Power subsidies: Their mistakes, our liabilities


Malaysiakini Your Say | May 26, 11

‘I doubt anything substantial will come out of the re-negotiation as the IPPs and Umno are sitting on the same side of the table.’

Transparency of IPP contracts ‘long overdue’

Kgen: The lopsided IPP (independent power producer) agreements are the result of Dr Mahathir Mohamad forcing TNB (Tenaga Nasional Bhd) to sign on the dotted line.

I frankly doubt anything substantial will come out of the so-called re-negotiation as the IPPs and Umno are sitting on the same side of the table – they feed each other at public expense.

The IPPs only have to give the faintest bleat of protest before the government backs off. Readers may be interested to know that despite the 40 percent excess electricity in the peninsula, yet another IPP power station in Manjung will be commissioned soon.

Cala: To the regime and their cronies, IPP contracts are as similar as honey is to bees, and opium is to drug addicts (as argued by MP Tony Pua).

To expect a re-examination of the terms of the contracts calls for exceptional political courage and foresight, something that is a tall order to a regime which has displayed little conviction to fight for public interests in its entire 53 years of uninterrupted rule.

So why is there a need to do so as suggested by minister Idris Jala? Three issues require our closer examination:

i) allocative efficiency
ii) incentive structure
iii) the benefiters behind IPPs

First, Malaysia is a Third World nation characterised by its preference for allocative efficiency in economic planning. Putting the said contracts in a lopsided fashion in favour of IPP producers is a case in point.

Second, what is the incentive structure for IPPs to surrender part of their bloated profits? None, unless of course someone comes to his realisation and is embarrassed by the magnitude of rent-capture. There is yet another reason for change, i.e. if the regime perceives trouble ahead, and in this instance, may twist the arms of IPPs (which are also their own arms anyway).

Third, who are behind IPPs? Since corruption and rent-seeking are the hallmarks of the Umno-led BN regime, one does not have to put them on public display. Recent public statements from DPM Muhyiddin Yassin who warned party members against complacencies and urged them to put public interest before self, are signs of admission of guilt.

Similarly, MCA chief Dr Chua Soi Lek too realised how little the party has done to protect public interests, and he foresees a dismal performance in the imminent general election. However, none of the above matters to the regime. Only the fear of losing in a GE may force an overhauling of IPP contracts.

Anonymous_5fb: The rational (if there is any rationality here) behind the unfair advantages to the IPPs is not ‘crony per se’, but political funds to you-know-who. If not, why be so secretive?

Even then, they have no shame at all. The ‘worms’ will only surface when Pakatan Rakyat takes over Putrajaya.

Opaque: Yes, it may be hard to amend agreed terms even though they are clearly lopsided. But as lawmakers, clearly there are many other ways the government could do to reduce the lucrative profits enjoyed by IPPs, including introducing ‘polluters pay’ tax, which has been proven successful in many countries.

The tax not only puts the pressure on top polluters to change to cleaner technologies but revenues collected could be put to better use, e.g. for upgrading of the appalling state of our public transport system.

The question is not whether they have a legal basis but rather do they have the political will to do the right thing against these lopsided agreements?

Longjaafar: It would be good to know the rationale for the signing of such one-sided contracts in the first place. To add insult to injury, such contracts are deemed ‘official secrets’, as if the disclosure of them may affect national security. This is stupidity at its lowest (or is it highest?).

Cannon: Transparency is the way to go. Malaysians should penetrate the veil, deny these pirates the cloak of secrecy for them to transact the people’s business in the dark. Maintaining transparency will help expose their crooked deals and stop the plunderers in their tracks.

Sandakan: Deputy Finance Minister Awang Adek Hussin said, “Do you want Malaysia to be known throughout the world as a country that can take back contracts that have been signed?”

But what about the agreement to allow Communist Party of Malaya leader Chin Peng back into the country? Malaysia has no principles and cannot be relied to keep its word under Umno.

EugeneT: I rather have Malaysia be known to be able to correct past dubious practices and come out clean in the end.

Why should Malaysia be known to the world as a country that gets holed in bad lopsided deals and practice cronyism? This only raises questions on Malaysia’s capability to make wise economic decisions.

Sarajun Hoda: Well, while we are at it, let us pry open the Petronas accounts too. The oil and gas belong to the people and we have the right to know how much exactly is our revenue and how it is being spent.

I am sure, if we can save the wastage, the government will not need to cut subsidies, afford more tangible developments, reduce spending and make every Malaysian happier, healthier, wealthier and wiser. Make Petronas accounts public.

Kit P: There really is only one route to getting a transparent and fair contract between the government and the IPPs – the rakyat needs to punish BN at the polls. It is the only language Umno/BN understands.

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  1. #1 by Bigjoe on Thursday, 26 May 2011 - 3:00 pm

    You don’t need to open up the IPP contracts to even know what happened. Utilities are suppose to be low profit, long gestation business, its not suppose to be able to make instant billionaires create rags to riches stories. How its able to create so many of them instantly tells you how its done. The simple scheme was they charged market rates of the electricity they sell to TNB while getting subsidized input from Petronas, its as simple, straighforward as it gets. The contracts were fraudulently obtained and hence if the govt can sue the IPP for it and essentially even nationalize it, even recoup back previous subsidies. There need not be any national credit crises. period. A lot of crony company stock will take a deep dive but that is about it..

  2. #2 by Winston on Thursday, 26 May 2011 - 4:07 pm

    We all know how to end all these nonsense, don’t we?
    Just go full steam ahead to boot them out in the next GE!!!

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