SELANGOR STALEMATE WATERS DOWN INVESTMENTS

Even as we are buffeted by dry taps and a he said-she said finger pointing between Selangor state and Federal governments about the state’s water crunch, investments into the state have been hit.

The sad truth is Selangor can no longer cope with the ever increasing demand for water.

Last year, Syabas had to freeze hundreds of new applications for water supply from manufacturers, including world’s biggest rubber glove manufacturer, Top Glove and beverage manufacturer F&N.

Top Glove’s plan to build a corporate tower in Setia Alam was delayed, while F&N had to deal with significant losses as their new plant in Pulau Indah can’t operate for 5 days because there was no water.

Meanwhile, the Selangor Times reported that Selangor recorded the highest investments compared to other states with a total of RM7.68bil last year. The figure came from 186 approved projects which represents 16,076 job opportunities.

How does the Selangor state government plan to meet the demand for water for all these 186 projects when the existing facility can barely cope with current demand?

The Klang Valley needs additional water supply which means more sources of water and treatment capacity.

The restructuring exercise and the membrane technology proposed by the state government can't be considered as solutions as they don't address the issue of additional water sources and treatment facilities. The state government is desperately in need of a better alternative than membrane technology and slashing the rate of non-revenue water. It cannot continue to deflect the issue by proposing solutions that does not address the problem.

To simply rely on existing facilities to provide sufficient water supply to a growing population is just proof of idiocy.

Menteri Besar Tan Sri Khalid Ibrahim has vowed to take over all four water concessionaires and proceed with the restructuring of Selangor water industry within 14 days. This is not the first show of defiance from Tan Sri Khalid. He even went as far as willing to delay the Langat 2 project for 100 years.

But how does that address the problem of new water sources and more treatment capacity?

It seems the people of Selangor, Kuala Lumpur & Putrajaya will have to expect more water disruption in the future as the state government & federal government continue to play tug of war over the water issue.

MCKIP SET TO FIRE INTEREST IN A HOST OF LOCAL STOCKS

A host of local stocks are anticipated to pick up steam with the launch of the 685-hectare Malaysia-China Kuantan Industrial Park (MCKIP) on February 5, 2013 that will pave the way for a slew of new contracts to replenish their companies’ order book.

Investors are turning their attention on MCKIP which is targeting a list of industries that involves the manufacturing of equipment for plastics and metals, automotive components, stainless steel, carbon fiber, electrical & electronics, information & communications technology, and consumer products.

Dozens of companies on Bursa Malaysia Securities have the fundamentals and business synergies to join the MCKIP bandwagon, as the RM1.5 billion industrial park provides opportunity for collaboration and joint-ventures with large Chinese companies and can fuel the potential of some companies to be on par with the “big-boys.”

The launch of MCKIP comes at the perfect time with the FBM KLCI still on its 1,600 point support level and anticipated to have further upside riding on a possible pre-Chinese New Year rally and taking into account that the 13th General Election is believed to be called in late February. The benchmark index had earlier in the month hit an all time high of 1,692.65 points at close.

A private sector initiative with the federal government as facilitator, MCKIP will also stir the interest of strategic emerging industries such as environmental-friendly technologies, new-generation information technology, biotechnology, and alternative energy to set foot. The industrial park’s potential is enormous as it is projected to create 5,500 employment opportunities and RM7.5 billion in total investment value by 2020.

What is interesting is that MCKIP is not a standalone but within the KuantanPort Cityproject that covers 30,000 hectares of an integrated industrial and logistics hub.

Besides higher level of sustainable economic relations between Malaysiaand China, the industrial park serves as platform for growth development and support of the private sector to help promote investment inflows and entrepreneurial opportunities that will also boost the small and medium enterprises (SMEs).

MCKIP is the first industrial park in Malaysia to be jointly developed by Malaysia and China, and is a government-to-government initiative announced in reciprocation to the China-Malaysia Qinzhou Industrial Park that was launched in China by Chinese Premier Wen Jiabao and Malaysian Prime Minister Dato’ Sri Najib Tun Abdul Razak on April 1, 2012.

To spice-up MCKIP, it will be developed by a master developer comprising a joint venture company between a Malaysian Consortium and a Chinese Consortium under a 51:49 equity ratio. The Malaysian Consortium consists of SP Setia Bhd with 40% equity, Rimbunan Hijau Group (30%) and the Pahang State Government through Perbadanan Setiausaha Kerajaan and Pahang State Development Corporation (30%). The Chinese Consortium involves Guangxi Beibu Gulf International Port Group (47.5%), CCCC Real Estate Co Ltd and China Harbor Engineering Co (47.5%), and Qinzhou Investment Co (5%).
 

Prime Minister Najib will officiate the ground breaking of MCKIP and is likely to unveil a list of fiscal and non-fiscal incentives such as preferential tax treatments that will bring further excitement among investors and see stronger equity returns sooner than expected.

It is learned that several memoranda of understanding (MOUs) will be inked on February 5 by key Malaysian and Chinese companies that are eager to commit their investments in MCKIP “in a big way” riding on the positive impact the industrial park has to offer.

It was recently reported that Chinese companies were showing keen interest to invest in MCKIP despite the political issues related to the Lynas rare earth plant in Gebeng which is located near the industrial park.

MALAYSIAN PETROL STATION’S FACE MARGIN SQUEEZE

 

Anwar Ibrahim maintains that he will drop fuel prices within 24 hours of Pakatan Rakyat taking power of the Federal Government.
 

His populist proposal has worried petrol retailers because excessive government market intervention will create a difficult operating environment for them.
 

Shell Malaysia operates one of the country’s largest networks of retail stations with over 900 stations serving 500,000 customers daily.

 

The company is therefore vulnerable to any drastic reductions in fuel prices. Doing so will force them to make only razor-thin margins on their pump sales.

The margin is the difference between the cost of running a service station and what can be made from selling its fuel. Poor margins and spiralling operating costs directly and indirectly threaten businesses and jobs.
 

State-regulated pricing mechanisms are anathema to the free market. They will hurt the size of the retail station networks even in the face of rising local fuel demand.

Earnings of other fuel retailers such as Petronas, Esso, Petron, Caltex and BHP will also be affected by any immediate reduction in fuel prices.

Malaysia's economy should be moving away from market-distorting subsidies and not retaining and encouraging a culture of dependence and entitlement.

 

Sorry Anwar, this sounds like a step in the wrong direction.