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Moral and ethical legitimacy
of Abdullah administration under challenge – selective application of OSA on
toll concession contracts in condoning their disclosures by rating and
equity agencies to benefit concession companies but victimizing Opposition
leaders for similar disclosures to protect public interest
(Parliament, Saturday) : Although the Prime Minister, Datuk Seri Abdullah Ahmad Badawi won the unprecedented 91% parliamentary seats in the 2004 general election, the moral and ethical legitimacy of the Abdullah administration has come increasingly under challenge – in particular with the selective application of the Official Secrets Act (OSA) on toll concession contracts in condoning their disclosures by rating and equity agencies to benefit concession companies but victimizing Opposition leaders for similar disclosures to protect the larger public interest.
On Tuesday, I had disclosed that the Rating Agency Malaysia Berhad (RAM) had in the past four years published information which are only available from the New Pantai Expressway (NPE) concession contract to assign and reaffirm long term ratings of AA3 and A1 for New Pantai Expressway Sdn Bhd’s RM490 million Senior Bai’ Bithaman Ajil Notes (22002/2013) (“Senior Bonds”) and RM250 million Junior Bai’ Bithaman Ajil Notes (2003/2016), which are to be found in four RAM’s Project Finance Ratings on New Pantai Expressway Sdn Bhd. dated:
(i) October 2003;
(ii) December 2004;
(iii) November 2005; and
(iv) October 2006.
I had said that the government cannot be unaware of these four RAM reports in the past four years and I had offered to email these copies to the Cabinet if the Malaysian Government had really been so ignorant, inept and incompetent.
I made it clear that I was not for a moment suggesting that RAM and its analysts should be prosecuted under the Official Secrets Act for using official secrets from highway concessions to rate loans and bonds, but the question that cried out for answer is: How could the Prime Minister, Datuk Seri Abdullah Ahmad Badawi, the Works Minister, Datuk Seri S. Samy Vellu and the Cabinet reconcile the application of double standards in demanding that the four Opposition leaders, Tan Sri Khalid Ibrahim and Tian Chua of PKR, Ronnie Liu of DAP and Dr. Hatta Ramli of PAS should “pay the price” for disclosing the contents of Lebuhraya Damansasra Puchong (LDP) concession contract while closing their eyes to similar disclosures by RAM and other equity analysts on NPE and other highway concessions?
Today I want to refer specifically to RAM’s “Rating Review” for Litrak in connection with its toll concession contract for the 40-km intra-urban LDP, dated August 2006.
RAM reaffirmed the AA2 ratings of Litrak’s RM275 million Guaranteed Serial Bonds (“Senior Serial Bonds”) and RM395 million Al-Bai Bithaman Ajil Islamic Debt Securities (“Senior BaIDS”), AA3 ratings of Litrak’s RM148 million Al-Bai Bithaman Ajiul Islamic Debt Securities (“Junior BaIDS”) and RM150 million Redeemable Junior Bonds (“Interchange Bonds”), as well as the AA3/P1 ratings of its RM255 million Murabahah Commercial Papers/Medium-Term Notes (“Junior ICP/IMTN).
In reaffirming that all the long-term ratings of Litrak bonds have “a stable outlook”, RAM cited several “strengths”, including:
“Commendable operating track record” – “Since the commencement of its tolling operations, LPD’s traffic volume has continued to chart impressive growth, underpinned by its favourable alignment that stretches across the densely populated areas of Puchong, Bandar Sunway, Petaling Jaya, Damansara and Kepong. The highway’s average daily traffic (“ADT” increased to 417,581 vehicles in FYE 31 March 2006 (“FY Mar 2006”) from 188,066 vehicles in FY Mar 2000 – representing a 14.5% compounded annual growth rate (“CAGR”) for the past 7 years. Meanwhile, traffic growth worked out to 7.98% for FY Mar 2006, exceeding RAM’s expectations for the fourth consecutive year. Nevertheless, we expect the envisaged traffic congestion to moderate growth in the longer term.”
“Robust debt-servicing ability” – “The LDP’s excellent operating track record has translated into robust cashflow generation for Litrak, as reflected by its average annual free cashflow (i.e. Operating cashflow less Net investing cashflow) of approximately RM120 million over the past 5 years……..Looking ahead, Litrak is expected to generate at least RM150 million of free cashflow per year throughout the remaining tenures of its debt issues.”
“Strong concession Agreement” – “Litrak’s Concession Agreement (CA) provides for the Company to be fully compensated by the Government should toll rates for the LDP not be implemented according to the CA. In this respect, Litrak has been receiving compensations from the Government since November 1999, following a reduction in toll rates in March that year. We note that compensation payments have generally been forthcoming, albeit with some delays.”
RAM noted that although Litrak’s toll rates were reduced to RM1.00 in March 1999 as a result of heavy public pressure, with the government paying compensation for the reduced rates, the concessionaire was the real winner – “To date, the lower toll rates have turned out relatively well for Litrak as they have attracted more vehicles to the LDP, contributing to the highway’s strong traffic volumes.”
In its Rating Review dated August 2006 on Grand Saga Sdn. Bhd and its concession contract for the Cheras-Kajang Highway, RAM reproduced in toto the original toll schedules for the Batu 9 and Batu 11 toll plazas under the Concession Agreement and the revised toll rates under the Second Supplement Concession Agreement – although Samy Vellu now claims that all toll concessions are “official secrets” under the OSA.
Although this is not done in the August 2006 RAM Rating Review on Litrak and the LDP, what is clear is that the information used by RAM could only have come access to information in the various concession contracts.
Does Malaysia then has one law on OSA allowing concession companies to disclose official secrets in the concession contracts in the public domain, although of an exclusive and nature, for the purposes of boosting their loans and stocks while another law to prevent disclosure of similar information to protect the interests of the 26 million Malaysians from being exploited and fleeced through unfair toll hikes as a result of lopsided concession agreements?
Abdullah must rise up to the challenge of the moral and ethical legitimacy of his administration, where OSA is on the one hand used to frustrate accountability, transparency, integrity and justice in the interests of 26 million Malaysians while on the other hand, allowed to be violated with impunity to further the profits and monetary interests of a handful of people and companies.