By Zairil Khir Johari, MP for Bukit Bendera
The third series of the Auditor-General’s 2013 Report has unearthed many irregularities associated with the Ministry of Education’s RM4.1 billion 1BestariNet project, including non-fulfilment of contractual obligations, lack of value management, delays in implementation and inadequate coverage.
For their failure to complete the 4G broadband infrastructure roll-out across 10,000 schools within the stipulated time, the contractor of the project, YTL Communications Sdn Bhd, was fined RM2.4 million by the Ministry.
However, going through the Auditor-General’s Report in further detail, it would appear that there are some contractual loopholes from which YTL is benefitting greatly. In fact, from just two contractual ambiguities alone, I have found that YTL stands to profit to the tune of RM50 million a year.
1BRIS: profits for YTL at the rakyat’s expense?
One of the controversial matters raised by the Auditor-General’s Report is that of the installation of the 1BestariNet Receiver Integrated System, or 1BRIS. For schools without a suitable existing LAN structure for high-speed broadband, 1BRIS towers are installed on the premises in order to receive and relay high-speed wireless signals.
As part of the process, the Ministry had sought input from the Valuation and Property Services Department (JPPH) with regards to the appropriate rental rate to the contractor, YTL. JPPH in a letter dated 14 January 2013 had recommended a monthly rental of RM1,200 for each 1BRIS site.
However, YTL refused to pay this amount, stating instead that their understanding of the terms of contract allowed them to install the towers for free. Subsequently, on 14 February 2014, the Ministry decided to charge a token rental of RM1,000 a year for each 1BRIS site. Based on this new amount, YTL paid the outstanding arrears, which came up to RM2,416.67 per site from 1 May 2012 to 30 June 2014, including three months’ deposit.
However, RM1,000 a year is a far cry from the RM1,200 a month that was recommended by the JPPH. In fact, the Auditor-General’s Report commented that such a rate was “unreasonable.” With 3,203 1BRIS towers installed all over the country, rental revenue at RM1,200 a month or RM14,400 a year would come up to RM46.12 million a year. Currently, YTL is only paying RM3.2 million a year. This equates to a whopping RM42.92 in lost revenue annually for the Ministry.
In addition to this, the Auditor-General’s Report also found that according to the contract agreed between the Ministry and YTL, all utility charges related to 1BestariNet and 1BRIS would be borne by the Government during the duration of the contract, and that the contractor was only responsible for costs associated with the installation, maintenance and management of 1BRIS.
This is a serious flaw in the contract agreement, as the Ministry admitted in their reply to the Auditor-General’s Office that the installation of 1BRIS towers have increased the electricity cost of schools by RM150 to RM180 a month. At 3,203 1BRIS sites all over the country, this amounts to an increase of between RM5.77 million to RM6.92 million a year in electricity charges, which has to be subsidised by the Government for YTL’s benefit.
According to the Auditor-General’s Report, the Government as a subscriber to YTL’s service should not be burdened by utility charges, which should be part of the service provider’s operational costs.
Due to inadequacies in the clearly one-sided 1BestariNet contract, it would appear that YTL would profit to the tune of nearly RM50 million a year. Over the 15-year timeline of the project, this will amount to RM750 million in additional profits for YTL, and this does not include profits gained from the commercial usage of the 1BRIS towers.
According to a report by the now-defunct news portal fz.com on 10 May 2013, YTL director Yeoh Seok Hong was quoted as saying that the “towers going up at the schools won’t just provide wireless Internet connectivity at the school, but in surrounding areas too.” In other words, the 1BRIS towers will also provide commercial YES 4G broadband services to residents in the surrounding community, thus allowing YTL to rake in even more profits.
Incompetence or cronyism?
It is obvious that YTL is benefiting substantially at the cost of Malaysian taxpayers. There are only two explanations for such a lop-sided contract. Either the Government and its lawyers are incompetent for agreeing to such a deal, or the deal was engineered in such a way as to benefit a crony company. Whichever the case, it is a huge cause for concern.
Seen in this context, the RM2.4 million fine that the Ministry imposed on YTL for non-compliance with the infrastructure roll-out deadline is actually peanuts compared to the hundreds of millions of ringgit in profits that YTL stands to make from contractual loop-holes alone, not to mention commercial usage and the services rendered through the project proper.
