RM 11 billion wasted just to rescue 7 “sick” privatised projects since 2001 part of the problem of the worsening income inequality, construction sector suffering negative growth and the prime minister unable to succeed in his anti-corruption campaign.

Press Statement

by Lim Guan Eng

(Petaling Jaya, Thursday): DAP is not surprised that the government spent more than RM11.022 billion to rescue seven ailing privatised ventures over the past five years as follows:-

•  the Putra transport system, which cost RM4.486 billion;

•  the STAR-LRT bailout costing RM3.256 billion;

•  MAS bailout costing RM2.802 billion respectively;

•  the takeover of the National Sewerage System costing RM192.54 million;

•  the Seremban-Port Dickson Highway costing RM142 million;

•  the Kuching Prison costing RM135 million; and

•  the Unit Kajian Makanan dan Gunaan Orang Islam costing RM8.3 million.

RM 11 billon wasted just to rescue 7 “sick” privatised projects since 2001 part of the problem of the worsening income inequality, construction sector suffering negative growth and the prime minister unable to succeed in his anti-corruption campaign. Imagine the type of national development that could have benefited the country and people if the RM 11 billion had been spent on the people directly these last five years. RM 11 billion would not have required any fuel price increase.

More importantly, this only includes the money spent by the government to bailout failed privatized ventures during the past 5 years. What about those failed privatized ventures rescued by the government before 2001 such as the twin RM 3.5 billion Bumiputra Finance scandals or RM 5 billion Perwaja scandals?

Deputy Minister in the Prime Minister’s Department Senator Datuk Abdul Rahman Suliman told the Dewan Rakyat yesterday that 490 projects were privatised from 1983 to 2005, but only a "small number" warranted the bailouts. However he did not state the number requiring bailouts out of the 490 privatised projects since 1983 by the Federal government.

Morgan Stanley estimates US$100 billion losses from corruption since 1980s

Clearly the amount needed could run into a hundred billion ringgit if we were to estimate those bailouts from as far back as 23 years to 2001. And perhaps much more if we also include those failed privatized projects by the State governments. DAP. In Time Asia magazine issue on March 15 2004, South East Asian economist at Morgan Stanley in Singapore Daniel Lian, figures “that the country may have lost as much as U$$100 billion since the early 1980s to corruption.”

This RM 380 billion lost since 1980s when former Prime Minister Tun Dr Mahathir Mohamad ruled for 22 years, covers not only bailouts from privatized projects but also foreign exchange(forex) losses of RM 30 billion that Bank Negara lost whilst speculating in forex markets in 1992-4. The reason for such estimated huge losses is not difficult to trace.

The principal person responsible for the huge forex losses was the then Bank Negara advisor Nor Mohamad as the chief speculator in the forex markets. And yet instead of being punished, he was promoted by Abdullah and is now the Second Finance Minister.

For this reason we are not surprised why Prime Minister Datuk Seri Abdullah Ahmad Badawi can not succeed in his anti-corruption campaign. How can Abdullah succeed when he condones the culture of money politics and grants immunity from prosecution those guilty of such money politics?

Apart from failure to punish those responsible for such losses, corruption is also systemic. Such systemic corruption can be seen by the perversion of the concept of privatization under the New Economic Policy (NEP). Privatization is intended to carve off public assets or services that is inefficient or a drain of national resources to enable them to be run more effectively and profitably as a private enterprise. Not only would the country save money, the people would benefit in terms of improved services and the company would also contribute to the country’s revenues from taxes on their profits.

Unfortunately privatization under BN has turned to piratisation where only BN cronies without any track record are awarded the privatized contracts by relying on the NEP. Worse profits are enjoyed exclusively by those who have obtained the privatized contracts whereas the losses must be borne by the public. Is this not privatization but piratisation where instead of bearing the risks, such risks are borne solely by the public whilst the rewards and profits belong to the cronies?

For that reason, privatization has generally failed with poor services, high cost to consumers and failure to reduce government expenditure. Such bailouts have also diverted resources from reviving the construction sector that has suffered negative growth for the last 3 years Abdullah has been in power. Income inequality has also worsened. The United Nations Human Development Report consistently list Malaysians as suffering the worst income inequality between the rich and poor in South-East Asia is ignored. The Ninth Malaysian Plan (9MP) shows the share of income of the bottom 40% of the population declined from 14.5% in 1990 to 13.5% in 2004 whilst the share of the top 20% of the population increased from 50% in 1990 to 51.2% in 2004.

The time has come for the government to follow market forces that not only awards privatized projects to those qualified as well as allow privatized projects that fail be allowed to fail. Those responsible must bear the losses and not be bailed out by the public. Anyone can undertake privatized projects if the profits are enjoyed by them whereas the losses borne by the public. Failure to respect this basic principle would only make it difficult to revive the construction industry, reduce income inequality and succeed in the anti-corruption campaign.