Toll Hike, A New Year Gift?

Read these first:-

tol naik sebelum dn selepas_omak_kau

toll

(The sweet talk before the elections – one good proof that one should never trust politicians who had become whiter than white, holier than the holiest man around when elections are around the corner. Barely 5 years after the election, all the sweet talk and endless promises of reducing the toll are quickly forgotten and it was back to business as usual. Image source: Omak Kau & Malaysian Insider)

Probably the last big bang from Najib’s army of highly paid consultants and dumb Ministers for year 2013…

If you had thought Najib acted like the Santa Claus on the loose before the elections, dishing out goodies and promising the sky to gain votes (you would not have missed “you help me, I help you” election bribes – it was on the front page on daily basis), here’s one for the die-hard BN fans to rejoice in tears for this coming New Year:-

The anticipated toll hike is coming too soon after the hike in electricity tariff and increases in the prices of sugar and fuel, say economists. The speculated rise of between 50 sen and RM2 in toll rates, coupled with other price hikes, would impinge on the quality of life. The hike, which will take effect next month, will affect 15 highways.

“The Government could lengthen the term of the agreements or ask the toll operators to space out the hikes,” he said. He warned that the sudden hike could result in a sharp escalation in the cost of living, which would be detrimental to the economy.

“Besides damage to the economy, there might also be widespread social repercussions. The cost of goods and services will go up,” he said. Yeah said it was unfair to raise toll charges for congested highways.

(Source)

To fair, despite of the overwhelming news and strong indications from “people” in the Government on the net & public media, the Government have not confirmed the actual quantum on the toll hike. But the hike nonetheless is still on the paper – it is just an matter of how much more and when the hike will be. Of course depending how loud the protests from the oppositions and the rakyat will be in the coming weeks, ha ha.

To tell you the truth, I never understood why there is a need to increase the toll other than it is stated IN the agreement. Not matter how I tried to understand the maths behind the proposed hike, I could not crack it. It is not like the price of petrol or raw materials which is dictated by global market supply & demand although interestingly when the global oil price came down, the petrol price remained unchanged. Well, no wonder some call this Government, the “Barang Naik” Government – there is only one way to go and that is up. The computation of the toll hikes on the other hand had remained a big secret – anyone who is able to decipher and explain it well & logically deserves a Nobel prize in Mathematics. It has been shrouded in high secrecy and confusion and totally detached from reality from day 1.

Let’s do some simple maths, shall we?

Let’s assume at the point of inking the agreement, the toll computation is set based on 10 cars per year and the toll is set at 1 car = RM1 (in total RM10). RM10 per year for x number of years is sufficient to cover the highway construction plus some sizable profit for the toll concessionaires.

In the same crappy agreement, it is also assumed that in Year 5, the number of cars per year is projected at only 5 cars per year. Why the lower figure, you may ask? If you are doing projections, that is very natural – better to keep lower figure for worst case scenario and you will avoid the need to go back to the stakeholders for more funding. Thus in order to sustain the same RM10, the toll is now increased to RM2 per car.

That seems to be case here whenever the Government announces the increase in toll – that it is IN the agreement. But is this case in reality? What happens if the number of cars per year had actually increased to 100 cars (instead of the projected 5 cars) per year? At RM2 per car (since it is IN the agreement), the toll concessionaires would be make a killing of RM200 instead of the rightful RM10 per year.

They don’t come back and say that the toll will now be lowered to just RM0.10 to maintain the same RM10 per year, do they? There is always one to go and that is up.

Now you know why the rest of us who are caught in the mega traffic jam on daily basis is very pissed off whenever the Government “after taking into consideration of the rakyat‘s hardship” announces increase in toll. Why the increase when there has been corresponding increase in number of traffic using the highway? We all know that there are 100 cars on the road and not 5 cars as projected in the agreement. We all know that as more commercial & residential areas are developed and more vehicles uses the highway, the toll charges should be reducing and not increasing.

And we know that the concessionaires are already making substantial profit even with the current toll amount:-

According to the the Pandan MP, based on the North-South Expressway’s (PLUS) details of cost in its 2010 yearly report, the longest highway in the country collected RM4.098 billion through its toll collection in 2011 and gained a net profit  RM2.515 billion before tax or a 61% profit margin.

“PLUS however only spent RM241 million or 6% on that profit margin to maintain the highway. They even spent more for salary, administration and etc by spending RM397 million. “There are not many businesses in the world that can get a profit of 61% like PLUS has recorded. Looking at the 6% they spent for maintenance alone is enough evidence that the current toll rates is too high and multiply PLUS’s profits,” Rafizi told a press conference at PKR’s headquarters today.

He further added that Kesas Sdn Bhd who operates Kesas highway recorded a 121% profit margin between the year 2008 to 2012 as reported by Maybank Investment Research on Nov 2013. Meanwhile, based on Lingkaran Trans Kota Holding Berhad’s (Litrak) 2013 yearly report, the company that operates the Damansara-Puchong Highway (LDP), collected RM369 million and gained a net profit of RM180 million before tax, a 49 per cent profit margin.

“The 49% net profit before tax is high, higher than what is made in oil and gas industries,” he claims.

(Source)

Ok, never mind, let’s not focus on the toll concessionaires – they are profit driven companies anyway and so the more money they make, it’s better for them. Let’s instead focus on the other side of the spectrum – the Government who by right should not be profit driven. The very same Government who promised “gradual reduction” of the toll when they went around on election campaign.

Let’s look at the typical reasons given by the Government in justifying the hike in toll – 1. the obvious and probably the dumbest reason that it is IN the agreement and there’s NOTHING anyone in the whole galaxy can do about it 2. the Government does NOT have enough money to continue to subsidize the increase (as a responsible Government, they want it for “cough” better use).

Let’s look at the first reason – that it is IN the agreement and that the Government is unable to do anything about it. But are they really that helpless as they are portraying it to be? Then read this:-

The Government can prevent the toll hike by renegotiating the terms of agreements with operators, said PKR strategy director Rafizi Ramli.

“Most highway concessions are dominated by subsidiaries of state-owned companies, so the Federal Government has the power and leverage to renegotiate the terms,” he said. He said PLUS, Prolintas and Gamuda were three of the biggest highway toll operators and all had Government links.

“Based on either share ownership or financial assistance, the Federal Government has the power and influence discuss the matter with concessionaires and ask them to re-work the terms of he agreement,”

“The excuse that the increases cannot be avoided because of agreements signed with the private sector cannot be accepted because a large part of the toll concessions are held by the Government, directly or indirectly,” he added.

(Source)

Put it this way – no contract in the world is cast in stone especially when it is made by the ever powerful Government. Nationalization and privatization have been done in the past with a stroke of a pen. There is always an opportunity to renegotiate – the shareholders of the toll concessionaires may not like it but at the end, they are doing good for the nation by causing the price of general goods not to spike up due to the increase in toll. And speaking about the shareholders, the interesting part here is as what Rafizi had said – the excuse that the increases cannot be avoided because of agreements signed with the private sector cannot be accepted because a large part of the toll concessions are held by the Government, directly or indirectly.

And to show how it should be done, the Selangor State Government had taken steps to make their stand on the hike through their representatives on the toll concessionaires companies (thank god, the voters in Selangor did not buy into Najib’s “we have repented” road show). So, what’s stopping the federal government from doing the same? Why they cannot propose alternatives to minimize the impact of the toll hike on the public? Why the eerie silence?

Let’s look at the other reason for the hike in toll – that the Government is unable to pay high subsidies (or compensation) to maintain low toll price. On an ideal situation, there should not be any subsidies – users pay the actual cost and any money saved from subsidies should be used for development activities that will generate economy for the country. But as I mentioned, in an ideal situation it works just fine but a different story in Malaysia if you have been keeping tab on the unsatisfied hunger & abuse for tax payers. Only in Malaysia, you can fly off a politician’s wife to private functions at the expense of tax payers and act like that nothing had happened. Just ask what had happened with all the past subsidies and compensation saved? How much of it has been “burned” on overpaid consultants? How much of it has been wasted by corrupted and careless civil servants?

It does not make sense when the consumer ends up paying more but whatever money saved ends up being abused by the very politicians who have been entrusted with the said money. There has not been much done to curtail the lavish spending by the Government. There has not been much done by the Government to curtail corruption (enforcement if any has been selective). So who is to be blamed when the Government now finds itself not having enough money.

And we have yet to comprehend the impact on other costs due to the toll hike – teh tarik and roti canai price already increased to an insane level due to increase of petrol & sugar cost (it was crazy to note that the price of my usual kopi-o kosong went up after the sugar price announcement), it is only going to be worse with the increase of electricity tariff and any other hidden increase of basic goods and services. That will take another long post, so probably let’s keep that for another time.

Merry Christmas to all…

P.s. since we are on the subject of “highway”, this is what I think the Government should do on a regular basis – haul up all drivers and send them for mandatory retesting (perhaps every 3 years). This is because there are way too many bastards out there (including bus and army truck drivers but not truck drivers) who do not know to properly overtake other vehicles on the highway. They cut into the fast lane without any indicators and once overtake, cut back dangerously in front of the car without any indicators as well. Sigh.

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