Toll hike - Are we over-reacting...

Saleh Mohammed | .

A question was asked whether Malaysians are over-reacting to highway toll rate hikes.

Have a look at the stakeholders and circumstances before guessing an answer.

Politicians

BN GE 13 manifesto - gradual reduction of intra-city tolls.

Highway Concessionaires

On 12 June - it was reported that major highway concessionaires were not aware of any impending increase in toll rates and media statement from the Malaysian Highway Authority (MHA) did not mention it.

Let us have a look at two of the concessionaires.

A cursory look at Gamuda’s 2013 annual report shows Kesas’ revenue and profit jumped by 37.3% and 80.9% respectively. Besides Kesas, Gamuda also controls Litrak Bhd, which holds the concessions to the Damansara-Puchong Highway and the Sprint Highway. It also has a 50% stake in the Smart Tunnel.

Gamuda’s 2014 annual report states the infrastructure division’s contribution remains stable contributing comfortably to profit before tax. For LDP, the average weekday toll-able traffic increased 1% from previous year (3.3% in 2013; 1.3% in 2012). For SPRINT, toll-able traffic increased 4.6% (4.4% in 2013; 5.6% in 2012).

Kesas received an interest-free loan for the period from the first draw-down to 31 December 1998 and thereafter at fixed interest of 8% p.a. The loan was initially repayable in 4 equal installments, commencing 30 April 2008 with final repayment on 30 April 2014. In 2009, the Government agreed to reschedule the loan to eight equal annual installments beginning 29 November 2010 to 29 November 2017.

Gamuda looked forward to a scheduled toll hike in 2015 which would help boost revenue for SPRINT. Meanwhile, LDP is expected to see a toll increase in 2016.

IJM Annual Report 2015 shows in March 1996, the New Pantai Expressway Sdn Bhd (“NPE”), entered into a Land Cost Supplemental Agreement with the Government for an interest-free loan provided by the Government in making available the concession area to NPE as Reimbursable Land Cost for the construction of the expressway.

During the year NPE posted improved pre-tax profit by 29% as a result of higher turnover by 10%.

Besraya contributed a higher turnover by 38% from the prior year. This is mainly attributable to the toll collections from the newly opened Loke Yew Toll Plaza in April 2014. LEKAS contributed an increased turnover by 23%. Traffic performance is expected to improve in the future with the maturing developments along the highway corridor such as Setia Eco Hill, Eco Majestic and Temiang Resort City.

Government

15 June 2015 - It was reported in the Star newspaper a cabinet meeting discussed the raising of toll charges this year by as much as 30%. However, several ministers at the Cabinet meeting were against allowing the increase.

August 2015 - it was reported that the Cabinet was reviewing proposed toll hikes of between 20 sen and RM1 for 16 highways.

12 Oct 2015 - Domestic Trade, Cooperatives and Consumerism minister said since not every highway would be affected, it was unlikely to drive up the prices of goods. It also explained that the highways were built through the private funding concept whereby the cost were financed by the concessionaires using commercial borrowing or sukuk.

The government is of the view that the money spent on compensation should be used for development projects with multiplier effects on the economy, benefiting the public in general e.g. used to upgrade existing roads and build more facilities such as hospitals and schools.

It also explained the hike was necessary in order for highway concessionaires to carry out maintenance and upgrading works

The Works Ministry pointed out that the government had postponed the toll hike on from as early as 2008.

The Rakyat

The new rates is a hike of 18% to a whopping 100% for car owners.

This comes after the Land Transport Commission said LRT fares will increase next month.

The introduction of a 6% GST in April puts pressure on domestic prices while import costs are rising after the ringgit slumped this year and is Asia’s worst performer. Inflation shot up. The inflation rate in Malaysia was recorded at 3.3% year-on-year in July and 3.1% in August from 1% in February 2015.

Realities

1. BN GE13 manifesto not fulfilled.

2. Contradicts the government’s promise to reduce the burden of the rakyat. It transfers the burden which has been shared between motorists and the Government, solely to the motorists.

3. The increase is between 20 sen and RM3 more as compared to what was reported as proposed toll hikes of between 20 sen and RM1 in August.

4. Gamuda expected LDP to get toll increase in 2016 but got it now.

5. Highway concessionaires seems to be getting sweet deals.

6. The spirit of the privatisation policy to allow market forces to govern economic activities and improve efficiency and productivity are conveniently forgotten.

7. The concessionaires are raking in more collection now than they were few years ago with increasing traffic.

8. A majority of these highways are in the greater Klang Valley area. The economic aspiration for this region is to grow its GNI contribution from around 30% to approximately 40% and increasing the population from 6 to 10 million. It will likely drive up the prices of goods.

9. The timing comes during period of road closures and traffic jams due to the construction of the MRT.

10. Bad congestion especially during festive seasons but the concessionaires were not penalised or requested to expand their capacity despite increased toll collection

11. Alternative non-tolled routes are either not available or have unrealistic routes.

12. No specific Build-Own-Transfer law in place and the propensity towards unsolicited proposals and adoption of sort of risk-free including revenue guarantee for concession companies.

It is imperative that the government compels the concessionaires to improve the carrying capacities and ensure free flowing traffic to justify any toll collections and toll reviews.

Tolled highway development in Malaysia are still considered as classified matter and shrouded in secrecy. Hence, the above analysis is somewhat spotty.

If the Income Tax Act which collects more money from the public trough taxes is in public domain, why is the CA disposed to secrecy?

The PM said those who disclosed details of the meeting that discussed on toll was a betrayal of trust of the Cabinet and the government.

How then is non-disclosure of the CA to the public since the burden is now passed on solely to the public? Wouldn’t it be betrayal of trust to the rakyat (who voted them in) and the country?

The rakyat applauds the PM by calling for accountability and transparency in political funding. Likewise, there should be accountability and transparency in the case of concessionaires. The minister should also be transparent and detail out in a report on how the money saved on compensation would be used for development projects.

Are you now over-reacting to highway toll rate hikes or just like the song,‘Que Sera, Sera’?

 

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