Frankly Speaking: Oct 4-10, 2010

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Time for national healingIn the wake of public outrage at the racist statements allegedly made by a senior civil servant of the National Civics Bureau recently, Chief Secretary to the Government Tan Sri Sidek Hassan issued a press statement last Friday explaining the procedure that has to be followed for disciplinary action to be taken against public officials who touch on racial and religious sensitivities.Sidek pointed out that, in line with the principles of natural justice and the rule of law, the government is guided by the provisions of the Federal Constitution concerning the procedures for disciplinary action and cannot act in haste due to pressure from any quarter.

The Chief Secretary also announced that he had issued a circular reminding all heads of department to ensure that civil servants do not make statements that are racist or that hurt religious sensitivities, and to take action promptly against any officers involved, in accordance with the Public Officers Regulations (Conduct and Discipline) of 1993.

Sidek’s statement affirms the government’s commitment to the rule of law and indicates that the requisite attention is being paid to get to the bottom of the matter.

In the interest of fostering healthy inter-communal relations in the public service and the larger public arena, the incident should act as a catalyst for inculcating an institutional culture that embraces diversity. Such an environment will in time supplant the ethnocentric atmosphere that has permeated virtually all spheres of life in the country.

A national healing has to begin now in order that future generations can enjoy a climate of mutual respect, appreciation and cooperation. Failure to address festering ill feelings among the various communities of Malaysia today could lead to the breakdown of social cohesion, a negative outcome that must be avoided by all.

Oil gamble There is nothing wrong with being ambitious, but when companies take high-risk ventures, it has to be hoped that they have the resources to see the projects through.

Last week, Uzma Bhd provided an update on its oil production activities in Inner Mongolia, China, where its 35%-associate, Uzma Oriental Company Ltd, has a 15-year concession to drill and produce oil in the Baiyin Chagan Basin. It successfully drilled six wells in the concession area in late 2009.

It added that three new wells have been drilled to a depth of not more than 600m and there are plans to drill another five before the onset of winter.  Drilling and testing oil wells is an expensive and high-risk venture.

Uzma, which was listed on the then Second Board of Bursa Malaysia in July 2008, was still loss-making in FY2009 ended Dec 31, with after-tax losses of RM11.9 million, compared with profit after tax of RM10.3 million the year before. Meanwhile, revenue fell 26.6% to RM98.8 million. The lower turnover was mainly due to slower completion of existing projects and lower sales, while losses were due to higher operating expenses, according to Uzma’s latest annual report.

Although its gearing is low, the group’s shareholders’ funds stood at RM49.9 million as at end-2009, compared with RM64 million a year earlier.

For the first six months of FY2010, Uzma remained in the red with cumulative after-tax losses of RM2.8 million on the back of lower revenue of RM49.9 million. Meanwhile, net cash from operating activities was lower at RM2.1 million as at June 30, compared with RM7.1 million a year ago.

Shareholders can only hope that Uzma’s ventures will bear fruit soon and yield returns to shareholders.

High-risk gameProton’s subsidiary Lotus International Group Ltd unveiled five models at the Paris Auto Show that it plans to produce between 2013 and 2015.  Early reviews have so far been good.

Obviously, Lotus is following in Porsche’s footsteps in producing cars for a wider range of customers. Under Volkswagen, Porsche has been producing more four-door models, breaking away from its trademark two-door sports classics.

But Porsche’s gradual shift is supported by a strong shareholder in the form of Volkswagen. As for Lotus, it has to rely on Proton Holdings Bhd.

The plan to revive Lotus is not cheap. It will cost the company some RM1.3 billion over three years.  Of the amount, some RM500 million will have to come from shareholders, meaning Proton.  The rest is to come from Lotus taking on debt.

It must be noted that, so far, Proton has already extended some RM300 million to Lotus that has not been recovered yet.Going forward, more will be required from Proton for Lotus to implement its plan. This is a given, considering that the company has said many times that Lotus is not for sale.

But can Proton afford to support Lotus financially in the latter’s plans to roll out new models?

If the new models launched rev up Lotus’ sales volume, then Proton’s gamble will pay off handsomely. But what happens if they fail to generate the kind of sales expected?

Who will be left holding the baby? It will be Khazanah Nasional Bhd, which is the dominant shareholder of Proton. Not the managers who run the company today.

This article appeared in Corporate  page, The Edge Malaysia, Issue 826, Oct 4-10, 2010