Frankly Speaking

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Benefits of electionsThe prevailing view in the Barisan Nasional (BN) that a by-election for the Penanti state assembly seat is a waste of public funds invites a dialectical response.

Elections are the basic building blocks of modern democracies as they give all citizens a chance to express their opinion about how well their government has been discharging its responsibilities. For this reason, the people’s right to cast their vote at regular intervals should be preserved with great care, as it is the ultimate test of a government’s acceptability to the people it serves.

By the same token, by-elections are equally precious, as they represent a chance for the electorate to give their elected leaders an early assessment about their performance. They should therefore be taken just as seriously as end-of-term referendums.

Of course, like all social institutions, the electoral process is fraught with abuses and aberrations. These flaws should be examined and corrected as they become evident, as part of a process of constant improvement.

However, for the ruling coalition to downplay this most fundamental democratic practice — the casting of the ballot — when the odds are not in its favour weakens the democratic tradition on which this nation is built. It needs to be emphasised that a scrupulous respect for the norms of democratic governance is the ultimate bulwark against the anarchic forces that have undermined so many modern states in recent decades.

The Election Commission spends RM600,000 to conduct a by-election, although this does not include the costs incurred by the police and other authorities. Nevertheless, this is a small price to pay if the outcome can ensure that elected officials who allow inefficiency, corruption, abuse of power or other excesses to breed can be shown the exit.Lower tax for tollIn three months, the Economic Planning Unit (EPU) will present to the government its recommendation on how to resolve the scheduled toll hike issue that has caused much discontent among the rakyat for years.

At least two political parties have asked the government to begin by privatising PLUS Expressways Bhd, which operates several tolled roads, including the North-South Expressway and the New Klang Valley Expressway (NKVE). The proposal is not without merit. The RM6.5 billion upfront cost to buy out the 36% block from PLUS minorities alone trumps the RM2.8 billion compensation paid to PLUS in six years between 2003 and 2008. That’s not counting PLUS’ RM8.5 billion net debt, finance costs on debt taken for the buyout, and the responsibility of managing the concession.

Moreover, the RM730 million that the government paid PLUS in compensation last year does not look as scary when compared with the RM725 million in dividends PLUS paid out the same year, of which RM464.2 million went to Khazanah Nasional Bhd and RM69.5 million to the Employees Provident Fund Board. In additon, PLUS was paying tax on its profits. Income tax-related expenses reduced PLUS’ net profit by RM435.7 million last year. Alas, this is not the scenario for all the other toll concessions.

While there’s no doubt that something needs to be done — and unless privatisation is found to be feasible — the government has little choice but to compensate the concessionaires according to the letter of the agreements signed.

However, instead of paying the toll concessionaires cash or lengthening the concession in lieu of the scheduled toll hikes, the government could grant the toll concessions tax breaks equivalent to the compensation amount.

Effectively, the toll concessionaire’s tax rate would be lower than the prevailing corporate tax rates. By doing this, toll rates do not need to go up and toll concessions are also not lengthened. Isn’t this what the people want?Putting up a good fightMalaysia’s minority investors, who are often at a disadvantage when it comes to privatisation deals, may envy the minority shareholders of Hong Kong-based PCCW Ltd for the level of “support” they receive from the regulatory authorities.

Last week, the South China Morning Post reported that Anthony Rogers, a Court of Appeal judge in Hong Kong, had described the privatisation of PCCW as “an outrageous attempt to squeeze out small shareholders who had put their life savings into a stock that had suffered a pathetic decline”.

The share price of PCCW, a telecommunications outfit, once traded at HK$120 in its heyday during the dotcom boom, but now Richard Li, younger son of tycoon Li Ka-shing, is privatising the company by offering minority shareholders HK$4.50 a share.

And the irony is, Li’s Pacific Century Regional Developments and its partner China Unicom Group — both major shareholders of PCCW — would have got a dividend of US$2 billion (RM7.1 billion) if the privatisation were completed.

The privatisation of PCCW hogged the limelight after the Securities and Futures Commission (SFC) of Hong Kong claimed that vote rigging by Li helped push through the privatisation deal in February.

The SFC first filed a case to block the deal in court but it was dismissed. It then brought the case to the Court of Appeal, where Judge Rogers is hearing the case.

Such incidents are indeed rare in Malaysia, where major shareholders can easily privatise their companies and give lousy deals to minority shareholders in the process. Perhaps the local authorities should take a leaf from the Hong Kong court’s book.

This article appeared in The Edge Malaysia, Issue 752, April 27-May 3, 2009