Frankly Speaking: Feb 28 – Mar 6, 2011

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The PTPTN quandaryLast week, the National Higher Education Fund Corporation (PTPTN) gave unemployed graduates a reprieve by extending the period to start servicing their loans to 30 months after graduation instead of 24 months.

A few weeks ago, the outfit had announced a whopping 45% increase in loan disbursements this year to RM5.8 billion from RM4 billion last year. Given that the 2009 Auditor General’s Report had raised concerns that the fund will face a deficit of RM46 billion up to 2016, the extension is certainly generous.

The projected deficit is due to the well-known fact that PTPTN has difficulties — or perhaps no political will — in collecting payments. It has disbursed RM24 billion to 1.3 million students since its establishment in 1997, but had collected only 10% or RM2.3 billion up to the end of last year.

Considering the staggering amount of uncollected debt, fears grew that PTPTN would scale down its loan disbursement in the future. Predictably, things are safe for now due to the prospect of a general election.

But can PTPTN realistically afford to cut down its disbursement? The truth is, it is not just the students who depend on such loans, but the education sector as well. When the fund reduced certain loan amounts last year, some 150 small colleges felt the heat.

The only way to go about this without disrupting the education sector is to collect bad debts. In other sectors, a special-purpose vehicle would be created for this task, but the government is looking at setting up a system with the Inland Revenue Board to deduct instalments straight from salaries.

However, considering that most of PTPTN’s collection has been from loans given out in the past three years, trying to recover 14 years of debt is a mammoth task. At the end of the day, the money can be collected. But without political will, this looks like a lost cause.

Who loses most from Bakun?The Bakun Hydroelectric Dam continues to haunt the contractors involved in the project. Last week, MTD Capital Bhd provided for some RM36 million of foreseeable losses from the project.

So, what’s new? Almost every contractor that undertook a job in the dam incurred losses, with Sime Engineering Bhd leading the pack.

But the biggest loser is likely to be Sarawak Hidro Sdn Bhd, the Ministry of Finance unit that owns Bakun. As early as April last year, the dam had fulfilled all its technical requirements to start the impounding process, but the order came through only in October last year.

And now, the sale of the dam to Sarawak Energy Bhd, Sarawak’s dominant electricity supplier and distributor, seems to be making slow progress. Since the middle of last year, Sarawak Hidro has been approached by various parties interested in Bakun. Finally, Sarawak Energy was given the green light to commence negotiations with Sarawak Hidro to take over the dam.

But until today, no agreement has been reached. While the state utility firm can afford to prolong negotiations and consequently the takeover, can Sarawak Hidro afford the delay?

Effectively, the longer the negotiations, the bigger the holding cost for Sarawak Hidro, which spent at least RM7.3 billion on building the dam. Imagine the interest cost!

After the brouhaha over the sale of Bakun last year, everything went quiet after it was determined that the dam had been earmarked for Sarawak Energy. But has a deal been concluded? Probably not.

And as long as there are delays, the biggest loser will remain to be Sarawak Hidro.

Transparency the best policyThe water concession agreement between the federal government, the Selangor government and Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), which a group of 14 litigants wants to be made public, belongs to a past era.

That was when the federal government entered into a slew of concession agreements on the delivery of what were deemed public goods.

The arguments for privatisation, including the need to keep bureaucracy small and stimulate private investment, must be balanced by well-functioning regulatory mechanisms to ensure efficiency and to protect the public interest. The usual indicators — transparency, a cost-benefit balance, performance and accountability — are indispensable for positive outcomes when public assets are taken private.

It is in this light that the Coalition Against Water Privatisation, on June 14, 2007, sought a court order that then Energy, Water and Communications Minister Tun Dr Lim Keng Yaik reveal the contents of the water concession agreement and an audit report. It argued that the audit report had been the basis for a 15% increase in water tariffs in the Klang Valley on Oct 14, 2006.

Last Friday, the Appeals Court ruled 2-1 that the contract and audit report could not be disclosed, overturning the High Court decision of June 28 last year that the disclosure of the documents would not be detrimental to the national or public interest.

Dissenting judge Datuk Mohd Hishamudin Mohd Yunus said: “The citizens have a legitimate expectation to know the process involved in determining any increase in tariffs.” Neither the state government nor Syabas had any objection to the disclosure of the concession agreement, he said. As with the toll concession agreements made public two years ago, the federal government may find it harder today to explain why the people have to pay more for services but cannot be told the terms under which public goods were signed over to private companies.
 
 
This article appeared in Forum page, The Edge Malaysia, Issue 847, Feb 28 – Mar 6, 2011