MAS: Logic Defying Economics


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(Will it work or it is going to be RM6 billion down the drain again? This is going to be the last chance for MAS and the people who are managing it. We do not want to see another bailout in 2018! Image source: TheStar)

It is going to leave the economists around the world speechless. It may even cause the rules of economics to be re-written all over again and the geniuses that came up with this brilliant plan will be worshipped as the God of Economy for many years to come.

If you do not know what I am talking about, well, read this first:-

Khazanah Nasional Bhd has unveiled a 12-point plan to enable Malaysia Airlines (MAS) to achieve sustained profitability within three years of de-listing, by the end of 2017.

Its managing director Tan Sri Azman Mokhtar said the plan involved a comprehensive overhaul of the airline.

“At its core, the plan involves the creation of a new company, (NewCo) which will house the ‘new MAS’ and the migration of the right-sized workforce and work practices and contracts into NewCo,” he told reporters at a special briefing at Khazanah headquarters on Friday.

(Source)

When I talked about re-writing the books on economy, blah, blah, I was not talking about Khazanah’s plans to restructure MAS. They seems to be doing things by the books and whether it will work or not, we will know in the next 3 years. One just hopes that they had identified all the correct shortcomings and have addressed them comprehensively in their plan. In an interview with the first CEO of MAS, it is obvious that there have been some serious bad decisions made in the past and all these must be addressed too:-

Generally, MAS poor performance is due to its wrong business plan and the loss of flight MH370 demoralized the staff and MAS has to handle this. How to do it? MAS must change its business plan. What’s wrong with the plan? The thing that is wrong with the plan is the choice of its routes which it has been plying for the past 15 years.

Those routes are now overcrowded with all the low cost carriers. The market now wants to fly domestic and regional and 80 per cent of air travellers want to fly budget. Only the rich and the businessmen fly full service. So MAS has to do something to capture that 80 per cent market. It has to reshuffle and realign its aircraft fleet. Utilizing Firefly as the main carrier for domestic and regional. The rest, let MAS handle.

And take a second look on the use of the A380. Does MAS really need six of the super-huge aircraft. No need to file for bankruptcy. Don’t be ridiculous.

Maybe in some departments there are a surplus of workers but we have to look at it in totality. We can’t lay off 5,000 workers out of the 20,000 employees which MAS has. It does not have to lay a single worker if it is restructured properly. But we have to take a look at the salaries of some of the management team of which I was told touch more than RM100,000 a month.

Why must they be paid such a huge amount at a time when MAS is in the red and why do you axe workers with low salaries? I question how the board of directors can approve such a huge salary. How did it come to this?

I question why MAS use the A380 which is hardly utilised but cost millions to operate.

Why do we need the six air-crafts? That is one out of a thousand and one issues plaguing MAS. MAS also wants to sell the MRO and the person who proposed it does not know anything about the aviation industry. Engineering plays a huge part in the MAS makeup and plays a vital role in safety, efficiency, integrity and operations.

MAS has to fully control that business and if properly managed can become an income earner. During my time, MAS maintains and services aircrafts from the US, Australia and Canada. MAS made money out of this division. So why do you want to hive off this division to another company and then buy back the service from the very same firm? MAS will bleed even more just like the catering business. Although MAS has a 30 percent stake, it has to pay a high price for the food. MAS can sell a small stake but make sure it still controls MRO. Don’t sell the entire stake.

(Source)

Anyway, we’ll see this one closely. Very closely indeed. However, the one that is going to rewrite the books of economics is going to be this:-

Khazanah Nasional Bhd not only intends to recover every sen of the RM6bil investment into Malaysia Airlines (MAS), but wants to make money on the venture, said Datuk Seri Najib Tun Razak.

The Prime Minister, dismissing perception that the money pumped into the airline was a bailout, said Khazanah would be injecting the money to make MAS a viable organisation.

“This is not a bailout but an investment. Khazanah intends to recover every single sen of the RM6bil and more,” he said after chairing the monthly Umno supreme council meeting Friday.

(Source)

And this:-

Umno mouthpiece Utusan Malaysia has given the thumbs up to the comprehensive revamp plan to revive loss-making Malaysia Airlines (MAS), saying that the move to turn the national carrier around will not affect its services.

Awang Selamat, the collective voice of the paper’s editors, said he was confident the national icon would be back in the black in three years, based on stringent regulatory controls over the 12-point plan unveiled by state sovereign fund Khazanah Nasional Berhad yesterday.

“The emphasis on these aspects will have a significant impact on the recovery effort. It also differs from previous efforts which have ended in failure.

“We are also confident such changes will bear fruit and more importantly, the services of the national carrier will not be affected,” he said in the column today.

(Source)

Yes, firstly use the word “investment” instead of “bailout” to hide the fact that IT IS a bailout. Then tell the whole world that the money spent on the bailout, opps err, investment will be recovered. And continue with the statement that the entity that was put in charge of the bailout, sorry, investment is doing it because they want to make money on the said venture. I wonder how many millions was paid to external consultants to come up with such brilliant idea to substitute a bailout with an idea of investment. Can they for once call a spade a spade? Malaysians are not that dumb, you know?

Then secondly get the editor of a newspaper (that is deep in shit themselves with RM11 million loss), to put on the hat of a learned economist and turnaround specialist to say that the proposed turnaround plan will definitely work and all that will happen in 3 years as promised. And this is despite of many failed attempts to turnaround the national carrier in the past by the same group of people. After all, if the editors are so smart and confident, why the paper is not making money themselves? After all, Khazanah themselves was reported to say this:-

Khazanah, which has injected more than 5 billion ringgit into MAS over the last 10 years, said its new fund injections would be strictly tied to the new company meeting performance targets.

“Success is by no means guaranteed,” Khazanah said.

(Source)

And even the Old Man has his doubts:-

I may be wrong but I think Khazanah’s 100% ownership of MAS will not be much different from its 70% ownership. We are going to see a lot of new people who will receive huge salaries, allowances and bonuses and not much else. That I believe is how Khazanah operates.

(Source)

Whatever bullshit that will be spinned in the next 3 years, one thing will be sure – the taxpayers need to be prepared for the worse to kiss their RM6 billion (or more in the coming years) goodbye. Unless of course, certain things happens.

The Government through Khazanah must have the will-power and political clout to make real changes that will see the RM6 billion to be spent on the turnaround plan of MAS be recovered with every cents accounted for in 3 years time. They must look beyond the color of the skin when it comes to picking the right people to run the airline (and never this piece of idiotic thinking again) and it should not be limited to Malaysians alone. Priorities must be set right and must be followed strictly.

They must not be swayed with likes of extremists like Perkasa, Pekida, Isma (do I need to say more?), dumb “keris wielding” politicians (who will make noise for the sake of making noise) or inexperienced consultants with unbelievable fat payroll (who may prolong the misery for more fat salary). Otherwise they will end up digging deeper into the taxpayers money for another turnaround plan after 2018.

And more importantly, they must always remember that national pride and the nation’s good name is at stake here and thus no matter what, this turnaround plan must work. No ifs or buts. They must remember that the RM6 billion that will spend on the turnaround plan belongs to the taxpayers (and not from their own personal pockets) and every cent must be accounted for. I hope so they will or otherwise we will talking about another turnaround plan in 2018.

Selamat Hari Merdeka!!

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Whack The Wrongdoers Hard, Please!


Read these first:-

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(Here lies the problem – some people have no sense of responsibility whatsoever just because they are spending money that does not belong to them and they know that if they can waste the taxpayers money without any care or prudence, they will not be punished even if it was reported by the Auditor General. Image source: http://tarpon.wordpress.com)

I guess those who had voted for the Barang Naik (BN) politicians in the last general election must be regretting their decision now. You know, somehow, “I told you so” just doesn’t quite say it, ah? Already there are multiple news in the net on how some people in disguise of “consultants” have been taking the Government and the taxpayers for a ride but there have been only silence and inaction on the part of these politicians. The obvious ones are these:-

Hazmi sits at the top of the pyramid of greed and takes a 10% on each program cost

Under him, he has several assistants to identify runners to identify those contractors and suppliers with the right license or kepala (heading) to be main contractors or suppliers or just a mere front. At the assistants, runners, and front contractors and suppliers level, they rake in a cumulative of 20% of the program’s budget. The balance is likely to be for the real contractors and manufacturers doing the work.

To get themselves paid, Hazmi’s assistants take care of the payment but it is not paid direct but only to the front. The money due to the real contractors and suppliers is released by the front companies after deducting for everyone’s cut. It means there are paper trails everywhere. Hazmi designed the budget for programs to be usually few ringgit short of RM5,000 or RM100,000. Above that, the control system is stringent and manipulable.

If this does not make your blood boil, we do not know what else.

(Source)

And this:-

Two DAP lawmakers want the Education Ministry to explain why it spent RM20 million hiring a private consultant to prepare the National Education Blueprint when it could have been done by “capable personnel” within the government.

Describing the RM20 million as a complete waste of taxpayers’ money, Serdang MP Ong Kian Ming and Bukit Bendera MP Zairil Khir Johari said the management consultant, McKinsey and Co, should not have been hired as the company was a general management consultant and did not specialise in education.

(Source)

And timing could not be better to dig up more crap from current Government’s total lack of transparency, enforcement and punishment of the wrongdoers. It has become a sheer wastage of taxpayers fund on a regular basis. The recent publication of the Auditor-General’s report was nothing new and only adds to the “good name” of the current Government. If the half-past six politicians are still under a delusion that everything is still OK in the Bolehland and they can sleep in peace at night, let me tell you that the AG’s report is very, very damaging. A responsible Government would have come in the open to admit the findings and announce strong measures to curtail them. Politicians who care about this nation will not sleep until they had made enough noise for the wrong doers to be caught and punished and existing laws & procedures tighten to avoid a repetition in the future. Unfortunately, in reality (and predictably), nothing have been said till now and everything being kept as hush, probably hoping the taxpayers and the opposition will soon forget about the findings.

The malpractices highlighted in the Auditor-General’s report keep repeating because of inadequate planning in procurement, poor drafting of specifications and lack of monitoring and evaluation, said Institute for Democracy and Economic Affairs (Ideas).

To address this, Ideas chief executive officer Wan Saiful Wan Jan has suggested that curbing political interference and using open tender systems would help in plugging the inefficiencies in government procurement which has resulted in millions of ringgit being wasted.

He cited examples in the 2012 AG report which had resulted in wasteful spending, such as the 20 wall clocks which were bought by for RM3,810 each when it cost RM100 each and the three A4 size scanners bought for RM14,760 each which was supposed to cost RM200 each.

He said Ideas was now conducting a study on transparency in how government agencies and department carry out their procurement. “These problems are repeated because there are inadequate procurement planning, poor drafting of specifications, insufficient use of competitive tenders and lack of monitoring and evaluation.

(Source)

Shouldn’t inadequate planning in procurement, poor drafting of specifications and lack of monitoring and evaluation which have been highlighted many times before in the past AG reports been resolved by now? Don’t each Government departments have some kind of operation guide and standard operating procedures? Don’t they have their internal audit processes to follow and meet? Don’t tell me that we are going to pay millions to some foreign consultants to propose the same thing? And if nothing been done in the past, then what difference it makes now? As long we don’t see the wrong doers and those mismanaged millions of taxpayers’ money punished and held accountable, we going to have the same problems reported year in, year out.

To add further, Malaysia have now been named as the most corrupt country in the world – I am sure some thick skinned politicians would have been very happy with this kind of achievements (they probably have dismissed it as an opposition tactics instead of seriously looking into the possible truth). However it was not a big surprise though – it was just a matter of time before we got that title. The sooner the Government wakes up from its slumber sleep, it is better for the rest of us.

Despite Malaysia’s high-profile anti-corruption crusade, half of the corporate executives surveyed by a global corruption watchdog believe that competitors have obtained business in the country through bribery.

Transparency International said Malaysia scored worst in the 2012 Bribe Payers Survey. It asked nearly 3,000 executives from 30 countries whether they had lost a contract in the past year because competitors paid a bribe, and in Malaysia, 50% of them said ‘yes’. Second on the dubious honor roll was Mexico, which was at 48%.

(Source)

And this is where race based NGOs such as Perkasa show their sheer ignorance and dumbness. They jump like their balls been run over by a steamroller when common Malaysians question the need to prolong race based policies and “giveaways” in the name of “empowering” the community economy, knowing very well that such policies have been manipulated to enrich a few and their cronies in past and continues to this day. But the same NGOs had said nothing or jumped in protest when millions is wasted by lack of enforcement and corruption – doesn’t the same community set to lose a lot more if such leakage is not stopped and the wrong-doers are not booked to stop the repeated wastage? Or are they simply going to ignore this just because those who cause such leakages and do nothing to curtail the leakages are from the same community? It looks like that is the case many times over. No wonder whatever they say and do does not carry any sense of creditability and is a total waste of space.

And when the AG report bring the crap into the open, instead of accepting the hard cold fact and whack the wrong doers hard & ensuring that this will be the last time such incident happens, sadly, some politicians (never mind if they are dumb enough to be caught on video supporting criminal gangs and admission of breach of rule of law) now tries to even justify the wrong doing:-

On Friday, when asked by the press about the firearms mysteriously missing from the police armory, as discovered by the Auditor-Genera, Zahid was quick to pitch himself as the champion and defender of the ‘maligned’ police force.

Insisting that the weapons ‘lost’ by the police were due to human error and not foul play, Zahid rather high-handedly forbade any more discussion on the matter. He even picked on and publicly berated a reporter to emphasize his point.

“I think this is ridiculous behavior from a minister. It is blatantly self-serving. As the Home Minister, the police have to answer to Zahid in many matters but who is he to forgive their wrongdoings. Firstly, this was reported by the Auditor-General, not fabricated by the Opposition. Secondly, have the police carried out an internal probe, why are the findings not released,” Opposition MP for Batu Tian Chua told Malaysia Chronicle.

(Source)

And it seems like the whole of the Government seems powerless (no thanks to their own shortcomings) to bring about the drastic measures needed to stop the rot for once and for all:-

The Auditor-General’s report for 2012 is alarming. And this is so not only because it exposed huge wastage committed by government departments last year, but also because nothing seems to have changed all these many years.

Year after year, the A-G tells us of cases of improper payment; of purchases made at astronomical prices; of unreasonable project delays; of poor asset management; of non-adherence to procedures, etc, etc. But year after year, nothing is done to address the shortcomings.

It seems as if our civil service just continues to plod on, continues to waste, continues to be inefficient, continues to make corrupt transactions. And the overriding controller – i.e. the Government – just lets it be.

The Government knows from the A-G’s reports that corruption is rife in the civil service, but it probably realises it doesn’t have the moral standing to haul in the culprits. After all, the civil servants are following the example of the country’s leadership. And since the Government has also not shown itself to be accountable for a lot of things, how can we stop the rot?

Worse, our civil servants seem to have acquired a tidak apa mindset because the money that is being wasted, that it being improperly used, that is going into the pockets of some of them, is not theirs. When I was in school, we used to characterise such an attitude with the jeering taunt: “You think this is your grandfather’s money ah?” It’s still applicable here and now.

(Source)

I say this again and I have said it many times before – if the Government feel that they need to increase the taxes and reduces the subsidies just to ensure that they have enough to keep the country going, that is fine and fair. But what is the point of the people need to pay more of everything if the blatant waste and mismanagement by the Government itself on the other hand remains high and continues to bleed the nation of its resources. After all, if unnecessary expenses are not curtailed (spending RM3,810 for a RM100 clock for example), the Government will have no choice but to reduce the various subsidies, borrow more money and keep taxes high. At the end of the day, the rot must stop. The “tidak apa” attitude must stop. The blatant wastage of taxpayers’ money must stop. The super unbelievable leniency on the wrong doers must stop. The day of hiring thirsty vampires to guard our blood banks must stop.

Those who commit wastage and corrupt must be charged with criminal breach of trust, bank accounts frozen, their property seized and they are made to spent a good number of their years behind bars. Investigations on the paper trails must be made so that all those involved one way or another are caught and punished. Those politicians who allow (by action, omission or sheer stupidness) this to continue to happen must face the same consequences. Punish the wrong-doers at both ends without any fear or mercy. Malaysia does not need these traitors running the show – we are becoming champions of the world for wrong reasons. The AG have done a very good job highlighting the shortcomings in managing taxpayers funds. The only thing that is needed now is a change of attitude and political will power to take out the cane and start whacking the wrong doers hard so that the rest will be more careful when dealing with taxpayers money. If this failed, then it is evident that the Government itself have failed the trust of the people and is corrupt to the core and thus, must be removed in the next general election.

Can this be done now and without the “ifs and buts”?