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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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

Subsidy Gone But…


We seriously need a divine’s help on this…

(How the Government’s financial management is going to affect us, the people, in the long run. Image source: http://www.themalaysianinsider.com/)

A long, long time ago, when the petrol price was increased, one “work-with-me” PM vowed to use the RM4 billion saved on petrol subsidies on the development of public transportation.

Of course, nothing happened to the improvement of public transportation and when called upon to be accountable to the subsidies saved, only excuses after excuses were given – in the end, RM4 billion simply went “missing”. Considering the amount of money spent by the Government, RM4 billion might be a small amount to some but there is no clear line of sight on whether the money had gone back to the people (the refund of RM625 aside).

Now there are calls for reduction of Government’s subsidies once again.

Reduction of Subsidies

Considering the fact of the global financial trend and the diminishing pool of national oil reserves, at end of the day, subsidies has to go. That is the fact and we need to face this sooner or later.  Subsidies are bad and here’s why. The call for reduction of subsidy is right and timely.

Idris Jala has made the right case for reduction of subsidies when he said:-

Subsidies only result in market distortion and they drain the government of much needed funds that could be better used for more strategic and pressing development projects for the rakyat.

The time for subsidy rationalisation is now.

We do not want to end up like Greece with a total debt of EUR300 billion. Our deficit rose to record high of RM47 billion last year.

If the government continues at the rate of 12 per cent per annum, Malaysia could go bankrupt in 2019 with total debts amounting to RM1,158 billion.

(Source: TheStar)

Why waste money to keep price of things artificially low when the same amount of money can be used for development and generation of economy of the nation? With the Government having more cash at the disposal, they can use it to ensure a better economic environment for business and people. This in turn may translate to higher business profit and taxable income for the individuals.

More cash reserve also means better investment opportunities by Government investment arm. It also means better buffer to engage the poor and provide financial assistance to them. It also means we have more money to pay off our debts whilst we continue with the strengthening our economy.

Perhaps a greater push for alternative energy to reduce the dependant on fossil fuel?

Managing Subsidies Saved

But here is where we start to worry…

When we look at the very jokers who is going to manage the money saved from the subsidies, it is no wonder why many are asking the question – why now (and not when we have plenty of oil lying around in our shores) and why the people (why no change of lifestyle by the Government)?

(Looks good on paper but given the past track record, can the people behind pilot seat make it count? Image source: http://www.themalaysianinsider.com/)

To common Malaysians like you and me, the call to reduce the Government subsidies by the billions really sounds like this – more from the people’s pocket and more into the corrupt’s and greed’s pockets.

And the same echoed in Malaysiakini:-

Fiscal austerity is required only when you have a clean management of country’s wealth, otherwise all the rakyat’s belt-tightening will go into the pockets of greedy politicians and businessmen

Asking the rakyat to sacrifice and support the cutting of subsidies, and here they are throwing away the nation’s money. How often do we read this type of news, but no one is sent to jail for misappropriation.

Good question – how many people who been caught for wasting public funds whilst still in Government office have been found guilty and severally punished? What about the million of ringgit which was wasted on an advertisement to congratulate a politician’s wife? What about the joker who wasted thousands of ringgit for a car plate number? Why they are not stripped naked and given the lashes for treating public funds as their own personal funds.

Subsidies on Toll

Out of the many subsidies paid out by the Government, one stands like a sore thumb – subsidies on the toll charges. Unlike increase of petrol price which we cannot do much once we become the net oil importer, the same cannot be said of the increase in toll charges. What global event that causes the increase in toll charges?

The answer is NONE!

(No justification whatsoever for increase of toll charges but the Government’s hands seems to be tied on this)

The only reason we are playing through our noses is because a long time when we needed highways to manage the  ever growing traffic problems, some civil servants and policy makers did not do their duty (that is “to do all they can to protect public’s interest”) properly. Toll concessionaire’s agreement became lopsided agreement and accountability became a secret. So, why the public need to pay more for highway tolls when all is needed is for the Government to review and redraw the contract obligations.

Will the Government have enough courage to say “fuck off” to the toll concessionaires when they come over asking for an increase of toll and demand for re-negotiations? Or they will just silently agree to it and let the people continue to suffer for it?

Policies on Economy

Najib, infamous for his call to people to change their lifestyle is yet to be proven as a leader who goes all out to manage the little resources that the country has and improve on the financial standing. No doubt, there has been plenty of talk on the topic but what about real action?

(NEM strives for better quality of life for the people with higher income and sustained national growth. But the very framework of NEM has been under fire by short sighted people)

Something called NEM was cooked up but already there are objections to it. There is a think tank behind the Government (good for the PM) but no firm policies have been made (meaning think-tank’s recommendations may end up in the dustbin or in danger of major modifications due to political pressure).

No major overhaul of the corruption fighting mechanism have been made – there seems to be an overwhelming tendency to go after the oppositions and where applicable, “small fishes”. Those who suppose to be accountable is still sitting comfortably in their chairs and pointing fingers at others.

What about the policies that promotes cost cutting measure, not only at the public sector but also cutting across Government linked companies? What happen to the KPI at GLC level? Just how much of the cost cutting measures have been implemented and enforced? The very fact that the Auditor General’s yearly report has not shown any good indication of cost cutting measures in place and blatant waste of public funds has been curtailed shows that Government has not been really serious to maximise the resources and source of income.

Cost of Goods

When the petrol prices went up, the price of a glass of teh-tarik at the local mamak restaurant went up substantially. When the price of petrol went down, the price of the teh-tarik did not go down. The owner of the restaurant made plenty of profit by increasing all prices of the food items.

(Want to measure how Government’s decision to increase fuel price and toll affects our daily expenses? Just check out the “latest” price of teh tarik at your local mamak restaurant)

The price of teh-tarik is just an example but an obvious sample where price of petrol affects daily consumer goods in a big way. The price of sugar, flour and cooking oil is expected to increase and there is no indication that there will be close monitoring of other items’ price. If the price of 3 basic items is going up, rest assured, others will follow suit.

With the planned reduction of subsidies, price of petrol, toll and others will also increase. With the increase of petrol and toll, we can only expect transportation cost to increase and when this happens, goods delivered will cost more too.

What the Government plans to do about this? How they are going to manage when price of goods sky-rockets? Are they going to do what they have done in the past – simply complain about it but do nothing?

Poor Implementation & Enforcement

MCA President, a couple of days ago said:-

Weaknesses in the implementation of Government policies have resulted in the disgruntled Chinese community wrongly assuming the Barisan Nasional is not doing anything for them

What Chua Soi Lek has said is not something new – it is something everyone already had known for a long time now. Chua Soi Lek only talked about weaknesses in implementation but there is more to it than just this.

We all agree that there is weakness in implementation of policies but it does not happen only in Malaysia. So, we are not really alone in this but what we want is “less talking and more action”.  Have we find out where are the weaknesses and quickly plug the weaknesses so that implementation is done without delays or unfairly? Has this been done in line with the expected reduction of subsidies?

To keep talking about weaknesses without talking about plugging in the weaknesses is nothing short of plain ignorance. Same goes for the quality of enforcement in Malaysia where sometimes more bite for enforcement is tainted with political pressure.

Final Say

But let’s say that God was kind on Malaysians and decide to wipe out corrupted, racists and good-for-nothing politicians and Government civil servants from the face of the earth and replace them with true nationalist, professional and idealistic people. What happens next?

We will go for the reduction of subsidies willingly – it is necessary after all. What ever the Government managed to save from these subsidies, then should be re-channeled to the people in form of tax relief, rebates, reduction of debt and certainly increase in taxable income. That is the right way to do, not the current way of pushing the buck back to the people whilst the politicians and the rich hold back and shake leg and whilst strict measures to handle the people’s burden due to increase of expenses is not been formulated and implemented.

We are against reduction of subsidies, not because we want the subsidies to be kept going (for ever and ever) – it is not good for the nation in the long run. We are against the reduction of subsidies because we know the subsidies saved will not be properly managed.