Saturday, 2 June 2018

Mahathir, HSR, ECRL, China Loans and Investment, and renegotiation.

I really want to work on the post on how to solve the HDB 99-yr lease issue.

But I keep checking FaceBook and finding uninformed comments about SG, and Mahathir.

I guess I could IGNORE them. After all, stupid comments about untrue things does not change reality.


I mean, Brexit was a fluke, right?

And Trump only became POTUS because of the Russians involvement, right?

Or maybe stupidity can warp reality?

Anyway, here are some of the comments or questions that dragged me into this post.

Mahathir scrapped the HSR. SG must be panicking!

No, we are not. (Quote from FB)
SG has experience dealing with MY. Do you think we did not consider this contingency?

First the plan is a 10 year plan (made in 2016). The HSR was supposed to start construction in 2020. To be completed by 2026. Do you think we did not consider that this is a VERY OPTIMISTIC timeline by MY?

Even if Najib had been returned to power, we would not be surprised if the HSR completion had been pushed back 5 years, or even 10 years.
In comparison, the shorter, non-High Speed RTS between SG and Johor was planned for completion first in 2019, then revised to 2022, and most recently to 2024. And this is a SHORT link between SG and Johor, that is not a high speed rail. Initial planning was started in 2014. So this will take 10 years from planning.

And the HSR which cuts across 4 states, and will be a High Speed Rail will be built in 6 years? And Singapore signed this agreement? You can be sure we would have been sceptical, even if we kept our scepticism to ourselves.
Second, in 20 years (the more realistic timeline for the construction of the HSR), there would have been about 5 GEs in MY. What is the probability that there would be a change of govt and that the new govt would be less "cooperative"? Even if BN hung onto power, different BN PMs can have different position in terms of cooperating with SG. Case in point: Dr M.
Did you think we expect Najib to live forever? Or survive politically forever? in 2016, he was already in his 2nd term, and over 60 years old. 
So this contigency - a MY govt that may be hostile to SG - has already been factored into a multi-year project that will extend over [several] election [cycles]. We are prepared for someone like Mahathir coming to power and replacing the Najib Administration. That it is Dr M himself coming back was probably an interesting development, but not a substantial surprise.
Third, the other thing about MY is that they don't stick to their word. Or rather, we will have to be very firm to hold them to their word. And if they can, they will try to get out of their legal obligations. So even if we have signed an agreement, even if we have included penalties for breaking the agreement, we would still have to make contingency plans for WHEN they break their word.
Did you know or suspect any of the above about MY? If you do, you can be sure the SG govt also does. And if the SG govt does, you can be sure they have scenarios for all of the above. Maybe not exactly, but the general situation. 

Mahathir seems to be picking on Singapore - he scrapped the HSR, but did nothing for the China-related mega projects like the ECRL, etc.

Maybe he is. I suspect he might, but the evidence isn't clear so far. Certainly he has taken his usual potshots at SG when he can. Perhaps this is just a bad habit. He has also overstated the cost of the HSR - RM110b - whereas the projection by the Najib administration was RM50 - 60 billion. Of course Najib could have been low-balling it. But equally possible, in the absence of any transparency or factual support for his assertion, Mahathir could also be hyping up the costs to sell the idea of scrapping the project.

I can't help but be suspicious of Dr M. Even the way he announced the scrapping of the mega projects is very suspicious.

First he announced that he is reviewing ALL mega-projects.
This by itself is NOT suspicious. But you can imagine the reactions. For the HSR, SG govt probably would have said, "scrap, chu scrap lor! This was one of the scenarios we expected from Malaysia. That's why we made sure to have airtight breach of contract clauses in the agreement."
For the China mega-projects, the reactions would have been a little different. China would have called him and offered to... "renegotiate the terms of the loan".
"Abang, no sorry, Datuk, we your good friend right? When you review the mega projects please consider how it will benefit ALL Malaysians. You are a Malaysian right, datuk? You must also make SURE you benefit ok! Aiyoh, for a man like you, you need to have better shoes. How can wear $4 Bata sandal? Even the devil wears Prada." 
Second, he then announced that the HSR would be scrapped.
And this is final. But he claims he has not seen the HSR agreement nor the breach of agreement clauses. But the decision is final. Don't you just LURVE such a decisive leader, who can make decisions without first checking on the consequences of his decision? Some would call it reckless and imprudent, but he is just showing Confident Leadership!
BUT at the same time, he announced that for the China-related mega-projects, he would be keen to "renegotiate the terms of the loans" with China. 
On the face of it, this is just him spelling out his plans. But to my suspicious mind, it sounds very much like a message between the corruptible and the corrupter(s).

I am quite sure China would have broken up the loan into tranches. And so even if Najib has received some initial tranches of the total loan (confirmed by recent news report), the cash cow would still have... "milk".

BUT, I would like to think that Anwar has learned from his experience dealing with Mahathir. The deal is that Mahathir will have about 2 years to do what he wants.
During those two years, Anwar would be meticulously gathering facts and evidence and when it is time, and Mahathir tries to play out Anwar by not handing power to Anwar, Anwar will reveal Mahathir's... "re-negotiations" with China. 
[Update: On 12 June, Mahathir told the Japanese media that the HSR is not scrapped, only postponed. My take on this is that after making all those noises about scrapping the HSR, and that the decision is final, he expected SG to panic and go begging him NOT to scrap the HSR. Because he thinks SG wants the HSR MORE than MY. He is an idiot. Or he never learns from dealing with SG. 1) We don't panic. 2) We don't act on rumours, gossip, media reports, only official communiques. 3) We don't beg. 4) We know Malaysia, and in particular we know Mahathir.

So basically, we called his bluff, by sitting in quiet dignity, while he tries to orchestrate his drama full of sound and fury signifying an old man trying to recapture his glory and making sure his circus revolves around him, him, him.

So when SG didn't follow HIS script, he had to walk back his, "the HSR will be scrapped and this is final!"

Meanwhile, Faithless Singaporeans (you know who you are) starting to crow about how the 4G leaders will have a hard time dealing with a crafty old fox like Mahathir.

What's so difficult about sitting quietly and watching the drama-mama try to make himself feel important?]

Mahathir might also want to settle some personal agenda - building the crooked bridge to replace MY's half of the causeway, restoring the Proton to the National Car status, and pissing off SG as often as possible.

BUT...  he had withdrawn MY's challenge to the ICJ's ruling on Pedra Branca. This seems like a "friendly" or at least a rational decision. And maybe I am overly suspicious, but maybe he was also taking a shot at insulting the Johor sultanate. The "loss" of Pedra Branca is a sore point for Johor. So not pursuing the challenge would dash the hopes of Johor. Mahathir may be peeved with the Johor Sultanate because in the run up to the GE, they had came out against Mahathir.

But I could just be overly cynical.

Perhaps he was just looking at the situation calmly and rationally and realised that MY had no case in the challenge to the ICJ's ruling. And MY would be better off focusing on constructive pursuits.


Malaysia is asking its citizens to donate to the govt to solve the debt.

RM1 trillion. 32 million citizens. Each citizen's share is... RM31,250 (approximately).

That's for every Man. Woman. And child.

Does SG need to have a donation fund for Singaporeans to contribute to the country?

Actually, SG already has a very efficient system. In this purely voluntary system (hence similar to MY donation), people freely offer to give money to the govt and they even tell the govt what is the maximum that they are willing to give.

After calculating what they need, the govt then tells all the people how much donation they would be making.

BUT not every would-be donor is successful. Those who pledge amounts lower than a cut-off (which varies at every bid) will not be asked to donate (because, obviously, they are less well-off), and they leave sad that they were not able to contribute to the govt.

To reward the generous donors who have pledged vast amounts of money (in the tens of thousands), the govt give them each a certificate allowing them to get a car for their troubles.

In the MY system, I don't think you get anything.

[Update: In one month (from 30 May to 30 June 2018), the Tabung Harapan has raised RM132m. To be fair, this shows the hope and goodwill Malaysians have for their country.

To be cynical, this is also a great way for the new govt to get some cash, lower expectations, and build up more goodwill without actually doing anything for the people (getting the people to do things for the country is a better way to build up loyalty).

Anyway, RM31,250 is about the average annual salary of a Malaysian employee in 2016. 

The PH govt claims that the country has a RM1 trillion debt. If the TH fund continues to receive RM132m a month, they are just 7, 576 months away from raising enough to cover the debt.

Or about 631 years. 

Call me cynical, but while this is a great "team-building" exercise, it also seems to me like a great scam.]

But Malaysia gets FREE World Cup!

So apparently, Malaysia's govt has got corporate sponsors to fully cover the costs of broadcasting the World Cup soccer games. 

Which got people asking, "so why can't Singaporeans get to watch the games for free too? Lousy PAP govt!"

Why? This:

You run a small business. You have a rich customer. You KNOW he is rich. He asks you to sponsor his daughter's wedding cake. What do you say?

You have a regular customer that recently had a string of personal crises. He lost his job, his wife is very sick. And in the midst of all this, his daughter is getting married. He asks you to sponsor his daughter's wedding cake. What do you say?

One of the above is analogous to SG. The other is analogous to MY.
Also football is the new opiate of the people.

Also, SG median income is about $3500. MY's median income is about $700. We earn about 5 times more than a Malaysian. In terms of annual salary (assuming 12 months), our annual salary is $42,000. The Malaysian is $8,400. And the World Cup is only once every 4 years, so the income over 4 years is $168,000 for the Singaporean. And $33,600 for the Malaysian. And the World Cup package is about $120. You think with the $135k difference in salary, the Singaporean can afford the $120?

Bonus: Minister Khaw says costs is still being incurred for the HSR and until SG receives a formal notification from MY that they are abandoning the HSR project, the work will continue.
Singapore will exercise its rights to compensation should HSR be cancelled: Khaw

Some uninformed (i.e. stupid) Singaporeans have taken Khaw to task on this. "Why are you still incurring costs? Already announced all over the place that the HSR is scrapped, you still don't want to stop work! Stupid is it?"

I'm paraphrasing.
I can't believe how many times this was asked by different commenters.
It's all about legality.

We don't make decisions based on media reports. Even Mahathir said he will formally inform SG. Until there is a formal, official notice, if we were to stop, WE would technically be in breach of the agreement. Perhaps this is his plan to reduce compensation. Show that SG was the first to breach the agreement, so SG has to PAY Malaysia compensation.

If you were informed by your colleagues that you were terminated from your job, but you did not get an official letter and you did not show up for work for three days, you would have left your job without giving notice and would be liable for any compensation covered in your employment contract. Maybe your employer changed their minds. Maybe your colleagues were playing a prank on you."
I love how... insecure Singaporeans are about their leaders. They are always ready to assume they (SG leaders) are stupid, incompetent, and naive.

Or they assume that they are smarter than our political leaders, that they have more common sense than our leaders, that they can do a better job than our leaders.

So... maybe it's a superiority complex.

Bonus 2a: Singapore should waive compensation for the HSR cancellation, lah! After all we very helpful when our neighbours need help right? Like tsunami or earthquake, we send help. Never ask for compensation. Now Malaysia needs help. We should help. No need to ask for compensation.
There is a difference between providing humanitarian aid in a natural disaster, and waiving compensation for a breach of contract. One is an act of mercy, the other, idiocy. One has no moral hazard, the other invites moral hazards.
A natural disaster is a natural disaster. If we provide aid, it is not likely that the govt will deliberately engineer a natural disaster to get more free aid from us. There is no moral hazard.

A breach of contract is a deliberate act. If we waive compensation in this case, then it will create a moral hazard - other agreements could be signed which the other party has no intent or ability to perform, and then they come to us and say, "sorry, things are bad. We cannot proceed. Can waive damages?" We are inviting others to take advantage of us.

Bonus 2b: Singapore should negotiate for an extension of the water agreement instead of asking for compensation.

First of all, this falls within the category of "Singapore should BUY or LEASE islands from Indonesia/Land from  Malaysia, to develop for our needs". It assumes that Malaysia has NO national interest, No national pride, and No increasing need for water in the future.

Second, you can't get blood from stone. From: Sui Pian
"...we must question if an extension of the water agreement beyond 2061 is even feasible. Linggiu reservoir's water level is falling every year, the capacity of the Johor River is probably about 350 mgd now [SG draws 250 mgd]. Climate change may permanently lower that capacity. Johor will need some of that water herself. Which means there may be little left for us. And what is left may not be enough if our needs grow."

When the first Water Agreement ended in 2011. We handed over the Tebrau-Skudai water treatment plant with a capacity of 100 mgd of treated water.

But we are still providing Johor with 16 mgd of treated water a day, and every now and then Johor will request for additional treated water for a short duration.

Why is that, you think?
What happened to the Tebrau-Skudai treatment plant? Why aren't they using it?

Bonus 3: "Lucky, Mahathir never say want to review Water Agreement."

Another uninformed comment. Here's the response
Please review. 
We already subsidise them and we provide them with more water than we are contractually required to.

"Under the 1962 Water Agreement, PUB is entitled to draw up to 250 million gallons of water from the Johor River daily. In return, Johor is entitled to a daily supply of treated water of up to 2 per cent - or five million gallons - of the raw water it supplies to Singapore.
Over the years, PUB has - at Johor's request - supplied about 16 million gallons of potable water per day to Johor... [And from time to time, Johor would ask that we temporarily increase our supply] by an additional five to six million gallons..."
 And this:

"it cost Singapore RM2.40 [2003] to treat 1000 gallons of water, and we sell it to Johor for 50 sen. That's a RM1.90 subsidy per 1000 gallons. Johor buys currently 16 mgd - million gallons PER DAY. That's about RM30,000 subsidy per day. 
That's money Johor doesn't have to spend to treat water for its residents. That's not the best part (for Johor). 
Johor then sells the water to their residents for about RM3.95 per 1000 gallons. They make RM3.45 per 1000 gallons from the water they buy from Singapore. "

It costs SG about RM11m a year (in 2003) to supply Johor with 16 mgd of treated water, and Johor earns about RM20m a year selling our subsidised treated water TO THEIR OWN PEOPLE.

So, do you think Malaysia (or Johor) benefit from the water agreement? If the water agreement is reviewed (illegally of course), do you think we will still be selling 1000 gallons for 50 sen?

Do you think Johor would want to review the water agreement?

You a) think too little of Singapore, and b) think too highly of Mahathir...

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