Economists debate over Edra Energy acquisition

KUALA LUMPUR – Nov 9, 2015: The intended sale of equity in Edra Global Energy Bhd by 1Malaysia Development Berhad (1MDB) has sparked a protest among those who are against foreigners being given a foothold in the country’s energy sector.

The acquisition of Edra Energy will reach its final stage by the middle of this month, with the emergence of foreign companies as prominent bidders.

Several prominent bloggers had expressed their dissatisfaction over the latest development by sternly stating that Edra Energy should not be sold to foreign companies.

Economists who talked to The Mole on the matter were however of differing opinions.

Binary University Professor Dr Zulkifli Senteri when contacted said Edra Energy should not fall under the control of foreigners, stressing that energy sector is very important to the country.

“Energy sector is considered as security industry to the country, thus it is important for us to keep it under our control.

“If energy sector is to be controlled by foreign companies, then we might face difficulties in the future, whereby it involves the problem of supply and demand.

“Let say we do not have total control of the energy sector; if in the future we face scarcity of energy, the foreign companies can easily charge high price of electricity to the country,” he added.

Zulkifli further explained that in terms of supply and demand issue, it is worrying if the country is facing low supply of energy.

“The foreign companies will surely have the advantage to control the price of energy should they be given 100 per cent ownership of Edra.

“Energy sector has a guaranteed market that will surely give us benefits. Then why should we give our energy sector to foreign companies? I suggest it to be given to Tenaga Nasional Berhad (TNB). We must have total control of the energy generation,” he added.

Another economist who spoke to The Mole on condition of anonymity concurred that energy is a strategic importance to the nation and must be controlled by the government and domestic players.

“Regardless of any decision; whether to allow foreign parties to participate in bidding or to sell it to local companies, ultimate control must be held by the government.

“Energy is very important and must not be given to outsiders. It will be detrimental to national interest if strategic industries are given to foreigners,” the economist added.

Stating that the energy industry is oligopolistic in nature and has small number of players, the economist said that energy sector must be open to domestic players in order to allow healthy competition.

“It is not true that giving Edra Energy to foreign parties will ensure growth and foreign investment. The most important matter is to nurture competition in domestic industry and increase the number of domestic players,” the economist added.

In contrast, Institute of Strategic and International Studies (ISIS) senior analyst Ahmad Rafdi Endut suggested that it is acceptable for the country’s energy sector to be controlled by foreign companies.

“There should be no worry over the ownership of energy sector and our independent power plants (IPP) provided that they are well-regulated by the companies.

“We should bear in mind that the most important issue now is which company owns the technology and capacity that can produce electricity with lower price. If the foreign companies have the capacity to provide energy in lower cost, then it can also yield benefits to the people,” he added.

Rafdi said that IPPs should be controlled by the government, but both local and foreign companies can be allowed  control of the energy sector.

“Personally, I believe that it does not matter who should be controlling the energy sector. If we are to give it to the foreign companies, then we would gain benefits, in which it is known that they have the technology and strategies to produce energy at lower prices.

“However, if local companies are as much more capable, then it can be given to local companies for total control,” Rafdi added.

Additionally, independent macro-economic analyst, Professor Dr Hoo Ke Ping commented that by giving the country’s energy sector to foreign countries, it will open the sector to shielded growth.

“Giving the IPPs to foreign control means that we are allowing foreign investment into the country. Without foreign investment, it is not easy for the country to achieve growth,” he added.

Stressing that the world is globalising and opening up, Hoo said the country had also been opening up to global market ever since the government agreed to the Asean Free Trade Area (AFTA) in 1992.

“The country needs robust energy production for various things, which also involves telecommunication and transportation sectors. Hence, the country needs foreign companies to work with our energy sector in producing energy the better way,” he added.



About the author

Amira Nutfah Zulkifli

Amira Nutfah Zulkifli

A budding journalist. Aside of struggling to understand Malaysian political scenario, she is inspired to study and fight for women's emancipation. Above the rest; she simply loves her nation.