliament seats.

The EC may feel that this ‘price’ is worth paying i.e. maintaining most of the boundaries in Selangor because the delimitation exercise in other states in Peninsular Malaysia has delivered sufficient electoral advantages to the BN. This would be my most ‘generous’ reading of the EC’s strategy.

Of course, this does not mean that the proposals presented in Syor 2 are final. The EC may be hoping that that opposition parties will be complacent and not file in any objections against Syor 2 because the boundaries from GE13 have largely been maintained. If the opposition parties do not file in many objections but if the BN parties organize themselves and file objections to Syor 2 and ask for the boundaries proposed in Syor 1 to be restored, the EC may take the opportunity to shift the boundaries back to what was proposed in Syor 1 before submitting the entire delimitation plan to the PM.

Even if very few objections are filed against Syor 2 in Selangor, the EC still can unilaterally revert back to the boundaries proposed in Syor 1. This, of course, would mean that the EC is acting in very bad faith. But the problem for the opposition is that the final delimitation exercise would not be publicly revealed until it is tabled in parliament in the upcoming March / April 2018 sitting. By then, it may be too late to make a legal challenge to the whole exercise once it is tabled in parliament.

There is however another possibility. Section 9 of the 13th Schedule of the Federal Constitution seems to give the power to the Prime Minister to modify the proposal for the delimitation exercise after it has been submitted to him. (See Figure 1 below).

Figure 1: Section 9 of the 13th Schedule of the Federal Constitution which writes that the PM can modify the Election Commission report for the delimitation exercise AFTER it has been submitted to the PM

Given that the BN is desperate to win back Selangor, this is the most likely outcome. The EC can absolve itself from acting in bad faith by putting the responsibility solely on the Prime Minister and the Prime Minister can refer to the Federal Constitution to say that he is acting within his powers, even though by doing so, it would make a mockery of the entire delimitation exercise and the need for public hearings.

What can be done to stop something like this from happening? A few things. Firstly, as many objections must be filed against Syor 2 in Selangor as possible. This will force the EC to have a longer period for the 2nd public hearing and delay the entire process to after the end of the March / April parliament sitting thereby preventing the tabling of the delimitation exercise in parliament. Secondly, the Selangor state government can continue to pursue its legal challenges in court including filing for an injunction against Syor 2 and continuing to challenge the gross malapportionment in Selangor in the Court of Appeal. Only with a concerted and determined effort, do we stand any chance of delaying the unfair and unconstitutional delimitation exercise from being passed in the March / April 2018 parliament sitting.

[1] http://ongkianming.com/2018/01/16/media-statement-the-delimitation-exercise-in-selangor-is-still-unfair-and-unconstitutional/

[2] http://ongkianming.com/2018/01/17/the-selangor-delimitation-exercise-is-guilty-of-ethnic-gerrymandering/