PERENNIAL WHIPPING BOYS EPF & KWAP FUNDED RM30 BILLION LOAN TO PFFI. NUR JAZLAN & PAC - DID YOU ASK THE RIGHT QUESTIONS?

by lease-con , donplaypuks® intrepid correspondent for bumiputra con-struction con-tracts

One sometimes wonders if Nur Jazlan knows his job as Chairman of The Public Accounts Committee (PAC).  Should we have some respect for his position as a watchdog and caning master or should we just lump him and write him off and the PAC as another shortcoming of the Najib administration. 

Seeing as to how he is the son of former Information Minister Mohamed Rahmat, could we really expect him to crack the whip at the civil service and government for what now seems to be the same litany of woes, only increased in number and monetary value, tabled year in year out by the Auditor General? Can an UMNO/BN MP be neutral in heading the PAC and work totally in the interest of the Rakyat? Shouldn't the PAC be headed by an Oppoistion MP or retired one? Put facetiously, can Dracula be the auditor for the blood bank?

For example, The MAHB blew its budget for KLIA2 by some RM2 billion. Sure, the PAC held an inquiry. But what has the PAC done to ensure LAD is collected from the delinquent contractor and punished those at MAHB who were responsible for this financial fiasco? Have the MAHB Chairman/CEO and Board of Directors been charged in court with dereliction of duty or let off through silent inaction or a slap on the wrist ("You naughty boys!")

For one, a PAC should be judged by what it has exposed and the action actually taken against offending civil servants and Ministers, and not by the number of meetings and inquiries it has convened. Should the Taxpayer accept that the PAC cannot hear this or that because it would be sub-judice Parliamentary inquiry or court cases on some stupid police or MACC investigation? Independent bodies are set up to precisely to step in before the shit hits the fan and the horse has bolted, where dodgy dealings seem to be afoot concerning massive public funds. 

Why are PAC hearings held behind closed doors and not open to the public?

Should a PAC Chairman be publicly gushing over the improbable explanation by MoF Chief Secretary Mohamad Irwan Serigar Abdullah, presumably the main architect behind the whole Pembinaan Private Finance Initiative S/B (PPFI) scheme, that it is "innovative financing"? CLICK HERE for my earlier blog post on the PPFI scheme and concerns. This kind of "innovative financing" would seem, and I hope I am wrong, to border on a kind of fraud by cooking up fancy agreements and valuations, and playing around with semantics.

Basically, the Government borrowed RM30 billion, 20 from EPF (Employees Provident Fund) and 10 from KWAP (Kumpulan Wang Amanah Pencen or Government Pensioners' Fund) at "commercial rates of interest", and used it to fund, so they say, some 886 projects, for infrastructure, schools etc., employing "small" Bumiputra contractors. 

EPF has for long been the government's perennial whipping boy for all kinds of government bailouts and fire-fighting. KWAP was also the whipping boy for the 2001 RM900 million bailout (by Diam Diam) of TimeDotcom and the more recent RM4 billion in 1MDB's coal mining venture whose value has shrunk by more than 50%, necessitating the government taking over the investment (read as nailout).

PPFI secured the loans by pledging 186 parcels of land valued at RM 30 billion transferred to it by the Federal Land Commissioners (FLC) from government-owned land, which PPFI then sub-leased back to the FLC for RM30 billion payable semi-annually over 15 years. The lease payments are utilised by PPFI to service loan interest to EPF and KWAP.

The curious thing about this whole precarious set-up is that the Bumiputra Contractors' Association (PKMM) seems to know nothing about this mega spending by PFFI. If Nur Jazlan thinks that his answer that "PKMM’s membership is not all-encompassing among the country’s contractor pool and that the projects may have gone to qualified non-members" will wash with the thinking public, he'd better think again. How does he explain that not even a singe project was awarded to a member of PKMM?

When asked if the contracts were awarded by open tender, or direct negotiations (the BUMNO/SCUMNO/Barang Naik preferred method), he did Najib and the PR spindoctors from Boston Consulting, McKinsey and Apco proud with his reply:

"All projects were awarded through normal ministry procedures and may involve a mixture of both processes as needed."

"Normal Ministry procedures"? What is normal and who has oversight? How many by open tender and how many by direct negotiations, the preferred BUMNO/SCUMNO/Barang Naik non-transparent method? Did Nur Jazlan direct that important question to Serigar Abdullah and PPFI, or is that information Unconstitutionally classified under the Official Secrets Act?  

Perhaps, Nur Jazlan should also ponder over the following questions too, and get straight answers from Serigar Abdullah and the MoF and PM Najib since he's the Finance Minister:

1. Where are the exact locations of these 186 parcels of land?

2. Who did the valuation of the land to arrive at RM30 billion?

3. To secure RM30 billion loan at a margin of say, 70%, the land value would have to be RM43 billion. What is the acreage of land involved and what is the per square foot valuation? Were independent private-sector real estate valuers engaged or was it all done by the government?

4. Did the EPF and KWAP carry out their own independent land valuations, as any self-respecting bank or lender would, and if so, where are the reports and what were the valuations?

5. How does borrowing from EPF and KWAP, both managed and controlled by the government, constitute private funding? Who are you kidding?

6. If the FLC is paying lease rentals of about RM2 billion a year for 15 years (total RM30 billion) what value is it getting for it? The rental payment must give FLC a right to enjoy something. What is that thing, that benefit? Or is it a fictitious arrangement which would then constitute open fraud by the MoF, the Government and PM Najib since he is also the Finance Minister?

7. Why is the list of projects a big secret? Surely the public is entitled to know the names of the contractors, what were the projects, whether they were awarded by open tender or direct negotiation and how much each was paid. Most importantly, were the projects completed and was there value for money audits done by the MoF or the Auditor General?

8. Malaysian Government Security (MSG) interest rate +15 basis points is about 4% per annum. How can this be called competitive loan rates for EPF and KWAP? Why should EPF and KWAP lend at this low rate when it has a duty to its members to maximise its income and profits? Does this not constitute arm-twisting EPF and KWAP to the financial detriment of its members?

9. Ultimately, it is the Taxpayer who will be funding the project and not the private sector. The FLC will have to keep coughing up, on average, RM2 billion a year for 15 years. The interest on RM30 billion @ say 4%, is RM1.2 billion, leaving RM800 million a year to service loan capital and operating overheads. So, where will the government get some RM 18-20 billion to repay EPF and KWAP the balance of the loan when it eventually matures in 2023?

10. Is the MoF using part of the RM30 billion to service what appears to be its "cooked up" lease payment obligation of RM2 billion  a year with PPFI? Is this proper and in the public interest?

11. Doesn't this resemble the 1MDB situation, where basically government guarantee is being used to raise capital, in this case 100% borrowing, and the cash flow shortage is being financed by rolling loans over again and again? Is this an acceptable business model, where there is grave doubt that the land pledged is worth anywhere near RM30 billion?

12. “The PAC was also asked on the risks born by the ministry and how the funds are managed and utilised,” said Nur Jazlan. 

What was their answer? Don't worry, there's is absolutely no risk? Easy to say that when it's not your money or risk, isn't it? 

Look at the 1MDB mess, and then say "absolutely no risk" again! 

I shudder when PAC officials, politicians and Chief Secretaries to the Government nonchalantly dismiss RM30 billion and RM46 billion debts which ultimately the Taxpayer/Rakyat will have to foot, as though we are talking about peanuts. 

Who do we have heading these important government posts with their multi-billion rinngit budgets - financially savvy Warren Buffet-types or Monkeys/Chimpanzees?

 Donplaypuks® with fictitious lease arrangements and mysterious RM30 billion projects, man!