Penang undersea tunnel developer CZC ‘duped into paying RM22mil’ at gun point?


GEORGE TOWN: The developer of the Penang undersea tunnel project claims it was duped into paying two individuals RM22mil to stop graft investigations.

Consortium Zenith Construction Sdn Bhd (CZC) senior executive director Datuk Zarul Ahmad Mohd Zulkifli (pic) said they were told that action would be taken against them if they did not pay.

“They (the duo) claimed to be the powers that be. Eventually, we found out it was not true. We were conned,” he said.

He said the company had previously followed all the rules.

“But at that particular period of time, we didn’t know what was the rule of law. It’s not bribery but the act was akin to putting a gun to my head,” he said.

Zarul Ahmad said he could not disclose the details because the case was still being investigated by the Malaysian Anti-Corruption Commission (MACC).

“I believe soon they will come out with something pertaining to those issues,” he said.

Zarul Ahmad said things were different now after the outcome of GE14 on May 9.

“On May 10, I opened my window and I took a nice breath of fresh air and it was wonderful.

“Last time, I couldn’t answer certain things but now, I can because there is freedom of speech. I know I won’t get into trouble for making statements that I want to make,” he said at a hotel here yesterday.

In March, a 37-year-old Datuk Seri was picked up by MACC for allegedly receiving RM19mil from CZC to “help settle” investigations into the controversial RM6.3bil mega project comprising an undersea tunnel and three highways.

Former chief minister Lim Guan Eng said the state government was shocked at the news that CZC allegedly paid RM19mil to an unnamed businessman and RM3mil to an MP.

Zarul Ahmad said they had provided an explanation about the incident which was accepted by the Penang government two weeks ago.

CZC, the special purpose vehicle of the Penang project, had come under the spotlight after its two senior directors were picked up to assist in MACC investigations over alleged corruption claims.

MCA deputy president Datuk Seri Dr Wee Ka Siong had raised numerous concerns about the project, including why the special pur­pose vehicle did not meet the RM381mil minimum paid-up capital requirement during the tender process.

Zarul Ahmad said they were adopting the just-in-time (JiT) philosophy, meaning the paid-up capital would only be increased when necessary.

He said 90% of the financing was done through the banks and they did not want to incur interests for nothing.

“That is the only way to reduce our cost and maximise returns.

“Why should we increase our paid-up capital to RM300mil or 400mil when we are only using a certain amount,” he said.

By Tan Sin Chow and Saran Yeoh The Star
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Penang Forum calls to review Penang mega projects


Penang Forum members paying a courtesy call on Chow, seated at the head of the table, at his office in Komtar.

Revise transport master plan because circumstances have changed

” A new public transport design has to be integrated to encourage walking, cycling and bus uise – Penang Forum”

THE Penang Forum steering committee, a loose coalition of non-political civil society groups, has called on the Pakatan Harapan Penang government to review the Penang Transport Master Plan (PTMP) estimated to cost RM46bil.

It said the Penang government should bear in mind its election manifesto of balancing economic growth with environmental protection and a commitment to improve public transport.

“Given the scale of the funding for this mega project, the state must ensure government procurement produces the best value for taxpayers’ money.

“The awarding process used was based on a Request for Proposal, rather than a true open tender, which did not allow for any meaningful comparison of bid documents as the scope of work was not fixed.

“Hence the award process must also be reviewed and revisited,” the statement read.

The committee also pointed out that the present PTMP was based on the assumption that buses, ferries and a cross-channel bridge were under federal control and there was nothing much the state could do.

“So it did not focus on how these could be improved or expanded. But now that circumstances have changed, the plan needs to be revised,” it said.

The committee also said the planning for equitable public transport should take into consideration the following criteria:

  • Fiscal prudence that should consider cost-effectiveness in construction, operation and maintenance.Detailed financial analysis of different public transport systems must be done and compared. The most cost-effective system should be selected.
  • Other important considerations are efficiency of operation, predictable schedules and systems compatibility.
  • The different components of the transport system must be well connected and integrated, socially inclusive, with a low impact on the built and natural environment.
  • Extensive public consultation at every stage, with plans available for online viewing and download so that more people can view and comment. It must be carried out and the exercise must be open to scrutiny.
  • Independent consultants who are at the forefront of designing equitable, sustainable transport must be engaged to do the review of the plans. They must not be associated with or employed by parties involved in tendering for the project.

The statement also read that the 2016 transport proposal was a mega project put forward by SRS Consortium, the project delivery partner of PTMP, to the Penang government.

“The design and planning fails to meet most of the above criteria.

“The overpriced package includes many components of mega road building that will discourage people from using public transport and undermine the stated goal of increasing public modal share of transport.

“Although public consultations have been held about impacts in specific localities, open scrutiny of the whole design was strongly discouraged,” the statement said.

The committee also said the original PTMP by Halcrow involved public consultation, but the state pressured the consultants to add the undersea tunnel and three highways costing a total of RM6.3bil just before it adopted the plan in 2013.

The SRS proposal costing RM46bil includes a proposal to reclaim 4,500 acres of land (comprising three islands). It departs drastically from the officially adopted 2013 Halcrow masterplan.

“Thus, a thorough, proper and independent review should be carried out to ascertain its suitability, viability and sustainability.

“The massive proposed reclamation will destroy fishing grounds and jeopardise fishing livelihoods and a vital local source of seafood.

“It will be environmentally unsustainable due to expensive maintenance costs required for dredging in the future.

“Promise 10 of the Pakatan manifesto talks of ensuring food security and protecting the welfare of farmers and fishermen.

“Last but not the least, with rapid changes in public transport technology and new trends in info-mobility, it is imperative that any existing plan for public transport should be re-examined.

“A new public transport design has to be integrated to encourage walking, cycling and bus use,” it said.

Chief Minister Chow Kon Yeow was earlier reported saying that the state government would leave the decision to review the components of the PTMP to the Federal Government.

He said this was because the proposal was at the Federal level right now, adding that if there was any need to review the project, the Federal Government could make a decision.

He also said the SRS Consortium would be happy to supply the Federal agencies with additional details. – Starmetro

 

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Penang new Chief Minister taking Penang to the next level


 

 

 

Man with a plan: Chow elaborating on his vision for Penang during an interview with The Star at Komtar in George Town.

Man with a plan: Chow elaborating on his vision for Penang during an interview with The Star at Komtar in George Town.

 

New CM Chow has a clear vision of how to develop the state into the next five years

 

“Economic growth with environmental sustainability would be an ideal situation rather than sacrificing the envoronment for the sake of development – Chow Kon Yeow”

 

GEORGE TOWN: It’s easy to understand why Chief Minister Chow Kon Yeow is such a popular figure in Penang despite hailing from Kuala Lumpur.

Holding the exco portfolio of Local Government, Traffic Manage­ment and Flood Mitigation for the last two terms here was not an easy task, but Chow’s simple, frugal and austere ways won over the people and even his harshest critics.

Now he is in the hot seat as the chief executive. Here, he shares his thoughts on his plans to move Penang up another notch over the next five years, as well as personal and party matters. Below is an excerpt from the Q&A:

How are you keeping after more than two weeks into the top post in Penang?

It’s a continuation of where I left off for 10 years as a state executive councillor in 2008. At the Chief Minister’s office, I deal with a wider range of issues than my portfolios under Local Govern­ment, Traffic Management and Flood Mitigation, which were more focused.

As Chief Minister, I also have to look into investment and economic issues, besides being chairman of Penang Development Corporation, PBA Holdings Bhd and other state statutory bodies.

Which plans do you intend to see through in your first term?

Upon taking office on May 14, I took up the Transport portfolio because I intend to see to the implementation of at least some of the projects under the Penang Trans­port Master Plan (PTMP). It is too ambitious to say that we will implement all the projects, but they will be a priority.

On the projects by Consortium Zenith Construction Sdn Bhd (CZC) comprising the RM6.43bil undersea tunnel and three paired roads, we will likely begin construction for one of the three major roads.

As for SRS Consortium, the project delivery partner of PTMP, we will start the Light Rail Transit (LRT) project. Since it is tied to Penang South Reclamation (PSR) in the southern coast of Penang island, the reclamation of three man-made islands will have to start as well to finance the LRT project.

(The PSR is a massive plan to reclaim three islands totalling 1,800ha off the southern coast of Penang island. The success of PTMP, the state government’s multi-billion ringgit public transport project involving LRT, monorail, cable cars and water taxis, depends on funding from property development on the islands.)

One important element here is that people see the reclamation as solely financing the infrastructure projects, which is true in a sense. The man-made islands will not only finance the infrastructure projects, but the lands made available will help meet the development needs of Penang for the next 30 years.

It is near to the Bayan Lepas industrial electronic and electrical cluster. Taking it away from the cluster will not produce the synergy effect.

And preferably, the expansion of our industrial zone into the future must also be near to the cluster and Penang International Airport facilities.

So we can safely say that the three man-made islands are a sure thing?So we can safely say that the three man-made islands are a sure thing? /b>

It is subject to review by the Federal Government. We need approval from the Federal Govern­ment for any large-scale project and the reclamation is one of them. It has to be approved by the National Physical Planning Council. If we can get all the necessary reports to support our application, it will be tabled at the National Physical Planning Council for approval.

You said the LRT component of PTMP is your priority. When can we expect to see it materialise?

We have made a submission to the Land Public Transport Commis­sion (SPAD) since March 2016 for a railway scheme.

Besides the LRT line from Komtar to Bayan Lepas, we have also submitted the other alignment as a full package, as our depot will be built on one of the man-made islands that has yet to be reclaimed. We are still waiting for the environment impact assessment approval.

I believe our application is still active. Hopefully, it will be brought before the Transport Ministry for deliberation and approval.

Previously, it was either an undersea tunnel or a third bridge to link Bagan Ajam and Gurney Drive. What will it be now?

It is still too early to say. We can always make changes because of the cost factor. There is no firm decision on this. CZC will have to complete the feasibility studies first, which are now at 96%.

There is no hurry because even if we were to build the undersea tunnel, it would only take off in 2023.

Right now, CZC’s priority is to start building the 5.7km paired roads starting from Jalan Kampung Pisang in Ayer Itam and connecting with the Tun Dr Lim Chong Eu Express­way in Gelugor. It is one of the three major roads undertaken by CZC.


What are your thoughts on the claims that CZC paid RM22mil to cover up anti-graft investigations on the mega project comprising the undersea tunnel and three paired roads?

It is entirely up to the Malaysian Anti-Corruption Commission to investigate, as it has nothing to do with the state government. We are not the approving authorities.

The concession companies ap­pointed by us are responsible for getting all the approval. What CZC told us was that it was basically political extortion. They were under great duress and had no choice but to believe that the other party could help smooth the process of getting the necessary approval.

This had nothing to do with the state government and we had no prior knowledge of it until it was reported in the media.

Penangites have been plagued by floods on some occasions. What are your plans to resolve this?

The first phase of Sungai Pinang Flood Mitigation project was completed in the late ‘90s and it never went beyond that. This project has been delayed for 18 years.

We need about RM600mil to resolve the problem. The money can be used to build a barrage along the river near the People’s Housing Project in Sungai Pinang. If there is a barrage, backflow from the sea during high tide would not flow inland.

Other components include the construction of pump houses, retention ponds, collector drains along the river, deepening of rivers and the raising of bunds. All these measures are expected to be completed in three and a half years.

We believe these measures will help mitigate floods. All designs can only cater to a certain capacity, so we cannot say that there will be no floods after this.

It is important to secure approval and funding from the Federal Gov­ernment. The Sungai Pinang Flood Mitigation project is vital because it has impact upstream, as there are six tributaries linked to Sungai Pinang.


Many hillslope developments have taken shape, especially in the Tanjung Bungah area, which has drawn concern from environmental activists. What is your take on this?

The current state government will not change the tight guideline of restricting development 76m or 250ft above sea level, although the national guideline can go up to 500ft. The guideline is very restrictive as it will prevent a lot of hill lands from being developed.

This guideline only came into place under the Penang Structure Plan approved in 2007. Before that, approval had already been given to certain developments we can’t stop abruptly. Under this category, there are many projects approved that went beyond the restriction.

I will get the Penang Island City Council to brief me on how much land is still left that is restricted by the guideline. If there is not much land left, we will consider that the guideline will prohibit hillside deve­lopment in the future.

If the guideline is still in place, the people of Penang must confront the fact that there won’t be any development beyond this guideline. Land will become expensive. If there is no reclamation, what will the future hold for Penang island?

Gentrification is an issue in George Town, with foreigners snapping up properties within the Heritage zone. What do you think of this?

Prior to interest in our heritage buildings and before the inscription of the Unesco World Heritage Site, there were a few hundred houses in need of refurbishment. Some houses collapsed during storms.

If you look at the heritage site today, there are few dilapidated houses left due to the interest in heritage properties. The owners have greater appreciation of their value.

My personal stance is to save the house first. If there are buyers, we should save the buildings and negotiate on their use later.

The Opposition in Penang is down to only three representatives – two from Umno and one from PAS. Will they be given any allocation?

They will be given allocation, although the figure may not be the same as the Government’s assemblymen. They rejected it last time, thinking that we were setting a trap on them.

Previously we offered them RM40,000 in annual allocation, but it will be more this time. The funds can be used to support the community, as well as assist organisations in their work and in getting facilities such as fax machines. The funds are meant for the people.

The Opposition is weak in the state assembly. How do you view this matter?

In a healthy Western democracy, when there is a weak Opposition, backbenchers play a more active role in scrutinising government policy. It is a working mechanism. A new check-and-balance in the ruling coalition can emerge to play this role of checking the executives and government on the use of public funds and policy.

Regarding tourism, is there any new programme that your administration would like to introduce to attract visitors within the next five years?

We should be more selective not only in terms of quantity matters, but in terms of quality as well. We need to have niche tourism markets to get high spenders.

At the moment, we cannot be choosy as we need them to fill up our hotel rooms and patronise our local businesses. But there will come a time when it will negatively impact the local environment.

We should move up a notch by focusing on higher spending and business travellers rather than the usual travellers.

In your own opinion, what should an ideal Penang look like?

Economic growth with environmental sustainability would be an ideal situation rather than sacrificing the environment for the sake of development.

Development has to be balanced not only geographically, but also in the strata of society, meaning that the B40 class (households earning RM3,900 a month or less) must be able to benefit from the economic development.

There must be job opportunities and stable income for them. They must not be sidelined or living in poverty without jobs. If jobs can be made available to foreign workers, why can’t it be the same for locals?

You won the Pengkalan Kota state seat in 1990, but lost it in 1995. What was it like having to start from square one?

I was back to full-time party work in 1998 to lead the party after the “Knock Out Kit Siang” internal party strife. After 1999, I was picked as state DAP chairman to continue the party’s struggle in Penang.

What was it like being a DAP-elected representative before and after 2008?

Very different. The government representatives have more resources to serve the people better. But we keep instilling the idealism of our party struggle and the long-term vision to win Federal power into our representatives so that they see a bigger vision for the party and themselves.

Many Penang DAP leaders are now in their 60s. Has the state party leadership identified the next echelon of leaders?

The party made a bold decision by fielding many new candidates in the 14th General Election. They have potential for future development in the Government and party. This is a rejuvenation process to prepare them for the future.

Source: The Star by alex tengtan sin chow

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To Malaysia with love, from the world

New MACC chief breaks down in recounting what he went through (full story)


PUTRAJAYA: Newly appointed Malaysian Anti-Corruption Commission (MACC) chief commissioner Datuk Seri Mohd Shukri Abdull broke down when he recounted his time running away from Malaysian authorities to the United States.

This came in 2015 after his former boss Tan Sri Abu Kassim Mohamed at the MACC decided to indict former prime minister Datuk Seri Najib Tun Razak over the RM2.6bil that was found in his personal bank account.

Shukri said that the commission had well-founded basis to initiate an investigation into SRC International, a subsidiary of 1Malaysia Development Berhad (1MDB), which had been accused of transferring millions of ringgit into Najib’s private account.

According to Shukri, Abu Kassim asked him whether he was ready for the consequences of indicting a sitting prime minister, which could have led to their dismissal.
“I said ‘no problem’, because I was willing to do it for the country,” Shukri told a press conference at the MACC headquarters here on Tuesday.

However, on the day in July 2015 when Abu Kassim was going to do indict Najib, former Attorney-General Gani Patail was removed from his position.

The announcement came along with the reshuffling of the Cabinet that also saw the sacking of the Deputy Prime Minister Tan Sri Muhyiddin Yassin and Rural and Regional Development Minister Datuk Seri Mohd Shafie Apdal, who had also raised questions about 1MDB.

With all these sackings foremost in his mind, Shukri left for Washington on July 31, 2015, to bring up the 1MDB issue with US authorities.

Wary, he released misleading information that he was headed to Saudi Arabia, and he heard that people were waiting to arrest him in Jeddah.

Shukri said that before he left for Washington, he faced tremendous pressure.

“The witnesses I interviewed had been taken away.

“I was threatened to be fired, was told to retire early and was even threatened to be sent to the training division,” he said.

The trip to Washington had its own drama.

“I noticed someone was following me (in Washington). My team in the United States took pictures of the man who was following me.

“I sent the pictures to MACC deputy chief commissioner (operations) Datuk Azam Baki, and asked him to send it to the then Inspector-General Police,” he said, adding that he made it clear that he knew that men were following him.

Shukri said he felt unsafe in Washington and decided to go to New York, where he met up with a friend who worked in the New York Police Department (NYPD).

“I got protection from the NYPD and they provided me with three bodyguards,” he said.

Shukri said he then returned to Washington.

It was in recounting this episode during his Tuesday press conference that Shukri broke down in tears, saying he felt guilty when he was told that his men who were working for him had been incarcerated.

“I felt helpless and was frustrated for failing to protect my men.

“I cried in front of the mat salleh (Caucasians). My men and I had been accused of conspiring to topple the (Barisan Nasional) government,” he said.

Shukri finally retired in August 2016 at the age of 56. During his farewell speech, he hit out at an “individual” who had alleged that he was involved in a conspiracy to topple Najib and his administration.

Abu Kassim, who was appointed MACC chief in 2010, was also replaced by Tan Sri Dzulkifli Ahmad in 2016.

Shukri served at the anti-graft body for 32 years before he retired. He first joined the then Anti-Corruption Agency in 1984 as investigations officer after graduating from Universiti Kebangsaan Malay­sia.

He rose up the ranks and served as ACA director in Perlis, Kelantan and Sabah.

Upon his return to the headquarters in July 2006, he was promoted to the post of assistant investigations director and two months later, was promoted yet again to be the director of investigations.

In 2010, he took on the position of MACC deputy chief commissioner (operations), which he held till his retirement.

Pakatan Harapan appointed Shukri to head the MACC when it took over Putrajaya after GE14.

He clocked in for work at 10.29am on Monday (May 21), having received his appointment letter just about an hour before reporting for duty.

This story was amended to correct some dates. By ashley tang The Star

 

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Huge landslide in Tg Bungah hill


Disaster zone: An aerial view of the recent landslide in Tanjung Bungah, Penang.
An aerial view of the brown water flowing into the sea from Sungai Kelian.

GEORGE TOWN: Nobody knew a natural disaster was waiting to happen until Sungai Kelian in Tanjung Bungah turned brown and silty.

The sudden profusion of laterite mud flowing out to sea was caused by a landslide even bigger than the one that killed 11 people at a Tanjung Bungah construction site last year.

But it was so far uphill – 231m above sea level – that Penang Island City Council (MBPP) had to use a drone to find it.

As it was a natural landslide, residents are now worried about the fragility of slopes in the Tanjung Bungah hill range and want tighter scrutiny on the many development projects slated for their neighbourhood all the way to Batu Ferringhi.
MBPP issued a statement on Sunday after discovering the landslide on Bukit Batu Ferringhi, in the forest reserve about 1.5km uphill of a disused Penang Water Supply Corporation (PBAPP) intake station.

PBAPP chief executive officer Datuk Jaseni Maidinsa clarified that the station had not been in use since 1999, after the Teluk Bahang Dam was completed.

An MBPP engineer said the landslide was about 40m long and 20m wide, but geo-technical experts were unable to reach the site to determine what happened because there are no jungle trails to reach it.

A group called Nelayan Tanjung Tokong shared a video on Facebook last Thursday, showing the russet brown water flowing into the sea from Sungai Kelian and expressed concern.

Tanjung Bungah Residents Asso­ciation chairman Meenakshi Ra­­man said it was worrying because the landslide happened without any human disturbance.

“It shows the hills in the vicinity are ecologically fragile, and we don’t want any untoward incidents to happen again.

“We hope the authorities will tell us what is being done to prevent further landslides,” she said yesterday.

Former Tanjung Bungah assemblyman Teh Yee Cheu said he knew the area well and believed that the landslide took place near the source of Sungai Kelian.

“I have always stressed on how sensitive the hill slopes here are. There are many underground springs in the hills,” he said.

State Works, Utilities and Flood Mitigation Committee chairman Zairil Khir Johari said the landslide happened in the middle of a forest reserve and experts need time to study the slope to understand how it gave way.

He gave an assurance that the mud washing down the river would clear up in due course without long-term damage.

Zairil also stressed that no deve­lopment had been approved near the landslide area.

“The state government’s guidelines on hill slope development are tighter than those used by the Federal Government. We will not approve developments without pro­per compliance,” he added.

Penang Drainage and Irrigation Department director Mohd Azmin Hussin said that it would be difficult to transport machinery to the source of the landslide for mitigation works.

“There are no access roads and the team will have to hike to the site,” he said. – The Star

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Jobs ahead for Pakatan’s first 100 days fiscal reform


Dr Mahathir moves swiftly to inject confidence and stability into the market

WHEN the results of the 14th general election were finally formalised early Thursday morning, showing that Pakatan Harapan had won and would form the new government, there was a sense of excitement among its voters over the reforms promised by the incoming administration.

At the same time, that wave of buoyancy was tinged with worries of uncertainty. Malaysia was taking a path not traversed and for financial markets, anxiety is something they have never digested well.

Prime Minister Tun Dr Mahathir Mohamad since then has moved swiftly to inject confidence and stability among investors and the population.

His swearing in as PM and the announcement of key ministries in the Cabinet will help in soothing nervy investors ahead of Monday when the stock market opens.

Strong track record: Dr Mahathir at the swearing in ceremony as the 7th Prime Minister. He expects the stock market to see its capitalisation increase over time. — Bernama
Strong track record: Dr Mahathir at the
swearing in ceremony as the 7th Prime Minister. He expects the stock
market to see its capitalisation increase over time. — Bernama

The early movements of the stock market will be closely watched and that is something Dr Mahathir too has quickly sought to assuage. He tried calming anxious investors by saying he expects the stock market to see its capitalisation increase over time. He also assured businesses and investors that Malaysia remains business-friendly and the economy is among his top priorities.

Hints of what businesses and investors can expect are laid out in Pakatan’s manifesto and its to-do list within the first 100 days. Central among the pledges is the confirmation that the unpopular goods and services tax (GST) will be cancelled and replaced with a sales and services tax (SST).

The other measures it intends to carry out in the initial period is to reduce the cost of living, stabilise the price of petrol and introduce targeted petrol subsidies, abolish unnecessary debts that have been imposed on Felda settlers, introduce EPF contributions for housewives, equalise the minimum wage nationally and start the processes to increase the minimum wage, postpone the repayment of the National Higher Education Fund Corp or PTPTN for all graduates whose salaries are below RM4,000 per month and abolish the blacklisting policy.

It also plans to set up a Royal Commissions of Inquiry into 1Malaysia Development Bhd, Felda, Mara and Tabung Haji and reform the governance of these bodies. A Special cabinet committee to properly enforce the Malaysia Agreement 1963 will be set up. There are plans to introduce the Skim Peduli Sihat with RM500 worth of funding for the B40 (low-income) group for basic treatment in registered private clinics, and initiate a comprehensive review of all mega-projects that have been awarded to foreign countries.

What impact the measures will have on government finances is another source of uncertainty but Socio-Economic Research Centre executive director Lee Heng Guie feels it’s too early to assess any impact. “We will have to wait and see if Pakatan will table a new budget. The current estimates are based on the old budget, but I believe the Pakatan budget will continue with fiscal consolidation,” he says.

Pakatan’s alternative budget projects for a smaller fiscal deficit of 2.04%.

AmBank Group Research chief economist Anthony Dass says there needs to be some clarification on the new government’s policy and strategy without risking the ratings.

“Removing the GST and introducing the SST and other subsidies will act positively on the economy, as they help to improve the disposable income of households, and thus, spending. This will help buffer any shortfalls from the GST. Besides prudent financial management as we have seen in Selangor and Penang, a more transparent public procurement system or tendering process will improve competition and lower margins for players and ease budget strains,” he says.

Improving disposable income: Central among the pledges is the confirmation that the unpopular GST will be cancelled and replaced with the SST.
Improving disposable income: Central among the
pledges is the confirmation that the unpopular GST will be cancelled
and replaced with the SST
.

Fiscal implications

Among the to-do list for its first 100 days in office, it is the promise to repeal the GST that has rating agencies worried.

“We are closely following the developments around some campaign promises that could have a negative impact on market sentiment and trigger volatility in the financial markets. These dynamics will take time to unfold and a lot will depend on what the new Government unveils in the coming weeks and months,” says Moody’s Investors Service Financial Institutions Group vice-president Simon Chen in a statement.

“If investor sentiment worsens materially, we will see increasing risks of capital outflows and a further weakening of the ringgit, that could in turn dampen private-sector consumption and operating conditions for banks in Malaysia.”

He did, however, say that Malaysia has weathered challenging periods, in particular, during the 1MDB scandal.

Fitch Ratings in a statement says the May 9 results means a higher likelihood of fiscal and economic policy change.

“The extent to which the new government’s agenda will shift major policy is uncertain, but the Pakatan victory and its policy platform indicate a much greater potential for change. In the meantime, Fitch will monitor the new Government’s policy agenda as it evolves,” it says.

It views policy slippage leading to deterioration in fiscal discipline and higher government debt or deficits as a negative rating sensitivity.

“Among the most notable proposals is the replacement of the GST – a value-added tax launched in 2015 – with the narrower SST that had preceded it. The GST has become a key source of government revenue, accounting for 18% of total revenue equivalent to just over 3% of gross domestic product (GDP) in 2017.

“By comparison, the SST accounted for only 8% of total revenue and 1.6% of the GDP in its last year, 2014. As such, absent offsetting measures, the replacement of the GST would result in a correspondingly higher deficit,” it says.

Lee: We will have to wait and see if Pakatan will table a new budget.
Lee: We will have to wait and see if Pakatan will table a new budget.

Fitch points to another significant proposal, which is to reinstate some of the fuel subsidies. It says that if fuel subsidies were to be reinstated, they could offset some potential budgetary gains from rising oil and commodity prices.

Maybank Investment Bank in a report says that the removal of the GST will mean a projected revenue loss of RM44bil based on the current budget estimates. It says that even if the GST is replaced by the SST, which brought in RM17bil in 2014, there could be a prospective loss of RM27bil in government revenue and that could lift the budget deficit by 1.9 percentage points.

The report, however, does point to Pakatan’s alternative budget released in October 2017, which says that abolishing the GST will stimulate the economy and raise other tax revenues by boosting consumer and business activities. It says tax revenues will rise from better economic growth, higher receipts of corporate income tax, real property gains tax and other sources of income.

Government expenditure is also expected to drop by cutting certain allocations such as for the Prime Minister’s Office that can help buffer the cost of the GST removal.

It says that operating expenditure could be improved by having open tenders and the rationalisation in non-critical spending from supplies and services, which accounts for 14.4% of operating expenditure, grants and transfers to state governments and statutory bodies (9%) and the others’ category (7.8%), which consists of grants to statutory funds, public corporations and international organisations as well as insurance claims and gratuities.

Higher oil prices, however, are a revenue source for the Pakatan government and can help mitigate the loss of income from the removal of the GST. Maybank’s analysis shows that for every US$10 rise in the crude oil price, government revenue will rise by between RM7bil and RM8bil. That increase will have to be balanced out by the Pakatan manifesto’s pledge to give higher royalties to Sabah and Sarawak, and petrol subsidies.

Growth direction

Fiscal consolidation will mean there will likely be an impact on economic growth, as government expenditure plays an important role in generating growth. Economists are, however, optimistic that consumption boost from lower prices from the removal of the GST will help buffer any shortfall from spending.

They feel that the policies that will be rolled out in the coming months will be positive for the market and economy.

“We reiterate our -2.8% budget deficit to GDP for 2018 with the GDP to grow around 5.5%, supported by domestic demand and exports on the back of a stronger global GDP,” says Dass.

“We foresee better management in the operating expenditure with a more transparent procurement system or tendering process and efficiency in development expenditure projects and targets.”

Maybank is keeping its 2018 growth target at 5.3%, pending details on Pakatan’s economic policies.

“We are neutral to positive on the consumer spending growth outlook, based on Budget 2018 and Pakatan’s GE14 manifesto on measures to address living costs and boost disposable income. The main issue on the growth outlook now is investment, as businesses adopt a ‘wait-and-see’ stance and amid potential government reviews of several China-linked infrastructure projects and investments,” it says.

The investment climate, though, will be crucial in generating higher economic growth for the new government.

Lee says investor-friendly policies are important and the next three to six months will be important after Cabinet positions are filled and their work starts.

“Dr Mahathir’s strong track record, added with Datuk Seri Anwar Ibrahim as the prime minister-in-waiting and the maturity of Malaysians as reflected in this GE, augur well for the country. These are positive signs on the business and consumer confidence,” says Dass.

“This will help the investment mood to improve and the pick-up in capital expenditure.”

By jagdev singh sidhu, The Star
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‘Malaysian tsunami’ May 9, 2018 ! Mahathir to be sworn in, Public holidays May 10 & 11


 

Mahathir to be sworn in as PM on May 10

 

After six decades in power, BN falls to ‘Malaysian tsunami’–

May 9, 2018. This is the day Malaysians experienced the power of the ballot.

Anger towards the current administration had brought them out in large numbers to cast their votes in the historic 14th general election.

Few Malaysians would have thought they would live to see this day – the defeat of the formidable UMNO-led BN/Alliance which had held unbroken power for 61 years.

This is the first time the country has witnessed a change of government since independence from the British in 1957.

Malaysia is probably the only country in the world, apart from a handful of communist states, to have not undergone a regime change.

Pakatan Harapan’s victory is even more remarkable because of the gerrymandering, the numerous attempts by the Election Commission to frustrate the opposition campaign, and the holding of the election in the middle of the week, which most likely resulted in a lower voter turnout.

The rout of BN was made possible by a Malaysian tsunami – a tide which comprised not just the major ethnic groups in the peninsula – Malays, Chinese and Indians – but also those in Sabah and Sarawak.

At the end of the day, the redelineation, which BN pushed through weeks before the election, backfired.

Voters, frustrated with various issues, made a beeline at polling stations nationwide to reverse the efforts by BN and its functionaries to steal this election.

More importantly, this election witnessed a swing among the Malays in favour of the opposition despite the scare-mongering and race-baiting.

With this, Malaysia has taken the first step of becoming a normal country.

A normal country in which two or more coalitions would vie for power. A normal country where power now resided with the people, and not politicians. A normal country in which race and religion would not be an unalloyed obsession.

Now the hard work begins. No one should be under the illusion that a new government would be able to reverse the rot that had taken root for decades.

For a country that is so divided, it would take time to heal the wounds, and for Malaysians to rebuild the trust for one another and for the many institutions that have failed them.

Credit must also be given to those in BN such as UMNO Youth Chief Khairy Jamaluddin, UMNO Treasurer-General Salleh Said Keruak and BN Strategic Communications Department Director Abdul Rahman Dahlan who were gracious in accepting defeat, emphasising that the voice of the people was paramount.

Similarly, supporters of Harapan must also be gracious in victory.

May 9, 2018, is also a reminder to all politicians not to take the people for granted. It is a reminder that it is the rakyat who are their masters, and the politicians have been elected to serve, and not lord over them. It would be wise for the incoming government to remember this.

Congratulations, Malaysia. At last, power to the people!

Source: Malaysiakini EDITORIAL

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AnalysisJoceline TanBy Joceline Tan
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