How and why did the RM70-100 million-a-year concession to security-label packaging for locally-made cigarettes change hands from little-known  Kod Efisien to a RM2 company,  Lembah Sari,  without openness and accountability as promised by Abdullah when he became Prime Minister

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Media Statement
by Lim Kit Siang  
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(Parliament, Wednesday) A report in yesterday�s Singapore Business Times on "Concession switch raises eyebrows - Question mark over how lucrative concessions are awarded in M'sia" has raised the big question as to whether,  despite the  ongoing Mahathir-Abdullah storm of controversy, there has  been any real change in accountability, transparency, integrity  and good goverance in the Abdullah premiership as compared to its predecessor.

Is the Prime Minister, Datuk Seri Abdull Ahmad Badawi walking the talk of a clean, incorruptible, open, accountable and transparent administration, whether in the award of tenders or concessions, or is he just walking the old Mahathir walk, with only the change of players but not the play?

The Singapore Business Times report raised the specific question of how and why did  the RM70-100 million-a-year concession to security-label packaging for locally-made cigarettes change hands from little-known Kod Efisien to equally unknown RM2 company,  Lembah Sari,   without openness and accountability as promised by Abdullah when he became Prime Minister.

The Singapore Business Times report said:

"SINCE Aug 1, a little known private Malaysian company named Lembah Sari has taken over a lucrative RM70-100 million-a-year (S$30-43 million) concession to security-label packaging for locally made cigarettes, sparking questions over how concessions are awarded in Malaysian business circles.

"In September 2003, little known Kod Efisien was awarded a government concession to security-label all locally produced cigarettes and beer in an unpublicised decision by Malaysia�s Customs Department, a unit of the Finance Ministry.

"Kod Efisien reached an agreement with the cigarette makers in March, 2004 but could never broker an agreement with Malaysia�s beer makers in a dispute that still continues. If a deal had been reached with the brewers, the company could have added another RM30 million to its annual cash flows.

"In mid-July, industry executives said that cigarette companies received a letter from Lembah Sari�s chairman Haris Onn Hussein informing them that it was taking over the security labelling facilities provided by Kod Efisien for a three-year period.

"At around the same time, the executives said that the Confederation of Malaysian Tobacco Manufacturers had been informed by Kod Efisien that its services would be replaced by Lembah Sari from August. No reasons were given for the change.

"According to documents lodged with Malaysia�s Companies Commission, Lembah Sari is a RM2 company - it may have increased its capital to its authorised RM100,000 by now - with two little-known shareholders. Its chairman, Mr Haris, however, is the youngest son of Hussein Onn, Malaysia�s third premier, and a brother of Hishamuddin Hussein, the country�s Education Minister."

�The unpublicised rotation of the award raises questions about how concession awards are given out in Malaysia, the executives said. Indeed, it used to be one of the chief complaints against the previous administration of Mahathir Mohamad: that a lack of public disclosure regarding contract awards resulted in an opaque process without open, competitive bidding or public debate. Meanwhile, the current premier Abdullah Ahmad Badawi had promised competitive bidding in government awards.

�Moreover, the shift of companies seems to negate arguments that Malaysian companies which promised state-of-the-art security features were passing on unique technological benefits to its customers. In this case, for example, the executives said that Lembah Sari will continue to supply the same security equipment and ink supplied by Kod Efisien - from the Swiss-owned Sicpa Holdings SA.

�In effect, the executives said, it was, like Kod Efisien before it, acting as a middleman in a process that usually resulted in price increases for consumers.�

Among the questions Abdullah should give answer are:

1. What are the reasons, basis and criteria for a RM2 company, Lembah Sari, to take over from Kod Efisien  a lucrative RM70-100 million concession to security-label packaging for locally-made cigarettes from August 1?

2. What was the rationale for granting a concession on a monopoly on security labels for all locally produced cigarettes and beer to little known Kod Efisien in Sept. 2003 totally without publicity.

3. Why  was the transfer of concession from Kod Efisien to Lembah Sari conducted in total secrecy, completely against the pledge of Abdullah for openness, accountability,  transparency and integrity?

(16/08/2006)