Plod along ...

Latest news has it that Sime Darby is suing its former CEO and 4 others for RM 338 million for responsibility in causing the conglomerate to lose some RM 2.1 billion in the Energy and Utility Division. If found guilty, how on earth can these 5 people ever pay Sime Darby back.

If the losses are due to corruption i.e. if the 5 had been guilty of siphoning money for their personal gains from the companies that they run, then, I suppose the legal action taken against them is justified.

If they merely mismanaged their companies i.e. by making decisions in good faith but were later to discover that the decisions resulted in losses to the companies, then was it fair to take legal action against them ?

If a company took such drastic action against its management staff, then no one would ever want to work in such a company knowing that if he made a mistake that cause the company to operate at a loss, then no one would ever want to work in the company and even if he had already been employed, the person would not risk his job or, more important, his reputation by making decisions that look risky. Business, in itself, is a risky undertaking; there's always the unknown, the uncertainty, the fear that once a decision is made, the consequence of that decision, could backfire on the person or group of persons making the decision.

I strongly feel that from now onwards, those guys in the top echelon of Sime Darby management would not dare make any decision that smacks of risking their reputation. What they will do is to plod along working for the company without risking themselves to secure contracts for fear that the contracts would entail business losses. Sime Darby would then be running like a government department.

ASB ...

Today, PNB announced that it would distribute 7.50 % in dividend and 1.25 % in bonus to unit holders of ASB. The CEO of PNB, mistakenly (as usual) stated that the total pay-out is 8.75%. Though the 7.50% is absolutely correct, the 1.25% is never right. Over the years, I have checked the amount of bonus against the amount held by the unit holders of ASB at year end, the percentage in bonus always came short of what the CEO said.

The CEO said that, for year 2010, the dividend payout distributed to the unit holders would come to RM 5.93 billion (RM 4.86 billion in 2009) plus an amount of bonus that came to RM 603.34 million (he didn't say the 2009 bonus amount). In total, PNB would distribute RM 6.53334 billion starting from 3rd Jan 2011.

The CEO further said that, among others, Maybank contributed RM 0.55 per unit (RM 0.08 in 2009) while Sime Darby (despite difficulties), RM 0.10 per unit (RM 0.23 in 2009). There were others like F&N, Maxis, Telekom, that had increased their respective dividends. In fact, F&N, contributed RM 1.58 per unit (RM 0.47 in 2009).

The CEO of PNB seemed pleased that PNB's performance was satisfatory, saying that it could in fact give out 11.4% in dividend but preferred to carry forward the balance to year 2011.

What I cannot figure out was when the CEO said that the ...............

MRT and such ....

I am all for the first MRT (mass rapid transport) project that is estimated to cost some RM 36 billion, to serve some 1.2 million people, to run from Sungai Buloh through KL city centre and finally to end in Kajang, to integrate with the current LRT lines where they intersect the MRT line. It is part of the so-called Greater KL transport system. With MRT, it is hoped that it would alleviate, if not solve, the traffic mess that people in the Klang Valley are facing right now. I believe, this is the biggest construction project in Malaysian history.

While the MRT is an entity that will soon be realised, another one that would cost even more (about RM 40 billion plus) is the bridge crossing the Melaka Straits. Touted by Mahathir when he was PM of Malaysia and strongly supported by his erstwhile counter part in Indonesia, President Suharto, the bridge is supposed to span from Melaka to Sumatra along, I presumed, the Strait's narrowest section. The idea was abandoned when the region faced the financial crisis of 1997/1998 and Suharto subsequently lost power. But now someone is suggesting to resurrect the idea.

To me, Mahathir's vision in having the bridge (which would have been the longest bridge ever built in the world), is good. It means a lot of construction and a lot of land speculation especially on lands in Sumatra. Mahathir wasn't thinking of the government funding the project as long as there were people who could fund the project privately. Come to think of it, he would approve a bridge to the moon if someone could fund the project at no cost to the government.

Back to the MRT. Someone estimated that it would ultimately cost RM 50 billion because the original cost only takes into account the cost of construction. Cost of land acquisition. and many other things are not included. He even claimed that the ultimate was more than the cost of building Putra Jaya and KLIA combined. Of course this is not right simply because when they were built, the USD was worth 2.50 MYR and that there is an element of inflation from 1998 to 2011 , that is, 13 years since then.

What I do not want to see is, for want of a better word, "hanky-panky" going on to balloon the project to cost more than the estimated original cost of RM 36 billion. I have heard of the bad underestimates by the authorities for the cost of building, for example, the Bakun Dam, the Agong's Palace, the East Coast Highway, and many others to make me ever wonder why JKR always underestimates project costs. I feel that these so called engineers, quantity surveyors, accountants in JKR simply do not know how to estimate when project costs are in the hundreds of millions. They are only able to count when they cost less than 10 millions because hundreds of millions are simply beyond their concept and vision and anything beyond several millions are simply guesstimates or figures plucked from the air. So much for their skill.

When I was a young engineer, I worry myself to death for estimating a budget or a project if somehow the ultimate financial cost resulted in a cost "overrun" of one percent. But now, these guys in the government seem nothing of it if projects were to double or triple the original cost. They seem to always have explanations for the high costs.

To be continued .........