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Economic Denial Syndrome Of BN - Would Tan Sri Nor Mohamed Yakcop Resign As Second Finance Minister If Malaysia Fails To Register a 6% GDP Growth Rate In 2006?


In DAP Lukut Branch 40th Anniversary “Malaysian First” Dinner In Port Dickson

by Lim Guan Eng

(Seremban, Saturday): Would Tan Sri Nor Mohamed Yakcop put his money where his mouth is by resigning as Second Finance Minister if Malaysia fails to register a 6% GDP growth rate in 2006? DAP express surprise at the economic denial syndrome of BN leaders in believing that Malaysia is enjoying good economic progress benefiting all Malaysians, especially lower income levels and a higher standard of living.

Tan Sri Nor is completely disconnected from the reality of economic hardship by insisting that the economic growth rate will be unaffected by the 12% hike in electricity tariff because it will not significantly burden the majority of people in the country. I can show him many cases of businessmen severely affected by the 12% fuel hike and who thinks that the 12% hike is definitely not reasonable.


Many consumers do not believe that the 12% tariff hike affects only 41% of consumers as many would exceed RM 44 in monthly electricity payments. It is easy for Lim Keng Yaik to say that the more you use, the more you pay because he can afford it. But for the large majority of Malaysians, their electricity bills can easily exceed RM 44 if the electricity meter reader comes late as their bills would be covering more than one month.


If Tan Sri Nor does not believe the ordinary businessmen and common people suffering under the heartless inflationary  policies of BN benefits the few large companies at the expense of Malaysians, then he should read the comments of the manufacturing and cement industries today. These industries expressing worries that the high increase in electricity tariff rates would affect their cost structure and bottomline.


The Cement & Concrete Association of Malaysia (C&CA) said in a statement the energy-intensive cement industry would, under the new tariff structure, face a 14% rise in electricity rates, which would translate into an additional RM64mil a year in energy costs. This comes after about 30% increases in production costs from 1995 to 2005, contributed mainly by a major climb in coal price and logistic costs.


The Federation of Malaysian Manufacturers (FMM) said the manufacturing sector would be paying additional energy costs of RM11.4mil a year for a company in the iron and steel sector; and an increase of RM1mil to RM7mil per company annually for other energy-intensive industries, including electrical and electronics.  FMM estimated profit margins could be reduced by up to 3% for highly energy-intensive industries; and at least 0.5% to 1% for other industries.


These percentages are significant because manufacturing companies generally record profit margins of only 3% to 5%. Exporters, which are facing lower proceeds from the stronger ringgit, could also lose their competitive edge, making Malaysia uncompetitive and unattractive to investments. How then can Malaysia enjoy a higher economic growth rate than last year’s 5.3% when all sectors of the economy except the Independent Power Producers(IPPs) who are earning exorbitant profits at public expense.


Under the current structure, TNB pays IPPs a “capacity charge” and an “energy charge”. A capacity charge is payment made for making available a certain level of capacity, while the energy charge is payment for electricity actually supplied to TNB. This means TNB would have to pay for spare capacity or reserve margins, even if unused. Power purchase from IPPs makes up almost half of TNB's operating costs. For the year ended Aug 31, 2005, TNB paid RM3.3bil in capacity payments and RM3.14bil in energy payments. 


Such high capacity payments of RM 3.3 billion last year have resulted in the TNB having one of the highest reserve margin in the world of 40% by paying for energy TNB does not need. If the reserve margin were reduced from the present 40% to 26%, TNB would save more than RM1.5 billion annually, which is more than sufficient to cover the RM 1.5 billion increase in revenue from the present 12% tariff hike.


Consequently there would be no necessity for any tariff hike. Why should consumers be asked to sacrifice but not the IPPs who are allowed to continue to enjoy high rates of returns and hefty profits unaffected by high fuel prices?


Prime Minister Datuk Seri Abdullah Ahmad Badawi claimed that he can not act unilaterally against the IPPs, but DAP wishes to remind him that he was elected with a huge mandate of 91% of the Parliamentary seats to defend and safeguard the interests of ordinary Malaysians and not that of the IPPs. DAP regrets that the Prime Minister has allowed Energy, Water and Communications Minister Datuk Seri Dr Lim Keng Yaik to betray his mandate and sell out the interests of consumers.                                            


* Lim Guan Eng,  DAP Secretary General

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