Paying for chicken and eggs
IMAGINE if you went to the market to buy eggs and were told there wasn’t enough.
If you want, you have to buy chickens for the farmers to raise them and later the farmers will charge you for the eggs laid by the chicken you bought. This hardly makes sense.
Is that fair? I can almost hear you shouting NO!
Or imagine a city, where all the roads are privatised and full of cars. The private toll road operator tells car companies not to sell cars anymore because they can’t build new roads. If car companies still want to sell cars, they have to build new roads on their own. However, their customers will still have to pay toll to the operators.
If that happens, car purchasers will pay twice. Once for the car price increase as they pay for the road construction cost, another is the toll charge.
Is that fair? I can almost hear you shouting NO!
Well, that’s what happened in the property industry, right at your home though you may not be aware.
Currently, property developers need to construct utility infrastructure when they build new projects. The utility companies will then charge the residents via utility bills despite the fact that they did not build the infrastructure.
According to Housing and Local Government Minister Zuraida Kamaruddin, the compliance costs for building infrastructure have added 20% to 25% to the developers’ construction cost.
Additional costs will be passed on to home purchasers and as a result, it leads to higher house prices.
To reduce the compliance costs imposed on developers, the government is proposing for utility companies to build their respective infrastructure in affordable housing projects.
According to news articles, the proposal was expected to be enforced in 2019 once the Cabinet approved the affordable home policy. This includes Tenaga Nasional Bhd for electricity and other water and telecommunication companies.
Zuraida was quoted as saying that “principally, at the ministerial level, we have agreed that the utility infrastructure building and the cost of building it will be handed over to utility companies”.
“After all, payments for the bills are collected by these companies and not the devel- opers.”
This is a good move that will help in the government’s mission to reduce house prices, especially in the efforts of providing more affordable homes. This is definitely a step in the right direction for the benefit of the rakyat.
Previously, when utility companies were owned and ran by the government, the government built the infrastructure with a reasonable capital contribution from developers.
However, after the privatisation of these utility companies, the infrastructure costs have been transferred to developers while the utility companies continue to reap profits without investing in the infrastructure within housing projects.
On the other hand, developers are loaded with additional costs even as they continue to contribute new customers to the utility companies.
As privatised entities, these utility companies place profit as a priority ahead of public good. From experience, they are not necessarily more efficient as there is potential for corruption and complacency due to the nature of their monopolies.
According to a developer whom I am familiar with, their project received a government watchdog’s advice on the compliance cost based on a calculation using a fair formula. However, it was not agreed by the relevant utility company which wanted to charge double instead.
It is unfortunate how such monopolies become so powerful and even ignore the advice of the government watchdog. Homeowners will end up paying more due to the higher contribution for the infrastructure.
Utilities can be highly efficient when they are operated by a clean government. Once they are privatised, the focus shifts from public service to profit. They profiteer from end users and also developers, who have no choice but to pass the costs to their customers.
In other words, the utility companies are taxing the customers twice as in my two examples at the beginning of this article.
As highlighted in my previous article, according to Transparency International Malaysia, corruption had cost our country about 4% of its gross domestic product value each year since 2013. Added together, this amounts to a high figure of some RM212.3bil since 2013. Today, the rakyat is paying for this, both ways.
It is time to re-look into all these and bring things back to order.