Monday, 31 March 2014

Puzzling moves by the Selangor state government

Put politics aside.

1. On Selangor water restructuring and the offer to SPLASH
fz.com quoted Selangor Menteri Besar who said  Gamuda's MD's concern on the invocation of Section 114 of WSIA to facilitate the Selangor water restructuring  was more due to the fact that it was trying to rake in as much money as possible.... The MB added that "the water restructuring was only based on fair pricing. It is not based on maximum pricing. Don't undermine the logic of the Klang Valley community.

Is the accusation by the Selangor MB valid? I disagree.

SPLASH will only receive RM250.6m if it had accepted the latest offer for the 100% stake in SPLASH. The amount was below 10% of SPLASH's NAV. The previous offer in February 2013, which Gamuda HAD ACCEPTED was close to the NAV of SPLASH. Accepting the latest offer would result in Gamuda suffering a disposal loss of RM920m.

Would any businessman including the MB who was a ex-businessman sells its assets below 10% of its NAV? Of course not but the main point I would like to highlight here is why the INCONSISTENCY? Both offers came from the same state government under the same MB but why the lastest offer was more than a staggering 90% lower than the offer made 1 year ago? Can the state government explain the huge difference in offer price and if the state government is sincere in resolving the water issue, I think explanation by the state government is needed. Who actually undermines the logic of the Klang Valley community?

Also, why the state government signed the MoU to allow Langat 2 to proceed when the state government earlier insisted it was unnecessary to construct Langat 2? Why the U-turn now? The treatment plant would have already completed if green light was given earlier and the current water rationing could have been avoided. With water reserve margin below 1%, growing population in the Klang Valley and hundreds of proposed property development projects being put on hold due to the water issue, the Selangor state government is indeed playing with fire and putting the rakyat's interest after politics.

2. Sanctity of contracts has to be respected
It was reported that the Selangor government has asked Tropicana Corp Bhd to expedite the payment of RM844.2m for a huge tract of land it sold to the latter just before GE13.

It came after Tropicana signed a deal to sell a quarter of the said land to Eco World for RM470.6m cash, to be paid in one lump sum.

Under the agreement signed in April 2013, Tropicana was supposed to pay for the tract of land in instalments over 20 years. It was in the Bursa announcement that the developer is entitled at any time at its ABSOLUTE DISCRETION to accelerate payment of the purchase price by the payment of any or all of the instalments prior to the expiry of the completion period.

The announcement was silent on partial disposal of land to third party. Unless there is a clause provided in the agreement that entitles the state government to demand for expedition in payment, is the demand by the state government not TYRANNIC in a capitalist country? Besides, did the state government led by a MB well known for his business acumen overlook this in the land deal agreement with Tropicana?

3. Free 20cum of water a wrong way to gain popularity
It is a known fact that Malaysians use (waste) a lot more water than the recommended usage. Imagine a country with average annual rainfall of 250cm (versus 10cm a year in Saudi Arabia) is facing water supply disruption issue. This is compounded by high number of car ownership in the country and Malaysians generally wash cars too frequently.

Malaysians use more than 200 litres of water per day, way above Singaporeans (150 litres per day) and Thais (90 litres per day) and the recommended limit of 165 litres per day.

The move by the state government to give first 20cum of free water was seen as a popular move to gain political support. However, this does not help at all in reducing the excessive usage of the water by Malaysians but instead, having an opposite effect of encouraging more wastage of the precious resources since the water is so cheap, or even free to families with low monthly water usage.

Selangorians start to see the problem now as water emergency is just 2 weeks away if dry days continue. Water is not expensive in Malaysia. But how much can the people benefit from the first 20cum of free water that compounded the issue of serious water supply shortage in the state. All in, the disruption to business, inconvenience, hygiene issues and cost to distribute water to affected houses by water tankers probably costs more than the savings from the free water. If you do the math, 1 litre of drinking water/ mineral water is more than 1500 times more expensive than the tab water.

Why the state government implemented the first 20cum of free water when low water reserve margin in the state in not something new?

4. Raw water extraction license
The Selangor state government will not renew the raw water extraction licenses when they become expired end of May 14 and June 14. Why the non-renewal of the licenses? I think the state government owe us an explanation here.

Water is vital to the people and living things.Without the permission to extract raw water, the water players will not be able to treat and distribute water to the people. Where are we going to get water then?

Is this a move intended to "force" the water players to fail to supply water as agreed in their concession agreements and using the "non fulfilment" by the water players as reason (excuse) to take over the operation from the water concessionaires? I hope this is not how the state government works.

Conclusion
Neither BN nor PR impresses me. But several moves by the Selangor state government is indeed very worrying.... Flip-flopping, inconsistency, disrespect of sanctity of contract, heavy politicking, failure to protect the people's interest etc are not doing any good to the people, business and investment communities.

1 comment:

  1. Former Selangor state executive councillor Ronnie Liu today claimed that Menteri Besar Tan Sri Abdul Khalid Ibrahim should step down for the problems he had created for the sand and quarry business community in the state.

    “Among the problems are quarry permits that need to be renewed monthly.

    “This has resulted in lorry drivers queuing up until midnight for sand,” he told The Rakyat Post when contacted.

    Liu added there were lots of other problems with Abdul Khalid’s administration, but declined to comment further.

    Earlier today, Liu was supposed to lead a group of 100 people from the mining community to protest against Abdul Khalid’s refusal to step down as MB.

    The group arrived outside the state secretariat building at 11am today, but dispersed shortly after due to rain.

    Liu said they would try to hold the protest again in the immediate future.

    http://www.therakyatpost.com/news/2014/08/16/selangor-mb-helpful-sand-mining-business/#ixzz3AZHcG5iH

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