KUALA LUMPUR – The Dewan Rakyat will reconvene on July 26 for a five-day special session to do two things: explain to lawmakers the Covid-19 national recovery plan and amend relevant legislation and regulation to allow for a hybrid sitting.
Based on the order paper, nothing much is expected to come out from these sessions as MPs from both sides of the political divide have chided Prime Minister Tan Sri Muhyiddin Yassin for reducing the exercise to a mere “briefing session”.
Any chance of a proper debate, however, is expected to only take place from September 6.
While that may be a couple of months away, four deals that involve public money are worth watching given the lack of parliamentary oversight, aside from Covid-19 expenditure and vaccine procurement.
Littoral combat ships
RM9 billion has been set aside for the procurement of six littoral combat ships (LCS) for the Royal Malaysian Navy, the largest modern defence purchase in the country’s history.
But since it was awarded to Boustead Naval Shipyard Sdn Bhd (BNS) in 2011, the project has been riddled with delays.
BNS is a wholly owned subsidiary of Boustead Holdings Bhd, the investment vehicle of the Armed Forces’ Fund Board (LTAT).
Of the total sum, more than half, or RM6 billion, has been used with no ships to show. The first LCS was expected to be delivered in April 2019 but only 60% has been completed with the rest completed at various stages.
The project calls to account three former defence ministers: Datuk Seri Najib Razak, Datuk Seri Ahmad Zahid Hamidi, and Datuk Seri Hishammuddin Hussein.
Hansards by the defunct parliamentary select committee on defence and home affairs led by Setiawangsa MP Nik Nazmi Nik Ahmad show that there were teething problems, ranging from unaccounted public money to middlemen in the system and bureaucratic delays.
What was certain from those parliamentary sessions held early last year was that any further resumption of the LCS project would mean cost overruns, whether in the form of variation orders or so-called middleman fees.
Despite these unresolved issues, Deputy Prime Minister Datuk Seri Ismail Sabri Yaakob has said the project will continue, albeit with conditions from the cabinet, which have yet to be publicly disclosed.
This is done to protect the navy’s interests as well as save the jobs of 8,000 workers and hundreds of local vendors and contractors.
The Public Accounts Committee (PAC) led by Ipoh Timur MP Wong Kah Woh wanted to grill Zahid over his alleged involvement in the project when he was defence minister.
The Bagan Datuk MP welcomed the move, but that session is now up in the air as the PAC’s current focus is on the Covid-19 vaccination roll-out.
5G roll-out
These are still early days, but the nationwide 5G plan has been garnering attention due to the size of the project – RM11 billion – albeit lower than the government’s estimated RM15 billion.
While Digital Nasional Bhd (DNB) has come out to explain the tendering process and why it chose Ericsson for the design-and-build project, market participants have raised two problems that need ironing out.
Firstly, governance. DNB is wholly owned by the Finance Ministry, therefore is the company answerable to the ministry or the Malaysian Communications and Multimedia Commission (MCMC)? The agency has come out to say that it will regulate DNB as it does any other telco providers.
Secondly, financing. So far, DNB’s statements have vaguely explained how the project will carry on. Per a July 8 statement, the company said: “The financing of network equipment will be sourced from foreign and domestic financial institutions that Ericsson has undertaken to arrange as part of the agreement to supply, deliver and manage the entire 5G network.
“DNB will securitise future cash flows from its wholesale business with mobile network operators via sukuk to finance its other network operating expenditures and meet its obligations to repay financiers when they become due. Accordingly, there will be no government funding required for the 5G network roll-out.”
What some are asking is for a breakdown of the terms of such financing, including concession details, as well as whether off-balance sheet debt will be accrued through the process.
Others have also questioned the need to make DNB the sole provider given that smaller countries such as Singapore have appointed three companies: Singtel, M1, and Starhub. The latter two have formed a joint venture. Singtel will be using Ericsson for its 5G kit while M1-Starhub has opted for Nokia.
While proponents argue that a single provider, in this case DNB, will avoid duplication of infrastructure, critics say that if a small country like Singapore can have three companies providing standalone 5G architecture, “what’s stopping Malaysia, since such matters can be ironed out contractually?”
Penjana Nasional fund
The venture capital (VC) fund is run by Finance Ministry-owned Penjana Kapital Sdn Bhd and eight selected VC fund managers.
This is a RM1.75 billion matching investment scheme, where the government puts up RM600 million, while the remainder will be pooled in by the fund managers.
Some of the VC funds come from a well-connected circle. For instance, RHL Ventures Sdn Bhd co-founder Raja Hamzah Abidin is Datuk Seri Tengku Zafrul Tengku Abdul Aziz’s cousin, while Vertex Force Sdn Bhd is owned and run by Yeoh Keong Hann, who comes from the Yeoh clan that controls the YTL conglomerate.
Penjana Kapital said in a January 28 statement that the selection of the VCs were above board and they were chosen due to their track record, and any conflict had been declared prior to being assessed.
However, market participants are questioning whether the RM600 million spent here could have been channelled elsewhere for better targeted Covid-19 aid for small and medium enterprises, “especially as Malaysia’s start-up success rate is an estimated 20%”.
In a May 9 statement, Penjana Kapital said it had raised RM676 million in funding for start-ups wherein 55% of the funds or RM372 million came from various foreign investors, specifically Hong Kong and South Korea.
National Integrated Immigration System
Iris Corp Bhd was awarded the RM1.16 billion contract to build a complex system that involves migration data and is seen as a successor to the troubled Malaysian Immigration System (MyIMMS).
Developed by Heitech Padu Bhd, MyIMMS had been the subject of auditor-general’s (AG) reports since 2015. In its 2018 report, the AG found there were no records of 214,398 non-citizens exiting Malaysia since mid-April that year. MyIMMs also experienced 4,489 breakdowns from 2016 to 2018.
In the run-up to Iris winning the tender, it was rumoured that Muhyiddin’s son-in-law Datuk Adlan Berhan had an interest in the project through one of the bidders S5 Systems Sdn Bhd.
But, in a March 23 interview with The Edge, S5 managing director Syed Mohammad Hafiz Jamalullail denied the claim, saying he knew Adlan for quite some time and shared the same circle of friends.
To the question of if any of the political connections, including Adlan, are involved in S5, Syed Hafiz said: “No.”
As this is a project of national interest, four areas deserve clarity.
Firstly, why did the government go with Iris when there were other players, such as MyEg Services Bhd and Scicom (MSC) Bhd, that had also bid for the project?
Secondly, costs the government has forked out to date to keep MyIMMS running since Iris was only awarded the NIIS contract on January 29.
Thirdly, whether Iris will end up maintaining the NIIS and, if yes, how much is the projected contract? Estimates put that figure as high as up to 15% of the contract value a year.
Lastly, whether variation orders have been accounted for, as these can lead to cost overruns. – The Vibes, July 24, 2021
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