MySejahtera: Is The Government Paying RM338m for the App?

The all pervasive MySejahtera application may not be free of charge eventually. There are many questions over who gets the contract to manage the application - which logs personal details, health status and whereabouts of 38 million users.

Source: https://en.wikipedia.org

Details on the deal would not have come to light had it not been for the Public Accounts Committee, who questioned the Finance Ministry and Health Ministry (MOH) on March 8.

Health Minister Khairy Jamaluddin said the MOH owns the rights to the MySejahtera smartphone application. 

However, a written reply by the Science, Technology and Innovation Ministry (Mosti) and MOH to the Public Accounts Committee (PAC) suggested that things are a bit more complicated. 

The MOH has formed a “MySejahtera Steering Committee”, chaired by Khairy, to decide on the management and direction of MySejahtera while considering the cost-benefit of a “complete” takeover of the application. While the Government may own the MySejahtera base application, they may not own some additional modules.

KPISoft Sdn Bhd was engaged by the Health Ministry to develop MySejahtera as a form of corporate social responsibility (CSR) from March 27, 2020, until March 31, 2021. Putrajaya was not charged for this period. 

According to the Mosti/MOH reply to the PAC, Putrajaya decided that KPISoft Sdn Bhd has to be paid from April 1, 2021, because of all the additional components added to MySejahtera which was not in the original 2020 agreement.

The deputy secretary at the Finance Ministry's Government Procurement Division, told the PAC that on Nov 26 last year, Putrajaya greenlit the MOH’s decision to appoint MYSJ Sdn Bhd to manage MySejahtera. This procurement was to be done without an open tender process.

The PAC chairperson pointed out during the proceedings that KPISoft’s directors were Rekhta Mani and Yogaraj Thuraisingam. 

As for MYSJ, the directors are Heah Kok Boon, Raveenderan Ramamoothie, Anuar Rozhan, Liew Kee Sin, Shahril Shamsuddin and Megat Najmuddin Megat Khas. Anuar is the brother to former Astro Malaysia Holdings Bhd CEO Rohana Rozhan, while Shahril is best known for being the Sapura Energy CEO and shareholder.

Megat Najmuddin was a long-time Umno member who joined Bersatu in 2018. Currently, he chairs Bersatu’s disciplinary board.

MYSJ is a brand new company incorporated in September 2020. As for KPISoft, they have been around since 2005 and are based out of Singapore, with a Malaysian presence. Their Malaysian outfit changed its name to Entomo Malaysia in May 2020.

According to a report by Code Blue, MySJ Sdn Bhd is Entomo Malaysia’s special purpose vehicle created for a public-private partnership (PPP) project.

According to Code Blue, citing court documents, Entomo Malaysia had proposed to the Government in Dec 2020 to pay them to expand the scope of MySejahtera beyond the Covid-19 pandemic.

The report said Entomo Malaysia proposed that MySejahtera can be used to track other vaccination distribution, manage other infectious diseases, conduct predictive analysis and integrate with other existing government health systems.

Entomo Malaysia proposed that the PPP contract would last 15 years and cost the government about RM138.9 million annually. 

In a turn of events, a new report by CodeBlue claims that there’s actually already been a deal between Entomo Malaysia Sdn Bhd (formerly known as KPISoft Malaysia) and MySJ Sdn Bhd, with the latter agreeing to pay Entomo RM338.6 million for MySejahtera’s intellectual property and software license.

The license agreement saw MySJ paying Entomo RM38.6 million for the last quarter of 2020 as a transfer of IP fee and a service fee, with further sums to be paid to Entomo annually for a total of RM338.6 million. According to Code Blue, MySJ would be paying Entomo RM60 million each year from 2021 onwards, with the last payment happening on 1 March 2025. This payment covers the first 24 million users of the MySejahtera app only though, with users exceeding 1% from 24 million users to cost MySJ a further RM1.50 per user per annum. Yesterday, Khairy had stated that there are over 38 million registered users on MySejahtera. This means that MySJ could end up forking another RM21 million per year on top of the agreed sum between them and Entomo. 

This deal has not been finalised.

Transparency is the real issue. Is the Government purchasing MySejahtera? At what price? RM338m?  Why no procurement tender? Why the denial by the Minister of Health? Will the data be eventually be sold to third parties? Security of data? Can the Government do a “White Paper” on this? Why can’t we be transparent and follow a tender process? Is doing a CSR the gateway to an exclusive contract?

References:

What PAC uncovered about MySejahtera, 28 March 2022 (www.malaysiakini.com)

Report: MySJ Sdn Bhd agreed to pay RM388.6 million for MySejahtera IP and software license, Raymond Saw, 28 March 2022 (https://soyacincau.com)

Do Poor Countries Develop Rich Countries?

The story is told that the rich nations of the OECD give generously of their wealth to the poorer nations of the global south. This is to help them eradicate poverty and push them up the development ladder. During colonialism western powers may have enriched themselves by extracting resources and slave labour from their colonies. These days, they give more than $125bn (£102bn) in aid each year – solid evidence of their benevolent goodwill. That’s the story.

Source:https://www.gfmag.com

The US-based Global Financial Integrity (GFI) and the Centre for Applied Research at the Norwegian School of Economics recently published some fascinating data. What they discovered is that the flow of money from rich countries to poor countries pales in comparison to the flow that runs in the other direction.

In 2012, the last year of recorded data, developing countries received a total of $1.3tn, including all aid, investment, and income from abroad. But that same year some $3.3tn flowed out of them. In other words, developing countries sent $2tn more to the rest of the world than they received. Since 1980, these net outflows add up to $16.3tn – that’s how much money has been drained out of the global south over the past few decades. To get a sense for the scale of this, $16.3tn is is nearly close to the GDP of the United States

What this means is that the usual development narrative has it backwards. Aid is effectively flowing in reverse. Rich countries aren’t developing poor countries; poor countries are developing rich ones.

What do these large outflows consist of? Developing countries have forked out over $4.2tn in interest payments alone since 1980 – a direct cash transfer to big banks in New York and London, on a scale that dwarfs the aid that they received during the same period. Another big contributor is the income that foreigners make on their investments in developing countries and then repatriate back home. Think of all the profits that BP extracts from Nigeria’s oil reserves, for example, or that Anglo-American pulls out of South Africa’s gold mines.

But by far the biggest chunk of outflows has to do with unrecorded – and usually illicit – capital flight. GFI calculates that developing countries have lost a total of $13.4tn through unrecorded capital flight since 1980.

Multinational companies also “steal” money from developing countries through “same-invoice faking”, shifting profits illegally between their own subsidiaries by mutually faking trade invoice prices on both sides. For example, a subsidiary in Nigeria might dodge local taxes by shifting money to a related subsidiary in the British Virgin Islands, where the tax rate is effectively zero and where stolen funds can’t be traced.

Who is to blame for this disaster? Since illegal capital flight is such a big chunk of the problem, that’s a good place to start. Companies that lie on their trade invoices are clearly at fault; but why is it so easy for them to get away with it? In the past, customs officials could hold up transactions that looked dodgy, making it nearly impossible for anyone to cheat. But the World Trade Organisation claimed that this made trade inefficient, and since 1994 customs officials have been required to accept invoiced prices at face value except in very suspicious circumstances, making it difficult for them to seize illicit outflows.

Poor countries don’t need charity. They need justice. And justice is not difficult to deliver. But doing so would run up against the interests of powerful banks and corporations that extract significant material benefit from the existing system. The question is, does anyone have the courage?

Reference:

Aid in reverse: how poor countries develop rich countries, Jason Hickel (https://www.theguardian.com )

Much Ado About RM63 Billion “Arbitration Award”?

Spanish arbitrator Gonzalo Stampa recently ordered Malaysia to pay US$14.92 billion (RM62.56 billion) plus interest and costs to the heirs to the Sulu sultanate. According to the Global Arbitration Review, the arbitrator further criticised Malaysia’s “intimidatory and coercive” tactics when issuing the award in Paris and directed the Malaysian government to pay the amount.

The families of the Sulu descendants who had been receiving an annual payment of RM5,300 for 135 years under the agreement signed during the British era had threatened legal action against Malaysia. But this was not taken seriously by the past administration. However, in 2019, the government was served demand letters which were sent by lawyers from London, acting on behalf of the descendants, seeking Malaysia’s participation in arbitration proceedings before a single Spanish arbitrator in Spain.

Map showing the extent of the Sultanate of Sulu in 1822 with borders of modern nation states

(Source: https://en.wikipedia.org)

Since there was no arbitration agreement in the 1878 and 1903 documents pertaining to their claims, the Sulu heirs had applied to the courts in Spain, which appointed a Spanish arbitrator to determine a dispute between Philippine citizens and Malaysia.

The Sabah Law Society offered an insightful and detailed legal opinion on the latest development.

The Sultan signed an agreement in 1878 with a group of British and German entrepreneurs for the exploitation of minerals and forest products in territory under his control, in return for annual payments.  The entrepreneurs’ rights were passed to Sabah state upon its independence in 1963. 

Malaysia continued to make annual payments of approximately US$1,000 (RM4,190) but stopped making payments in 2013. The claimants pointed out that Malaysia’s ex-attorney general Tan Sri Tommy Thomas admitted in his autobiography that there were no legal grounds for Malaysia to refuse to continue making the payments and that Sabah was in breach of the agreement.

The tribunal, consisting of sole arbitrator Gonzalo Stampa, held that the 1878 agreement was an international private lease agreement of a commercial nature. He found that the arbitration agreement was reflected in the arbitration clause contained in the deed. 

On March 29, 2019, the Civil and Criminal Chamber of the Superior Court of Justice of Madrid rendered Judgement 11/2019 had earlier also upheld the arbitration agreement. The arbitrator found that Malaysia had breached the agreement by not continuing to make payments as of January 2012 and that the contract was terminated. The tribunal held that the claimants were entitled to recover the restitution value of the rights over the leased territory. 

This sum amounted to US$14.92 billion (RM62.56 billion) including pre-award interest.

As Malaysia is a member of the New York Convention, it is obliged to enforce the award, but has the option of making an application to set the award aside in France, where the award was rendered. If Malaysia refuses to make payment, the claimants will have the right under the New York Convention to enforce the award against Malaysian state assets in any of the 167 signatory state parties around the world.

There will be a very interesting situation if the claimants decide to enforce the award. If anything we only have to blame ourselves. So is Sabah part of Malaysia? Yes it is, as this is not on sovereignty but commercial interests signed over by the Sultan. Should we have come to this? Of course not if we had wisdom to re-negotiate things!

Reference:

Much ado about RM63 bil “arbitration award’ to Sulu Sultan’s descendants – Sabah Law Society, 1 March 2022, www.thevibes.com

Sapura Energy Berhad: Bailout by Najib?

Sapura Energy Berhad posted RM8.9 billion loss after taxation and minority interests (LATAMI) for the financial year ended 31 January 2022 (FY2022). The Group announced that it also recorded an operating loss of RM2.2 billion on the back of RM4.1 billion revenue. The Group recognised a RM3.3 billion provision for impairment on goodwill on consolidation and a RM2.3 billion provision for impairment on property, plant and equipment in FY 2022.

Its FY 2022 revenue of RM4.1 billion was 22.8 percent lower than the RM5.3 billion recorded in financial year 2021 (‘FY 2021”) primarily due to lower contributions from the Engineering & Construction (E&C) segment.

5-Year Group Financial Highlights

Source: Sapura Energy Berhad Annual Report 2021

The Group has embarked on a series of negotiations with clients on legacy contracts for amicable solutions to recover or limit losses.

To address its unsustainable debt and settle outstanding claims to vendors, Sapura Energy successfully applied for and was granted two Orders by the High Court of Malaya, which allows it to begin a court - sanctioned debt restructuring exercise with creditors. The Orders, which include a Restraining Order, will help create a stable platform for the Group to negotiate with creditors while its operations can continue.

Sapura Energy is in talks with lenders to restructure its long-term debt and will begin scheme of arrangement briefings soon. The Group is also seeking sources of new funds to finance its business plan as it restructures its business and streamlines its operations.

In FY 2023 revenue from secured projects attributable to legacy contracts will be reduced to about 25 percent. With an average of nine rigs expected to be in operation in FY 2023 compared to an average of seven in FY 2022, its Drilling segment will continue to generate stable cash flow under better market conditions.

Najib Razak has urged the government to protect Sapura Energy Bhd from bankruptcy by providing loans or instructing Petronas or Khazanah Nasional to take over ownership from Permodalan Nasional Bhd (PNB). The former prime minister was critical of PNB for failing to take action. Najib also said nearly 10,000 high-paying jobs would be lost and around 4,500 vendors or suppliers would be affected. He urged the government to act immediately by providing easy interest loans or loan guarantees to Sapura to solve its cash flow problems. Alternatively, he said, the government could direct Petronas or Khazanah Nasional Bhd to take over ownership of Sapura.

Although PNB conducted a reshuffling of Sapura’s management in early 2021, Najib said PNB no longer wanted to help the company with a new loan but instructed Sapura to dispose of its assets to solve its cash flow problem.

What is Najib’s problem? Did Shahril (and the former team) run the Company to the ground? Banks are not in favour of them, PNB is against them, Khazanah is not interested. So, where does Sharil go to? Government? Najib? Perhaps Najib could advance USD756m from his loot to meet cash flow until he becomes the next PM?

References:

Sapura Energy posts RM8.9bil loss, reviews biz direction, Azreen Hani,

https://themalaysianreserve.com 

Protect Sapura from bankruptcy, urges Najib, FMT Reporters, 20 March 2022

Why Are We Doing MRT3?

 The Ministry of Finance (MOF) has committed up to RM50 billion (or roughly RM1 billion per km) in financing for the Mass Rapid Transit 3 (MRT3) Circle Line project. The initial construction cost estimated was at RM31 billion plus RM8 billion for land acquisitions.

The MOF will issue government-guaranteed Islamic bonds to raise the required funds for the massive rail project. The extra RM11 billion is to be set aside as contingency.

The construction cost of RM31 billion, is similar to the cost of MRT2, which is expected to commence operation in the next quarter. In comparison, the first MRT1 Sungai Buloh-Kajang Line cost RM21 billion while the second MRT2 Sungai Buloh-Serdang- Putrajaya Line also cost RM31 billion, according to MRT Corp’s official numbers.

The tender for the construction works on MRT3 Circle Line project will be opened in May.

The jobs will be awarded in the fourth quarter of 2022.

The construction activities will be monitored directly by MRT Corp as the project developer and it will be assisted by a project management consultant (PMC).

The MRT3 Circle Line is scheduled to be fully operational by 2030 with the first phase’s completion expected to conclude in 2028, subject to land acquisition process.

The third MRT line will have a circular alignment running along the perimeter of Kuala Lumpur City with about 51 kilometres (km) in length, split between 40km of elevated tracks and 11km of underground tunnels, according to MRT Corp.

The current proposed alignment of MRT3 Circle Line will have 31 stations, 10 of them serving as interchange stations with the eight existing rail lines in the Klang Valley.

Contractors are expected to also shoulder the responsibilities of funding the project whenever there is shortage of funds from the MOF.

The hybrid funding model, including the issuance of sukuk, is to keep MRT Corp’s financing

options open, adding that the MOF will finalise the details of the issuance of the green sukuk under the Securities Commission Malaysia’s Sustainable & Responsible Investment Sukuk framework.

A spokesperson from MRT Corp pointed out that the proposed hybrid funding model will see a public-private partnership with contractors of the project contributing to the upfront construction cost and receive deferred payments as the project progresses.

What is the urgency of this project? Why do we need a Circle Line? Is it to assist some “valued” contractors? We have no money to pay the B40 or M40 who need RM10,000 and we allow withdrawals from EPF? Isn’t this a contradiction, Zafrul? Will Zafrul resign, since he could not accept any further withdrawals from EPF? But please, don’t hold your breath! In Malaysia, nobody resigns, even convicts can go campaigning freely.

To be financially feasible, i.e. Fare box ratio of 1, ridership numbers must exceed one million passengers per day (with an average fare of say, RM10 per passenger per direction) – a rough estimate. This excludes repayment, which may suggest a much higher ridership or other income stream to meet annual debt obligation. When is this feasible? Probably in a 100 years’ time – 2130. By then, new technologies will arise – tele-transportation. So, why do this?

Reference:

MOF to raise up to RM50 billion for MRT3: tender to be called in May, Seah Eu Hen and Shazni Ong, theedgemarkets.com, March 16, 2022

AirAsia X Writes Back RM33bil to Profit?

AirAsia X (“AAX”) said on 16 March 2022 it had completed its debt restructuring, and will write RM33bil back to profits in the next quarter.

Under the airline's restructuring proposal, it would pay just 0.5% of debt owed and end its existing contracts. It was approved by its creditors and the High Court of Malaya in 2021. The restructuring was proposed to avoid liquidation after the long-haul low-cost airline posted a record quarterly loss last September. It is one of many carriers in the Asia-Pacific region to have entered a court-overseen debt restructuring process to survive the pandemic.

Social media users expressed frustration over low cost carrier AirAsia X Bhd’s proposal to pay only 0.5% of RM33 billion debt owed to each of its creditors and passengers. That works out to just 5 sen for every RM10 and RM50 for anyone who had bought tickets for RM10,000. 

Source: https://www.airasia.com

For first half of 2021, MAVCOM said of the complaints received, 41.4% of that total was against AirAsia, 28.7% on MAS and 12.1% for Malindo Air.

By 2026, AirAsia Group aims to connect more than 1 billion passengers in Southeast Asia via its aviation unit, which is expected to include a new joint venture airline after restructuring the firm into an investment holding company called Capital A.

Capital A chief executive Tony Fernandes said because AirAsia's load factor and flights in the fourth quarter posted record highs, its furlough policy is expected to be terminated shortly.

One social media user called Retweeter said the move was unfair to other businesses as the move is to prevent liquidation of the company.

Could I could take huge loans/mortgages & just pay 0.5% to my lenders... not going to happen for an ordinary person? Now every creditor can enjoy 0.5%!

Isn’t this exercise of write-down/restructuring like a sleight of the hand by David Copperfield? The losers are the creditors! How could they settle for 0.5%? Shareholders are in a great position, to reap the benefit from future cash flows.

The missing link in the restructuring is the RM500 million facility to be guaranteed by Danajamin. Will Danajamin issue their guarantee without the principal shareholders commitment or guarantee? No ordinary company or person could do this “magic”! Don’t try it at home!

References:

AirAsia X completes debt restructure, to write back RM33bil to profit, The Star, 16 March 2022

AirAsia eyes 1bn flyers by 2026, Dusida Worrachaddejchai Bangkok Post, 29 January 2022

Fury over 0.5% payment to AsiaAsia X passengers, creditors, FMT Reporters, FreeMalaysiaToday, 21 October 2021

The World of 1MDB Crooks!

Fugitive financier Low Taek Jho (Jho Low), the alleged mastermind of the 1Malaysia Development Bhd (1MDB) scandal, obtained US$1.42 billion from three bond transactions that Goldman Sachs Group Inc arranged for the Malaysian wealth fund. This is from the FBI.

The former Malaysian prime minister Datuk Seri Najib Razak secured US$756 million of the US$6.5 billion raised in the bond offerings, while his stepson, Riza Aziz, pocketed US$238 million.

Khadem al-Qubaisi, a former managing director of Abu Dhabi’s state-owned International Petroleum Investment Co (IPIC), which guaranteed the 1MDB transactions, received US$472.8 million. And another Abu Dhabi official who worked with IPIC’s subsidiary received US$76.6 million. Aziz invested at least US$60 million of his 1MDB money to produce The Wolf of Wall Street. Aziz was a friend of Jho Low. 

Red Granite Inc production company agreed to pay US$60 million to settle US claims that Wolf was financed with stolen 1MDB money. In 2020, Aziz resolved a separate government suit by agreeing to drop claims to tens of millions of dollars in US and UK real estate without admitting wrongdoing. Ng got US$35.1 million from two of the three bond transactions, while Leissner received US$73.4 million during the scheme.

At the time of his 2018 plea, Leissner agreed to forfeit just US$43.7 million which the US said was the money he earned in the scheme. It’s unclear why Leissner is forfeiting a lesser amount. 

Najib was convicted in Malaysia and sentenced to 12 years in prison and is appealing.

Meanwhile, Al-Qubaisi was sentenced in Abu Dhabi in 2019 to serve 15 years in prison and ordered along with the other IPIC executive to repay US$336 million, according to The Wall Street Journal.

This not the only scandal (shit) to “hit the fan” in Malaysia. We have more than our fair share compared to other countries in the region – Maminco, BMF, Perwaja, MARA, Tabung Haji, MAS and the list goes on. When can we stop this? When we have a leadership that is committed to integrity, honesty and service to the people; when people involved are held accountable; when the checks and balances do work? Is that too much to ask?

Reference:

FBI agent tells court how Jho Low stole US$1.4b of 1MDB money and Najib received US$756m, Patricia Hurtado (Bloomberg), TheEdge CEO Morning Brief, March 16, 2022