THE scrapping of MMC-Gamuda’s contract to develop the underground portion of the MRT2 project, and the backlash from the company and the public, has sparked concerns by economists that Putrajaya’s austerity drive could create animosity between the public and private sector.

On Sunday, Finance Minister Lim Guan Eng announced that while MMC-Gamuda would continue to build on the above-ground sections of the line, its underground portion of the contract will be terminated due to a failure to reach an agreement on the cost.

Lim said the government will now issue a new international tender for the job.

The company responded by launching a social media campaign to shore up support and public pressure for the government to reconsider its decision.

Yesterday, Prime Minister Dr Mahathir Mohamad said Putrajaya would now be reviewing its earlier decision, following claims by MMC-Gamuda that a cancellation of its contract could mean the loss of up to 20,000 jobs.

Economist Lee Heng Guie warned that both the government and private sector must maintain transparency and openness in the renegotiation of existing contracts.

“Stop complicating matters, this isn’t the right way to do things,” said Lee, who is executive director of the Socio-Economic Research Centre.

“This is why it must be transparent, reasons must be given for all decisions so that uncertainties can be minimised. If it (project) cannot be done, then re-tendering the contract is possible,” he told The Malaysian Insight.

Lee said that the private sector also should be aware that the government was not out to force companies to operate at a loss, but was merely to bring down their profit margins to make projects more affordable.

“There are many inner workings that we do not know of, but the government may be holding the view that everyone has to make sacrifices due to the high national debt, that includes the private companies holding government contracts, hoping that maybe they can reduce their profit margins,” he said.

He said that distrust and ill-feeling between the government and private sector would not bode well for economic growth and recovery.

Phillip Capital Management Sdn Bhd chief strategist Phua Lee Kerk said in the case of MMC-Gamuda and Putrajaya, the cancellation of a portion of the contract was business as usual in the industry.

“To a certain degree, both sides a responsible. There’s no right or wrong here.

“For example, if the cost of construction is high, the cost will be passed down to consumers through higher ticket fares, is this fair for the consumers?” he said of Putrajaya’s decision to scrap the contract.

On the backlash from MMC-Gamuda employees, Phua said all industries face the same risk and that it was unfair to pin the blame on the government for any potential loss of jobs.

“As an employee of a private business, they have this risk to begin with (contract cancellation), it’s difficult to blame the government for this.

“If the company is capable, then it naturally can win other contracts, so its employees will still have their rice bowls taken care of,” said Phua.

Earlier today, Tony Pua revealed that the refusal of MMC-Gamuda’s directors to further reduce their cost to a price which an independent engineering consultant had estimated would be fair, had led to the termination of their contract.

Pua, who is political secretary to Lim, slammed the company for attempting to rally support from the public and for playing victim in the whole issue. – October 10, 2018.