Lembah Sari (Haris Onn Hussein) Lucrative CONCESSION –SECURITY LABELLING CIGARETTES; Malaysian BREWERS RESISTING; PM Open Tender for Concession Award?

All you need is a directive (see below, on the use of hologram security device for pharmaceuticals products) from the relevant Ministry and you need to comply. And who is donig the labeling - local private firm Mediharta – is capitalised at RM1 million and has five shareholders, mostly unknown except for two.They are Saleha Mohd Ali, the sister-in-law of Dr Mahathir with 9 per cent, and entrepreneur Sandra Wong with 25 per cent. Ms Wong used to be a corporate adviser to Halim Saad in the early 1990s when the tycoon ran the Renong conglomerate but left to pursue her own business interests in 1996. (Source)

Similarly a directive is issued for cigarettes and beer sold and Kod Efisien was awarded (in Sep 2003) a government concession to security-label all locally produced cigarettes and beer in an unpublicised decision by Malaysia's Customs Department, a unit of the Finance Ministry.

Now since Aug 01, Lembah Sari (chairman Haris Onn Hussein is the youngest son of Hussein Onn, Malaysia's third premier, and a brother of Hishamuddin Hussein, the country's Education Minister) has taken over from Kod Efisien

Ostensibly these labeling measures are to prevent smuggling and fake products, But are they effective as they raised the prices of goods.

So the question many are asking is- PM Abdullah practicing what he preaches. How the well connected worm themselves into taking over “CASH COWS”?

Now read on…

from

http://business-times.asiaone.com/

Concession switch raises eyebrows
Question mark over how lucrative concessions are awarded in M'sia

By S JAYASANKARAN IN KUALA LUMPUR, Published August 15, 2006

SINCE Aug 1, a little known private Malaysian company named Lembah Sari has taken over a lucrative RM70-100 million-a-year (S$30-43 million) concession to security-label packaging for locally made cigarettes, sparking questions over how concessions are awarded in Malaysian business circles.
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'These are international companies that can do their own protection on a far more cost-efficient basis.' - An industry executive
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In September 2003, little known Kod Efisien was awarded a government concession to security-label all locally produced cigarettes and beer in an unpublicised decision by Malaysia's Customs Department, a unit of the Finance Ministry.

Kod Efisien reached an agreement with the cigarette makers in March, 2004 but could never broker an agreement with Malaysia's beer makers in a dispute that still continues. If a deal had been reached with the brewers, the company could have added another RM30 million to its annual cash flows.

In mid-July, industry executives said that cigarette companies received a letter from Lembah Sari's chairman Haris Onn Hussein informing them that it was taking over the security labelling facilities provided by Kod Efisien for a three-year period.

At around the same time, the executives said that the Confederation of Malaysian Tobacco Manufacturers had been informed by Kod Efisien that its services would be replaced by Lembah Sari from August. No reasons were given for the change.

According to documents lodged with Malaysia's Companies Commission, Lembah Sari is a RM2 company - it may have increased its capital to its authorized RM100,000 by now - with two little-known shareholders. Its chairman, Mr Haris, however, is the youngest son of Hussein Onn, Malaysia's third premier, and a brother of Hishamuddin Hussein, the country's Education Minister.

The unpublicised rotation of the award raises questions about how concession awards are given out in Malaysia, the executives said. Indeed, it used to be one of the chief complaints against the previous administration of Mahathir Mohamad: that a lack of public disclosure regarding contract awards resulted in an opaque process without open, competitive bidding or public debate. Meanwhile, the current premier Abdullah Ahmad Badawi had promised competitive bidding in government awards.

Moreover, the shift of companies seems to negate arguments that Malaysian companies which promised state-of-the-art security features were passing on unique technological benefits to its customers. In this case, for example, the executives said that Lembah Sari will continue to supply the same security equipment and ink supplied by Kod Efisien - from the Swiss-owned Sicpa Holdings SA.

In effect, the executives said, it was, like Kod Efisien before it, acting as a middleman in a process that usually resulted in price increases for consumers.

Indeed, the state's mandating of security labelling for products from cigarettes and beer to pharmaceuticals - through local private firm Mediharta - to prevent smuggling and fake products, has drawn flak from multinationals and Malaysia's International Chamber of Commerce. They have fretted that the move would burden consumers unfairly.

'These are international companies that can do their own protection on a far more cost-efficient basis,' said one of the industry executives on condition of anonymity. 'In any case, it's all a matter of enforcement.'

Many of the pharmaceutical makers in Malaysia are multinationals as are the vast majority of the beer and cigarette manufacturers. The latter include British-American Tobacco, Japan Tobacco International and Philip Morris while the two beer makers in Malaysia are Guinness-Anchor and Carlsberg.

The industry executives point out that the record of security labels has been mixed. Immediately after Kod Efisien began its labelling, smuggled cigarette sales dropped by 50 per cent but it has begun increasing again to around 17-20 per cent of the whole market, according to figures from the tobacco confederation. The executives said that the figures indicated that smugglers may have found a way around the security.

Meanwhile, Kod Efisien continues to battle it out with the beer-makers which refuse to security-label their products claiming that beer prices are already too high. They also claim that the label prices are too expensive. For its part, Kod Efisien has argued that the savings - from reduced smuggling - would more than compensate the companies.

Following is the Directive for pharmaceuticals.

1 May 2005

DIRECTIVE ON THE USE OF THE HOLOGRAM SECURITY DEVICE ( MEDITAG^TM )

FREQUENTLY ASKED QUESTIONS ON IMPLEMENTATION REQUIREMENTS

1. Background:

1. Due to the concerns of the Government in respect of counterfeit, imitation and unregistered products being manufactured or imported and sold, and in an effort to streamline the manufacture, import and sale of genuine products, the Ministry of Health has issued a directive on the use of a hologram security device to authenticate and verify that products sold have been duly registered with the Drug Control Authority (DCA). The directive can be referred under the Circular Section of the website ( www.bpfk.gov.my ).

2. The security label is only one of the many means that will be employed by the Ministry of Health to complement its enforcement activities to ensure public safety.

1.3 The requirement for the affixation of this security device (called the Meditag^TM) to product labels, is only applicable to pharmaceuticals, including traditional products and health supplements. Cosmetics are currently excluded from the exercise. Implementation on the use of the hologram label will be carried out in 2 phases.

1. Phase 1 beginning 1st January 2005 for products which are non-parenterals, i.e. not in the form of injections ; &

2. Phase 2 from 1st July 2005 for parenterals/injectables

1.4 Products like vaccines and biologicals which are temperature sensitive and require cold chain maintenance are exempted from the requirement of security labelling.

1.5 The local manufacturer (meaning also the repacker for products which are imported in bulk and packed locally) or the importer shall be responsible for affixing the security device onto the individual unit packs.

1.6 With the affixation of the hologram security device onto the product label, the requirement to label OTC products with “diluluskan oleh KKM“ does not remain and may be considered optional.

following extracted from

Storm brews over move to make drug labels; May 04 2005

It is estimated that 7 per cent of all medical products sold in Malaysia are counterfeit.
The concession - agreed upon in the waning years of former prime minister Mahathir Mohamad's government - is expected to be a goldmine for Mediharta and will lead to an increase in drug prices throughout Malaysia.

But it is also likely to be unpopular and, going forward, could even lead to international complications.

Drug companies will pay Mediharta 5.6 sen for each label and will be responsible for affixing the labels themselves.
Given that it could involve repacking of, especially, imported drugs, the final price hike at the retail level could be anything from 5 per cent to 30 per cent, say executives from several drug companies

read on for this related Privatization by the backdoor

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http://www.malaysiakini.com/columns/55367

Privatisation by the backdoor? KJ John Aug 15, 06 11:55am

The government's privatisation policy, when launched by the Economic Planning Unit, promised to deliver efficiency, improved costs and greater effectiveness in the delivery of what was hitherto considered as public goods. That was more than 20 years ago.

Today, it appears that the spirit of privatisation has become the basis for a new kind of economics of artificial demand creation and especially to create false and artificial oligopolies to benefit select people, apparently so that crony capitalism can be propagated as a full blown policy.

Is this the new and unwritten government policy for privatisation? Pardon my skepticism.

After the last attempt by the Selangor government to monopolise advertising space in all local authorities failed, there now appears to be another attempt by two councils to require another public good function to be 'piratised' by way of some agents from the pest control and fumigation industry.

This improved demand creation strategy took the form of requiring food and hawker businesses under these local authorities to seek approval of the specified 'agents' before the annual licences are issued.

The theory is that cleanliness needs to be ascertained - in practice it is a quality assurance issue. Both councils are supposed to have approved this new policy.

The Sun got another scoop in discovering that the so-called 'agents' are not "accredited by the professional association or approving authorities to undertake the specified function". It raises a number of questions.

How did this happen? Why the sinister need to dictate or create such an oligopoly? Are any kick-backs involved? Are there other reasons, like trying to kill the currently competition for the benefit of a few? Why this pro-monopoly market development policy? Should it be the public sector that defines and controls suppliers in the market?

Is this really in the best interests of citizens? Who are the ultimate consumers of the public good of cleaner and healthier eating places? Is it not all of us? But at what cost and at whose cost will all this be added?

Why dictate demand?

I fail to understand why the privatisation policy has blatantly and vulgarly become the framework for backdoor 'piratisation' of countless goods and services all of which can also be secured through the tender process?

What do I mean? Most of such contracts are given to new RM2 companies that who have a short track record or none at all. They may have the right connections instead of the right competence. When these unqualified companies are entrusted with work in an area where they have no demonstrated competence, is that not an official way of allowing pirates to come in?

There are many legitimate and authorised pest control agencies. Why not let the market determine demand and supply? Is that not what free-market economics is all about? Why should the public sector begin to dictate
specific and particular demand that cuts off competent suppliers?

Is the creation of such oligopolies in the particular interest of the powers-that-be? Do the RM2 companies represent some kind of special interest, and could someone help identify them? Why are dormant companies given contracts for a 20-30 year period without due diligence?

As has been made evident by the Public Accounts Committee (PAC) in the Matrade building case, why would the finance ministry reject a legitimate and qualified company selected by the tender process and instead conclude a negotiated tender with an unknown company which led to a fiasco?

Will the cabinet address such cases and clarifies what the 'new' privatization policy is about? Does not the Financial Procedure Act clearly state and dictate the due processes for all public assets procurement or disposal? Are such violations not clear and definite evidence of corruption or at least abuse of power through the absence of due diligence process?

Waiting for answers.

Who will answer my questions where these relate to Selangor and its local authorities? If the semua-ok MB of Selangor cannot answer the questions - since his is subsidiary jurisdiction in relation to financial due diligence - can the housing and local government minister - as the second most senior member of the Barisan Nasional cabinet - please answer the question of this taxpayer?

Alternatively can the finance minister clarify the real policy and due procedure for such privatisation of public goods? Or, must this also must also fall to the PAC to check if there is any conflict of interest, non-compliance with federal law, or absence of mandated due diligence processes?

In conclusion, how can the two local authorities incompetently approve unqualified agents of public goods delivery, without due process, as dictated by the Federal Financial Procedure Act for all public assets
acquisition and disposal?

Based on what the Subang Jaya assembly person is reported to have said, the "Finance Committee of the MPSJ was misled into believing that these were fully authorised agents".

Can we then be assured that someone's head will roll over this specific misinformation? Or, is this also part and parcel of the semua-OK MB's governance of the state and local authorities?

Can I expect someone with authority and responsibility to reply, or does the MB have to be invited to meet the PAC before this citizen can expect a policy oversight reply?
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KJ John served in public service for 30 years and took optional retirement
to work in his own consulting group. He hopes to see transparent and open, new governance practiced in Malaysia some day.


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