Today’s media report top government leaders virtually falling upon one another in their competition to denounce and declare action being taken against fugitive blogger Raja Petra Kamaruddin and Malaysia-Today website under the Official Secrets Act for leaking on the Internet an 18-page Treasury Memorandum to the Cabinet in June 2007 on the RM12.5 billion Port Klang Free Zone (PKFZ) scandal.
Led by the Prime Minister, Datuk Seri Najib Razak, those who had spoken of action under the Official Secrets Act include the Home Minister, Datuk Seri Hishammuddin, the Attorney-General Tan Sri Gani Patail, the Deputy Inspector-General of Police Tan Sri Ismail Omar and Director of Commercial Criminal Investigation Department, Datuk Koh Hong Sun.
However, none of them has shown any concern about the right to know of Malaysians about the hows and whys the taxpayers are being burdened with the “mother of all scandals” – the RM12.5 billion PKFZ scandal running through three Prime Ministers, three Finance Ministers and four Port Klang Authority Chairmen.
Najib said: “We will inform the people what we should concerning the case and we will do so later but that is no excuse to reveal cabinet papers.”
The question Najib has failed to answer is why the Cabinet papers on the RM12.5 billion PKFZ scandal should continue to be kept as secret documents instead of being declassified, unless the Barisan Nasional has skeletons in the cupboard which must be kept hidden from public knowledge and scrutiny.
As former member of the Cabinet, the Chairman of Public Accounts Committee, Datuk Azmi Khalid would have access and digested the Cabinet documents on the PKFZ scandal.
Why didn’t the PAC, under his chairmanship, summon the Chief Secretary Tan Sri Mohd Sidek Hassan to appear to help the PAC inquiry into the PKFZ scandal and testify as to the information given to the Ministers and the decisions taken by the Cabinet on the issue?
Shouldn’t the PAC take a stand that all the Cabinet documents and papers relating to the PKFZ scandal should be declassified not only for full study by the PAC buit also by all MPs and the Malaysian public – unless there are skeletons which must be kept hidden?
In the PAC hearing on August 12, the Attorney-General Gani Patail had made clear his position that the four Letters of Support issued by the two previous Transport Ministers Tun Dr. Ling Liong Sik and Tan Sri Chan Kong Choy from 2003 – 2006 for the RM4 billion bonds by the PKFZ turnkey contractor Kuala Dimensi Sdn. Bhd (KDSB) – and which has landed the government with the RM12.5 billion PKFZ scandal – were in fact Letters of Guarantee and had been unlawfully issued.
The next logical question is why the Attorney-General did not prosecute the two former Transport Ministers for unlawfully issuing the four Letters of Support landing the taxpayers with the RM12.5 billion PKFZ scandal?
This is the question which the Attorney-General and the government leadership should be answering instead of running after Raja Petra and Malaysia-Today under the Official Secrets Act for their role as whistleblowers.
Who do not want to enjoy the ill gotten gains when they are drunk by that even if that is rotten system?
The power crazy people would LOCK up the whistle blowers for their indulgence and to be drunk in corruption forever.
I have been whistle blower since 1969…and survived to helm the IGGG.
pw: drabs SZULC
Why did Nor Mohamed Yakcop as Finance Minister II sign a letter to the rating agency to confirm that the letters of support signed by Ling and Chan constitute valid and binding obligations on the government ? This MoF letter allowed the rating agency and their lawyers to give the KDSB bonds a triple A rating.
Can Najib make this MoF letter public ? Or is he trying to cover up as much as he can under the OSA ?
The PKFZ scandal is nothing more than a BN project to raise funds for the March 8 elections. Now that the funds were either misused or proven to be ineffective, BN has to cover up their misdeeds. That is what the Super Task Force announced by Najib is mandated to do.
Maybe he was also part of the gang and hence prosecution was dropped.
The purpose of government is to serve the people, and not the other way round. UMNO has to rethink its priorities.
AG is still in the sewage oxidation pond
Cari-ing his bola
How to prosecute Ling n Chan lah
Persecute RPK n Malaysia Today
Yes, anytime, no bola needed
The wrongdoings in PKFZ scandal is protected by Official Secret Act. This is happening in this ‘boleh land’.
And this is only the tip of an iceberg…. The people must be wondering how many more wrongdoings and criminals are protected by ‘official secret act’ or those who are walking in the corridor of power?
To have a CLEAN MALAYSIA, get rid of En. OSA and En. ISA first!!!!!
//The next logical question is why the Attorney-General did not prosecute the two former Transport Ministers for unlawfully issuing the four Letters of Support landing the taxpayers with the RM12.5 billion PKFZ scandal?//
Sdr Lim, I do not know issuing a letter of support per se is against the law and subject the ministers to prosecution. But I do know that sophisticated bond investors and traders would know the difference between the letters of support and the letters of guarantee. Don’t bark at the wrong tree. But be that as it may, I am not saying that those issuing the letters of support are not part of the conspiracy.
You see, in almost all moral hazard situation, the only sucker is the national coffer (i.e tax payers’ money). It is never the promoter (Kuala Demensi), or the individuals supposedly representing the government (MOF, MOT, PKA) or the bond investors and the deal makers.
For moral hazard to work, those stand to gain have almost zero risk. Bondholders have returns but with no risk because the bonds are guaranteed by the government, so there is no likelihood of default. There is no risk to Kuala Demensi because the loans given to the company is like an income. There is no need to pay back (so who cares whether or not the cost of project is five or 10 times overshot); remember the government has guaranteed its debt. For individuals in government, there is no risk but everything to gain – big fat “privileges” pampered by bond traders and promoters.
If I have one solution to this, I suggest that the government defaults the bond repayment. Let the bond holders go after Kuala Dimensi, how about it? We must teach the bond investors a lesson. I know it is easier said than done because with the letters of guarantee issued by the government, the bond holders will sue the government if they fail to get the payment from Kuala Dimensi and our judiciary is “independent” when come to issue like this. You got the point now; it is just like our North-South Highway concession – guaranteed traffic, guaranteed toll raise, semua guaranteed termasuk anak cucu. Either we are most stupid or most corrupted government in the world – you choose one.
The land alone which PKA bought for RM 1,064 million cannot make it a PKFZ, and the balance of RM 24 million available to the project was not enough even to build roads inside the 1,000 acres site. Clearly PKA had acted irresponsible in utilising 98% of the budget to acquire the land, since it was obvious that the project would be a still birth without additional funds from the government. That went against the Cabinet decision for the project to be self sustaining within the budget alloted.
Miraculously the minister was able to obtain supplementary funds to allow PKA to continue with construction activities, at the cost determined by the only contractor Kuala Dimensi. The project cost determined by Kuala Dimensi might have been friendly or at arms length is an issue for government quantity surveyors, it is the invoice for work not done amounting to hundreds of million ringgit and the disputed interest charge which together exceeded the original budget for the project that make PKFZ exceptional. The government might later claim that the money came from Petronas, and not the tax payers who should not complain. That justifies their action against leakage of official secret information.
The few guarantee letters were a follow up to the schemes to facilitate payment, which might otherwise have to be paid by Petronas directly. The reason for the project cost overrun lies mainly with the purchase of land which determined that the project could not be self-financed within the budget of RM 1,088 million.
Was the Finance Minister responsible for agreeing to the purchase of the land, without Cabinet approval?
“We will inform the people what we should concerning the case and we will do so later but that is no excuse to reveal cabinet papers” – Najib
The above assurance given by Najib is just another one of his bluffs. When he is not prepared to ‘declassify’ those document pertaining to the PKFZ case as called upon to do so by true Malaysian Patriot, LKS, then the OSA will always be their excuse to cover-up.
If Najib is sincere about what he said, dare he publicly call on the rakyat to reject him if, again, this time nothing comes out of the investigations, turning the PKFZ scandal into a crime without criminals involved???
And, why go after RPK when what he has done is undeniably helpful to PDRM and MACC to bring to book those involved? Is the AG too concerned that by prosecuting Ling and Chan, hundred other names will surface including the one who ruled 22 years and now retired????
“If I have one solution to this, I suggest that the government defaults the bond repayment. Let the bond holders go after Kuala Dimensi, how about it?”
I have never come across a more stupid comment than this one.
Intensity of Umno + BN reaction = exposed rahsia docu (a) exist and (b) genuine. Quite simple.
“If I have one solution to this, I suggest that the government defaults the bond repayment. Let the bond holders go after Kuala Dimensi, how about it? We must teach the bond investors a lesson.” (limkamput)
limkamput is just a typical jerk of Malaysia who thinks that it is OK not to honour one’s covenant and legal contract signed with others!
No wonder the world confidence in Malaysia’ currency has alway gone down to the drain!
The recent polis and gomen’s actions confirmed that
Malaysia Today is more trustworthy than the spineless msm in terms of accurate news
All msm editors are truly rubbish
AG is a snakey guy. On one hand, he said the Letters of Guarantee are unlawfully issued yet he still does take any action to prosecute the issuers. Rather on the other hand, he is more concerned and quick to react running after the whistleblowers of PKFZ scandal.
The documents MT leaked out are actually an eye opener concerning the PKFZ scandal. They should have been declassified long time ago together with all documents on PKFZ for the investigators (pricewaterhouse, PCA, etc) and for Rakyat’s scrutiny as this scandal involved multi-billion ringgits of Rakyat money.
Isn’t AG the No.1 crooked attorney in Malaysia? Prosecuting the issuers i.e. the 2 formers ministers will badly affect the image of the BN Government while prosecuting MT as whistleblower with intention to frighten future whistleblowers of many wrong-doings, misdeeds and corruptions of BN Government. What kind of AG, our country is having??? He is now being exposed as one abusing his power to cover-up the evils of BN Government.
We are very sure that in Najib’s OSA classified cabinet we can find many, many skeletons.
Stupid he is….Jaswant…but daily UMNO and MCA are revealing how stupid they are thinking Malaysians can be fooled….with Najib commenting…how did secret documents got out…with not one word…of the said documents…proving UMNO knew everything about the PKFZ RM12.5 billion scandal……giving the green lights to everything…by the billions.
How stupid Najib thinks Malaysians are…..with not one word about UMNO”s approval….proven in the said documents published at RPK’s blog…..and talk of how did secret documents leaked out…yet saying UMNO have no secrets to hide from Malaysians.
You go and listen to kind of logic…and you will be stupid too.
#1. PKFZ scandal involving Billions of Malaysian Tax Payer’s Hard Earned Money classified under OSA.
#2. Malaysia Today is always criticized by Govt of reporting lies, etc.
#3. AG / BN Gov’t have just openly declare that the documents on PKFZ being true. Otherwise, why go after Malaysia Today. If not true, no case.
Coming to #1, since all Malaysian Tax Payer’s Hard Earned Money were sucked away due to OSA…can we (Tax Payers) not declare our own income as OSA? That is, the govt has no right to know our taxable income until the time is right. Tax payers will have the right to reveal that is necessary to the IRB (LHDN) what they need to know only bcoz every Tax Paying Citizen of Malaysia’s income should be classified as OSA & cannot be revealed unless the Tax Payer want to. If that’s the case, each Tax Payer have the right not to pay tax. Bcoz the Govt has just admitted Tax Payer’s have no right to know what’s in OSA, especially on PKFZ.
#2 & #3 means that public admittance by the Govt that what was revealed is “100% truth”. Don’t forget that PKFZ was also from TDM time. So, everyone from that time until now are involved one way or another. How can such a big amount of robbery go under the nose of the Govt? If Billions can be siphoned just like that, imagine what is next in the present cabinet.
Next thing we know, we spent Billions trying to patent each & every Malaysian dish.
good question why ag took no action. answer is …. ag singing ‘WE ARE FAMILY’
““If I have one solution to this, I suggest that the government defaults the bond repayment. Let the bond holders go after Kuala Dimensi, how about it?” Mr Schitzo
If the government were to default on any of its loans, it’s international credit rating would plummet, interest at which others would be willing to lend to it would soar, the terms turn for the worse, and worse it would find it difficult to borrow in the world’s capital markets. Now how stupid is that? Tell me!
This man is completely delusional. And he says he lectures post grad students! Check it out!
Onlooker politics, please read in full what I wrote. I am saying tongue in cheek actually.
IN anycase, what divine rights have all these bondholders got? It is not just this case; just look at all the IPPs bonds as well. But if you think I am a jerk or stupid or anything, so be it. Saya malas mahu argue, I just want to say my piece, you are welcome to say whatever you want, no issue.
Yes honour all the agreements; that is what we are trained to do, never mind many of these agreements are a rip-off of Malaysia’s coffer. You talk about people losing confidence of Malaysian economy and currency, one of the reasons is we have too many such agreements the full impact of which is still unreveling as I write.
I believe that the most used rubber stamp in the ministries is “RAHSIA”. Even the date stamp is not used that often.
In case we are overlooking the obvious. The memo was to seek cabinet’s approval RETROSPECTIVELY the approval of a few things that were not approved but were carried out. So Guni Pet Tail can’t sue these two corrupt chinese buggers without sueing the whole cabinet because the whole cabinet gave their permission for the nation to be sodomised.
Perhaps these two chinese buggers was holding abdullah’s ball. I can imagine a comical scenario in BN government where every corrupt ministers are holding and squeezing each other balls just so that all could continue with their corrupt ways. In short :
BN = MBS coalition
*MBS = Mutual Ball Squeezing.
Gently does it now ……once in a while one of them would just squeeze a wee bit hard and we get to hear an ouch or two.
All these bonds are guaranteed by the government. May I know what is the coupon rate of these bonds? If the bonds are sovereign guaranteed, they should actually earn risk-free rate. So why are we paying these bondholders higher than risk-free rate? Who is the sucker here?
Now how stupid is that?? There is no such thing as risk-free lending and therefore no such thing as a risk-free rate. What about the coupon rate Mr Schitzo?
“But if you think I am a jerk or stupid or anything, so be it. Saya malas mahu argue, I just want to say my piece, you are welcome to say whatever you want, no issue.” Mr Schitzo
Nobody says you’re a jerk.
Didn’t you just issue an invitation to all readers?
#20 by limkamput on September 19th, 2009 12:00
“Fight me with your ideas and knowledge.”
So I’m taking you up on the offer.
“limkamput is just a typical jerk of Malaysia who thinks that it is OK not to honour one’s covenant and legal contract signed with others!” Onlooker
Like you suggested earlier, Onlooker. Let’s not be too harsh with the man. “Delusional’ is what he is.
SPVs issues the bonds and here he’s talking about sovereign bonds and coupon rates.
“Yes honour all the agreements; that is what we are trained to do, never mind many of these agreements are a rip-off of Malaysia’s coffer. You talk about people losing confidence of Malaysian economy and currency, one of the reasons is we have too many such agreements the full impact of which is still unreveling as I write.”
So you enter into an agreement. Then when circumstances turn against you, you tear up the agreement?
That’s one ‘brilliant’ idea.
Yes…. I keep quiet….he insults me.
I am also taking up on his offer too.
“Fight me with your ideas and knowledge”
That’s a good one from an idiot.
When you fight him..he cannot respond..out come his insults.
This young hyeana needs attention.
PKA suing Kuala Dimensi for RM720m. Is this a wayang kulit to divert attention? Does this lawsuit mean that nobody will be charged for corruption as it now being a civil suit? Can someone please enlighten me?
C’mon let’s face it. What’s the KPI for this AG? We all know that it is to ensure the continued plunder of our nation’s wealth by UMNO and it’s cronies, and to ensure the destruction of anyone blocking its path.
Not only has UMNO become reviled by right-minded Malaysians, but now even neighboring countries like Indonesia are furious towards its selfish and unjust acts.
Earlier you said:
#6 by limkamput on September 19th, 2009 08:41
“Besides, please take note, there are exceptions to the non-admissibility of hearsay. You see, if you want to know stuff, you must know enough to know the exceptions to general rule; otherwise you are just a half baked. That is what I always told my post graduate students.”
I would like to take the offer on that one too. If you don’t mind. Who knows? I may end up educating myself like all other half-baked contributors to this blog.
When moral hazard issue is involved, the culprit is not just the promoter (Kuala Dimensi). You see, bond investors and traders are supposed to conduct due diligence before investing to at least work out the risk-return trade off. But the moment these bonds are guaranteed, they become god sent investment opportunity. The bond investors readily buy those bonds without any regard for risk.
The modus operandi being used here is almost the same as many privatization projects we implemented in the 1990s. The government guaranteed the loan of a company that was granted with a privatized project. The company, having got its loan guaranteed by the government, treated the loan like income. Cost padding (i.e. purposely escalating the cost) became a common practice so that the company can get as much loan as possible. The banker who extended the loan did not care much because of government guarantee (there is no risk extending the loan to this company). Few years into the project, the privatized project failed (or was purposely allowed to fail), but the company has already got all the money. The banker just turned to the government to get back the loan plus interest it extended to the company.
We must break this con scheme that is played out over and over again. It is not just Kuala Dimensi; it is almost everybody.
This law suit is to show Malaysians…how great our government is…suing all that cheat tax payers money.
The fun starts when all are approved by the government.
A buyer pays RM1 per sq. ft…and I sell to government……100 times more. Nobody force the government to buy…how to win case against Dimensi…yet all approved by the government..
The law suit is a bloody side show…government can never win
Imagine…Mahathir lied 14 times in court,..insulting highly respectful learned Malaysians…insulting laws…insulting the country…let the whole world laugh at us..showing such terrible bad examples to young Malaysians….yet..UMNO dare not take action.
To me..that is equally serious cheating Malaysians wholesale..and Demensi..tax payers…yet the so call cheating was approved by the government……which means.. no cheating at all.
But Mahathir was PM for 22 years.
Fortunately…young Malaysians are fully aware what’s right and wrong….and know Mahathir is the dirtiest politician in the world.
Mahathir blaming Samy for loosing so many sears to PR is unbelievable. He is the main reason UMNO will loose all,,,,,,,in 13th GE….because all are corrupted to the core…and will never admit that…therefore UMNO can never change.
Now Mahathir is trying very hard to get Malaysians love and respect him…with his art to blame everyone…with so much sense and correctness…….yet.they are totally false..because he is the main culprit.
Jaswant….Do you sense somene is actually telling all ..how UMNO cheats?
“But the moment these bonds are guaranteed, they become god sent investment opportunity. The bond investors readily buy those bonds without any regard for risk.” Mr Schitzo
Why then the difference in rating for the different countries i.e. BBB for Malaysia and BB+ for Thailand and Philippines and Mexico – and BBB- for a few others.
limkamput #31:
From my understanding of your explaination, corrupt leaders make use of Kuala Dimensi to siphon off rakyat money?? Kuala Dimensi, PKA and government leaders work hand-in-glove to rob rakyat??
Sovereign guaranteed bonds are not ipso facto sovereign bonds but the effect of a sovereign’s guarantee on any bond would make that bond as good as sovereign bond. That is why we have the nincompoop Kuala Dimensi junk bonds (but now with government’s guarantee) becoming triple A bonds as stated by Godfather. But I do not know for sure it is triple A or not; I did not check.
Monsterball,
He extended the offer and I’m taking up his offer and he’s pretending not to see it. What do you think of Mr Schitzo?
Any government borrowing in the world’s capital markets comes with a government guarantee. Some corporate bonds come with a government guarantee.
But you missed my question about the point you raised i.e. government borrowing is risk free. If it is risk free, explain the different ratings given to different countries.
Of course different countries will be accorded different rating depending on economic fundamentals and the sustainability of those fundamentals. But from my observations, rating agencies are also bias, often time hopelessly outdated in their assessments.
For example, if Malaysia is A- (for foreign currency), it means when the government borrows externally, it has to pay certain interest rate based on that rating (A-). Another country with lower rating may have to pay higher interest rate in line with the lower rating.
When the government issues bonds, the rate is generally termed as risk free rate because we usually don’t expect a sovereign government to fail (please note, risk free rate is not zero rate, it is a rate charged when the sovereign govt borrows).
Corporate bonds usually have to pay risk free rate plus the risk premium. The lousier the company, the higher would be the risk premium.
Now we come to corporate borrowing say within Malaysia. When the government is A-, certainly corporations within Malaysia cannot be higher than A- except may be Petronas bonds or some well-managed banks.
Now we come to corporate borrowing with government guarantee as in the case of Kuala Dimensi. Now if the bonds are guaranteed, technically it is as good as the government bonds so by right the interest rate should be lower, like the risk free rate I mentioned just now. I suspect this is not the case. The bond holders are getting higher interest rate but without having the bear the risk. That to me is also a rip-off. In other words, a government guarantee is worth a lot of money, but i think we are giving it away free in the sense that the bondholders are getting much higher interest rate given the risk level they have to bear.
“But you missed my question about the point you raised i.e. government borrowing is risk free. If it is risk free, explain the different ratings given to different countries.” (Jaswant)
Jaswant,
From your above comment, I guess that you must be a practicing legal counsel who was trained in England therefore unlike limkamput who might be studying in the United States and had studied about “Bond” in the Finance Course, you were not required to learn about the mathematical calculation in Bond Price Analysis.
Anyway, I just copy the explanation on the words “Risk-free Bond” from wikipedia in order for you to share the common reference with limkamput, so that both of you may discuss in the same direction making it possible for two of you to reach some kind of consensus somehow or rather:
A risk-free bond is a theoretical bond that repays interest and principal with absolute certainty. In practice, government bonds are treated as risk-free bonds, as governments can raise taxes or indeed print money to repay their domestic currency debt. For instance, U.S. Treasury notes and bonds are considered risk-free bonds, even though investors in U.S. Treasury securities do face a negligible amount of credit risk. That this credit risk exists is shown by the example of Russia that defaulted on its domestic debt in 1998.
Of course, another good example for the existence of credit risk in the Sovereign Bond can also be found in the Government of Iceland, which is at the verge of declaring bankruptcy since 2008 due to its inability to pay back the matured Yen loan from Japan!
There’s no such thing as a ‘risk free’ rate. In all bond issues there is the coupon rate or the interest rate and then there’s the yield. Then there are the issues of ratings and credit spreads. These are all issues the lender would be dealing with. In this particular case neither the Malaysian Government nor any of its agencies is lending. So where is the relevance of all this?
Interest rate is the function of risk. That’s 101 Economics.
“The bond holders are getting higher interest rate but without having the bear the risk. That to me is also a rip-off”. Mr Schitzo
So what you propose is for the Malaysian government not to honor any obligations they have entered into each time circumstances turn against it. So it would be OK for a Pakatan run government to dishonor all agreements entered into by the UMNO led government?
So tell all bondholders generally, the Government of Malaysia will not be honoring its commitments because of corruption at home or because the transaction was done not with the best interest of Malaysia in mind? The interest rate was too high and the maturity too long or too short.
It is perfectly acceptable to tear up all the agreements the UMNO run government has entered into because they are not made in the national interest?
“So you enter into an agreement. Then when circumstances turn against you, you tear up the agreement?
That’s one ‘brilliant’ idea.” (Jaswant)
Jaswant,
In fact, limkamput can be accused by us for spreading an idea which is blatantly tantamount to the sin of “intellectual dishonest” when he encouraged the Malaysian Government not to honour its letter of guarantee signed and offered to the Bondholders as the surety for Kuala Dimensi Sdn Bhd.
I cannot agree that his idea is “brilliant” no matter how! A Chinese old saying goes, “The virtue of honouring one’s promise is worth a thousand taels of fine gold!” Most Chinese businessmen are able to achieve great success in their business endeavours simply because they possess the personal trait of the highest moral quality, that is, “making it a habit to always keep one’s promise with no twist and no regret!”
I wonder why the Bumiputera university graduates always think that it is alright for them to default in making repayment back to the study loan lending institutions such as MARA or commercial banks. Perhaps there is an inadequacy in the personal trait or the moral value of the university graduates who still owe the lender some delinquent loans!
Here we talk about PKFZ scandal.We should go after the wrongdoers instead of the whistle
blower.
If the government of the day refused to be transparent in this scandal,then vote them out in GE13.Why let them continue sucking the taxpayer’s money?
Onlooker,
He used the words ‘risk free rate’ and not ‘risk-free bonds’. There is a difference. Ever since he has been waffling.
“In practice, government bonds are treated as risk-free bonds, as governments can raise taxes or indeed print money to repay their domestic currency debt.” onlooker
Yes, that’s for the domestic market. The domestic capital market is too small. It is also inflationary and will push domestic rates up.
Usually the Government of Malaysia borrows in USD to fund its projects by way of government to government, soft loans from OECD countries, and institutions like the World Bank. When it does it is almost always in USD and rarely, say in Yen denominated loans for example, issued in Tokyo and for their domestic market known as Samurai bonds. Even government corporations like MAS once upon a time were loath to issue Samurai bonds. The exchange rate between the USD and Japanese Yen is never favorable to Malaysia. Exports are denominated in USD and all LCs both export and import are in USD. Our export earnings are in USD. Why borrow in another currency?
BNM to print money to repay ringgit denominated loans? You don’t want to go there.
But that’s beside the point. The issues he raised gave no clear indication as to where he was going with his comments.. Where is the relevance of the coupon rate or interest rate? The Malaysian government is not borrowing as far as the PKZ project is concerned. The SPVs issued those bonds to both domestic and foreign investors. His argument is that since bondholders are enjoying a high yield on those bonds ( strangely the term ‘yield’ has never come up in his comments) against government guarantees perhaps the government should dishonor whatever agreements it has with KDSB.
That would be enough to blow the mind of anybody reading! What sort of rationale is that??
ooops PKFZ
He is a proven idiot..,,who is trying to prove all of us are idiots..when time and time again..he was proven wrong…Jaswant.
Imagine….Onlooker is also an idiot to him..and I am an idotic senile man.
He wanted to reply…”Monsterball took the words out of my mouth”…..and think twice not to do it…to be a bigger idiot.
“BNM to print money to repay ringgit denominated loans? You don’t want to go there.” (Jaswant)
Jaswant,
For the sake of shared knowledge, please allow me to elaborate.
Malaysian Ringgit is not a world currency, neither is Singapore Dollar or Brunei Dollar!
Practically speaking, the world has only three currency choices left, namely US Dollar, Eurocurrency, Japanese Yen, for international fund raising through the regional bond markets.
Eurocurrency is defined as a currency on deposit or loan outside its own country. The eurodollar is the most common eurocurrency; other examples are eurosterling, euroyen, eurofranc and so on. The eurocurrency market communicates electronically; dealings take place between banks (interbank transactions) and with institutions, companies and governments. The eurocurrency market was the first “offshore” market; a more recent development has been the Asian Dollar Market.
The Asian Dollar Market is sometimes nicknamed as Dragon market by the Europeans. Dragon market is the Asian end of the euromarket – the Asian market for currencies and securities held outside their country of origin.
In theory, Bank Negara Malaysia (BNM) has the discretion to raise fund from internal debt by issuing bonds denominated in domestic currency. But in practice, it is not viable for BNM to raise fund domestically therefore it has to issue Asian dollar bonds, which are usually denominated in US Dollar.
The group of economists from ANZ Investment Bank, which members include Cherelle Murphy, Amy Auster, and Katie Dean, gave the reasons on the Bond Market developmental restrictions of Asia’s five crisis countries, namely Indonesia, Malaysia, Phillipines, Singapore and Thailand, which suffered during 1997-1998 currency crisis. The reasons are listed below.
1) Asia’s bond markets are still very small by international standards, particularly the corporate bond market. Liquidity is still low and investors find the market difficult to access despite high liquidity levels around the globe and good appetite for risk.
2) Underdeveloped capital markets are contributing to the export of domestic savings from East Asian economies to economies such as the US, Australia and NZ, and as such represent an opportunity cost for East Asia.
3) Moreover, the ongoing thinness of the capital markets implies a residual risk to the economies of South-East Asia from an exogenous shock.
4) Most recently, rising capital inflows entering still small markets have generated asset price inflation and raised pressure on central banks to respond with a re-regulation — rather than a deregulation — of the capital market.
Onlooker,
Mr Schitzo took issue with YB Kit and felt that there is nothing unlawful ( ‘nothing unlawful per se’ as he puts it) about a Minister issuing letter or letters of support. He ignores what YB Kit said prior to that and like you said is therefore intellectually dishonest. He picks and chooses the material before him so he could make his false argument. This habit of his has been pointed out by Jeffrey time and again.
In this case YB Kit pointed out that the AG himself had taken the position in a PAC meeting on August 12, that the Letters of Support were in fact Letters of Guarantee. Letters of Guarantee by the Government of Malaysia, I believe, are issued by the Treasury and certainly not signed by the Transport Minister. YB Kit’s contention is that it is a deliberate act to circumvent and short circuit the process. There is therefore an element of bad faith and criminal intent. Once there is shown a criminal intent, then why aren’t the wrongdoers prosecuted for their actions?
There is prima facie evidence against the wrongdoers sufficient for the matter to go to court. The AG should exercise his powers and let the issue of ‘unlawfulness’ and ‘criminal intent’ go to the courts and it is for the court to decide. Of course they are not going to let that happen and we know why.
Mr Schitzo is busy celebrating Raya obviously.
And keeping quiet…with no ideas how to respond……for each time he opens his mouth…it is all nonsense.
To cut the story short…bottom line..how trustworthy and strong is our currency…our political …economical and social situations…that do bear some weights for world leaders and strong currencies to trust us.
How much Malaysian ringgit mean to them.
We really do not know how strong is RM.
Although Spore and Brunei money are not world recognized……nevertheless…they have proven to be much stronger than ringgit.
Strength and being constant plays huge part.
Our money is so weak….that it simply will react to the money we are backing up.
There are so many ways to look at a country currency…and our strength lies in exports and oil.
If depending on the reputation of a country;;;;;like S’pore with no natural resources…Malaysia would have gone bankcrupt long ago….under UMNO.
There is no such thing as risk free in businesses…be it money or products….for buyers or sellers.
Guarantors needed and when government looses..it will always be the tax payers bearing all the risks.
To have meaningful dialogue, we must read carefully what others said. Otherwise, lots of things may be misunderstood.
Yes, some of things we discussed here may need only 101, but most probably you will need a 101 from Ivy League, certainly not from kopitiam. We like to use big big terms or quote big big names but I doubt those terms are fully understood and those names are relevant. From the way challenges are thrown and questions asked, I know those terms are loosely used and not understood. I am experienced to know that. That is why I always believe the US system of education is better than the British. You see, the British system allows you to write an answer and pass the exam without you knowing or understanding a single thing. The US objective questions (which is compulsory for most exams) will not allow you to do that.
Let me now restate:
There is such thing as risk free rate (real or nominal and I am talking nominal here). When the Malaysian government issues debt, say domestically, the bonds are generally termed as MGS (Malaysian Government Security) and the interest rate charged is low because these are sovereign bonds. The risk free rate, however, is not one constant rate. It depends on inflation rates, liquidity etc at the time of issue. We are talking about risk free rate, not risk free bond. Risk free rate is fundamental because other bond issuers (i.e. non sovereign) also have to use this rate as benchmark to add the risk premium onto it.
The coupon rate is the rate that is attached to the bonds at the time of issue. For example, a 15 years MGS issued in April 2008 (I simply quote a date) has a coupon rate of 4%, it means the interest paid as stated in bond divided by the par value of bond is 4%. This is the interest rate the government will pay for bonds it issued on that date.
The coupon rate will stay constant during the whole duration of those bonds. However, the yield will vary according to the prevailing market interest rate. That is why we have the famous maxim interest rate is inversely proportionate to bond prices. Let say after the bonds were issued (as mentioned above), the prevailing market interest rate increased due to higher inflation expectation or increasingly fiscal deficit etc. When the market interest goes up (say to 5%), the bond that was issued earlier is now worth less (do you get it?) because the alternative new investment can give you a higher interest rate compared to those bonds which continue to pay 4%. Hence the bonds price (say originally at RM1.00) now has to come down to say RM0.80 in order to generate a yield of 5%.
If what I stated here is understood, then we are in business. Otherwise, may be we need not discuss further because things which we can say a little here and little there are really complicated and not easily comprehensible.
This was what I stated earlier in #8 above, “Sdr Lim, I do not know issuing a letter of support per se is against the law and subject the ministers to prosecution. But I do know that sophisticated bond investors and traders would know the difference between the letters of support and the letters of guarantee. Don’t bark at the wrong tree. But be that as it may, I am not saying that those issuing the letters of support are not part of the conspiracy.”
How can someone say that I took issue with Sdr Lim and twist what I said into ‘nothing unlawful per se’ when what I said was “issuing the letter of support per se”. So much for being a master of English.
Mr Jaswant, I want to continue contributing to this blog. It is up to you whether you want to read, to find fault, to admire or to learn from my contribution.
Interesting, I wish what you said will happen. But for the court to decide whether or not there is unlawfulness, may be you want to tell us the issuance of letters of support violated which laws or which regulations that have the force of law. That will bring the discussion into more focus and also enlighten me a bit.
So also is criminal intent; how do we charge someone for criminal intent? Are incompetence or ignorance which eventually lead to disaster a criminal intent? Hope you can share a bit; I am not trying to find fault seriously. I just want to learn a bit. Thanks.
Jaswant & Monsterball,
By “risk free rate”, limkamput indeed refers to the technical jargon as often used in the textbooks of Financial Management or Investment. You may not find a lot of information in relation to “risk free rate” from a textbook of Economics.
As I mentioned much earlier, you need to have a same set of common references in relation to technical jargons if you want to discuss in the same direction as limkamput. Otherwise, limkamput and you will never see one another eyes to eyes because there are different sets of common references being referred to by different persons!
“Why didn’t AG Gani prosecute previous Transport Ministers Ling and Chan for unlawfully issuing 4 Letters of Support causing the RM12.5 billion PKFZ scandal?”
Wasn’t the A-G himself was involved in the giving of advise and then didn’t take action when things then went differently and awry? He himself may have a little fault in this mess so how to prosecute himself when he might have some conflicts of interest?
I don’t have a law degree from UK, or a commerce degree from USA. I am just a layman wanting my govt to serve the people and not looting this country under our nose.
Now, who cares if it is “risk-free bond” or “risk-free rate”. At the end of the day I do not want my hard earned EPF and taxes going up in smoke or into some corrupted fools who are running this country. Yes, these F#@$kers will not stop until they siphoned the Treasury dry and high. One day they will go after our EPF money as well. They will!!!!
Now, we have these educated fools or “nobles” arguing about “risk-free rate” and “risk-free bond”. At the end of the day, when all the EPF money is gone, our taxes which are supposed to put to good use are gone, the old and the young are suffering, do you think this argument is relevant?
For goodness sake, please unite. Your differences are just a speck of dust. Why can’t you guys just look the other way? Moreover we are fighting this evil, corrupted regime not against each other.
With the rate you guys are going, I really dont see any hope for the future generation to stand fast, focus and unite against the evil regime.
When the time comes, not even your eloquent English or your law degree can save you. You will still be eating crumbs, with their foot on your neck.
So please, go on heckling each other over
“risk-free bond/rate” some more.
//Now, who cares if it is “risk-free bond” or “risk-free rate”. At the end of the day I do not want my hard earned EPF and taxes going up in smoke or into some corrupted fools who are running this country.// (undertaker888)
undertaker888,
If you are really showing concern about the integrity of your EPF savings, then it is advisable for you to equip yourself with profound knowledge of financial management first before you can really tell whether the BN Government has really abused your EPF savings in buying some junk bonds. In order to ensure that the EPF Board will pay you reasonable amount of dividends each and every year before you have fully withdrawn your EPF savings, the EPF Board has to make investment decision every now and then. If you really want to evaluate whether the investment choices made by the EPF board are the sound ones, you need to possess some minimum financial knowledge. Otherwise, it is quite easy for you to commit the mistake of barking at the wrong tree due to ignorance!
To know more about “risk free rate”, please surf
http://pages.stern.nyu.edu/~adamodar/pdfiles/papers/riskfree.pdf
Undertaker888, can you not see I have tried my best not to indulge in endless quarrels anymore. Just look at this thread, did I provoke anything? I just tried to explain on questions and insinuations thrown at me and I have not used any harsh words so far.
There are basics to bond investors/traders/deal makers being part of the conspiracy and unless this is understood, we can never understand fully why the problem in PKFZ is so protracted. This is not the first time the same scheme is used to default the government.
By the way, how do you know your money in EPF is still there? The money that you draw now (I am just assuming) are money paid by present contributors. The money that you contributed earlier has probably all gone somewhere. The sustainability of EPF is not dependent on whether the money you have contributed is still there or not. The sustainability depends on number of new workers entering the labour force, the employment growth, income growth and age distribution of population. Should any of these falter, you may have problem getting YOUR EPF money. Please take note. You drink water, you must know the source.
If we are educated “fools”, that is because may be you don’t understand what we are talking about. It is ok, there is no need to show your frustration by insulting others. If we want the right solutions, we need to diagnose the right problems. Yes, we know it is all corruption, abuse of power, greed, incompetence and ignorance, but by knowing all these in general terms would they get us anywhere? Yes getting the right people (i.e people with right ethics, honesty etc) is important. It is also important to get people who know how to manage sophisticated stuff. Managing a rapidly modernising Malaysia requires more than honest people.
There is no issue of disunity here. Despite our differences in terms of personalities, approaches and methodologies, I think on the fundamental basis we share the same common objective and philosophy. Sorry if I have said things on behalf of others without their permission.
sorry second para, last line shold be…..This is not the first time the same scheme is used to short change the government.
onlooker,
If the mighty might of Lehman Brothers can collapse although they have financial management experts, do you think I will put too much trust on Malaysia Incorrupted
? Especially with all those crooks with licence to steal drooling at the safe?
Even if I equipped myself with sound financial knowledge, do you think you and I can influence EPF what to buy or not to buy? If I equipped myself with sound financial knowledge, do you think I have the power to stop those corrupted fools from stealing?
If your answer is “YES” to all above, then today onwards I will go study very hard.
Your financial management expertise comes in only after the fact. Yes, after the fact the money is all gone, vaporize with no trails.
Then with your financial expertise, you tell me, this is how and why the money is gone. What good is that?
limkamput,
you guys are already insulting each other long before i came. they are calling you names and vice versa which normally i wouldn’t do. Even the word “fools” i used is considered subtle to what you guys are using against each other.
I am not sure what you are trying to diagnose on this “risk-free bond//rate” argument which are going no where.
What? Do you think the ruling government will behave like angels after you guys find out and agreed what is “risk-free bond or rate”?
Do you think the government does not have financial management experts who are 100 times better than you guys? They do and abused it to their full advantage.
Instead of arguing until the cows come home on risk-free bond/rate, might as well find out who are those bond holders. Are they all UMNO,MCA,MIC related “businessmen” or companies?
YB’s question of why the AG did not prosecute is a very clever question that puts govt. in dilemma. This is how I see is the case by this and another posting.
KDSB raised moneys for his turnkey obligations to PKA via issuance by 4 of its Special Purpose Vehicles (companies/subsidiaries of KDSB) of bonds/commercial papers/notes (“bonds”) relating to PKFZ.
Before investors subscribed for these bonds, they required Malaysian Rating Corporation Agency (“MARC”)’s rating. MARC had to rate whether KDSB’s SPVs could meet their redemption obligations at bonds’ maturity to bondholders. MARC had to give a debt rating of KDSB. MARC would factor in KDSB’s potential cashflow and quality of receivables. This in turn depended on whether PKA could afford to pay KDSB if KDSB executed its turnkey contractual obligations. Then again it would next depend on whether government supported PKA to the hilt in making sure PKA was in moneys and funds to pay KDSB if and when progressive works executed and billings invoiced by KDSB to PKA. The theory is if PKA would honour debt to KDSB then KDSB could procure its SPVs to honour debt to SPVs’ bondholders. MARC gave a triple A rating because of complete support by govt (via MOT) for PKA under MOT’s purview. Amongst other things the letters of support issued by Ministers of Transport weighed heavily in MARC’s calculations.
Much hinges on whether the letters of support are letters of guarantee. This is because if they were guarantees that only Ministry of Finance (MOT) could issue, and when Transport Ministers issued letters of support which in effect were intended guarantees, they would be acting “ultra vires” which some quarters including YB Kit would argue tantamount to “unlawfully” and hence prosecutable by AG.
Whether letters of support were originally at time of issuance guarantees would depend on wordings. The title of the document – whether described as letters of guarantee or support – would not determine the status. The substance of the meaning behind the words and intent would decide. I have not seen the wordings to be able to decide one way or another but I suspect the better view is that they were likely mere letters of support (which is likely the defence put up by Transport Ministers if they’re made scapegoat).
They were likely letters of support saying that MOT/Govt was giving full managerial and financial support to PKA – reassuring all that they should have to worry in these respects. They were likely not guarantees in strict legal sense. For in this legal sense, the letters must say that the Govt/MOT were answerable legally for PKA’s debts to creditor of PKA’s debts, in this case, KDSB, because this is the party to whom govt pays.
One notices that KDSB has been subject to much public criticism and little of its sympathy. The position of govt to retropectively ratify and treat the support letters as guarantee was taken not to benefit KDSB per se (itself a subject of public criticism) but ostensibly to reassure the market & bond holders to whom only KDSB (and not PKA) owes a obligation to pay. Even MARC did not dare unequivocally say that the support letters were technically guarantee. It merely said the letters of support evinced unswerving government support for PKFZ project, which, in layman’s terms, is a kind of project that may be viewed by the market/bondholders as “guaranteed” by govt as to its success (ie through two tiers/processes ie govt supports PKA financially, therefore KDSB will sure get moneys if it executes its turnkey obligations which translates to KDSB having revenues to pay bond holders on bonds’ maturity) even though strictly and technically the instruments/documents actually issued by MOT ministers were not, in legal sense, letters of guarantee for which they might be in hindsight be said to have been issued unlawfully without MOT’s approval!
Continuing : Due to bourhaha over this PKFZ that shakes market confidence and causes MARC to revise and downgrade its bonds ratings because of doubts thrown at government’s procedures, the government quickly took the position that the letters of support were guarantees – this time confirmed by MOF and with AG!
From viewpoints of powers that be, better do it now – ie confirm thje support letters as equivalent to guarantee – because only direct government projects may be justified to be issued letters of guarantee (ie guarantees in legal sense) endorsed by MOF.
Many other projects linked in other ways to govt’s objectives are not necessarily govt projects for which guarantees may be (legally) issued. But it may be speculated that perhaps cronies have an interest in these govt related projects and under our patronage system of politics, MACC or no MACC, helping these govt related/linked entities to raise moneys from the market whether via loans or debts securities (bonds) is one principal way to raise political funds for election and winning them!
What is at stake is that if the market loses confidence in mere letters of support, there will be fewer deals around for cronies’ participation and raising political funs …so it is imperative that letters of support, even though not guarantee, and not even issued to the public, must be viewed by the public to be as good as guarantee…or else there will not be enough of projects to go around since direct govt projects, for which govt guarantees may be issued with MOF’s approval, are very limited.
This kind of approach by ruling coalition is of course not acceptable to Opposition opposed to cronyism and (indirect) funding of not so feasible mega projects from public coffers, because such funds used (belonging to public) will defeat the Opposition in elections that public may support. And this whole method of raising political funds from mega projects will be facilitated if every letter of support may in a public outcry be easily convertible by retrospective ratification to a letter of guarantee to support using public funds an unsupportable project!. If it were that easy, why have guidelines and limits to what govt could guarantee with MOF’s approval in the first place? Letters of Support means Letters of Support – not Letters of Guarantee.
The difference – nuanced but distinct – must be maintained for commercial expedience (whether when dealing with govt or big corporates and people receiving these must be able to accept their different risk stature and act accordingly). Otherwise all hell breaks lose and all letters of support can be conveniently converted to guarantees when project fails, money needs to be raised, the govt wants to continue to flog a dead horse!
What Kit wants to do is to pose this dilemma: if the govt wants to insist support letters were for all intents and purposes guarantee, then prosecute your ex MOT Ministers issuing them unlawfully without MOF’s approval. However if govt says the support letters are not guarantees (and the 2 MOT ministers get off the hook) then the govt will be in trouble and lose market credibility whenever it issues support letters for projects indirectly linked to govt. agenda of dubious viability for which guarantees may not be issued under present standing operational procedures.
Kit is good for posing dilemmas : the other side turns left they get entangled in one thing but if the turn right there is also road block! In other words the other side can’t do any right! Either way they are checkmated!
Those are secrets.
It is our money….yet kept as secrets.
One day..who are the bond holders will leak out….no surprises…and Najib will go after the man leaking government secret documents.
UMNO is very secretive…totally insincere…and daily putting out acts….slogans and one sided news….to brainwash Malaysians to kowtow to them…..for mercy.
This band of robbers and thieves have committed too many evil deeds secretly and are simply thick the lowest form of dirty politicians you can eve find in the world.
One is supporting MCA and bragging…..few are against him….so why be so surprised?
Oops sorry Typo omission in # 14 – “….They were likely letters of support saying that MOT/Govt was giving full managerial and financial support to PKA – reassuring all that they should NOT have to worry in these respects. ..”
undertaker888,
please tell us what we need to discuss here. I think that would be the best. I am also getting tired. It is holiday season, may be I should go Fraser’s Hill or somewhere. It seems like anything we said here you already know, is after the fact or will not make the difference. So, please tell me why are you here?
I am not saying that they do not know. I am saying that was the strategy that they have been using since the heyday of privatisation – the same moral hazard issue. Why is this strategy used over and over again. Why nobody highlight it or stop it.
Now the F1 team is being assembled. To me it is the same moral hazard issue. Now who is going to ask them to account. It is easy to say oh corruption, abuse of power, wrong allocation of resources, unproductive expenditure etc. We must ask the right questions and insist on the answers. If we highlight the problems in general terms, of course they too can give you the answers in general terms, got it? Ask: 1. Who is owning this F1 team? 2. Who is financing it? 3. If bank loans or bond issues are involved, ask whether the government stands guarantee on these loans or bonds. 4. If the financing come from government allocation, ask where is the budget (all expenditure from the consolidated fund of the government must have parliamentary approval)? 5. If the financing had come from one the GLCs, we want to know which GLC? 6. What is cash flows like, when break even and when starting to get some returns? 7. Who has the right to scrutinise the account of F1 team (is this another outfit registered under the company act and not accountable to Parliament?) 7. Mahathir said the returns would probably be 100 more than the initial investment, well, ask them to quantify it so that we can assess whether the 100 times return is justifiable or sheer nonsense.
If we ask all these, it is not sure whether we will get the answers. But if we don’t ask, I can assure there will not be any answer until the problem is blown right in front of our face later.
The crux of the problem is that political corruption is (I believe) quite universal (not that I say it should be condoned when it comes to frittering our tax payers moneys.)
The fact is that many (though not all politicians) of whatever political complexions and pretensions have gone and will go into politics to make money, and devise all kinds of ways to camouflage that. It is that part of human nature that we cannot say or deny is not there. Corruption bears resemblance to the other oldest profession (prostitution) Ronald Reagan would say. The fact that to campaign in an election and by election needs money and underlines the imperative of political fund raising. Donations from party members andd supporters outside are not enough. So corporate ventures/projects are resorted to and everywhere money is raised (techically corruption per MACC) but camouflaged. Here one takes the spoils for one political party and part of the spoils for oneself and no one gets you because your party that takes care of everybody is the holy cow and cannot be implicated vicariously with you. Thats the protection!
Some bright spark from one of the ruling party mentioned following the American system. The lobby system there allows money to be raised for campaign funds subject to rules and limits. A politician can get rich under that system. On any issue there are opposing sides and their lobbyists. When one takes a certain position that one side is unhappy of and lobbying against, there is another side, an interest or corporate group lobbying for and is happy to pay you for a position taken that meets its satisfaction.
The difference is that in the Ameruican Capitalist system politicians get rich from (quite frequently) corporate funds lobbying from govt a certain position beneficial to its business objectives.
Here’s there’s no such system: so we end up with mega projects of huge cost overruns especially when so many politicians sometimes from different political parties have to be “taken care” off.
The money squandered will come from tax payers money if not EPF or Petronas moneys which are supposedly a heritage of all Malaysians.
The American system is perhaps different in that political corruption is financed under pretext of political funding from corporates’ and interest groups’ moneys via their lobbying – not necessarily from the ordinary rakyat’s coffers…..
If one cannot rid corruption from politics, if one cannot rid abuse of power from hearts of men/politicians, then at least the American system mitigates to an extent the ordinary men’s plight. Because the greed of politicians that cannot be eliminated it can at least be channelled to and satisfied from corporations and various interest groups’ funds (indirectly one may still argue, ultimately passed on to consumers).
But the point is that a corporation/interest group still has a choice whether to make political contributions for a certain business objective and as a consumer one has also a choice whether to buy the product the political cost of which has been passed on.
Here under our system you don’t have to choice. So maybe what is unavoidable (political corruption) may be redirected through a more sophisticated system akin to the American style of lobbying to raise political funds from corporates than ordinary rakyat bearing the brunt!
My understanding is the MARC, the bond investors, the arrangers and the deal makers ought to know the letters of support, no matter how they are worded, are not letters of guarantee. It is well established in our system that only the MOF has authority to issue the letter of guarantee and no one else. Under our system of government, there is only one financial controller of the government and that is the Treasury. I simply cannot relate how other ministries are allowed to issue letters of support or letters of comfort that have the effect of letters of guarantee. I think investors must be taught a lesson that letters of support or letters of comfort is not a prelude to letters of guarantee.
“Under our system of government, there is only one financial controller of the government and that is the Treasury. I simply cannot relate how other ministries are allowed to issue letters of support or letters of comfort that have the effect of letters of guarantee.” (limkamput)
limkamput,
You are making a lot of presumptions or assumptions here, especially on the issue about whether the former two Transport Ministers had ever been authorised by the Federal Cabinet to issue letters of support (which you one-sidedly denied that they must not be taken as letters of guarantee).
Many Malaysian people know that the Ministry of Transport works freely to a certain extent with large freedom to impose fine on the traffic rule offenders and with the power to collect road tax from the motor vehicle owners. If the MOT has the power to collect money from the public within the rule of law, it also has the obligation which it must fulfill in terms of its financial commitment. If the letters of support given to the Bondholders in favour of KDSB had been phrased in such a way that the MOT has the legal obligation to pay on behalf of KDSB in the event of default payment by KDSB’s Special Purpose Vehicles (SPVs) after the maturity date of the issued and fully subscribed Bonds of SPVs, then there is no good evidence for you to argue against MOT’s agreeing to stand as the surety for the bonds issuance.
Since I have no access to the classified Cabinet paper which talked on the status of the letters of support, I am not able to argue validly whether MOT is obliged to take the legal responsibility to pay in event of SPVs default payment in redemption of Bonds. However, I feel that you may be jumping into the conclusion too hastily by suggesting that the letters of support are not the letters of guarantee, unless you know something about the classified Cabinet paper which I don’t know! But then if you did have access to the classified Cabinet papers, the AG might have the discretion to charge you for violating the Official Secrets Act. It would be too risky for you to show me the evidence here if you really possessed a copy of the classified Cabinet papers. That is the reason why YB Kit wants PM Najib to declassify the classified Cabinet Papers in relation to PKFZ decision-making. Indeed, YB Kit is trying to protect you from the persecution by the power-that-be through invoking the draconian OSA! You should at least show some appreciation to YB Kit’s effort in his blog and not to get too tough on him without good reason!
“do you think I will put too much trust on Malaysia Incorrupted?” (undertaker888)
undertaker888, I sincerely hope that you will put trust on at least one person in the world, that is, you yourself. If you have faith that you can do something good to our nation, then please do not hesistate to voice out your opinion and seek for empathy! No one is allowed to take law into his/her own hand, but with your contribution for providing a system of checks and balances in our political system (even though it may mean the violation of Official Secrets Act), I believe the Malaysian people will eventually be entitled a better governance to be provided by a better government. The system of checks and balances can be made possible by you through your voicing out the dissident opinions or dissenting opinions which make good sense, or through your casting a vote in favour of Pakatan Rakyat during the general election for putting checks against Barisan Nasional and hence balancing off Barisan Nasional’s abuse of excessive political powers!
The first leap towards important change in Malaysia’s political culture can only be made possible by your making the first move now by pledging your commitment to change for the better!
limkamput
i am here to find more information why i shouldn’t vote for the same government come next general election.
I want to be able to convince my neighbours to do the same with all the information i have.
I am an old man.
I do not have the luxury to study financial management like onlookers adviced me too.
I do not have the luxury to wait until my hard earn money is looted by the government.
I am depending on you young people like jaswant, onlookers, monsterball, etc to put your intelligence together on how to expose this regime. So that old and young people of all races like me can understand.
You guys are shouting high and low to vote the government out, but at the same time arguing over “risk-free bond/rate” with such intense and is not going to convince old people like me whether i should or shouldn’t vote for the ruling govt.
Seeing young people like you guys arguing over minute little things, makes me wonder if the next generation is mature enough to lead this country after the regime is gone.
Maybe i should move to Thailand and cash out my EPF. I will let you guys quarrel over the crumbs.
Undertaker888 has every right to be angry at what is happening in the country and what is happening on this blog. He is merely echoing the thoughts of presumably many on this blog and I don’t mean the state of the economy or the political situation. My apology goes to him for ‘welcoming him to the club’ (chaired by Mr Schitzo) earlier.
I have seen how one regular contributor has been consistently and constantly embarrassed and ridiculed by the antics of this one man whose penchant for name calling and the responses it draws from some commentators including mine, does injustice to a political blog like this one.
Against my better judgment I’ve decided to engage with him on some of the issues he wrote to see where it would take me this time. The questions I put to him remained unanswered. Should we be surprised? Should we be surprised that by not answering he has once again shown where his interest lies. It lies not with debate of the issues. For if it was then he would have given his response to the following;
“The bond holders are getting higher interest rate but without having the bear the risk. That to me is also a rip-off”. Mr Schitzo
So what you propose is for the Malaysian government not to honor any obligations they have entered into each time circumstances turn against it. So it would be OK for a Pakatan run government to dishonor all agreements entered into by the UMNO led government?
So tell all bondholders generally, the Government of Malaysia will not be honoring its commitments because of corruption at home or because the transaction was done not with the best interest of Malaysia in mind? The interest rate was too high and the maturity too long or too short.
It is perfectly acceptable to tear up all the agreements the UMNO run government has entered into because they are not made in the national interest?
Your response, Mr Schitzo?
Here’s an observation I made – a follow up to his criticism of the public statement by YB Kit to the media. Did it draw any response from him??
Mr Schitzo took issue with YB Kit and felt that there is nothing unlawful ( ‘nothing unlawful per se’ as he puts it) about a Minister issuing letter or letters of support. He ignores what YB Kit said prior to that and like you said is therefore intellectually dishonest. He picks and chooses the material before him so he could make his false argument. This habit of his has been pointed out by Jeffrey time and again.
In this case YB Kit pointed out that the AG himself had taken the position in a PAC meeting on August 12, that the Letters of Support were in fact Letters of Guarantee. Letters of Guarantee by the Government of Malaysia, I believe, are issued by the Treasury and certainly not signed by the Transport Minister. YB Kit’s contention is that it is a deliberate act to circumvent and short circuit the process. There is therefore an element of bad faith and criminal intent. Once there is shown a criminal intent, then why aren’t the wrongdoers prosecuted for their actions?
undertaker888,
You must vote BN out of the Government.
The reason: BN does not know how to manage your money well!
The BN Federal Government promised the non-professional employees of the government offices and departments, such as the clerks, the janitors, the drivers, the despatch riders and others a wage supplement (bonus) of RM500 each before 19 September 2009. However, most government employees who entitle this token-sum bonus have only received RM250 each so far before the commencement of Hari Raya Aidil Fitri. PM Najib does not know how to manage the people’s money well. Otherwise, he would not have short paid the declared bonus of the government employees!
“I think investors must be taught a lesson that letters of support or letters of comfort is not a prelude to letters of guarantee.” Mr Schitzo
And how do you propose to do that? It drew “you’re a jerk” comment from one reader.
The government is not in the business of teaching investors anything. They do business with investors.
Jaswant it is obvious that you are sick psychopath who does not read and does not know “what you don’t know”. You can say whatever you want; I don’t give a damn to you. I will continue to say whatever I deem fit, and there is not damn thing you can do about. Frankly I don’t even think you have 101 from a half baked college. I owe you nothing, assh*le.
Moderator, you can do whatever you want. Jaswant is a product of an incestuous relationship. You should know how I learn all these terms from. Come and get me if you want.
“[Before] ….. the court [could] decide whether or not there is unlawfulness, may be you want to tell us the issuance of letters of support violated which laws or which regulations that have the force of law. That will bring the discussion into more focus and also enlighten me a bit.” Mr Schitzo
If by labeling something as Letter of Support it is then and therefore not a guarantee there is no issue that could go to the courts. Where then is the need for the AG to make his statement that it is in fact a guarantee? Where then is the need for YB Kit to make his statement to the media calling for the AG to follow through with his statement.
If, for example, by labeling a document “Letter of Guarantee’ it is then not an indemnity, then there would be less litigation and business would be smooth, and the number of judges, court staff and courts reduced. Imagine the savings to the government and to those who do business. The cost of doing business reflected by the cost of insurance premiums too would be greatly reduced and we can all breathe a sigh of relief.
The act of issuing (such letters) has no relevance to the issue. The answer could easily be found in the job description of the person signing those letters.
The issue here, firstly, if such letters are in law and in fact the nature of a guarantee. If they are, then the second issue is who should have issued those?. Thirdly, is there bad faith on the part of the individuals who signed them. Is there criminal intent? What evidence is there?
These are issues which should be allowed to go to the court. It is then for the court to decide and for the court alone.
“ … [also[ how do we charge someone for criminal intent?” Mr Schitzo
You don’t charge someone for criminal intent. Criminal intent is not an offence. Criminal intent goes to mens rea of the offence.
Yes, I want to repeat what I said earlier as follow:
//My understanding is the MARC, the bond investors, the arrangers and the deal makers ought to know the letters of support, no matter how they are worded, are not letters of guarantee. It is well established in our system that only the MOF has authority to issue the letter of guarantee and no one else. Under our system of government, there is only one financial controller of the government and that is the Treasury. I simply cannot relate how other ministries are allowed to issue letters of support or letters of comfort that have the effect of letters of guarantee. I think investors must be taught a lesson that letters of support or letters of comfort are not a prelude to letters of guarantee.//
If we consider providing guarantee as borrowing money, then under the Financial Procedure Act, MOT can not borrow money on behalf of the government. Do you lawyers or half baked know about this? The Financial Procedure Act not only states who can borrow, but also the maximum amount the government can borrow.
Now I want to say further why we cannot continue to treat the bond investor gently. It is not like investors have not learned the lesson before (Johor Corp bond some years back was also the bailed out the fed govt before). Many of them went into the deal with their eyes wide open, so they can not expect the govt to bail them out all the time. My contention is if investors and financiers are only more prudent and cautious (for example, following proper risk assessment and expected return), the fiasco would not be so big – if there are not so many people want to lend, may be KDSB can not borrow so much and therefore can not abuse so much. I think the treasury is either stupid or for “some reasons” follow up the letters of support with letters of guarantee. Yes, I know someone will argue that if the govt do not support KDSN’s bonds, it will affect the bond/financial market. The same argument was used when the government wanted to review the IPP rates because the argument was it will affect the existing IPP bonds. Sound familiar? It is not just KDSN, or MOT. It is a conspiracy of many parties.
UMNO is damn retarded(purposely) for every issue concerning benefits for mmalaysians!
donkey years ago,DAP had sang a song asking SAMY to step down bcos of his dictatorship,now only Mamathir n Najis are considering it!Similarly,DAP had revealed PKFZ scandals couple of years ago,the so called ‘CABINET’ (azmi was there too)insisted the mega-public-loan to proceed,n now thy said thy will leave ‘no stones’ unturned,we know damn well that thy are actually trying to cover the mother of all scandals but thy have forgotten that now we are not at stoneage,we are at extremed-ITage,thanks to ppl like RPK,the public need more info of BN evil deeds,so that at the next election,even PR (like Mamathir said before how advantages was on BN’s side)put a stone thr,thy are winning!
“If we consider providing guarantee as borrowing money, then under the Financial Procedure Act, MOT can not borrow money on behalf of the government. Do you lawyers or half baked know about this? The Financial Procedure Act not only states who can borrow, but also the maximum amount the government can borrow.” (limkamput)
limkamput insists that the letters of support given by the two former Ministers of Transport to the bondholders in favour of the bonds issued by Kuala Dimensi Sdn Bhd’s special purpose vehicles (SPVs) shall not be the valid letters of guarantee. Let’s assume that limkamput’s opinion is true and the letters of support are to finally be declared by a judicial court as “invalid letters of guarantee and therefore have no legal binding on the Federal Government of Malaysia.” Who will be the losers in this predicted court judgement?
Let me take some guesses here:
1) The bondholders in case KDSB fails to redeem the bonds upon their maturity.
2) Wijaya Baru Global Berhad (WBGB) since the de facto bond issuer, KDSB (which is the associated company of WBGB), after failing in redemption of the bonds would badly affect the company performance of WBGB in view of the fact that KDSB had already served as the major revenue contributor to WBGB during the financial year ended 31 Dec 2007 but its revenue contribution to WBGB had been significantly reduced during the financial year ended 31 Dec 2008.
3) Dato Seri Tiong King Sing since he is the substantial shareholders of WBGB.
4) OSK Capital Sdn Bhd since it has been disclosed in the 2009 annual report of WBGB as the major money lender to Dato Seri Tiong King Sing.
However, the Chinese old saying always goes, “A cunning hare will make three underground hiding holes!”
Where are the other hiding holes of WBGB? My guesses are
a) China,
b) Republic of Djibouti (an East African country).
The letters of support issued by former Ministers of Transport, with perhaps knowledge of then PM, were not strictly in legal sense guarantees when issued without written authority of the Treasury (Ministry of Finance or MOF). This is because section 14 of the Financial Procedure Act of 1957 (“FPA”) stipulates that no guarantee incurring financial liability involving public finances will be binding upon the Federal government unless entered into with written authority of Treasury/MOF/government represented by Cabinet. Besides, the former minister of Transport was alleged to have also ignored Treasury guidelines by not getting advice from the MOF before approving variation works to contracts entered into by the Port Klang Authority (PKA).
Also as an instrument a Letter of Support is not unique to the PKFZ-related debt/bond issuances. By market practice, Letters of Support or its variants such as Letters of Comfort or Letters of Awareness by companies with strong balance sheet are a common feature in many bond issuances and in banking practice acceptable to financiers/market. When dealing with and where ultimate cashflow derives from government agencies regarding projects deemed of national importance, it is not unusual for debt rating agencies like MARC, financiers etc ie the market to require some kind of support letters from relevant Ministry exercising oversight over the relevant agency (in this case MOT over PKA) to reassure high level of managerial and financial government support for the project for which finance is raised whether via loans or debt/bond issuences by parties carrying it out.
That a Govt’s letter of support is not a govt’s guarantee is techically/legally correct position but in reality dictates otherwise in terms of their effects. The government is concerned here with its credibility with the Financial/Bonds Market. Government & its agencies also raise moneys from bonds and financiers, both domestic and international, and they rate Malaysian Government based on its capacity and willingness to meet payment obligations. To be sure, in PKFZ, the government or its agency PKA did not raise any bond directly. However PKA’s turnkey contractor Kuala Dimensi Sdn Bhd (“KDSB”) via its 4 special purpose vehicles (“SPVs”) did. As I said, (a) bond holders depend on KDSB’s SPVs to be in the moneys and funds to honour their payment obligations upon maturity of bonds which in turn depend on (b) govt agency PKA’s capacity and willingness to honour their payment obligations to KDSB subject to KDSB executing its contractual obligations which ultimately depends further on (c)
Malaysian Government’s capacity and willingness to put PKA in moneys and funds so that expectations in (B) up to (a) may not be disappointed! Also unless this “chain of confidence” is maintained without break at any point, it would be difficult for companies (including those of cronies’) involved with govt related projects to vicariously garner the kind of credibility from financial markets to raise funding for these projects. For these reasons, even if the Letters of Support were strictly not govt guarantees, our AG expressed the opinion to Public Accounts Committee (PAC) that the support letters “tantamount to letters of guarantee”.
“Tantamount” means in reality/substance, they are, even though not guarantees governed by FPA, the kind of commitment on Govt’s part to be treated by the market as binding as guarantees in preservation of financial markets’ confidence in Govt’s credibility and its related projects. Thats why the govt gave the RM 1 billion soft loan to PKA even after scandal blew up, and, according to RPK, govt knew all along what happened and yet supported PKFZ.
As I understand what YB Kit is posing in this thread, it is this: if support letters from MOT are, according to AG, same stature in terms of financial commitment as guarantees, why didn’t former Transport Ministers get prior Treasury/MOF approval to comply FPA? After all object of FPA was to regulate public finances so that they are not frittered by any Minister or Ministry without the proper Ministry (MOF) or cabinet’s approval – and these PKFZ letters of support do incur liabilities and strain on public finances “tantamount” to guarantees (in AG’s views), frustrating and circumventing the very spirit and purpose of FPA….
So if AG takes such a stand of govt support letters = guarantee, why doesn’t he now prosecute former transport ministers for breach of FPA’s regulations which as they regulkate guarantees should regulate letters of support having similar financial effects on public purse?
The other conclusion to be drawn is that in the interest of accountability in relation to use of public finances, section 14 of the Financial Procedure Act of 1957 (“FPA”) ought to be amended to cover, besides and beyond guarantees to any letters of support, comfort or any form of written assurances the effects and reasonable expectations of which are that the government or any of its agency will incur a financial liability, whether actual or contigent, in respect of public finances. Without such an amendment, Ministry of Finance’s oversight over public finances will be circumvented by all other kinds of written assurances by any minister from any ministry (that are not govt guarantees) but in substance treated by the government as morally binding to incur and honour laibilities as the same way as govt guarantees….
Is Jeffrey trying to suggest an inroduction of much stringent regulation or a law amendment on the Financial Procedure Act 1957 in order to impose tighter control on the issuance of “surat sokongan” (letter of support) by the unauthorised Minister or unauthorised Ministry? If this is the proposed law amendment, I doubt that Umnoputras will give strong support to it in Parliament.
“Surat Sokongan” is indeed a declaration made by the signatory to the addressee that Mr so & so is a crony of the signatory so that the addressee is hereby requested to give whatever assistance or support to him/her in case he/she does really make a request asking for a favour from the addressee. If the top government officers are refused of the rights to issue a “surat sokongan”, how are they going to implement the much needed system of cronyism among all the Umnoputras? What is the rationale for Umnoputras to require such a hand-roped amendment?
I am referring to the kind of letters of support of the kind (like that issued by former Transport ministers in PKFZ) that by nature or effects and by reasonable expectations of the market, could morally or legally incur, on behalf of the government the same kind of financial obligation or liability as that equivalent to a guarantee, undertaking or indemnity.
The reference to ordinary “Surat Sokongan” in Onlooker’s sense – a declaration made by the signatory (usually Politician or Minister) to the addressee that Mr so & so is a crony of the signatory so that the addressee is hereby requested to give whatever assistance or support to him/her in case he/she does really make a request asking for a favour from the addressee” – is different, by nature and effects, from the kind of Surat Sokongan above explained in the PKFZ’s case ….
I however agree Umnoputras would not require such a hand-roped amendment to Financial Procdure Act.
On the other hand what’s the point of requiring Govt guarantee to be issued only after Treasury approval if any Minister can circumvent this by issuing letter of support that dispenses Treasury approval and yet has the same effect as a guarantee incurring liability on the part of government and public finances?
Why is that there is so much of argument over the Letters of Support issued by the MOT is indeed a Letter of Guarantee or not ?
The AG had stated very loud and clear on this at the PAC Meeting i.e The Letters of Support issued by the MOT is indeed a Letter of Guarantee and from a legal point of view, the Government must honour it as the Minister is an officer and acts on behalf of the Federal Government.
By not following the Treasury Financial Instructions, the MOTs are acting illegally.
Whether the AG is going to prosecute the said Ministers of Transport is dependent upon the AG himself and the answer could be quite obvious.
Arguing over what coupon rates to pay is just to pull wool over our eyes. Simple as that.
The end result is : Federal Public Funds is lost through this mismanagement and fraudulent acts by those entrusted to spend the money wisely but did not do so.
The Ministers, the Chairmen of PKA, the GM of PKFZ are all supposedly elected to hold public office and have the honorable duty to safeguard public funds but sad to say this had not been so.
Therefore, the public has the right to complain and demand for those responsible to be brought to book. Those innocent need not fear.
///Why is that there is so much of argument over the Letters of Support issued by the MOT is indeed a Letter of Guarantee or not ? The AG had stated very loud and clear on this at the PAC Meeting i.e The Letters of Support issued by the MOT is indeed a Letter of Guarantee and from a legal point of view, the Government must honour it as the Minister is an officer and acts on behalf of the Federal Government./// – FY Lim.
AG did not unequivocally say in PAC Meeting that letters of support were legal guarantees. Accoirding to reports, he said they were “tantamount to guarantees”.
Tantamount does not mean it is.
We are entitled to think that this is a play of words – semantics.
But consider this: If they were legal guarantees, then their issuance by former minister of Transport without Treasury/MOF’s prior approval would implicate the minister in an unlawful contravention of section 14 of the Financial Procedure Act of 1957 (“FPA”).
However if letters of support were, by their nature, not legal guarantees, then there was no contravention of FPA and former MOT Minister issuing letter of support is not caught by coverage of FPA and not implicated in breaking any law.
Yet the objective of pumping in more money like throwing salt into sea to keep PKFZ afloat against all wisdom could still be achieved if it takes the position that letters of support, whilst not by their nature letters of guarantee, however share the same effects ie – the government will assume the liability, actual or contingent, reasonably expoected pof it by the market. Whilst the obligation of the govt to pay on a guarantee is a legal obligation, the obligation of the govt to pay on letters of support is a moral one (necessary to maintain govt’s sovereign debt ratings). The difference is that in case of letters of support the govt can still fund and pay on them (just like they were guarantees) and yet keep the former minister harmless from being accused of otherwise issuing guarantees without (Treasury/MOT)’s pior approval. Dual objectives are met instead of one!
Hence a very careful choice of word by AG of letters of support “tantamount to guarantee” rather than letters of support were actually in substance and law letters of guarantees (though described as letters of support).
I wish to further add that if the letters of support were indeed by subtance and nature guarantees then not only would the former minister of Transport be implicated in contravening FPA for issuing without Treasury’s approval but arguably the letters of support aka guarantee would be legally void and of no binding effect from the beginning which will cause the bonds rating to be immediately rated junk throwing the whole PKFZ, which they want it to succeed at all costs against the odds, into uncertainty and collapse.
To however say that letters of support tantamount to effects the same as guarantees, though grounded on moral obligation than legal, whilst not conceding letters of support are actually guarantees, everything will be Ok in terms of the govt could still fund the PKFZ project and the former Minister of transport saved from the accusation of contravening the FPA. It is a well thought out strategy.
“It is a well thought out strategy.” (Jeffrey)
Jeffrey may be too kind and too polite to use the words “well thought out strategy” to describe the tacit explanation given by the AG which stated that letters of support as those signed by previous Ministers of Transport tantamount to the effects the same as guarantees. I would prefer to put it in such words that the AG’s ambiguous answer was indeed the “wilful employ of political cunningness” by the AG to get around with the PAC in order to save his political master out of the criminal litigation troubles. Obviously, the political master of the AG is none other than those powers-that-be of Barisan Nasional, which include both current politicians or retired politicians from all BN component parties like Umno or MCA.
No one from the AG’s Chamber is going to take Ling Liong Sik and Chan Kong Choy to court so long as BN still holds the control over the Federal Government. However, if the power of the Federal Government has changed hand or it just happens that the BN Prime Minister decides not to let go Ling Liong Sik and Chan Kong Choy, there will still be no legal basis for the AG’s Chamber to charge both Ling Liong Sik and Chan Kong Choy for abuse of official power in signing letters of guarantee without valid and proper authorisation from the Cabinet or from the Treasury. This is because the AG never conceded that the letters of Support were Letters of Guarantee! From here, we can clearly see the cunningness of the AG in playing around with the legal loophole by his ambiguous answer given to the Public Accounts Committee (PAC) of the Parliament!
1. The simple answer is AG (like many others officials) deliberately do not want to do their job. And, their Superiors (again like many other officials) do not bother or deliberately avoid pressing AG to do their job.
2. The two Ministers would not have the chance of issuing those letters as “Guarantee” letters if those supervising parties (the Cabinet, the Financial Minister, PM etc) or parties involved (the fund raising “companies” ) had not closed their eyes by simply ignored to verify the letters or matters.
3. Basically the way how the project had been approved should be considered as operation in a “black box” especially on the contents and amounts. A violation of proper procedures!!
4. When AG has to prosecute the Transport Ministers can he avoids taking accounts on the Cabinet and others?
5. Can those letters be letter of Guarantee for the Purpose of Fund raising for such kind of project, without MOF approval and statement that “there is no express or implied guarantee with regards to the
Repayment Amount / Sum.” (Point 4.78 in the PWC PKFZ report?
6. Should the case be classified as Fraudulent or even cheating with abetment from a great number of parties? Therefore, does AG dare not prosecute the two Ministers only or because a much greater number and bigger shots are to be involved?
All the problems are because the scandal are by a collective of those in Power!!
Even AG would prosecute, like the Steel factory scandal, had anyone responsible been getting their rightful punishment by law? The financial Controller was not even touched by law and even got a Datukship after the case!
Malaysian Jokes in Tears!!
Onlooker Politics,
Your posting on September 22nd, 2009 22:33 has summarised the “wilful employ of political cunningness” well. Thats their idea – not conceding that the letters of Support were Letters of Guarantee and yet at the same time maintaining that letters of support tantamount in effect to guarantees. It is fundamental to answer and defend against all points raised by YB Kit/Opposition against the various players whether former transport ministers, chief secretary etc.
The BMF scandal is as bad as the PKFZ scandal considering that 2.5 big ones thirty years ago would be equal to 12.5 big ones now.
You may say that in the PKFZ case, there is no dead body of an honest Serpico in a banana plantation (the MBF case), but wait, wait until the investigation into PKFZ gets serious: perhaps bodies will start to fall from buildings.