Highway takeover unnecessary as concessions set to expire

The move seems illogical as the toll restructuring deal lacks transparency, economist says

by AZREEN HANI / Pic by MUHD AMIN NAHARUL

THE takeover of four highways in Klang Valley makes no economic sense considering that the concessions for the highways are about to expire, and one is heavily under utilised by the public.

Dr Muhammed Khalid told The Malaysian Reserve that the move seems illogical.

“Kesas concession will expire in six years, while the LDP will expire in eight years. There are no more toll increases for both highways. Given that the toll for the two highways will expire soon and will be handed back to the government for free, why are we extending the concession? This is unfair to the rakyat, a burden for current and future generations,” he added.

Read more: Highway takeover a step forward?

He highlighted that SMART Tunnel is a flood mitigation project which is currently running at heavy losses due to high maintenance costs and low traffic.

“Among the four highways, SMART only contributes to 2% of the total average daily vehicles. Easy access to the alternative free-toll road has also led to a very low utilisation rate by users of only 34% from its maximum capacity. So why the need to allow private firms to get a bail out from the rakyat?” he asked.

“This toll restructuring deal lacks transparency. What are other options, and the cost and benefit to the rakyat and government? For instance, if the government decides to continue to collect toll upon expiry of the concession given that it is costly to operate highways, what is the cost benefit for the Malaysian Highway Authority or other firms to undertake the operation and maintenance of LDP and Kesas?

“What would the rates be, given that the toll rate would be adjusted to take into account operation and maintenance, and without debt servicing? The government must not socialise losses and privatise profits” he added.

On Monday, the government announced the restructuring of four Klang Valley highways concessionaires, namely Kesas Sdn Bhd, Syarikat Mengurus Air Banjir dan Terowong Sdn Bhd, Sistem Penyuraian Trafik KL Barat Sdn Bhd and Lingkaran Trans Kota Sdn Bhd through private entity Amanah Lebuhraya Rakyat Bhd (ALR) worth RM5.5 billion in enterprise value (EV) in a bid to maintain toll rates

CGS-CIMB Research’s analyst Sharizan Rosely dubbed the restructuring as the “first of its kind” in Malaysia. The analyst noted that the total takeover value of RM5.5 billion is 13% lower compared to the RM6.2 billion EV from the original offer in 2019.

However, he said Gamuda Bhd’s share of the estimated equity value of RM4.4 billion for all four highways is RM2.3 billion which is slightly lower by 1% compared to the previous equity value of RM2.35 billion.

Meanwhile, Parti Amanah Negara communications director Khalid Samad said Pakatan Harapan’s (PH) proposal during its reign was for the government to buy over the four tolls and provide a 30% discount to all users who use it during off-peak times.

“Suffice to say the toll concession period was not mentioned in the proposal as there would be no change. Toll collection, albeit with discounts, would end when the concession ends,” he explained in a statement yesterday.

He questioned whether there will be any measures to prevent the new entity, ALR, from awarding fat and lucrative projects to its crony companies for jobs undertaken on highway maintenance and management.

“In the PH’s proposal, the government would own the tolls, raising funds for its purchase through the sale of bonds as well which would then be paid for through the toll collection as well. The difference is of course the discounts for the rakyat and the fact that ALR is a private entity,” he said, adding that the phrase “non-profit” can be misleading as overheads and operating costs can be exaggerated and increased to result with a net zero profit.

“It would be so much better for the government to take it over now, while the tolls are being collected so as to ensure the highways are well maintained at all times and that there won’t be any surprises after the concession period,” he said further.