PART IV: PAKATAN RAKYAT’S “ACID TEST” TO BARISAN NASIONAL

Pakatan Rakyat takes a very strong view on the need to have a strong political will to carry out economic reforms promptly and extensively.

The biggest challenge for Barisan Nasional is to prove that NEM (despite all the contradictions and gaffs already committed by Barisan Nasional leaders) is genuine and not a part of the continuous public relations gimmick, presumably developed by APCO Worldwide.

Therefore, the government needs to immediately response to the lukewarm reception of the market and public by demonstrating early political will to implement certain key economic reforms; failure of which will only confirm the prevailing sentiment that NEM is nothing more than repackaged past failures presented as a public relations campaign.

Pakatan Rakyat hereby outlines four key acid tests for Barisan Nasional that could and should be implemented immediately if it is serious in pushing economic reforms.

If Pakatan Rakyat is the government of the day, these four key economic reforms shall become a top priority as they bring about an immediate relief to the public as well as having a big impact in spurring economic growth.

Restructuring of four public utilities
There are four areas of public utilities that have been bogged down and tainted with criticisms for the burden they impose on the economy and the public.

These are electricity generation involving IPPs, water concessions, toll concessions and provision of broadband services.

Pakatan Rakyat views these four public utilities as key utilities that are vital to resuscitate the economy in two prongs.

Firstly, the provision of cheap and reliable utilities is key to lessening the burden of the public who have to pay premium while the concessionaires continue to make obscene profits at the expense of the public.

Only with the restructuring of these key utilities, the household expenditure can be reduced substantially thus allowing for other equally important reforms such as the removal of the petrol subsidy. One without the other is akin to the eyes without the ear.

Secondly, the availability of cheap and reliable utilities is a catalyst for industry to become competitive. The cost structure of our manufacturing and services sectors is very dependent on these four key utilities.

The status quo means an inherent high cost structure for the utility costs that the industry cannot control – hence why many enterprises resort to cheap foreign labours as a mean to lower down the cost structure.

In the case of broadband services (in particular high speed broadband), the country is desperate for cheap and reliable high speed broadband in order to drastically increase the internet penetration rate. The latter is crucial to widen the net so that more people can benefit directly from the vast opportunities presented by the internet and is a key prerequisite in any knowledge- and innovation-based economy.

Pakatan Rakyat has been consistent that the lopsided agreements with the toll and water concessionaires must be reviewed immediately to provide the relief to the people.

We are even willing to go one step further to take over the toll and water concessions by restructuring and consolidating the concessions so that the assets are returned to the government. Thereafter, a new concession agreement can be entered to avoid unnecessary escalation of cost to the public by ensuring an equitable and reasonable operating profit to the new concessionaires.

On gas subsidy to IPPs, Pakatan Rakyat feels that the allocation of gas subsidy to tune of billions of ringgit each year is wasteful and is counter-productive (if the intention is to provide subsidy to the public).

Most importantly, it is an open secret that the number of IPPs currently exceeds the demand for electricity in Malaysia.

Pakatan Rakyat is shocked with the revelation that “following the full commencement of the 1,400MW Jimah coal-fired power plant in July last year, the country’s power reserve margin rose to 66% in FY09”.

A reserve margin of 66% can possibly amount to one of the highest reserve margin in the world, considering that even developed countries like Australia has a common reserve margin of 25% (which is normally accepted as a reasonable reserve margin globally).

Pakatan Rakyat most certainly will conduct a holistic review of the power industry in Malaysia to ensure the right balance between demands and supply. A review of the business model of IPPs is necessary to ensure the billions of ringgit in gas subsidy borne by PETRONAS each year are allocated wisely to the area with most significant economic impact.

Finally on the broadband, while we acknowledge the huge investment commitment on the part of TM in providing the backbone infrastructure, we are of the opinion that the owner of the backbone infrastructure should not be in the business of providing the services to the end users.

Pakatan Rakyat advocates liberalisation of the internet service providers (ISPs) industry to allow for competition while the owner of the backbone infrastructure concentrates on ensuring a reliable internet infrastructure for the country.

Philosophically, this is in line with the current trend of managing public utilities where the aspect of assets maintenance and investment is separated from the distribution/services portion.

The capital-intensive assets maintenance and investment should be entrusted to a government-backed body as the availability and reliability of such key public utilities is the responsibility of the government; while service providers lease the assets to compete in bringing the best and cheapest services to the end users.

We feel this model will bring in more healthy competition and liberate Malaysia from the never ending debate on low internet service and penetration.

These four areas of public utilities exemplify the approach that Pakatan Rakyat would have taken if it is in Putrajaya because it can be implemented immediately with sufficient political will.

If Barisan Nasional is serious about economic reforms, the restructuring of key utilities as suggested here should be a test case for the public to gauge its openness to reform. Only then the public can take comfort that NEM will see the light of the day.

[Download Full Document]