Higher cement price – of what purpose is CIS
Published on: Sunday, November 28, 2021
By: Datuk John Lo
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Cement Industries Sabah: Performance of CIS in question.
The State Government is working doubly hard to rejuvenate the economy which has seen negative growth in recent years, finding ways to keep the cost of living, especially food items, from rising further when the global inflation is still raging on.
The cement price increase without sufficient justifications being given has made these 2 onerous tasks much more difficult for the Sabah’s Government.
Not being familiar with politics, I cannot comment on the political fallout of this cement price increase. For sure, the adverse economic implications will be considerable.
Cement, like steel, is essential for economic development. The increase in cement price will directly impact on infrastructure and construction cost, especially real estate.
Dream of owning a home will become even more problemic for many more young Sabahans. Sabah’s housing price is probably the highest, the worst income/housing price ratio in Malaysia.
My guess is that many Sabahans must be pretty unhappy and quite few projects must have been made financially unfeasible in the present economic depression and cancelled or postponed
Sabah has been suffering higher prices for years, at least 30pc more than W Malaysia.. This latest unfortunate timing cement price increase will adversely impact on:
[a] Sabah Government’s efforts to promote investment. Already the cost of doing business in Sabah is the most expensive.
[b] Sabah Government’s effort to provide more affordable housing.
[c] This cement price increase will produce a spiral of inflation in other economic sectors when Sabahans’ income has remained stagnant and lowest in the country. Many Sabahans have remained jobless.
[d] The poorly timed increase is already giving a negative image for the Sabah’s Government.
https://www.theborneopost.com/2021/11/19/cement-price-up-building-materials-will-also-cost-more/
Monopolies and responsibilities.
Monopolies exist in all countries. They can be operated by private sector but most of them are by government. Some for good reasons and others to serve the personal interest of individuals at the expense of ordinary citizens.
In a country with decent management and high degree of accountability, monopolies are allowed to exist under strict conditions to prevent exploitations like Anti-Monopoly Laws, a government department staffed with highly qualified personnel to implement their compliance and parliamentary select committees to oversee and monitor their performance.
The Malaysia Government has, over the years, created too many loss-making, poorly managed and supervised government and private monopolies in many critical economic sectors, in aviation [ended when AA was formed], airports, electricity, transportation, rice, sugar, medical supplies, vehicle inspection, immigration [visa], satellite TV.
The list is endless. Added to these monopolies are cartels, special licences, APs etc. Most of these have become a bane to the economy, a curse to ordinary Malaysians and in favour of a limited few.
No wonder Malaysia’s Asian Tiger aspiration has gone up in smoke. Many Sabah’s GLCs, though on a smaller scale, are no exception.
Over the years, the Sabah Government has formed 231 GLCs. Many have been given monopolistic rights like Suria Capital for ports and CIS in cement.
These GLCs were supposed to use their monopolistic rights to expand the economy and to serve the economic interest of Sabahans.
Sadly, the performance of some of these GLCs are highly questionable due to inappropriate appointments to the Board of Directors which in turn has resulted in poor governance and accountability.
Glaringly obvious are many cases of lack of definitive objectives, a rigorous regime of checks and balances, effective supervision and poor management resulting in financial underperformance and/or loss of valuable prime lands/assets.
Fundamental questions on CIS.
As an ordinary Sabahan, forgive me for asking some questions about CIS.
Question 1 What were the original objectives of the establishment of CIS and if these objectives are being adhered to or are there still relevant?
Question 2 What was its financial performance, says, 20 years ago and in the last 5 years. Has its profitability shrunk? What is the reason[s] for the lesser profit when the construction industry has expanded by several hundred percentage in the last 20 years? Being a monopoly and in an expanding market, why has its profit shrunk?
Question 3 What has CIS done with its monopolistic rights on cement? Has CIS been helpful to expand Sabah’s economy or has it been a drag, an economic burden for Sabahans? Why is Sabah’s cement more expensive than W Malaysia and in Sarawak?
Question 4 Where does CIS get its raw materials? If imported, can it be sourced in Sabah? If local raw material is available, why no attempt to develop it? Has CIS sourced raw materials transparently and competitively?
Question 5 What justifications for the latest recent increase in cement price? How was the price increase computed? Did the Board of Directors refer to any higher authority for this increase?
Question 6 What is the accumulated profit of CIS? Does it have sufficient sinking fund for plant replacement and/or renovation? If no sinking fund or insufficient sinking fund, what is the contingency plan when the present plants and machinery are down?
Question 7 How does CIS fix the price of cement as a monopoly? Has CIS been a responsible government monopoly?
Question 8 What are the returns of capital, asset of CIS for the Sabah Government?
Questions for Sabah on CIS.
Question 1 Is the performance of CIS satisfactory? How is its performance in comparison to other cement factories in the private sector in Malaysia and elsewhere?
Question 2 What is the feedback of contractors, buyers of cement on quality of CIS in price and service? How is CIS’s cement quality in comparison with other cement? Has a comparative study been undertaken? Without competition, such feedbacks are important assessment considerations on the performance of CIS for the Sabah Government which is the ultimate owner and accountable to all Sabahans.
Question 3 Can CIS do better to serve the objectives of the Sabah Government in economic recovery and for future economic expansion? If CIS is allowed to continue as a monopoly with its present performance, what are the economic consequences for Sabah?
Question 4 Has the recent cement price increase come at a bad time? Who is to take responsibility?
Question 5 Has CIS been a responsible monopoly? Is CIS an asset or a liability to the Sabah Government?
Question 6 Has the CIS Board of Directors managed CIS in accordance with best practices and sound governance?
Question 7 Is it time for Sabah to have another cement factory that is independent and/or privately owned? How can a 2nd cement factory expedite economic development and attract investors? Why not allow users to import of cement to keep CIS on its toe?
Question 8 Has an independent assessment been done on the performance of CIS? If yes, when? If none, why? Can one be done soonest? Has the performance of CIS been consistently excellent, such than no performance assessment is necessary?
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