YTL's Yeoh: Open up to foreign investments

The Malaysian Reserve, July 16, 2013

Kazi Mahmood

Malaysia may need to open up its utilities and infrastructure sectors to foreign players to cope with future demand from consumers, according to YTL Corp Bhd MD Tan Sri Dr Francis Yeoh Sock Ping.

Yeoh, who heads one of Malaysia’s biggest domestic utilities and infrastructure companies, said the industry may not be able to keep up with demand at its current rate of expansion.

He urged the authorities to open up the water, electricity, Internet, public transportation and housing sectors in order to attract foreign investments, stating that this would keep the prices of utilities at competitive rates.

“Governments and businesses have not been able to respond to their needs at all fast enough because, either they have underestimated the demand, or they have not found a way forward to fix this quickly,” Yeoh said in an email exchange with The Malaysian Reserve.

He said consumers want utilities like water, electricity, Internet, public transportation and housing at competitive prices.

“And they want it now.

“My recommendation of setting up a transparent, coherent regulatory framework (TCRF) for utilities and infrastructure similar to the UK is a way forward,” he said. He said this will foster competition and investments from the world’s best players in the utilities and infrastructure space.

“These legal and transparent frameworks, like the ones created by Margaret Thatcher in Britain in the 1980s, also ensure that companies are held to account by independent regulators who are endowed with sweeping powers to fine or even strip operators of their licence,” he said.

A regulatory framework also means that companies from any country with the right expertise can compete to run key public services, safe in the knowledge that they will be free to do so completely independent of governments.

The independent regulators can review those key utilities every five years to ensure they are being run properly. If not, they have the power to take action by replacing or fining those in charge.

With this framework, the best players in the world would be forced to take a long-term perspective of investing in a country and therefore the demand for immediate and exorbitant returns is avoided, he explained.

Yeoh said this will result in utilities and basic infrastructure provided at affordable prices to meet demand and, with coherent and transparent competition, little inflation is introduced to the economic system.

“Everyone is talking about this incredible economic miracle taking place throughout Asia. It is true that we have made huge strides. But while millions more move up to the middle class, huge swathes of our region’s population are being left behind.

“It is amazing what people have to put up with till now to have access to quality utilities, like clean, running water and reliable power supplies, as well as Internet services at competitive prices,” he said.

Yeoh said because the UK has a transparent and coherent regulatory framework, this allows the private sector to provide basic utilities and infrastructure at competitive prices.

In the UK, there are no shortage of global investors in this sector, and the situation is similar in Singapore and Australia, where 80% of the turnover and profits of YTL comes from these three economies which have TCRF in place.

YTL has invested in Wessex Water Services Ltd in the UK for the past 11 years and will continue to invest in the sector in perpetuity.

The rest the company’s investments are in Malaysia, which has some form of TCRF in place, he said.

YTL carries out its utilities activities through its subsidiary, YTL Power International Bhd, which is listed on the Main Market with a market capitalisation of about RM11.16 billion.