The long and winding road towards the govt’s highway takeover

Putrajaya certainly has a lot to consider before making any big decisions. But time will tell if people will remain patient


Dr Mahathir refutes reports that the ministry’s RM6.2b proposed takeover of 4 highway concessionaires has been put on hold

DURING the run-up to the 14th General Election (GE14) in May last year, many entrepreneurs including Kamaruddin Atan, a petrol station dealer in Ampang, Selangor, lamented their struggles in generating a decent income.

Kamaruddin, who had been operating the fuel-pump business for 20 years, was among those who cited living cost issues as their primary concern which would influence their vote.

“Previously, customers may fill RM50 of fuel, but now they only buy RM30. They used cars before, but now they use motorbikes. With the rising cost of living, people are limiting their transport cost,” said the 53-year-old father of four children.

It was against this backdrop of elevated concerns on the high cost of living that the Pakatan Harapan (PH) coalition, on March 8, 2018, revealed a 60-point election manifesto to win voters.

On top of the voters list, it seems the pledge to make roads toll-free would definitely translate to great daily savings and the creation of extra disposable income.

However, a year after the historic win, that promise has yet to be fulfilled.

Describing the manifesto as a “big burden” after discovering over RM1 trillion worth of government debt, Prime Minister (PM) Tun Dr Mahathir Mohamad said it is impossible to have highways without the imposition of toll collection.

“We made the manifesto thinking we would not be the government,” Dr Mahathir said. At the same time, the 94-year-old underlined the need for PH to at least try and keep their words — given the lack of trust in the government that is mainly due to the scandal involving 1Malaysia Development Bhd.

Now, the government finds itself with the massive task of revamping the entire toll collection system, which includes gaining control over a significant number of highway concessionaires.

Putrajaya certainly has a lot to consider before making any big decisions. But time will tell if people will remain patient.

If the public is unaware of the rationale behind the govt’s decision, they will be cynical, critical, says Ramon

Considerations for a Takeover

The government’s multibillion ringgit plan to abolish tolls by taking over and guarantee the debt of over 15 highways will come down to the operators’ ability to run on a challenging business model.

Dr Mahathir’s administration is currently considering at least two proposals by the Ministry of Finance (MoF) and Khazanah Nasional Bhd to acquire about 1,509km of roads across Peninsular Malaysia, in keeping with its election promise to abolish toll collection.

Institute for Democracy and Economic Affairs research manager in economics and business Lau Zheng Zhou said the government’s consideration for the highway takeover should be on the track record of potential operators and financial options that would avoid future bail-outs.

“Since the whole idea of the highway takeover is to work towards the abolition of toll rates as promised in PH’s election manifesto, the new operators are expected to work with narrower profit margins, and given that some of these highways are seeing declining traffic, this could mean very tricky adjustments to business operations,” Lau told The Malaysian Reserve.

Previously, customers may fill RM50 of fuel, but now they only buy RM30. With the rising cost of living, people are limiting their transport cost

The toll-road sector is one of the largest issuers in the domestic bond market, with 23 companies issuing bonds and sukuk worth RM52.83 billion as of May last year.

Experts have estimated that the overall takeover cost could reach RM130 billion.

PLUS Malaysia Bhd, the country’s largest toll operator, alone has RM30.2 billion worth of debt.

In addition to debt, the average cost for the operation and maintenance of the country’s 29 tolled highways stands at RM2.5 billion a year, Works Minister Baru Bian revealed in Parliament last year.

Routine maintenance cost and periodic maintenance and upgrade costs, meanwhile, are estimated at RM402 million and RM459 million annually respectively.

Local credit rating agency Ram Rating Services Sdn Bhd raised a red flag on MoF’s plan earlier in March, saying it could potentially exacerbate the federal government’s debt burden which has increased to nearly RM800 million in the past year.

A local daily reported on Monday that the government had received a proposal with a combined value of RM43 billion to take over 15 highways, to be paid via issuance of debt papers to the concessionaires.

The news report, quoting sources, also stated that Khazanah will form a special-purpose vehicle called a highway trust, to act on the government’s behalf for the purchase of all the concessions.

The unexpected proposal by Khazanah, where Dr Mahathir is chairman, has raised many eyebrows, given that the MoF has so far spearheaded efforts to abolish tolls.

Earlier this month, the PM refuted reports that the ministry’s RM6.2 billion proposed takeover of four highway concessionaires has been put on hold, but said that the implementation date will be decided by the Cabinet.

At the time, Dr Mahathir said: “The MoF seems to be convinced it can be done. Our problem is that we don’t have the money.

The average cost for the operation and maintenance of tolled highways stands at RM2.5b a year, says Baru Bian

“But the MoF said that by charging during the peak hours, they can reach enough funds to pay for the acquisition of these four highways. We will have to see whether it will be enough or not.”

Lau attributed the differing plans by MoF and Khazanah to the reconfiguration of government- linked entities across different ministries post-GE14.

“For example, Khazanah has been transferred from MoF to the PM’s Department. So, we are seeing different options being forwarded because it has now become an inter-ministry conversation, not necessarily because the MoF’s plan is not viable,” Lau said.

Asian Strategy and Leadership Institute’s Centre for Public Policy Studies chairman Tan Sri Ramon Navaratnam underlined the importance of adequate consultation with the tax-paying public by the government. Ramon, who was former Transport Ministry secretary general, said the public must be made aware of the pros and cons of the government’s eventual decision.

“If the public is unaware of the rationale behind the government’s decision, they will be cynical, critical and unfair. So, share the analysis with the public and you will get public support. Otherwise, you may have a good case, but if it is not well-explained and discussed, even the best proposal can go off the rail,” Ramon said.