Fuel Subsidy - Another AES, Crooked Bridge In The Making?

Folks pay attention to Khazanah. You think it is my favorite target of focus. It better be yours as well. They blow our money by the Billions.  The year will be coming to an end soon. Khazanah Nasional's  "nenek tua business model" will kick in shortly.  Towards the end of the year they usually sell TNB and other blue chip shares given to them by Dr Mahathir when he set up Khazanah Nasional Bhd. They will make a huge gain and use it to dress up their books. 

The other preferred business model in Malaysia is claiming compensation on cancelled projects. The Arabs liwatted Khazanah in Johor over that Medini land issue. The Arabs did not put in their portion of capital in full. So the Khazanah boys had to "buy them out". Paying them a hefty profit in the process. So they made money by NOT investing money. That was round one.

During Pak Lah's time, a crooked bridge was planned. The bridge project was cancelled. The promoters still got paid compensation. So titi tak jadi, tapi promoter dapat duit besar.

Then there is AES. Those AES cameras are still blinking. But they said no need to pay the AES generated summonses. The system is a waste. The project was KIVed ? Cancelled?  Again AES claimed compensation. Dont know if they have been paid anything.

So this is the other Malaysian business model. Embark on some outrageous project. The public will certainly kick up a fuss. Cancel the project. Promoter claims compensation. Cronies laugh all the way to the bank.They collect money when the project gets cancelled. This is another 'business model' in Malaysia.

That other crony built six university campuses for under RM2.0 Billion then leased it to the gomen for 25 years for under RM8.0 Billion. These are the easy money projects. Here is some Std 2 arithmetic. If the gomen pays RM8.0B over 25 years, that works out to RM320 million a year.  Give me the same project and I will do the following. Build the same six campuses for under RM2.0 Billion. Then the gomen pays me RM500 million but for FIVE years only. This means the gomen gets the six campuses for RM2.5B and in a shorter time of FIVE years only. 
  
And I can still make a profit of say RM200 million plus RM100 million = RM300 million.

I was a banker and now I build buildings too. I know how to do this. Bukan susah pun. Alternatively I can tell these cronies how they should price these projects.

Anyway here is something I received from a highly placed gomen man long, long before Malaysian Insider wrote about it. Then I was awaiting some details on the implementation of this fuel subsidy management thingy. First here is Malaysian Insider. To reduce torture I have truncated their story :

Umno-linked firm frontrunner bidding to manage fuel subsidies 

BY THE MALAYSIAN INSIDER

Published: 15 July 2014

• Malaysia suffers RM7 billion leakage yearly from diesel & petrol smuggling
• Putrajaya looking into smart-card system to provide targeted fuel subsidies
• brother of Umno MP & a businessman close to Putrajaya behind Fuelsubs Hse
• Fuelsubs frontrunner bidding for a fuel subsidy management project 
• causing disquiet among party supporters
• Fuelsubs surfaced last month 
• Syed Mokhtar's Datasonic Group paid RM10m for a 30% stake 
• if secured letter of award from Putrajaya 
• presented to the Economic Council
• owners of Fuelsubs Habibul Rahman Kadir Shah 
• Razali Merican brother to Kepala Batas MP Reezal Merican 
• Habibul close to Umno and PM's Office, sits on board of 
• Group Lotus PLC, owned by Proton Bhd (Syed Mokhtar)
• Felda Global Venture Bhd's Twin River Technologies 
• London-based Petronas Energy Trading Limited
• Fuelsub owned thru HKS Primatrix, owned by Habibul & brother Zaid
• causing disquiet among some quarters in Umno and pro-government bloggers
• called for transparency to plug leaks in the subsidy programme
• diesel and petrol smuggling to foreign countries.
• IMF estimated top 40% of Malaysians enjoy 80% of fuel subsidies
• RM24.8 billion budgeted for fuel subsidies in 2014
• only RM3.5 billion is projected to benefit low-income group 
• after leakage from fuel smuggling
• led Putrajaya to consider the proposed fuel subsidy management
• Datasonic & Pos Malaysia reportedly joining up to bid for project 
• programme will utilise MyKad, fuel card and smart card 
• cost between RM200 million and RM1 billion to implement
• other bidders are:
• MyEG Services Berhad
• IRIS Corporation Bhd
• ICASH Global Rewards Sdn Bhd
• MOL AccessPortal Sdn Bhd 
• and a company linked to a former minister. 
• Pos Malaysia denied teaming up with any firm 
• network of post offices could provide logistics 
• Datasonic rationalised stake in Fuelsubs good opportunity 
• April, Datasonic won contract 4 mill MyKad RM72 million.
• company will supply 10 million MyKad RM 220.2 million. – July 15, 2014.

Blogger Another Brick In The Wall also carried this story here.

My comments : This is also why the PM needs the GST folks. The extra revenue that the gomen collects from the GST will be used for ridiculous and dubious projects like this fuel subsidy management contract. 

Sources tell me the PM tak faham head or tail about this. The PM simply believes the last person who spoke to him, who is in his "I can believe him" list. 

I am not in the PM's 'I can believe him' list. So whatever I say, the PM will not believe. Well the PM keeps falling down on his face so much.

The gomen must pay this company RM200 million to RM1.0 Billion. I dont know who is being vague here M'sian Insider or the gomen sources. That is a huge range RM200 million to RM1.0 Billion. 

Ok here is Question No. 1 : Is this an annual figure? RM200 million to RM1.0 Billion EVERY YEAR? My source says yes EVERY YEAR.

Question No. 2  For how long will this "contract" last? 25 years? 30 years?  

I first heard this about a month ago. Fuel Subhouse was a frontrunner? What does that mean?  It is heavily linked to UMNO MPs, Ketua Bahagian and strong cable "businessmen" !!

I beg to differ lah. Getting an easy money, monopoly "business", crony contract is NOT business. It is called rent seeking. Hang pi kerja kah, hang tak pi kerjakah duit masuk juga. Betul tak? So please dont call yourselves 'businessmen'.

Lets dissect some main points.

• Malaysia suffers RM7 billion leakage yearly from diesel & petrol smuggling
• Putrajaya looking into smart-card system to provide targeted fuel subsidies
• IMF estimated top 40% of Malaysians enjoy 80% of fuel subsidies
• RM24.8 billion budgeted for fuel subsidies in 2014
• only RM3.5 billion is projected to benefit low-income group

First of all there is absolutely no way this RM1.0 Billion a year fuel subsidy management system is going to stop the leakages and the petrol and diesel smuggling. In Johore for example there are jetties or terminals that are used to smuggle all sorts of things out including cooking oil, diesel and petrol. If I mention who is behind one of the jetties boleh kena that archaic Act. So I wont. 

So how is this RM1.0 Billion fuel subsidy management contract going to overcome that? It wont. The diesel and petrol smuggling will still go on. In fact it will increase. 

Perhaps this fuel subsidy management contract is designed to achieve exactly that - in an age where the lower income are suffering even lower income, give them an opportunity to earn extra income by assisting them become petrol and diesel smugglers. Then they may continue voting for the gomen. The cronies can remain in power and everyone is happy.

Here is the logic. The new fuel subsidy management proposes some income tiers. Those earning below RM4000 per month will be entitled to 150 litres of subsidised fuel a month. 71 sen.

RM4k per mnth get 150 litres per mnth at full 71 sen per litre subsidy

RM4k-8k per mnth get 150 litres per mnth at 40 sen per litre subsidy (RM46.50 extra)

RM8k-12k per mnth get 150 litres per mnth at 20 sen per litre subsidy (RM75 extra)

This is where that special MyKad contract also comes in (refer Another Brick In The Wall). 

Talk is the fuel subsidy management contract company will be paid 2 sen per liter of fuel that is sold. In 2010 Malaysia's fuel consumption was 20 billion litres. 20 billion x 2 sen = 40 billion sen. That is RM400 million annual fuel subsidy management fees alone.

Wow !! Kaya-nya.

The below RM4k a month guys will buy fuel at the subsidised price and smugggle it to the Domestic Fuel Smuggling Industry (this is an industry that is going to be born soon in Malaysia, thanks to this fuel subsidy management thingy).

This is where the new MyKad (which will cost more millions) should help curb this smuggling. But havent you heard of 'Kita offline'. This is fuel. Surely you cannot deny someone fuel if the system is offline. This is one loophole. 

I think some clever guy will organise the Mat Rempits. Once a month the Rempits may be buying 150 litres of fuel. They will minus what they need for their motorbikes and sell the rest.

Why dont we just phase out the fuel subsidies altogether? Raise fuel prices 10 sen every six months. 20 sen per year. Announce it ahead of time. Say in three years there are no more fuel subsidies.

I suggested this about four years ago. At that time we could have cut five sen every six months. There would be no more subsidies by now. No need for GST.

The gomen's proposal now is :

i. fuel subsidies will still be there
ii. cronies get an extra RM400 million to RM1.0 billion for fuel subsidy management
iii. plus there will be the extra GST burden

So the burden on the economy has in fact been multiplied. We have to pay for all this. This is called saving money? For whom? 

Bagi depa kontrak lembu condo saja lah. Senang kira. One time sapu. Bahagi-bahagi sikit kiri dan kanan. Beli Porsche satu atau dua biji. End of story. 

And no compensation payments if the contract kena batal. No collecting RM200 just because you pass "GO".

The moral of the story : The moral of the story is that on one side the GLCs are pushing out genuine businessmen and genuine corporations from emerging. The GLCs do not create new wealth (Kidzania, Lego, movie making, land flipping) does not or has not created much new wealth, new talent or new economic growth.

On the other side the ministers, sons of ministers, husbands and wives of ministers sapu ridiculously stupid rent seeking gomen projects overinflated into the billions of Ringgit.

These projects too do not create genuine business savvy, market competent  businessmen or businesswomen. They do not even create market oriented managerial talent. 

They are all overpriced. Since capital (gomen funds) is a limited resource, more and more easy money flows around the greasy palms of proportionately fewer and fewer cronies, ministers children and their spouses. The vastly larger and growing in number ordinary man in the street is left to wait for the BR1M handouts. 

This means there are less resources left to be let loose in the economy to create new jobs, new opportunities and new wealth.  The vastly larger ordinary man in the street is therefore growing relatively poorer. 

Akhir kalam - this applies largely to the bumiputera and Malay community. The gomen is not doing the right things anymore.