Agenda Daily

Whither credibility?

ykadirxPledges of closer supervision and tougher action by the authorities appear to have gone unfulfilled, as epitomised by several high-profile corporate misdemeanours. When will things change?

THE VERY PUBLIC, LONG-RUNNING SPAT BETWEEN Malaysia Airports Holdings Bhd (MAHB) and AirAsia Bhd does not appear to be abating.

It continues to be a case of a lack of honour and decorum among the nation’s corporate players.

Disputes, litigations, disciplinary action and criminal investigations involving Bursa Malaysia-listed companies, shareholders and top executives seem to be on the rise despite the corporate and enterprise governance mantra.

Pledges of closer supervision and tougher action by the authorities appear to have gone unfulfilled and, unsurprisingly, have largely fallen on deaf ears. Some of the most glaring insider trading cases and conflicts of interest have gone unattended. This has led to many parties questioning the credibility of the key supervisory agencies.

The point of contention in the most recent spat involving the Khazanah Nasional Bhd-controlled MAHB and entrepreneur-driven AirAsia is the delay in the completion of the new Low-Cost Carrier Terminal (LCCT) at the KL International Airport and the raising of the passenger tax at the existing LCCT.

For AirAsia, the delay in the completion of the project and the massive cost overrun it incurred is the case of what the Malay proverb says pucuk dicita u/am mendatang (getting more than what you had bargained for). It gives the airline operator an opportunity to thumb its nose at its nemesis MAHB.

I don’t think AirAsia and its backers, including conglomerate Sime Darby, have completely gotten over the heartbreak of having their proposal to build the so-called KLIA-East at Labu in Negeri Sembilan in 2009 rejected. The construction was planned to have started in mid-2009 and the new airport was anticipated to be ready by this year.

It was that proposal that led the government to order MAHB to hasten the development of what is now known as KL International Airport Two (KLIA2).

Sadly, the ineptitude of MAHB and its backers has not only caused the cost of the project to escalate, but a completion delay of six months as well.

Adding insult to injury, the fellows at MAHB arbitrarily raised the airport tax beginning Dec 1 from RM51 to RM65 on departing international passengers and from RM25 to RM32 on domestic passengers at the existing LCCT.

One may dislike Tan Sri Tony Fernandes’ apparent brashness, but he has a good cause to raise a tantrum over the tax issue in the interest of passengers.

He said the airport taxes were being raised when facilities at LCCT remain poor, the cost of KLIA2 nearly doub.jing and its opening delayed to April 2013. The new rates, Fernandes said, are half of what AirAsia charges for such destinations as Kuching and Langkawi.

IT is disconcerting that MAHB and the relevant government agencies could go so badly off target with the planning and implementation of KLIA2.

This has led to speculation that the original project size and cost were deliberately under-estimated, but later amended to benefit the well-connected companies involved in its contraction. The project’s main contractor is the UEM Construction-Bina Purl joint venture.

Although MAHB Managing Director Tan Sri BashirAhmad Abdul Majid claimed that the KLIA2 construction cost, at RM4,600 per sq metre, was lower than many other terminals which often ranged from RM5,000 to RM1O,000, a statement by Project Manager Mohd Zaifuddin Idris tended to support the allegation that the changes were intended to benefit the contractors.

Mohd Zaifuddin was quoted as saying, during a media tour of the construction site, that: ‘The government wanted to make sure everyone can survive. Otherwise, many companies would have closed down and we would have less competition (in the future).’

He said that there are 40 main contractors and 50 consultants involved and the work is divided into some 40 packages. Other sources say as many as 60 contractors are involved.

Could the involvement of so many contractors and consultants, plus the Government’s desire to ensure their survival, be a contributing factor to the variation orders and the doubling of its cost?

There is nothing wrong in the Government wanting to help contractors, but surely not at the expense of taxpayers and airport users.

Also, it is hard to believe that amidst claims that government planning and delivery systems have improved via the various transformation initiatives, MAHB and collaborating agencies, including the Treasury, things can go so terribly wrong in planning and executing the project.

There’s also a major contradiction in Bashir’s statement. He was quoted as saying that the quality of the project was not affected although a larger number of parties had to be engaged because they were selected via open tenders and the MAHB board was careful about adhering to strict processes.

Surely the efficiency of the project would be affected when mid-course changes and large-scale amendments are made, like increasing passenger capacity from 30 million to 45 million per year.

In a Nov 29 Press conference, Bashir said KLIA2 would now cost between RM3.6 billion and RM3.9 billion — almost double the original estimate of RM2 billion — and the completion date would now be April 2013 instead of October 2012.

STILL, the question is: Why the massive changes when the plan for the permanent LCCT was hardly two or three years old?

This has led to yet another poser: Could the Government have rushed to launch the project in order to show that its economic and administrative transformation programmes are bearing results?

There has been talk among top civil servants and corporate leaders, especially those in the government-linked companies (GLCS), that they had been urged to rush up their project planning and implementation to show that the transformation programmes are working.

Could KLIA2 be one of them? Judging from Bashir’s statement on the open tender and the selection of a large number of contractors, KLIA2 could be one of those high- impact projects that the Government has been touting.

Incidentally, the controversial National Feedlot Centre (NFC), which is threatening to further damage the reputation of the Government, is also a high-impact project.

The shortfall in the project, which was franchised to a company controlled by the husband of Women, Family and Community Development Minister Datuk Sari Sharizat Adbul Jalil as reported in the 2010 Auditor-General’s Report, has since become fodder for the Opposition in its attack against the Government.

Even within Shahrizat’s ruling United Malay National Organisation (Umno), more voices are calling for her resignation.

How could MAHB so badly underestimate the growth of low-cost passengers at KLIA when all figures, including its own, clearly showed an upward trend?

In 2010, the LOOT handled 15.4 million passengers, a growth of 17% over the preceding year, while the larger Main Terminal handled 18.7 million or 12.9% more than in 2009. There were 98,600 aircraft movements at the multi- user Main Terminal as opposed to 81,600 at the single- operator LOOT.

Bashir said capacity revision was due to forecast passenger growth, adding that the original 30 million was based on the number KLIA handled in 2009.

That does not sound like a very convincing argument or clever planning, given the fact that the existing LOOT is being used only by AirAsia while KLIA2 will be used by AirAsia and other low-cost operators.

MAHB said there would be 30 million low-cost passengers by 2017 to which, AirAsia Chairman Datuk Abdul Aziz Bakar, respc3nded: ‘Our projections is that we can reach 30 million even in 2015 and based on our track record we have delivered what we projected.’

Development surrounding the KLIA2 project is symptomatic of the growing disregard for good planning, implementation and coordination within the government sector.

Massive cost overruns and variation orders, late completion and shoddy workmanship appear to have become a rule rather than the exception rendering the much touted open tender and competitive bidding farcical.

The once mighty and effective Implementation and Coordination Unit (IOU) had been done away with and the talk in town has it that even the Economic Planning Unit is no longer playing the role of the central planning agency.               

Could this be the case of too many cooks spoiling the broth? Que sera sera.-11/1/2012

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