AES: Asking the Right Questions

UPDATE 1: Read FAQ from JPJ on AES here

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Oh dear, another opposition politician jumping to defence the criminals on the road…

(It’s about time – a simple flow on how the Automated Enforcement System works. It covers speeding & beating the red light offenses but what about other types of offenses like road hogging, cutting in and out of traffic without any proper indication, riding around without wearing any helmet? When we can have a similar automated enforcement system for it? Image source: http://www.skyscrapercity.com / TheStar)

The Barisan Nasional Government in awarding the Automated Enforcement System (“AES”) Project to Beta Tegap Sdn Bhd and ATES Sdn Bhd whereby the two private companies in return for installing cameras in 831 locations will be entitled to a share of fines, of which fines for unpaid traffic summonses for 2000 to 2009 amounted to RM5.8 billion, has created a situation where there is a conflict of interest amounting to gross derogation of the Government’s duty to promote road safety.

Under the business model the companies will receive a share of the fines on three levels. At the first level each of the companies firstly will receive RM16.00 for each traffic summons for the first 5 million summonses issued, for summons issued after 5 million the companies receive as the second level payment 50% of the balance of the summonses up to RM270 million per year and after RM270 million they receive further payments at the third level of 7.5% of the balance of the summonses. The companies’ internal projection is that they will achieve an internal rate of return of 17% based on 10 million summonses issued each year.

Revenue tied to summonses issued

By reason of revenue being tied to the number of summonses issued, the business model for the two companies and Ministry of Transport will depend on ensuring that the number of speeding violations must not be less than 10 million each year and if they are to increase their profits and growth over the years the number of speeding violations must by necessity be increased accordingly.

The Government in turning the issuance of traffic summonses into a business for the maximization of profits has derogated from its duty to promote road safety. This is because if motorists keep to the speed limits these two companies will not be able to make any profits. Since business profits are contingent on a minimum number of traffic summonses being issued this model is incompatible with any programme to promote road safety and reduce speeding. There is thus a serious flaw in this AES Project.

Don’t maximise profits from summonses

The Ministry of Transport should not be looking to traffic summons as a profit center. The Ministry of Transport should be looking towards a study whether the speed limits are too low in the light of modern highway design. The ministry should be looking at ways to reduce speeding and road accidents.

An example is the police programme such as Ops Sikap. Road safety is improved by the physical presence of the police where a friendly warning not to speed is more effective than an injudicious mechanical taking of pictures by hidden cameras. Not all speeding is wrong. The police has on many occasions assisted motorists by acting as outriders for drivers rushing someone to the emergency ward of a hospital. The automatic cameras in the AES when implemented not only cannot assist but will issue summonses to every ambulance and fire engine rushing to save lives and property.

Money-making frenzy

This privatization of traffic summonses is an example of the Barisan Nasional Government having lost sight of its duties to the people in their feeding frenzy to make money out of every conceivable aspect of government.

I ask the Prime Minister to review this AES Project because road safety cannot be compromised and should not be turned into a business venture.

In a related matter, Dr Chua Soi Lek in his capacity as President of MCA has denied that Beta Tegap Sdn Bhd or ATES Sdn Bhd is linked to MCA. However, this project was mooted and implemented under the watch of three Ministers of Transport, all of whom are from the MCA.

I ask Dr Chua and Dato Sri Kong Cho Har, the present Minister of Transport to disclose the date this AES Project was awarded and whether the directors or shareholders of these two companies are known to the Minister or Ministers concerned.

William Leong Jee Keen is the PKR Member of Parliament for Selayang

(Source)

Leong may be harping on the wrong tree but before we analyze what Leong is saying, let’s get some facts right.

Firstly, no amount of sweet talk and soft approach will ever change the way Malaysians behave themselves on the road. Some will remain hard-core bastards to the end and they will only change once you whack them hard with a thick cane. You don’t have to go far to see these bastards in action – just count how motorcyclists riding around in your neighborhood without wearing any helmets. Strict enforcement of the law is the only way to ensure less traffic offenses committed on Malaysian roads.

Secondly, we lack an effective mean of enforcing the traffic laws. Yes, we have the police but then again, as we have seen in Ops Sikap year in, year out, we cannot expect the policemen to be around everywhere all the time and the moment the eyes of the law is nowhere to be seen, this is when the traffic laws gets abused. And it has been abused on a regular basis for some time now.

Automated Enforcement System (“AES”) should resolve this shortcoming in many ways. And there are another benefits too – by outsourcing the enforcement system on traffic offenses and verification to issue summons to private companies, the police would be freed up to do other more critical policing work. It may save them some infrastructure and logistics costs too.

Leong is contending that because the revenue of the private companies is tied to the number of summonses issued, the number of speeding violations need to be maintained not be less than 10 million each year and if they are to increase their profits and growth over the years the number of speeding violations must by necessity be increased accordingly. In other words, he implies that the number of speeding violations will be increased arbitrarily just to ensure profitability of the private companies remain unchanged and because of this, the focus of AES has gone awry. He also claims shortcomings of the AES (even before it is implemented) – that AES when implemented issue summonses to every ambulance and fire engine rushing to save lives and property. Really?

Yes, it is possible to some extent but then again, we should look at it from another point of view.

By tying the revenue of the two companies handling the camera installation to the number of summonses issued, aren’t we just ensuring effectiveness of the AES since a defective installation and poor traffic offense verification will mean less summons issued and this in turn translates to lower revenues? And by entitling a share of the fines in return for installing cameras, doesn’t this mean that the Government can opt to forgo using taxpayers funds for the installation of the cameras since these payments will now come directly from the traffic offenders?

On the onset, it does look like a win-win situation. So, instead of making general statement that the BN is out to make a profit from traffic summons and the wasteful plea to look at soft ways to reduce speeding and road accidents (Leong is really wasting his time here), Leong should be asking these questions:-

1. What is the scope of work? Will it be just installation? Or does that also include maintenance, summons and payment processing and other services as well? Are there any hidden commissions involved and we are getting the best price in the open market for that given scope of work?

2. What is the strength of the two private companies in installing the cameras for AES? It does not matter if they are directly or indirectly linked to BN but we need to know if they are competent enough to handle the enforcement system or are they going to outsource or sub-contract the work to another company and enjoy the free ride in return? What is their expertise in handling the enforcement system? What is their track record? How they were selected in the first place? Was it through an open tender or based on some kind of strict evaluation?

3. What is the detail of the payment structure? For summons issued but not collected, where the Government intends to get the funds to pay the companies the first 50%? Note that RM16.00 is to be paid for each traffic summons for the first 5 million summonses and this itself works out to RM80 million.

4. Assuming the installation cost (and surely maintenance cost) has been worked out, for how long we allow the two companies to take a share of the fines when it should be passed to the Government as an alternative source of income?

5. What is the term of the “concessionaire contract”? Has the terms of the contract been vetted through strictly to avoid the recurrence of the lopsided terms that now haunts toll concessionaire contracts? Is there any term that will allow the Government to restructure the payment terms in the future? Is there any penalty clauses incorporated to ensure that the private companies does not short-change the Government on the quality of camera installed and workmanship of the camera installation?

6. What if the projection of the summons issued (to meet the installation & maintenance cost) falls short in the coming months? What if by some miracle, Malaysians decided to behave themselves on the road and the number of summons issued drops drastically? Since the revenue of the companies is tied to number of summons, are we going to subsidize the companies for their “losses”?

7. What are assurances that the traffic users sensitive information is safe-guarded from any unauthorized party?

These are some of the questions that Leong should have asked in the first place. And wrongly branding the collection traffic summons to profit frenzy is not the right direction that we suppose to head when it comes to dealing with stubborn traffic offenders and when we are serious about reducing the fatalities on the road.

Yes, we are aware that privatization and outsourcing in the country at times riddled with cronyism, monopoly, abuse of public funds and lopsided agreements but that should not stop us from seeing the bigger picture which is to enforce the traffic law and reduce road fatalities in this country. We desperately need the automated enforcement system and we need it to implemented it to be highly efficient, strict and without any favors to the stubborn traffic offenders on the road. Let’s start with the right objective and questions in mind.

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