By Syed Akbar Ali
By Syed Akbar Ali
The Star is read mostly by Chinese readers. The Utusan is read mostly by Malay readers. Here is the news about the LCCT in both newspapers today. Note the different headlines:
Projek LCCT Labu ditolak
KUALA LUMPUR 30 Jan. – Kerajaan hari ini menolak cadangan AirAsia Bhd. untuk membina sebuah lapangan terbang baru berharga RM1.6 bilion di Labu, Negeri Sembilan.
Here is The Star Saturday January 31, 2009
Decision on Labu LCCT plan soon
‘Ditolak’ versus ‘decision soon’. As they say, different strokes for different folks. Here is the Star’s version (truncated)
“Actually, the Government has not made a decision on the matter. What is important is that all the fact-finding and details arising will be scrutinised,” he told Bernama after attending a Chinese New Year dinner function organised by the MCA, here, last night.
Ong said the Government needed time to decide on the matter as it involved many parties.
“The Transport Ministry, Economic Planning Unit,
Bernama had earlier yesterday reported that the Government had rejected the proposal for a new LCCT in Labu, but the low-cost carrier was said to have several concessions, according to sources.
It was reported that MAHB would be given the responsibility to build a new LCCT near the existing terminal, which is next to the
The sources were also quoted as saying that the decision to cancel the proposed project was conveyed to AirAsia at a meeting chaired by Deputy Prime Minister Datuk Seri Najib Tun Razak and was attended by Finance Ministry, MAHB and AirAsia officials.
At the meeting, AirAsia was led by its group chief executive officer Datuk Seri Tony Fernandes.
In a statement issued after the meeting, Tony said AirAsia regarded the outcome of the meeting as very positive and that it was now awaiting the details.
He said AirAsia was committed to providing its guests with world-class, five-star service via a purpose-built LCCT.
He said AirAsia was also committed to making Kuala Lumpur a regional hub for low-cost carriers and contributing significantly to the growth of Malaysian economy.
Financially, it is also good news for AirAsia, he said.
It already has a high gearing, and with this it does not have to seek funding for the new LCCT, he added. — Bernama
So the Labu LCCT may be off. As a trade off, in lieu thereof, to compensate, as an alternative, to resolve the matter the Government will now use taxpayers funds to build an LCCT terminal at the KLIA to serve Tony’s needs.
According to Tony this should be a profitable proposition for Air Asia because (the Star quotes Tony) ‘Financially, it is also good news for AirAsia’.
Well good for Air Asia then. The whole world runs on making profit. Making profit should be the end result of running things on sound, business principles. Honesty is also important. Dishonesty ultimately leads to disaster, even war. Since Air Asia is already heavily in debt, they are relieved that they do not have to pay for the LCCT terminal.
Well taxpayers have long been paying for bus stations, ferry terminals, airports and ports around the country. But most buses, ferry boats, ships and even airlines which operate from these terminals are owned by private corporations. In other words the building of terminals is part of providing required infrastructure.
I hope that with the new LCCT addition at the KLIA to be built by Malaysian Airports, the passenger volume through the KLIA will multiply. This will increase Malaysian Airports (Government) revenue and help recoup the investment in the KLIA. That is how business should work.
Perhaps KLIA will also emerge as the new low cost carrier hub in
What is good for business must be good for Malaysians.
But this episode does bring to the fore the extremely poor track record of Government departments and Government organizations in undertaking business negotiations with private companies. Despite decades of five year plans, decades of development projects and privatization they still don’t know how to think like businessmen or be realistic.
Accepted business practices or the time value of money are still vague notions among many Government negotiators.
The IPPs (Independent Power Stations) were mooted after the disastrous four day country wide power outage in the early 90s. The blackout was a terrible failure on TNB’s part.
The first kid off the IPP block was YTL Power. YTL is an efficiently run business organization. But they ran into severe roadblocks when they had to negotiate the first PPAs (Power Purchase Agreement) with TNB.
Decisions had been made by the Government that IPPs would be allowed. But TNB got emotional and egoistic. They were quite determined to drag their feet over the IPPs. To them it became a case of ‘face saving’. Their monopoly was being broken.
The public is seldom made aware of the numerous rounds of time wasting ‘mesyuarat’ and negotiations with the Government which private companies have to suffer. I have personal knowledge of such negotiations and it can really cause stomach ulcers.
Despite what the public may say of YTL, Air Asia etc, I am positive they have suffered tons of time wasted – wasted time which costs money. Ultimately it is the economy and the man in the street (the ordinary Pak Hashim, Sundram and Mrs Lee who shoulder these costs)
To digress a little, I designed and taught a Project Finance course to Bank Officers in Maybank many years ago. (After 14 years I believe my module is still being used). In the most exciting era of Tun Dr Mahathir Mohamed where hundred million Ringgit projects were the norm, I always asked the junior officers at the Bank to calculate quickly in their heads : what is 1% of RM1.0 million? Answer: RM10,000. 1% of RM10.0 million? Answer : RM100,000. 1% of RM100.0 million? Answer: RM1.0 million.
At that time the BLR was running at around 7%. Plus say a 1.5% margin the interest rates suffered by a Borrower could be 8.5% per annum.
For a RM100.0 million loan, that would work out to RM8.5 million in annual interest payments alone. This works out to RM708,000 a month or RM177,000 a week or RM25,000 a day (including Sundays and public holidays) or RM3,000 per working hour (of an eight hour day).
But even then projects were already running into the multi billion Ringgits. A RM1.0 billion loan could suffer RM85.0 million interest payments per year or RM1.6 million per week!! This is a lot of money. Delay a billion Ringgit project by one week and about RM1.6 million is lost!!
Whether the planes are taking off or not, whether the power station is generating power or not, the Bank’s will charge interest according to time elapsed. Hence the ‘time value of money’.
But I have attended meetings with the Government where they may just say ‘OK let’s meet again next month and get updates on the issues’ etc. No closing on the matter. So what if the interest payments are piling up? Its not their funeral. They are Civil Servants, they get paid every month.
What choices will the Promoter have? Crying is not an option. If they are well connected, eventually the Promoter has to call upon political muscle to sort things out. If they have no connections their projects will die unnatural deaths. These things happen too. And few return from the dead.
I believe some intransigence is being faced by Tony Fernandez and Air Asia with the Government people too. Of course compounding the matter is Air Asia’s own reputation. Air
It will be much easier if Government can think in straight forward practical terms like businessmen. One simple way of achieving this if more seasoned, honest businessmen are appointed to Government. People who really have the interests of Pak Hashim, Sundram and Mrs Lee at heart.