Frankly Speaking: Dec 20-26, 2010

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Dilemma for Stamford College minoritiesIt has been more than two weeks since Stamford College Bhd’s shareholders passed a resolution on the proposed ratification of the education group’s plan to diversify into steel product manufacturing.

The diversification is part of the group’s regularisation plan to rehabilitate its balance sheet and come out of the Practice Note 17 category. Under the plan, the manufacture of alloy and long steel products will become the group’s core business.

But the regularisation plan was rejected by Bursa Malaysia in July on the grounds that the group’s steel manufacturing business had only commenced operations in February and had yet to prove viable, according to Stamford College’s announcement on July 26. At the same time, its existing education business continues to bleed red ink. Thus, Bursa is of the view that the sustainability of the company’s operations remains uncertain.

Furthermore, Bursa says the steel manufacturing business is “highly dependent on a single supplier and single customer, which is a related party, to sustain its operation”.

Nevertheless, the company went ahead with a shareholders’ meeting to get approval for the regularisation plan.

In a circular to shareholders dated Nov 8, the company indicated that it has a diversified base of suppliers. It admits it only has one customer currently but its “dependence is expected to reduce” in the future.

The steel mill is already part and parcel of Stamford College and the shareholders’ meeting on Dec 2 was sought merely to ratify the group’s diversification.

Several questions begged to be asked: Why did the company seek shareholders’ approval for a plan that had already been rejected by Bursa? What is Stamford College’s future? Can it be revived or will it be delisted?

An even more pertinent question would be, should Stamford College have held an EGM?

As the regulator of the stock exchange, perhaps Bursa should state its stand again, just to clear any doubts that the minorities may have.Why the tax needs to be waived?The compensation the government has to pay PLUS Expressways Bhd, should it disallow toll rate hikes, is much higher than the amount it loses for not collecting taxes from the concessionaire.

It has come to our attention that in present value terms, the compensation for the remaining concession period that stretches up to 2030 is said to be some RM30 billion.

This is why the UEM Group-Employees Provident Fund joint venture is seeking a tax waiver in respect of all the highway concession assets. The tax waiver, if granted, will mitigate the impact on the joint venture as the government has said it will not increase tolls for all highways under PLUS for the next five years.

PLUS is one of the highways where the toll collection growth rate increases at a much faster pace than the tax rate, which is on the decline. In fact, it is said that even now, after taking into account the tax allowances, the tax PLUS pays the government is not significant.So, there is a reason why the UEM-EPF JV is seeking a tax waiver. However, not all the reasons were disclosed in a circular distributed to the shareholders.

Perhaps the legal experts hired by the UEM-EPF JV felt that the information was too sensitive, or that it would impact the JV’s renegotiations with the government on the toll concession agreement.

Nevertheless, with the amendments to the Code of Take-overs and Mergers, the promoters will not be able to withhold such information from shareholders. That is a story for another day.

The UEM-EPF JV’s proposed takeover of PLUS for RM23 billion is under scrutiny by shareholders of other regulated assets. It will be a model for others to overcome the problem of not getting rate hikes for their concession assets.

But can a tax waiver be applied uniformly? Will it be granted to the owners of other regulated assets as well?

This is left to be seen as not all concession assets are as profitable as PLUS’. But then again, not many are losing money, at least as far as the original promoters are concerned.

Where is the debate?The controversy over the suspension of four Opposition members of parliament (MPs) last week does not augur well for the proper conduct of parliamentary proceedings.

The suspension of Opposition leader Datuk Seri Anwar Ibrahim and MPs Karpal Singh, R Sivarasa and Azmin Ali of the Pakatan Rakyat coalition for six months has stirred public disquiet, primarily because there was no debate in  Dewan Rakyat of the motions to suspend Anwar and to cite his fellow MPs for contempt before Speaker Pandikar Amin Mulia called for the motions to be voted on.

The first motion, a recommendation by the Rights and Privileges Committee to suspend Anwar for linking the government’s 1Malaysia slogan to the One Israel campaign via APCO Worldwide, was put to the vote by the Speaker who said that the Opposition showed no intention to debate the matter.

This decision has cast a shadow on the standing of Parliament as the august forum for debating issues of national importance and diminishes the role of parliamentarians in seeking accountability for official actions on behalf of all citizens.

After the motion against Anwar was passed, all Opposition MPs staged a walkout, leaving the MPs from the ruling coalition to take a meaningless decision to suspend the other three members for contempt in connection with a Rights and Privileges Committee hearing.

The entire episode gives the impression that the process of parliamentary debate has been short-circuited.

 
This article appeared in Forum page, The Edge Malaysia, Issue 837, Dec 20-26, 2010