In 2002, the government bailed out two privately run LRT systems, which had run into financial difficulties, at a cost of over RM8 billion. That cost of that heavy bailout burden has resulted in the subsequently formed government-owned Prasarana now struggling to repay its bonds.
The takeover of the Star LRT system cost RM3 billion, according to a national financial accounting committee report. Star was owned by EPF, Lembaga Tabung Haji, LTAT, KWAP and private firms such as KLTG Assets, AIA Co Ltd, STLR Sdn Bhd, Apfin Investment, Trustees of Shell Malaysia Retirement Fund and Trustees of Shell Sarawak and Sabah Retirement Benefit Fund.
The takeover of the Putra system, on the other hand, cost RM5.2 billion.
The National Audit Department confirmed that government-owned Prasarana’s takeover of the two LRT systems cost RM8.2 billion, resulting in Prasarana incurring a debt of RM10.5 billion. “This is a heavy burden for Prasarana,” the accounting committee report noted.
The Mahathir administration had originally privatised the systems instead of running a single publicly-owned integrated system that should have included a bus feeder network and a common ticketing system.
Since its formation, Prasarana had to issue bonds, guaranteed by the government, totalling RM8.5 million to finance the LRT and bus systems. But it was unable to repay the first and second tranches of the bonds totalling 1.4 billion (principal and coupons) that matured in 2006 and 2008. The bonds were subsequently redeemed in full by a government financial allocation.
The report noted: “Prasarana has to be committed in its efforts to assist the government in redeeming the bonds. The Finance Ministry must carefully monitor the financial management of Prasarana to ensure it is carried out efficiently so that the firm’s cashflow can improve to ease the government’s burden in repaying the Prasarana bonds…”
The National Audit Deparment has confirmed that RM9.1 billion worth of bonds (principal) are due to mature between 2011 and 2029, added the report.
As of July 2010, the committee noted it had not yet received a satisfactory explanation on Prasarana’s plans to strengthen its cashflow. “By right, Prasarana should have more efficient management to produce the required cashflow.”
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We also have another joker in Penang who believe in investing on LRT but not BRT which is more affordable. Guess who is that joker?
The biggest jokers are all of you car owners in Malaysia who are paying exhorbitant car price to safeguard Proton in the name of National automobile Policy.
Ha ha!
Where is their business sense? When they can’t make money out of existing infrastructure like invest on Bus Rapid Transit, and wanted to build costly flyover to cater for LRT type of transit, you sincerely believe that they know how to make money? What a joke!
Isn’t it wonderful news, all of Tun Mahatir’s becoming a national embarassment and the rakyat are the bailors! He justified his developments by comparing current cost and future cost. Of course future cost “might” be high, but is that the only reason for all those MAHA projects at MAHA cost? Coffee shop economics I must say. What happens to maintenance cost? Will the infrastructures be spink spank in future? Will the infrastructure be relevant in the future? …
I believe the cashflow of Prasana is enough to service the bonds but never to repay it. The entire financing is predicated on being able to roll over the bonds until cashflow improve to pay off the bonds. But its highly flawed because it does not take into account need for replacement stock and new investments for system upgrade and expansion that will keep postphoning any redemption of bond.
This morning, on BFM (Business FM) radio station which the KL people can listen to, a guy from the “mass transit council” was on the “Morning Grille” show, and he was grilled left right and center.
The url for the show on podcast is at: http://www.bfm.my/spad-mohd-nur-ismal-mohamed-kamal.html
The MP3 can be downloaded from: http://www.bfm.my/assets/site/download.php?f=assets/files/Breakfast%20Grill/2010-10-12_BreakfastGrille_Chuang_Mohd%20Nur%20Ismal%20Mohamed%20KamalSPAD_Podcast.mp3
Bailing out cronies (basically agent for umno?) is a trend set up by mahathir. Read the Barry Wain’s book ‘Malaysian Maverick’ and you will understand how umno manipulate the … money.
At least this operation has cash flows from operations, despite the ridiculous amount of debt. At least there’s a service being provided to the Malaysian public (albeit suboptimal).
Can’t say the same about some of the other debt-laden initiatives the government continues to pursue e.g. 1MDB. RM5bn in debt ….
Are we still not convinced after 53 years of misruled, one can expect and should not be surprised, if you gave a gold mine … they will turn it into a s… mine!!
Again the taxpayers have to bail them out…not much of a choice though….
This is what me and you gets when voting UMNO/BN for 53 years….
Did I hear CASH FLOW?
Oh wait… when you have a super-bloated government, it is luxury to talk about cash flow.
Tun Mahathir was suggesting about Malaysian government to follow the healthcare system of Australian based on his experience during hospitalization. I would also suggest that the government learn how Europe and Australian government centralize the transport system and ensure it is not privatized. Today, the taxpayers still have to carry the burden of a private company though it is privatized. This is an embarassing moment for the Malaysians and guess what? Learn from experience.
What Experience? All this is done with intent, first they give the contracts to cronies… then of course over capitalized companies will go in the red as there is no way they can make money and then the gormen bails them out… and everybody lives happily ever after. What a nicely thought out system – A Fairytale by M…
In the 1980s and 1990s, Halim Saad and Tajudin Ramli were two of Malaysia’s brightest stars, picked by former prime minister Dr Mahathir Mohamad to lead the country’s ethnic Malays onto the national stage as exemplars of a new bumiputera business culture that would catch up with the ethnic Chinese who had dominated commerce as long as Malaysia had been in existence. When Mahathir took office, insiders say, his plan was to create a cadre of 100 super-rich bumis who in turn would help rural Malays into prosperity under a ‘konsep payung’, or umbrella concept routed through Umno, much the… Read more »
The main reason why Tun M is so vocal about Malay rights, NEP, etc is because he is fearful of Najib dismantling his legacy, and in the process of dismantling his legacy, the can of worms he so carefully nurtured and ensured that it remained unopened would be open for all to see.