Tolls and hikes short-circuiting Malaysia future

The simultaneous increase in fuel and sugar prices, electricity tariff and toll hikes have got Malaysians worried and bewildered as to how they will manage their household expenses. Compounding matters will be the GST that will kick in and the rakyat in 2015. The already weakened ringgit and the sudden withdrawal of subsidies on essential goods will hit hard where it hurts most – the pocket.

Not unlike Marie Antoinette, the prime minister is obstinately insisting that the people can afford these massive hikes. Talk about telling the masses to eat cake, he adds insult to injury by saying these increase not be a burden!

Waking up to reality

The entire Cabinet and prime minister suddenly woke up from their slumber. It dawned on them that the budget deficit, huge public and household debt have to be narrowed. What is shocking is that for 16 continuous years, the deficit and the mounting debt did not raise any alarm bells.

In fact the pro government economists and main stream media stoically  reminded the rakyat that economic fundamentals were positive and our country is on track to become a developed nation by 2020. But all that propaganda did not convince the world. Fitch Rating Agency, in a startling report, downgraded Malaysia from stable to negative. And the game was up.

The media propaganda failed and the even more frightening –instead of being developed Malaysia by 2020, may be a bankrupt nation!

The acrimonious Fitch report had a jolting effect that aroused Malaysian government from its deep slumber and self-delusion. It suddenly dawned upon the Cabinet that the lies they had believed to be the truth, were, in fact, lies.

Shocking tolls tax rakyat to brim

The 16 consecutive budget deficits and the huge debt suddenly had to be addressed, checked and reversed immediately. To appease the fund managers and rating agencies, the government is hurriedly moving, albeit, rather clumsily to make band-aid changes to gapping wounds. Wounds that needs massive surgery. In good times when the government privatized essential services like electricity and water supply, highways telecommunications to name a few, it  was concerned about assuring the service provider’s future profits and not the people’s welfare.

The government created monopolies’ that were provided with easy loans to be written off later. UMNO cronies and new government linked companies were created into being to acquire lucrative under-valued privatized monopolies. And government was on hand to absolve their losses and ensuring future profits.

Toll concessionaires and independent power producers signed shock-proof contracts that not only guarantee future returns, but included provisions to extend and raise duration and tariffs. They are already earning billions if not hundreds of millions and yet the government continues to raise toll rates.

PLUS HIGHWAY BHD owned by EPF and KHAZANAH earns the following:

                                               2009         2010        2011 

Revenue (billion)                      3.179        3.352       4.098

Profit before tax (billion)           1.624        1.777        2.515

It is said that the cost to maintain road is only about 6% of revenue. Such a cash-generating concessionaire’s do not need any subsidy or toll hike. Yet PLUS has the right to collect toll till 2038 with right to hike toll rate every 3 to 5 years.

TNB’s 2012 YE profit is RM4.6 billion and 2011 YE profit is RM4.2 billion. Yet effective 1st January 2014, all consumers have to pay higher rates which will bring another one billion into TNB coffers. The 38.53 cent per kWh hike will add 1 billion ringgit to TNB coffers. Consumer’s subsidy approximately 5 billion to be stopped but IPPs subsidy about 19 billion continues.

Feeding bloated uncivil service

Having an over bloated civil service, which constitutes 4.68% of the population is rather unimaginable given the massive inefficiencies at all levels. Compare this figure to Indonesia that has only 1.79%, Philippines 1.81%, S Korea 1.85% and Thailand 2.06%. If anything, it is a tremendous drain on the budget. Civil servants emoluments will make up RM63.6 (30%) billion out of RM217.7 billion the country’s operating expenditures in 2014. Having such a huge civil service, the Malaysian government still paid RM7.2 billion to private consultants since 2009.

Race to the finish…

Malaysians are carrying the burden of paying for their bloated civil servant’s incompetence, bailing UMNO cronies and funding the raising BN election campaigns funds. Winning elections has become very costly for BN. Since Datuk Seri Najib Tun Razak took over as finance minister in 2009, the debt to GDP ratio grew from 38% to present 54%.

Is Malaysia racing to become a developed nation or is it heading towards a catastrophically bankrupt nation come 2020. Unfortunately, the rhetoric is about being a developed nation. But the actual statistics tell another tale.

With huge civil service which is unproductive and high debts resulting in heavy debt servicing cost, Malaysia government will resort to privatize more essential services without subsidies. And these will add more financial burden on the people. And the vicious cycle becomes even more frequent, and faster, strangling the rakyat further. Indeed, let them eat cake…with less sugar.

 

 

 

 

Explore posts in the same categories: From the desk of Senator S Ramakrishnan

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