The Highway Promise

It certainly looks like a highway robbery than a sincere promise to maintain the highway toll rates

(We are ok with highways and highway toll booths but we are pissed off with the one sided agreement and the huge compensation being paid from the tax payers’ pockets. Image source: http://travelerfolio.com)

During the recent Budget 2011, Najib made this bold statement that the toll rates on four highways owned by PLUS Expressways Berhad (other highway operators, apa macam?) will not be raised for the next five years as a means of alleviating the burden of highway users. For those who have been keeping their heads in the ground, this may sound like a sincere, heavenly promise by politicians who are concerned with the rakyat’s plights. But for the rest of us, we all know that when certain things promised by the politicians seem to be too good to be true, there is always a catch to the deal.

What Compensations?

No one seems to ask the question – what happens to the toll amount that is supposed to be increased by PLUS? Surely PLUS as a business entity is unlikely to give such huge discount (even if it has all the MPs in the Parliament at the top of their voice, protesting for any toll hike) or ignore what is entitled under the agreement. It does not make good business sense and certainly PLUS have their shareholders (which includes the EPF) to answer to. So, opting PLUS to take a huge hair-cut is likely to be out of the question.

And Malaysian Insider reports:-

Toll highway operator PLUS Expressways Bhd could be compensated as much as RM5 billion over the next five years for not raising toll rates. The highway concessionaire is also owed about RM2.5 billion from previous compensation as at June 30.

(Source)

What about the previous compensations and the future compensations?

Toll compensation to PLUS amounted to RM655 million, RM698 million and RM731 million for 2006, 2007 and 2008 respectively. PLUS has 30 more years before the concession expires. Without even taking into consideration the direct toll collection from motorists, the government’s compensation amount over the next 30 years would exceed RM68 billion should the current toll rates be maintained. This is after taking into account the fact that PLUS is entitled to increase toll tariffs by 10% every three years.

(Source)

Compensating the highway operators for not increasing their toll is not something new. Compensation (also known as subsidies to some) amounting to millions have been paid whenever the Government have requested the highway operators to maintain the current toll rate. It has been so since the days when Samy Vellu was heading the Works Ministry. PLUS for instance, was reported to have received compensation for almost 850 million for last year alone

For those who are using the highway, freezing the increase of the toll rates may sound like a welcome measure but look again, where the Government is getting the money to compensate the highway operators. Ultimately, it is going to be the rakyat who is going to pay for these compensations. At the end, the net effect of freezing the toll rates ends up meaning nothing.

(Either you get the rakyat to pay the increased toll rates or get the rakyat to pay for the compensation. Either way, the rakyat is screwed. Image source: http://thestar.com.my)

And compensation paid by the Government does not go into the development of the country but rather it goes to enriching the already cash rich business entities. Unlike petrol subsides, there is no external or global factor or limited supply that causes the increase of the toll rates (hence requiring heavy compensations to maintain the rates artificially low). And still remember the warning by the Minister in the Prime Minister’s Department Datuk Seri Idris Jala on compensations?

Let us recap…

Malaysia will be bankrupt by 2019 if it does not cut subsidies and rein in borrowings, said Minister in the Prime Minister’s Department Datuk Seri Idris Jala on Thursday.

(Source)

Idris Jala even proposed that the “toll rates to increase in mid-2010 as per concession agreement except for highways without alternative toll-free routes”. So, why Najib is going on the wrong side of the road? It is obvious that that when the rates are not increased, it is only mean compensation to be made in its place.

To make things worse, the compensation to the highway operators is going to come from those who are not using the highway in the first place. Not many of us uses PLUS highway on daily basis (how many out of the 28.2 million Malaysians?) but if the Government is going to compensate PLUS for the frozen toll rates, one can be assured that their tax money is going to work hard (direct or indirect ) to compensate these highway operators. Is it fair? The one who is using the PLUS highway is enjoying the old toll rate, courtesy of a populist, short-sighted budget but the one who is not using PLUS highway is “paying” for the compensation that runs in billions.

Telling the rakyat that the toll will not be increased for x number of years without a viable proposal on the highway agreement and no means to reduce these painful compensations is anything but empty talk. Not when the money is coming from the right pocket to the left pocket. There is no real saving to the tax payers – it would have been fairer to get those who are using the highway to pay for the usage instead of spreading it to the rest in name of compensation. That way, we can see the money paid to the correct usages – road users’ money to usage of the highway and the Government’s “money” to development of the country (something that Idris Jala pointed earlier).

New Highways, Old Problems?

Then we have this rather disturbing news:-

The Najib administration should explain the tender awards process of four new tolled highways, amid reports of them being directly awarded, DAP MP Tony Pua said today.

(Source)

We are not complaining on the new highways – after all, highways helps in development and somehow provide relief to traffic jams. So we were meant to believe whenever the Government talk about awarding new highways (just wish the bastards who signed off on behalf of the people for the bloody highway that cuts through Puchong are out there, stuck in traffic jam,  with a full bladder, wasting their time and fuel after paying the insane toll charges with their hard earned money). Nah, we don’t mind the new highways but how it is awarded and how it is shrouded in secrecy is what we have a problem with.

The Government says that the highway agreements are subject to Official Secrecy Act but we don’t have a clue why it is deemed secret. Certainly, agreements made by the Government with any business entities will not go to the extent to cause suffering and multiple losses to the people. Certainly methods of calculation of the toll rates will not jeopardize the national security of the country.

In fact, if the agreement is made public, perhaps the road users who are paying the insane toll rates may able to understand as to why the cash rich highway operators increase the toll rates of the already heavily jammed highway (which by the way, built on existing trunk road) to RM0.60 at one go and wanting to increase even more. But no, the Government fought tooth and nail to maintain the agreement secret (is it because they worry the agreement may be challenged in a court of law?).

Now we are hearing that the new 4 highways were directly awarded. How we know that whoever drafting the agreement and working out the formula for toll rate increase have not made the same mistakes that the idiots in the past have done? Has the proper toll reduction mechanism been built this time around? Is there going to be periodic review of the agreement? Is the highway agreement really water-tight and in favor of the people and the country and not helping a profit driven business entity to make even more money?

No Viable Alternatives?

And what happened to the proposed buy back the highway concessionaires that sounded more cost effective than the yearly compensations that the Government keeps paying from public funds?

In 2009, Nutgraph reported:-

The DAP has suggested that the government buy back all shares of PLUS Expressways Bhd that it does not already own, and take over its existing asset-backed liabilities for the approximate amount of RM15 billion. This amount and more would be recovered from motorists using the North-South Highway by maintaining the existing toll rates for six years. Should PLUS be acquired this year, by 2016, toll collection would no longer be required on PLUS-owned highways

(Source)

Tony Pua of DAP made interesting points on the buy back of the highway concessionaires but nothing concrete has been put in place in this aspect (was it because it came from the opposition and not from the ruling party?)

This is why we are suspicious of the Government when it comes to toll rates for the highway. We are even more suspicious when the Government is saying that there will not be any increase in toll rate for the next 5 years. We are suspicious because what is being said is far from reality.

And just when we thought we have seen the worse, came along Warisan Merdeka

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9 thoughts on “The Highway Promise

  1. BJ,

    I was once involved, as an appointed director/shareholder, in a large public-listed company that bid for a toll concession highway. The government actually set the terms and conditions and the toll rates over a period of thirty plus three years; and they will always have their cronies in the company, appointed just before the project is awarded, and they will hold quite substantial shares, paid for with taxpayers’ money (this is an unwritten condition). The first three years being the period for the project to be completed.

    So, when talking about periodical toll increases, do blame the concession companies, blame the government. It’s always them who are asking for the increase.

    HAK

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    1. Ha, ha…I do blame the Government because at the end of the day, the concession companies are nothing but business entities who need to make good return for their investors

      Like

  2. The government may have made a mistake in calculating the 2011 Budget

    Here’s the list briefly explaining the high-impact 2011 Budget as presented by the Rt. Hon. Prime Minister Datuk Seri Najib Tun Razak last Friday afternoon. (NST Saturday Oct 16)

    • RM1.3 trillion – investment in 12 National Key Economic Areas
    • 3.3 million jobs to be created in NKEAs
    • Private pension fund for private sector employees and the self-employed
    • No increase in toll rate on PLUS highways for five years
    • RM10 billion mixed development in Sungai Buloh
    • RM5 billion Warisan Merdeka project in Kuala Lumpur
    • RM3 billion eco-nature resort in Sabah
    • RM252 million aquaculture zones in Sabah and Sarawak

    All the above looks good and ‘mouth-watering’, giving us all an indication how far and how much the country is going into in the next five to ten years, and it also shows us how aggressive our government is in their quest to make the country achieve 1st World status and a high-income economy by 2020.

    However, in today’s reports carried out by all the mainstream newspapers, it says that the RM5 billion Warisan Merdeka project in Kuala Lumpur shall be undertaken fully by PNB, and they are not getting even a single sen from the government.

    So, the above being the case, how then could that RM5 billion project be included as part of the 2011 Budget?

    Did the government make a mistake?

    Hussaini Abdul Karim, Shah Alam

    Like

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