THE article by Supriya Surendran (Corporate, The Edge, January 29) on “Sizing up EPF and PNB’s purchase of Battersea assets” is hereby referred. His piece essentially draws from the analysis of Kenanga Investment Bank’s head of equities research, Sara Lim Fern Chieh, and of other analysts.

Curiously, Supriya ended his report by asking a binary question of sorts. Was the £1.6 billion (RM8.8 billion) by Permodalan Nasional Berhad (PNB) and Employees’ Provident Fund (EPF) a bailout, or simply to ensure that the project progressed and generated returns on their investment?

Simply put, a bailout is an act of giving financial assistance to a failing business to save it from collapse. Going by that definition, Supriya’s question is at best erroneous, if not superfluous. A truly binary question would be to ask whether a bailout was in order or if the entire project should be put up for auction, so as to cut losses and save the good money of our pension funds from having to keep paying for a bad investment!

Arguably, Supriya said that the “property transaction was dubbed the most expensive to date in the United Kingdom”. Lest anyone be in doubt, the original Sime Derby/SP Setia consortium’s purchase price was £400 million in 2012, after it had sat for decades as a crumbling white elephant project on the South Bank, despite arguably being an iconic London landmark of sorts.

The fact that it was bought from the Central Electricity Generating board in 1987 for £1.5 million meant that our pension funds now paid a thousand times more.  Britain’s then Prime Minister David Cameron and particularly former Trade Minister Lord Marland must be commended for their success in charming Najib Razak back in 2012 to enter this transaction.

Again, would it be more pertinent for Supriya to allude that the “bailout” was ostensibly a face-saving move for Najib on the brink of the upcoming election?

Be that as it may, whatever and however Lim had rationalised the reasons for the cost overrun, it should have been anticipated well before the investment was concluded.

Granted that the project involved multi-phase redevelopment and a plethora of other specialised requirements for an iconic heritage building, it surely was no small feat, and in Lim’s words, had become “an exorbitant affair”.

That the UK doesn’t practise progressive billings must equally be noted much earlier and a cash call from shareholders is to be presumed. Hence, justifying the better able pension fund continuing to commit more of their money, since both hold a substantial stake in SP Setia and SD Property anyway, may be the best exit for both SP Setia and SD Property, but may not be in the best interest of pensioners.

The fact that the projected profit return, or the project’s margin, has dropped from 20% to 8% speaks volumes. There may not be many upsides to this investment anymore, because of the cost overrun, while the property market has arguably reached its top already.

The case of Apple’s 16-year tenancy of a yield of 4% to 5% is illustrative. Lim has honestly admitted that anything below that will not be fair to the pension funds’ shareholders and contributors.

While analysts are politely tight-lipped on this bailout, we contend that it is evidently not in the best interests of the nation and the pensioners-contributors that their savings are again given another raw deal, if not outright ripped. To save face for the much embattled finance minister, who is facing his most crucial “do-or-die” general election, the people’s funds are again put to national service, on the heel of the 1MDB’s bailout et al.

It is really time for a game-changer or a regime change. We cannot afford to have the ruling clique rule with impunity any longer, both politically and financially. – January 30, 2018.

* Dr Dzulkefly Ahmad is the strategy director for Parti Amanah Negara.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.