Why Najib has money for RM36bil MRT but not for civil servants

Najib's Budget 2011 was filled with doubtful projects

Wong Choon Mei, Malaysia Chronicle

Amid rising speculation that the biggest gainers for the RM36bil mass rapid transit system was the Umno elite and the Perak royal family, Pakatan Rakyat leaders have called on Prime Minister Najib Razak to come clean on where the already cash-strapped federal goverment would raise the money from.

Indeed, their caution is timely given that the Najib administration has warned the country could go bankrupt by 2019 if he did not cut subsidies and raise prices of consumer essentials.

Even today, Najib refused to confirm if civil servants would be paid bonuses for 2010, saying that any payment would depend on the country's economic situation.

"The government must be realistic and not spend more than it earns. We cannot borrow to pay civil servant salaries or else we will end up being ruled by the IMF (International Monetary Fund). What is the use of being independent when our sovereignty is ruled by an international body like IMF?" Najib told reporters.

Salt to the wound

His words only added salt to the wound as far as the man on the street was concerned.

"It only confirms the hypocrisy of the BN government. The fuel hikes, the sugar price hikes only save the government RM126 million. And yet they have the gall to launch an RM36 billion project that only contains the scantiest of details," PKR vice president Tian Chua toldMalaysia Chronicle.

His sentiments were shared by DAP leader Tony Pua, who also worried that gross mismanagement of the country's finances could leave the country indebted for decades to come.

"The announcement also indicated that the Government will own and finance the project in its entirety. However this raises further questions on how the Government, via Syarikat Prasarana Negara Bhd will be able to bear the entire cost of the project, estimated at RM36 billion before taking into account land costs of an additional RM10 billion," Pua, the Petaling Jaya Utara MP, said in a statement to the press.

"As of today, Prasarana is already heavily indebted with RM8.5 billion in bonds which it is unable even to service its interest. This has been heavily criticised by the Auditor-General’s report in 2009 for making accumulated losses of RM840 million as of December 2007, in part due to suspicious activities and mismanagement. In the 2011 budget, the Government had to allocate RM2.5 billion of funds to bailout Prasarana-issued bonds which are due in November 2011. It will not only affect the Government’s financial position, it will also affect finally the fees to be charged for the MRT commuters when it is ready for use."

It's the cronies again

Najib had last week appointed MMC-Gamuda Joint Venture Sdn Bhd as the project delivery partner for the deal to lay 156-kilometres of rail across key parts of Kuala Lumpur.

Muhyiddin, Syed Mokhtar, Najib

Both firms, MMC led by tycoon Syed Mokhtar Al-Bukhary and Gamuda by the Perak princess Raja Eleena, are widely regarded as crony firms with strong connections to the Umno elite.

Syed Mokhtar's MMC has benefitted from dozens of mega-projects handed out by the Umno-led federal government, while the Perak royal family has been accused of being enticed by the huge deal into siding Najib during the coup d'etat he staged against the Pakatan Rakyat state government in February 2009.

"It is highly misleading for the Prime Minister to espouse the viability of the project by claiming that it will generate gross national income of up to RM4 billion per annum when the interest servicing cost for the project at completion may in itself come up to more than RM2 billion each year.

"We call upon the Government to be completely transparent with the entire plan, design and financial impact of the MRT project to convince the rakyat that the MRT routes are optimised based on maximum public benefit, but also that it will not become an unsustainable project which will leave our future tax-payers with billions in debt."

Malaysia Chronicle appends below the press statement from Tony Pua for readers' convenience.

Tony Pua

Datuk Seri Najib Abdul Razak must disclose how the MRT will be financed and why the project is expected to commence before even the urban public transportation plan is ready.

We welcome the Prime Minister’s announcement on Saturday which announced that Malaysia’s largest ever infrastructure project, the Mass Rapid Transit (MRT) system, will be tendered openly via 9 project parcels. This is after strong criticisms against the Prime Minister’s initial proposals and admission in October that “there are some contracts that you just cannot tender out”.

The announcement also indicated that the Government will own and finance the project in its entirety. However this raises further questions on how the Government, via Syarikat Prasarana Negara Bhd will be able to bear the entire cost of the project, estimated at RM36 billion before taking into account land costs of an additional RM10 billion.

As of today, Prasarana is already heavily indebted with RM8.5 billion in bonds which it is unable even to service its interest. This has been heavily criticised by the Auditor-General’s report in 2009 for making accumulated losses of RM840 million as of December 2007, in part due to suspicious activities and mismanagement. In the 2011 budget, the Government had to allocate RM2.5 billion of funds to bailout Prasarana-issued bonds which are due in November 2011.

The Prime Minister must come clean with the entire funding process as it will not only affect the Government’s financial position, it will also affect finally the fees to be charged for the MRT commuters when it is ready for use. While Malaysians, particularly those who reside in the Klang Valley look forward to better public transport facilities, they must be made available at an affordable basis without at the same time, become an unsustainable burden for the tax-payers.

For example, last year’s audit report on Prasarana showed that the current average LRT fare of RM1.60 has to be increased to nearly RM9 for the LRT infrastructural costs to be fully recouped within the next 20 years despite the LRTs costing the Federal Government less than RM8 billion, nearly 5 times less than the proposed MRT system.

What is perhaps most worrying is the fact that the Government is rushing headlong into the project without the newly minted Land Public Transport Commission (SPAD) first coming out with the 20-year urban public transport plan for Klang Valley, which is only expected in September next year. The Cabinet has however decided to award the relevant contracts and commence construction works for the MRT in July 2011, even before the holistic public transport plan, which will include buses and other rail systems is finalised!

In fact, SPAD is still unable to declare, as of today, backed by a thorough and professional study that the MRT is the best option for the Klang Valley in the near future, as opposed to cheaper alternatives like buses or even trams based on travel patterns and population statistics.

It is highly misleading for the Prime Minister to espouse the viability of the project by claiming that it will generate gross national income of up to RM4 billion per annum when the interest servicing cost for the project at completion may in itself come up to more than RM2 billion each year.

We call upon the Government to be completely transparent with the entire plan, design and financial impact of the MRT project to convince the rakyat that the MRT routes are optimised based on maximum public benefit, but also that it will not become an unsustainable project which will leave our future tax-payers with billions in debt.