Abolishing toll must not burden the government
FocusM team | 01 Jun 2018 00:30
The new Pakatan Harapan government has promised that it will eventually abolish toll. A review of the various toll concessions will be carried out.
In abolishing toll, we must take into account the financial implications of such a move. How will it affect the government’s coffers if compensation has to be paid? What will be the effect on the toll concession companies and other stakeholders?
The main toll concessionaire in the country is PLUS Malaysia Bhd. It is controlled by government investment arm Khazanah Nasional Bhd through UEM Group Bhd (51%) and the Employees Provident Fund (49%). In November 2011, UEM and EPF paid RM23 bil to privatise the then listed PLUS.
If tolls are abolished, the government will have to compensate UEM and EPF. That will put a burden on its already financially strained coffers.
The alternative would be to consider bids for PLUS and other highway concessionaires that won’t cost the government anything. In other words, a third party could take over the highways and freeze or abolish tolls.
In fact, there was an offer last year from Maju Holdings Sdn Bhd, a company controlled by businessman Tan Sri Abu Sahid Mohamed who also owns the Maju Expressway (MEX).
Abu Sahid made a RM36 bil offer for PLUS last year and promised that tolls will be frozen for 20 years. He claimed he was able to freeze tolls through cost cutting which he currently applies to his MEX.
Interestingly, he claimed that amongst others, PLUS paid RM58 to resurface one square metre of its highway compared to RM18 for MEX. He also claimed he could cut PLUS’ overall expenditure and add value to its surrounding land bank.
Abu Sahid’s RM36 bil offer is much higher than the RM23 bil UEM and EPF paid. However, both of them declined to dispose of their stake. EPF said PLUS was a core investment that fitted well with its risk profile.
Now that the new government wants to abolish tolls, will other parties submit proposals for PLUS that is better than Abu Sahid’s?
But whatever the proposal, it must be viable and sustainable. The last thing we want is for a new company to take over PLUS, abolish toll and run back to the government to rescue it.
Download and read the latest issue of Focus Malaysia here: