5MDB? – The 5 Main Worries About 5G And The MOF's Latest SPV 'MyDigital Blueprint'
There are two versions to the latest vision presented to Malaysians over the past few days.
In the first scenario Malaysia is about to hurtle towards cutting edge status in the global digital future, following South Korea and Singapore to be the third fully fledged 5G connected nation in the world – all thanks to a massive government investment of RM15 billion (admittedly bound to rise).
Major world industries will apparently flock to relocate in such an entrepreneurially led state and the average kampung will shame the western world and trounce China with the speedy internet access available to rural folk, who will be eagerly signing up to bail the project out.
The alternative analysis is that Malaysia is yet again about to embark on another secretive, bloated, taxpayer-funded government ‘enterprise’ project shielded by a Chinese state company, which is doomed to become the next white elephant but will make a handful of ambitious businessmen cronies and politicians vastly rich at the expense of everyone else.
In other words, much the same outcome as for similar grand projects in the past, having been bulldozed through by Malaysia’s same ruling clique of politicians, businessmen and ever present royalty – the ones who tend to benefit.
So, ‘White Heat of Technology Malaysia’ or ‘Once Again Taken for an Obvious Bloody Ride Malaysia’? Take your pick.
Why No Mention In 2021 ‘Covid Emergency Budget’?
There are, of course, long established and institutionalised precautionary measures to protect the public from the worst excesses of disastrous investments by politicians, including the open budget process and scrutiny by parliament and the public accounts committee.
These basic forms of oversight ought not to be ignored in the public interest, but in the case of 5G they plainly have been, thanks mainly to the dictatorial bent of an administration that has seized power by overturning an elected government and abusing the duties bestowed upon the Agong.
It is what detractors are suggesting comprises ‘Worry Number One’. The entire project has just been announced out of thin air over the past week without the slightest scrutiny thanks to a bogus State of Emergency and the excuse of Covid.
As a result, no Parliamentarian has had the opportunity to question why, at this time of a national health crisis when people across the country are suffering without food and jobs, it has been deemed a sudden priority to pour a vast chunk of the country’s inflated ‘Covid’ borrowings raised in the name of the pandemic into a digital network designed to allow movie buffs to watch South Korean films faster on their handphones?
Despite the fact that, thanks to the intervention of the Council of Rulers, Parliament had a long budget session from November to mid December last year, this extraordinary and vast project never got a single mention at that time.
Not a whisper of the plan to borrow RM15 billion to project Malaysia’s bid for digital glory appears on a single page of the 2021 projected figures. Nor is it part of any departmental budget either. One bewildered parliamentarian comments:
“It’s a brand new project not approved by Parliament. It seems like no one with expertise has written it. Nowhere is 5G mentioned in the budget of the Ministry for Communications & Multi-media for 2021. The 5G project could be a component of the Jendela or broadband 2021 budget but the total allocations for those are RM500 million and RM50 million respectively. How did 5G leap from zero mention to a RM15 billion project in less than 2 months? Why the sudden rush for such a major strategic plan?” You can read the entire Budget Speech 2021 and the 500 plus pages of the Estimated Federal Expenditure 2021 and you will not find a single mention of “5G”.
Upfront Spending By an MOF “SPV” (special purpose vehicle)
To those sensible souls who are in favour of oversight, transparency and accountability when it comes to major government spending there are several other flashing red lights related to this project. Indeed, some have already dubbed it 1MDB 2.0.
Remember the SPV in the Cayman Islands and the development fund wholly owned by the Ministry of Finance? After the global disaster that was 1MDB, surely this present pushback coup coalition can’t be planning on creating yet another opaque Ministry of Finance managed super-spending vehicle along the same lines?
The failure to shift the risk and responsibility over to the private sector with proper experienced in the industry sector features loudly therefore as Worry Number Two.
The entrepreneurial Minister of Finance may reckon he can manage the entire unauthorised project on his own advised by a panel of shadowy businessmen advisors, not all of whom seem to have been advertised on the published board of four directors. But for the rest of us it all seems worryingly familiar and involves similar sums to what went into the previous black hole of 1MDB.
And, just like Najib Razak’s 1MDB and pipeline projects, it is already being advertised that the 5G spending will be ‘largely up-front’. That means the government will borrow these billions and then tip the lion’s share straight into the hands of the trusted managers of this SPV (more on the trustworthiness of those involved below) to invest, distribute or possibly lose with oversight only from the board appointed by itself.
This is how a Star ‘exclusive’ on the sudden plan quoted the CEO Ralph Marshal on his spending strategy last week:
In his first exclusive interview with the media since being appointed as the CEO of Digital Nasional, Augustus Ralph Marshall told StarBiz that the special-purpose vehicle (SPV) is expected to front load the investments, possibly investing 25% of the RM15bil in the first two years.
“Following that, about 15% to 20% will be spent in the next few years and the percentage will gradually drop in the following years.
“This is because once you complete building the infrastructure in the urban areas, then it becomes less intense (to rollout). [The Star]
In the absence of proper oversight Malaysians will just have to hope that this hasty spending will go into solid structures and not just evaporate into TRX style deserted building sites, from which the cash then miraculously re-appears into the election coffers of PN.
That is what happened with 1MDB, so it is alarming that this new government in anticipation of an election has chosen to adopt an almost identical model with another MOF owned SPV to raise vast sums of public money.
In his interview CEO Ralph Marshal even makes a virtue out of the risk being placed on taxpayers, rather than the industry where it belongs:
“Effectively, the SPV model removes a significant burden on the telco operators’ balance sheet and puts it in the hands of the government. The government will then figure out a way to finance it, ” he said. [The Star]
How troubling indeed that the government has not yet figured a way, because taxpayers can already work out the solution government will find. One has to ask whether voters are likely to regard the opportunity to subscribe (at further cost) to a super-fast broadband service as being at the top of their personal spending priorities in the middle of this pandemic?
One has to ask how genuine is this whole plan anyway if Ralph Marshall says the government is still figuring things out?
Worry Number Three is the China angle
The MOF SPV, named Digital Nasional Bhd, has without any basic tendering or accountability has announced that it has contracted the troubled Chinese digital giant Huawei to roll out the network in partnership with Malaysia’s state regulator Telco in study supervision.
The announcement came hours after Ralph Marshall had told The Star
“As for the tender process for the 5G infrastructure building, Marshall assured that it will be fully transparent.”
Any surprise there? The hastily produced blueprint for the programme has been named the MyDigital Blueprint, by the way – note the haunting acronym.
Followers of recent history are already trembling at the prospect of 5MDB with a scale to match.
Certainly, the injection of Huawei through a cosy backroom negotiation brings little to comfort those who worry. Chinese state companies do not possess a pretty recent history in their dealings with the parties of the present coalition government – think Sabah Pipelines and think East Coast Rail. Jho Low still cowers a fugitive in China primarily because were he to be surrendered he would spill the beans on the financing of those projects.
However, Sarawak Report together with the US Department of Justice and others have already pieced together enough of the very ugly picture. It shows that Chinese state companies have not hesitated to engage in filthy corrupt contracts with the Government of Malaysia, whereby bloated contracts are returned as kickbacks to the politicians who authorised them – by the tens of billion.
This is effectively China showing willing to buy political influence and drum up business in Malaysia using the money of Malaysian taxpayers to do so. Win win for China, lose lose for Malaysia and ching ching for the recipients of the kickbacks concerned.
And there is another China worry. Not only is Huawei facing business troubles but the company arouses the concerns and suspicions of the non-authoritarian, anti-corruption segment of advanced economies. The US just arm-twisted prime minister Boris Johnson out of the same bad idea of engaging the company to roll out 5G in Britain.
On-going, Malaysia will not have a single secret (be it to do with strategy, politics, business or ministerial sex lives) that the Chinese spy agencies will not be appraised of in a 5G nano-second. Information is power and Malaysia will have surrendered it, along with independence.
For this reason all those anticipated western companies, relied upon to relocate their digital businesses to ‘Cutting Edge KL’ in order to recoup this brilliant public investment by the government, won’t.
The SPV having spent billions of public funds will be forced to rely on the ordinary local medium and low earners from the towns to the kampungs to make their 5G ‘profits’. In other words there is the strongest likelihood of having to write the whole project off, as usual as a debt to be funded by future taxpayers.
If this had not been such a suspiciously hasty plan these grim prospects could have better been explored. Even in South Korea 5G is proving a hideous loss-maker say the experts, as ordinary consumers are rebelling at the costs and lack of variety and defecting back to 4G – there were half a million 5G defectors in South Korea in just the past year!
Yet at least in South Korea it is private investors who will take the hit, not so Malaysia given this baffling choice to own the project by the Ministry of Finance.
The excuses given by Ministers for their desperate desire to heap the risk on the public purse have ranged from Communications and Multimedia Minister Saifuddin Abdullah who laughably told Bloomberg that government would do the job faster. To Ralph Marshal who himself articulated many people’s thoughts whilst demanding the right to prove them wrong:
“There’s no reason to expect that just because the SPV is government-owned, it is going to be a mess, expensive or badly implemented.
“You have to give the government the opportunity to deliver on the MyDigital initiative, ” he said [The Star]
Also in people’s thoughts is that, certain present decision makers and their business allies presumably don’t care if the consequences are catastrophic because they will have long since disappeared the investment into tax havens according to the blueprint used by Najib and Jho Low. Given it has happened before the Malaysian government cannot remove these concerns from the public mind now, particularly since it has removed accountability, transparency and oversight from the entire process.
The above disastrous business plan in the making would amount to Worry Number Four.
Who Is Running The Show?
Featuring fifth (but not final) on the worry list is the dodgy personnel issue at 5MDB, best encapsulated by the appointment of a Chief Executive who lives as a fugitive in Malaysia. Ralph Marshall is a businessman who features on the Wanted Lists of not one but two neighbouring friendly countries.
Owing to the long-running Maxis corruption scandal which enmeshed his former direct boss, the billionaire Ananda Krishnan (naturally one of the key players in 1MDB), Marshall has been evading formal criminal extradition requests from both India and Indonesia.
It is to be acknowledged that were Ralph Marshall to submit to these requests, he might be found innocent at trial. Who knows, since he isn’t risking it?
However, the situation does somewhat does beg the question as to why on earth the Malaysian government would seek to employ as the CEO of a Special Purpose Vehicle owned by the Ministry of Finance and about to spend billions a man accused of dire financial crimes of enormous magnitude by two friendly countries – crimes he has proved unwilling to counter in a court?
Will his presence at the helm inspire confidence amongst investors and potential major American, European, Australasian and other entities whom Malaysia in banking on enticing to re-locate to their digital future parks? One suspects not. And why should the financiers of this project, the Malaysian public, be expected to trust him either?
The only advantages of such an appointment from the perspective of the MOF in charge would appear to be of the seedy and negative variety. Ralph Marshall will undoubtedly be extremely vulnerable to pressure from his own boss, the Malaysian government, who could decide to comply with its neighbours and extradite him at any point. There is, one assumes, nothing Marshall would not do to please the minister of finance in return for his continuing asylum.
There is even a possibility that Ralph Marshall, wanted for alleged forgery and other fraud offences, may not be so fussy about a bit of ‘hanky panky’ – Jho Low style? SR only says so on the basis that prosecutors from two friendly nation states are openly alleging these crimes and have proceedings ongoing against him. If these factors have proven appealing to the MOF one has to question why.
In summary, Malaysia has been suddenly astounded by its failing coalition government in the run up to an anticipated snap election with a sizzling hot project for the future that projects a hugely risky investment gamble on the taxpayer’s tab.
Since PN only remains in power thanks to a Declaration of Emergency, which the prime minister himself admitted was necessary to prevent an election having lost his majority, the very legitimacy of the vast investment is in fact open to question.
Observers are therefore left to decide whether it is a brilliant move to wow voters or yet another planned straight theft, of the type that has unfortunately been perpetrated a number of times before under similar circumstances.
Tellingly, all the institutional protections set up to to try to avoid ghastly missteps and corruptions by decision-makers, namely an open budget, a sitting parliament, an accounts committee, a free and unintimidated media, have been silenced and bulldozed.
On what side of Malaysia’s sudden 5G vision will beholders therefore tend?
It is perhaps of no surprise that the former 4th and 7th prime minister has already raised his dissentient voice in the past few days. The same Dr Mahathir flagged up the misdeeds of 1MDB and it seems to be that he scents the same game over 5G. In a party statement he took the opportunity to flag up PM8’s personal embarrassing record over the so-called Bestari.Net scandal relating to an earlier generation roll out of 4G:
“The government’s plan to develop a 5G infrastructure amounting to RM15 Billion through a government owned Special Purpose Vehicle (SPV) without an open tender is worrying and has raised many concerns. The same SPV is then also given the responsibility to own, deploy and manage the 5G infrastructure…
Recent history has shown how a government-owned entity like 1MDB was seriously misused to fulfil personal and political gain, how can this current government guarantee that this SPV will not become 1MDB 2.0 and become a vehicle to further the interest of the few?
Without an open tender process, the 5G infrastructure plan may be in tatters similar to the Bestari.Net project that was implemented by Tan Sri Muhyiddin Yassin when he was the Minister of Education. [statement Pejuang Tanahair]
The ex-PM may have his faults, but he can plainly recognise a scandal when it comes to government misspending and corruption and has no fear of speaking out.
The PN leadership – or Ralph Marshal – are of now course at full liberty to sit down, open the books and release the minutes in order explain why the Malaysian taxpayer should plough money into 5G following an inflated ‘Covid Relief’ budget pushed through by the present Agong on behalf of his appointed minority choice PM where it was not mentioned.
Malaysians have every right to demand some answers.