Chee How: Be true to yourself, then you won't be false to anyone else

Batu Lintang State Assemblyman See Chee How's speech in the State Assembly, April 24, 2015

I must thank Datuk Amar Speaker for enlightening me to bring up the matter that I had brought up under Standing Order 15 to discuss the Cahya Mata Sarawak Berhad (CMSB) proposed acquisition of Sacofa Sdn Bhd at this stage.

Indeed, it concerns administrative responsibilities of ministers and come within the scope of ministerial actions. And it is a matter of earnest public importance.

“Sarawak Leads The Way In Integrity”

 “Sarawak leads the way in integrity”. I noticed that the press article with this title is adapted and pasted on the home page of this Honourable Dewan’s official website.

I must applause this august House for the good effort as it is expedient to emphasize and underscore the virtues that this august House attempts to anthropomorphize.

The meaning of integrity came, amongst others, in the form of a fatherly advice from Polonius to his son Laertes, in William Shakespeare’s play, The Tragedy of Hamlet Prince of Denmark: "This above all, to thine own self be true. And it must follow, as the night the day, thou canst not then be false to any man."

In our modern language, it simply means “Above all, be true to yourself. Then you won’t be false to anyone else.”

It is suggested that “being what one is, honesty or authenticity, without deceit or dissembling”, is the core of integrity.

One of my favourite jurist, John Rawls, adopted this meaning and identified the virtues of integrity as “truthfulness and sincerity, lucidity and commitment” in one of the most important textbooks in jurisprudence, A Theory of Justice.  He

ranked integrity as one of the primary virtues of a democratic government.

A democratic government has an obligation arising from its democratic nature to practice honesty or authenticity toward its citizens, those to whom it is responsible.

Honesty and integrity are certainly the qualities most to be valued in the government and public officials.

CMSB’s acquisition though primarily concerns a commercial transaction, a corporate acquisition, but it also goes into the qualities we honoured in the government and public officials because the transaction involves the selling of a prized public asset that is substantially-owned by the state.

The selling of public assets, particularly strategic assets, is a politically fraught endeavour.

Are we doing it for the public good?

This Honourable Dewan should therefore seek full disclosure of the rationale to dispose the controlling interests in Sacofa to CMSB and the justification of the purchase consideration.

Sacofa Sdn Bhd, incorporated in 2001, is a “one-stop centre” providing telecommunication infrastructure to telecommunication service providers in Sarawak. Its primary objective is to build and expand the provision of telecommunication network infrastructures throughout Sarawak.

Sacofa is substantially owned by the state. Besides the 70.5% shareholdings held through the State Financial Secretary Incorporated, the state vehicles Sarawak Information Systems Sdn Bhd and Yayasan Sarawak each holds 7.6% and 6.8% equity in the company. Celcom Axiata Berhad is the only private entity which holds 15.1% shareholding in Sacofa.

To facilitate Sacofa in achieving its objectives, the state government granted it with a 20-years concession for the monopoly and exclusive right to construct, own and manage the communication infrastructure.

Through the provision of facilities and services in tower space rental, local access network, cabin for equipment storage and power supply, Sacofa is a hugely profitable company.

For the financial year ending 2011, 2012 and 2013, Sacofa’s revenue were respectively RM140.8 million, RM155.3 million and 153.4 million, while the company’s pre-tax profits for the 3 years were RM69.4 million, RM84.6 million and RM66.9 million. Sacofa has also registered post-tax profits of RM66.93 and RM51.64 million for the financial years ending 2012 and 2013. The net profit is at 33% of its revenue each year.

More than RM150 million net profits in 3 years and 85% of that belongs to the state. Imagine what we can do with that RM43 million each year, for rural development projects, scholarship for our children and care for the needy.

With the purchase consideration for 50% shareholding in Sacofa fixed at RM186.79 million, it is only 7.23 times the price-earning ratio, too low when we compare to the valuation of the other comparable companies.

I have looked at 4 comparable public-listed telecommunication services providers:  OCK Group, Instacom Group, Maxis and Telekom. They have shown their profit after tax margin of 10%, 22%, 19.5% and 7.5%. Their current price earning ratio are 30 times, 25.5 times, 31.5 times and 32.8 times.

The figures show are that while these companies have much lower profit after tax margins compare to Sacofa, their current price earning ratio are much higher than that of the purchase consideration of CMSB’s proposed acquisition of Sacofa.

The Honourable Minister should not tell us that this is a “willing seller willing buyer” transaction or that the deal is made at arm’s length for it cannot be so. Our Right Honourable Chief Minister, our government, the relevant public officers, including us, will be accused of failing our obligations arising from our office to practice honesty and integrity toward the state and all Sarawakians, those to whom we are responsible.

The Honourable Minister should also be reminded that the CMSB acquisition of Sacofa is not a pure business transaction because of the nature of Sacofa set-up and the regulatory powers that have been vested in the company.

Government policy priorities

Firstly, as a state substantially-owned company, and granted the monopoly and exclusive right to construct, own and manage the communication infrastructure, Sacofa is tasked to serve the government policy priorities in Sarawak.

Sacofa is the main project implementer of the government’s initiatives to manage the issues of digital divide in Sarawak and elevate the state’s status to a well-connected K-economy and K-society.

It is committed to pave the way towards building human capacity and increasing rural communities’ self-sufficiency through planned diffusion of information and communications technology (ICT), such as computers and the Internet, into rural communities.

From the records, Sacofa has deployed affordable high speed broadband connectivity to many rural and under-served areas in Sarawak.

Can the Honourable Minister enlighten us what are the safeguards stipulated in the acquisition agreement whereby the performance of such government policy priorities in Sarawak will continue to be taken care of by the company, post acquisition?

How can we be assured that Sacofa will continue to provide affordable high speed broadband connectivity to the rural and under-served areas in Sarawak?

How can we be assured that there will not be any price hike in the provision of structural facilities and services that will discourage the continuous expansion of the telecommunication services in the state or passing the higher costs of better connectivity in Sarawak to the consumers?

Regulatory power vested in Sacofa

Secondly, being a state substantially-owned company, it is acknowledged that Sacofa is and can be vested with regulatory power over the construction, ownership, management and provision of the communication infrastructure and services to other telco companies and providers operating in Sarawak.

Amongst others, Sacofa is vested with power under the Ministerial Direction, Commission Determination of the Malaysian Communication and Multimedia Commission (MCMC) to prepare and maintain the access reference in relation to the facilities and services which it provides to itself and third parties, in Sarawak, the rights and obligations set out in the Mandatory Standard of Access Determinations.

The said access reference made pursuant to the Commission Determination also contain the general terms and conditions on access to Sacofa’s network facilities and or network services by other telecommunications operators licensed under the Communications and Multimedia Act 1988.

Sacofa is also empowered to determine the charges and charging principles for each of the facilities and services and may on its discretion determine whether to provide any telecommunications operators access to its facilities and services.

By disposing the controlling interests in Sacofa to a private entity, it will be strange, even bizarre, that the company continues to exercise such regulatory power in the Sarawak, in the industry. Even if the state allows it, with the federal ministry and MCMC allow it?

Due Deligence?

I have noted, the advice of Datuk Amar Speaker in this Honourable House that the Honourable Minister of Finance II will answer questions and address matters related to the sale of Sacofa.

Besides the concerns raised hereinabove, I am hopeful that the Honourable Minister of Finance II will be transparent with the process of this acquisition and clarify in this august House the discussions, negotiations and decisions made from the time the idea of this acquisition.

We are certainly hopeful and await the Honourable Minister’s answer that the purchase consideration is not based solely on price-earning ratio consideration.

We want to know, whether due diligence was undertaken for the state government before the conditional agreement on the sale of Sacofa was signed? Who was commissioned to conduct and complete this due diligence study?

In other countries which genuinely practice parliamentary and legislative supremacy, the legislative instituted committee would have required the officers including our State Financial Secretary, who is also the chairman of the board of directors in Sacofa to appear and explain this proposed acquisition.

Surely, the Honourable State Financial Secretary would have better knowledge and is in a better position to explain the matter in this Honourable Dewan.

In the premise, particularly for Sarawak to continue leading the way in integrity in Malaysia, I respectfully ask for a full disclosure of the rationale to dispose the controlling interests in Sacofa to CMSB, the justification of the purchase consideration, and I pray that the State Government will seek the assistance of the National Audit Department to audit and prepare an acquisition analysis on this proposed acquisition and to table the report before this Honourable Dewan for its approval to the CMS’ proposed acquisition of Sacofa.