Would toll charges be abolished if Malaysia’s debts are only RM687 billion?
This is the biggest con Mahathir and the Pakatan Harapan government are pulling off. And now they say because the RM200 billion PPP projects and the RM200 billion guarantees are considered debts, Malaysians will not be given toll-free highways after all. Do Malaysians realise they have been taken for a ride?
NO HOLDS BARRED
Raja Petra Kamarudin
(Bloomberg, 24 May 2018) – Malaysia’s new Finance Minister Lim Guan Eng on Thursday gave a breakdown of government debt and liabilities exceeding 1 trillion ringgit, a figure that’s fuelled market worries and raised the prospect of a credit-rating downgrade.
Prime Minister Mahathir Mohamad said this week that the number was higher than previously disclosed under the administration of ousted leader Najib Razak, partly because the state had given guarantees to companies, like 1MDB — the investment fund at the centre of a multibillion corruption scandal — which now can’t repay its debt.
Lim said in a statement Thursday that the government’s liabilities as at the end of last year comprised of the following:
* Federal government debt of 686.8 billion ringgit, or 50.8 percent of gross domestic product
* Government guarantees of 199.1 billion ringgit, or 14.6 percent of GDP. The government is committed to paying the debt of entities which are unable to do so, including 42.2 billion ringgit for Danainfra Nasional Bhd, 26.6 billion ringgit for Prasarana Malaysia Bhd and 38 billion ringgit for 1MDB.
* Lease payments for public-private projects of 201.4 billion ringgit, or 14.9 percent of GDP. The government is obligated to pay for rental, maintenance and other costs on a number of projects, such as construction of schools, hospitals and roads.
That takes the total debt to 1.087 trillion ringgit, or 80.3 percent of GDP, which Lim said was a number Malaysians are “rightly concerned” about and that the government will take action to fix.
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That was what was announced almost three months ago. And that is why toll charges cannot be abolished yet — because Malaysia’s debts are RM1 trillion and not RM687 billion as originally thought.
Okay, so if Malaysia’s debts are RM687 billion as originally thought instead of RM1 trillion, then toll charges could be abolished and highway users can now drive toll-free on all the highways all over Malaysia.
The truth is Malaysia cannot afford to pay the RM400 billion compensation to the highway concessionaires even if Malaysia’s debts are just RM687 billion
To be able to abolish toll charges and to allow Malaysians free use of all the highways in Malaysia, the government will have to fork out RM400 billion in compensation to the highway concessionaires. But because Malaysia’s debts are RM1 trillion instead of RM687 billion, the government cannot afford to do that now.
What the government is saying is: if Malaysia’s debts are only RM687 billion, then the government can afford to pay this RM400 billion compensation. But since Malaysia’s debts are RM1 trillion, the government cannot afford to pay this RM400 billion compensation.
Does that make sense? Malaysia can afford to pay RM400 billion compensation to the highway concessionaires if the country’s debts are just RM687 billion but not if the country’s debts are RM1 trillion.
Lim Guan Eng is taking Malaysians for a ride
The truth is, Malaysia cannot afford to pay the RM400 billion compensation to the highway concessionaires never mind whether the country’s debts are RM687 billion or RM1 trillion. So, to get out of paying this RM400 billion compensation, the government says since the country’s debts are RM1 trillion and not RM687 billion then no toll-free highways for Malaysians.
The reason Malaysia’s debts are RM1 trillion instead of RM687 billion is because they have included guarantees of roughly RM200 billion and PPP projects of another RM200 billion.
Now, guarantees are not debts, and even if they include 1MDB’s guarantees, that is only RM42 billion and not RM200 billion. Furthermore, 1MDB’s RM42 billion loans are secured by RM51 billion in assets. So, technically, 1MDB is NOT bankrupt even if it is facing a cash-flow problem. So how can you say the RM200 billion guarantees are going to end up as debts because of 1MDB’s RM42 billion loans that are secured by RM51 billion assets?
Regarding the RM200 billion PPP projects — Private Finance Initiative (PFI) or Public Private Partnership (PPP) — this concept was actually introduced when Tun Dr Mahathir Mohamad was the Prime Minister and Tun Daim Zainuddin the Finance Minister. So this is not Najib Tun Razak’s brainchild.
Mahathir did not want Malaysia’s ‘book debts’ to appear high so the government introduced PPP projects. In this way these projects would not appear in the books as debts. That was one way to implement projects without raising Malaysia’s debts.
So, it was Mahathir’s idea to build schools, hospitals, police stations, military bases, highways, bridges, power plants, water treatment plants, etc., through a ‘private initiative’ and keep Malaysia’s debts low.
Mahathir and Daim came out with the PFI-PPP concept so that Malaysia’s debts can be kept low since PFI-PPP projects are not considered debts
Now they go and include the RM200 billion as debts when in the first place the reason for the PPP projects is so that they will not appear as debts.
This is the biggest con Mahathir and the Pakatan Harapan government are pulling off. And now they say because the RM200 billion PPP projects and the RM200 billion guarantees are considered debts, Malaysians will not be given toll-free highways after all. Do Malaysians realise they have been taken for a ride?
