Malaysia

Lucrative highway deals in the spotlight again as anger, despair mount over toll hike

Putrajaya's privatisation exercise is under scrutiny again after it confirmed a hike in toll rates next month, with analysts saying the public has to pay the price for such lopsided concession agreements.

They told The Malaysian Insider that Putrajaya's past mistakes have come back to haunt it as the agreements were legally binding and toll hikes were part of the deal – and however the government pitches the case, it has to give in to the concessionaires.

Some 15 highways will see toll increases of between 50 sen and RM2, but the government has yet to announce the final rates. The hike comes on the back of higher electricity tariffs and proposed pricier assessment rates and public transport prices in Kuala Lumpur.

"If you sign an agreement, you have to stick by what you have signed," National Economic Advisory Council economic consultant and banker Syed Akbar Ali told The Malaysian Insider.

"If you oppose price hike, then why did you sign the agreement?"

Akbar was referring to Barisan Nasional's (BN) election manifesto, where Datuk Seri Najib Razak had promised that intra-city tolls would be gradually reduced over five years.

"He is the PM, yes. But with what authority did he promise that? An agreement, which is legally-binding, has been signed."

RAM Holdings Bhd group chief economist Dr Yeah Kim Leng, adding that if concession agreements were broken, said the government's credibility and the country’s credit rating would be at stake.

"Of course the government can use its influence to ask these highway concession companies to be more accommodating in toll hikes," Yeah added.

The economist, however, called on Putrajaya to look into the issue "case by case" to see which highways were profitable and which were not.

"Hiking up toll rates on highways which are congested and are making money because of the high volume of traffic is not really justified."

He said this would then give Putrajaya the higher ground to "persuade and renegotiate" with highway concessionaires not to raise their toll rates.

Akbar said Putrajaya should be more careful in signing agreements in the future to avoid issues of toll hikes at a time when escalating living costs followed price increases in petrol, sugar and other items.

He said: "One of the conditions they should include is, as the volume of traffic increases, the increase in toll should be lower. And toll increment should be pegged to the amount of money concessionaires owe to banks.

"Also, the length of the concession periods should also be looked into as some of them have long concession periods."

PAS Research Centre executive director Dr Dzulkefly Ahmad said Putrajaya had been "more than merciful" when it signed deals with the highway concessionaires and water supply companies.

But he said the government must be able to renegotiate for a shorter concession period and for a stop to the toll rate, as the agreements were based on the forecasted volume of traffic to use that particular highway.

"On urban highways like the New Pantai Expressway and Kesas, the traffic would have been more than they expected.

"Thus the Internal Rate of Return of 15% would have been achieved much earlier and they would have recouped their investment," Dr Dzulkefly said.

Penang chief minister Lim Guan Eng had also previously blamed the impending toll hike on the "lack of integrity" shown by the federal government, citing the failure to practice open tender in awarding projects had led to lopsided concession agreements.

"The companies are only collecting net profits from the toll collections, minus maintenance cost. We are against this proposed hike. But since such an agreement had been signed, the people will have to bear with it."

Dr Dzulkefly said relooking the concession agreement is one way of protecting public interest.

"But it is obvious now that the government are more interested in guarding the concessionaires who are cronies of the BN government.

"Details of the concession agreements must be disclosed as it involves the greater interest of the rakyat," he said. – December 19, 2013.

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