Pak Lah's brother's sweet deal questioned

The sugar refinery owned by former prime minister Abdullah Ahamd Badawi's brother in Kuching is expected to start production by the end of 2013 - the sole sugar manufacturer in Sabah and Sarawak.

The RM130 million sugar refinery is constructed by Admuda, the only licensed manufacturer of refined sugar and molasses in those two states.

The company is a 60 percent subsidiary of Brahim's Holdings Bhd, in which Abdullah's (left) younger brother Ibrahim Ahmad Badawi is the major shareholder and executive chairperson.

Admuda's sugar, to go commercial with the brand name Borneo Sugar, is expected to penetrate more than 30 percent of the Sabah and Sarawak market within its first year of operations, according to a Bernama report on Thursday, quoting Admuda chairperson Abdul Aziz Shamsuddin.

Abdul Aziz said this to reporters after a financing facility agreement signing ceremony between Admuda and Maybank Bhd in Kuala Lumpur.
The ceremony was witnessed by Deputy International Trade and Industry Minister Mukhriz Mahathir.

The sugar refinery will be the fifth such production facility in Malaysia and the first to operate in East Malaysia.

It will help to reduce the sugar price in the two states to the level of the price in the peninsula. Sabah and Sarawak presently get all their sugar from the peninsula and the local prices are higher than in the rest of the country.

The granting of the exclusive manufacturing licence to Ibrahim's company has raised issues of market monopoly and cronyism.

Chinese news portal Merdeka Review, for example, has questioned whether the licence is a lifeline to Brahim's as its core business – the lucrative 25-year exclusive inflight catering contract with Malaysia Airlines (MAS) – may be in trouble as the national carrier is undergoing restructuring after being in the red for several years.

Close links with Umno

According to Abdul Aziz, the sugar refinery is expected to contribute about 10 percent growth in revenue for Brahim's within the first year of its operations.

The portal pointed out that both Brahim's and its subsidiary Admuda have close connections with Umno.

On top of Ibrahim's blood ties with the former premier, Abdul Aziz is chairperson of the Former Umno Elected Representatives Association or Penawar.

He was a long-time aide to former prime minister Dr Mahathir Mohamad from 1980s to 1990s and was appointed a minister by Abdullah in 2007.

However, Abdul Aziz's political career hit a snag in the 2008 general election when he was defeated by Khalid Samad of PAS in the Shah Alam parliamentary constituency.

The 25-year MAS inflight catering contract was awarded to Ibrahim's company Gubahan Saujana Sdn Bhd in 2003, when MAS sold its inflight catering arm MAS Catering Sdn Bhd to Gubahan Saujana during its asset disposal exercise.

Abdullah was deputy prime minister at the time.

The deal drew flak from opposition leaders then, who argued that the contract was lopsided and would provide 'guaranteed profit' to Gubahan Saujana.

MAS Catering was later renamed LSG Sky Chef Brahim Sdn Bhd.

According to Merdeka Review, Ibrahim reportedly told the media in May this year that the route rationalisation exercise of MAS, especially its decision to cancel certain long-haul routes, would have an impact on Brahim's revenue.

The inflight catering business currently provides the major earnings of Brahim's, making up over 93 percent of its RM184,460,000 revenue in the 2011 financial year. Eighty percent of the inflight catering income comes from the MAS contract.

No monopoly, says Abdul Aziz

However, Abdul Aziz denied the accusations of a monopoly when contacted by Malaysiakini.

"There is no monopoly. Currently refiners in West Malaysia sell sugar to East Malaysia. Admuda's licence is for manufacturing in Sarawak but anyone can sell sugar in Sabah and Sarawak," he said.

He also dismissed speculation that the licence comes at the time when Brahim's is facing financial uncertainty.

"Brahim's in-flight catering business is not affected by MAS restructuring and it will not affect Brahim's business, which is always in expansion mode for other opportunities.

"No lifeline is required. Brahim's continues to seek business opportunities in the food industry via vertical expansion such as acquisitions, and horizontal expansion such as internal growth. Brahim's is a growing dynamic," he said.