Short Position


  • Business
  • Saturday, 14 Jul 2018

Lrt workside At sec 14 shah alam(13/07/2018/S.S.KANESAN/The Star)

Hot on the heels of Prasarana 

GOVERNMENT-OWNED Prasarana Malaysia Bhd has been in the news this week after the Finance Ministry (MoF) called for drastic cost reduction for its LRT3 project.

With the national debt well over a trillion ringgit, this is much needed and as some will attest, Prasarana, which was supposedly set up to manage public transportation in Malaysia, has somehow veered from this objective.

It has reportedly chalked up billions in debts since its establishment in 2003, partly because it went into overseas projects in Saudi Arabia.

As a unit of the MoF, all of Prasarana’s costs, debts and overall financial obligations are Malaysia’s concerns. And its lack of efficiency – if its debt position is anything to go by – should stop.

Prasarana president and CEO Masnizam Hisham, who has been in the job for six months, must step up her efforts to revamp Prasarana.

Back to the LRT3 project, the MoF said it would withhold its support for extra funding unless Prasarana finds a way to slash the total cost of the project, which currently stands at a whopping RM31.45bil.

The projected total cost of the LRT3 of RM31.45bil due to poor management by Prasarana requires drastic cost reductions to make the LRT3 feasible and cost-effective, Finance Minister Lim Guan Eng has said.

In 2015, Prasarana appointed MALAYSIAN RESOURCES CORP Bhd (MRCB) and GEORGE KENT (M) BHD (GKent) as the project delivery partner for the LRT3.

A total of RM9bil was for construction cost and there was an allocation of up to RM1bil for land acquisition.

Notably, Prasarana had in 2015 secured a government guarantee for a RM10bil bond facility to fund the LRT3 project.

However, on March 30, 2018, Prasarana had requested for an additional RM22bil in government guarantee to ensure funding for the construction and completion of the LRT3 project.

The additional amount quite obviously does not sit well with the new Pakatan Harapan government.

 

Getting more for what you pay

BROADBAND users in Malaysia have always wondered just what kind of service they are getting for the price they are paying. For a long time, many customers of broadband services in Malaysia had to pay a much higher price for the speeds they were getting.

It was great news for many that their speeds will be increased by almost ten-fold at no extra cost after the middle of August with TELEKOM MALAYSIA BHD (TM) bumping up speeds to match what most countries are giving.

In fact, for the price point consumers are paying and the speeds they are getting, the service they are getting is way better than what many in other countries are getting.

The only question is whether this could have been done earlier.

With TM giving such an increase in Internet speeds to consumers, it is apparent that it could have been done earlier. By increasing speeds to such an extent, it means that TM had the capacity to do so and one would think that it didn’t because it had pricing power and was able to price higher speeds for more money.

The action by TM puts pressure on other broadband providers to do so with the change in how packages are now being rolled out to consumers.

That, however, is still at odds with what the new government has promised, The deal was to double the speed at half the cost, But by giving ten times more speed. TM can argue it is giving more that what has been promised.

The focus now is on the other players. Maxis, which rides on the high-speed broadband network, has to correspond with its offerings and Time dotCom.Bhd will have to up its service to consumers to keep pace.

This episode of how broadband service in Malaysia has been tackled is a lesson to most. The dismantling of monopolistic services is essential in giving better service and lowering cost and that is what is needed for the betterment of consumers.

 

Where is the benefit of zero-rating the GST?

THERE is a reason why the new government has asked restaurants and retailers to continue with the inputting of the goods and services tax (GST) receipts into their cash registers. It is from finding out that after it had zerorised the GST charges, the drop in prices was not being felt by all quarters of the public.

It has been reported that 30% of mamak restaurants have raised their food prices despite the GST having been zero-rated since June 1.

However, it is heartening to know that 70% of shops have not and there has been an overall drop in prices by retailers after the GST was done away with.

The understanding when the GST was cancelled was that there should be a universal reduction in prices by way more than the 6% GST rate. The reason for the outcry before was that a lot of outlets had raised prices by more than 6% due to cashflow issues. They had to pay the government for the 6% they received but had to wait for some time to collect the 6% on a squaring-off process that was not efficient.

Hence, that is why prices were increased by way more than the GST rate. Now, what needs to be disclosed is just how much the public has benefitted from the abolishment of the GST.

If consumers do not receive the full benefit from the reduction in the GST, it would mean that businesses have pocketed the difference. There has always been a concern that businesses would do that and based on the data released by the government, it would appear that this is exactly what has happened. Essentially, the government and consumers would have lost out at the expense of businesses.

The one way to ensure fairness is to make sure that those businesses are fully punished for their profiteering.


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