Frankly Speaking: Take the straightforward route to break toll impasse

This article first appeared in The Edge Malaysia Weekly, on January 13, 2020 - January 19, 2020.
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The objective is simple enough: stop imposing tolls or reduce their rates substantially. But the Pakatan Harapan (PH) government has struggled to find a way to deliver the promise it made to the people. It does not help that there are differences in opinion among the three Cabinet members involved in looking into the matter — Economics Affairs Minister Datuk Seri Azmin Ali, Finance Minister Lim Guan Eng and Works Minister Baru Bian. We are told the economic adviser to the prime minister, Dr Muhammad Abdul Khalid, also has his own views about the issue, complicating things even further.

In such a disparate situation, it is no wonder a decision by the Cabinet has been delayed for months.

We shall throw our hat in the ring and offer two possible solutions to break the impasse.

First solution: This is straightforward. Maintain the status quo in the ownership of all the concessions. Reduce the toll rates by as much as 40%, staggered over three to five years. This reduction will be financed by the appropriate extension to the concession period. There is no need for any complicated and expensive takeover of PLUS and the other highways, such as those operated by the Gamuda Group. And the government does not have to incur more debt. Road users may be unhappy with the extension of the concession period, but we say there is no such thing as a free ride. You can’t have your cake and eat it too.

Alternative solution: It is our view that infrastructure assets should be owned by the government. If private businesses were to own them, they would want to maximise profits and they can’t be blamed for that. The government, on the other hand, can tolerate lower profits for the public good. And the savings will be enjoyed by the public, in this case, in the form of lower toll rates.

Our second solution gives the government the chance to use this impasse to put most, if not all, the tolled highways into a national highway trust that it will own — meaning ownership is with the people.

How can this be done?

The trust can issue perpetual debt papers that pay a coupon of say, 5% to 6%, to acquire all the highways (estimated at RM40 billion). The debt papers can be issued to both the owners of the highways and also to new investors, in particular, pension funds that will be happy with the 5% to 6% interest they will get. In fact, the papers can be made tradeable. Interest payments will be paid by the cash flow and profits generated by the collection of tolls.

Toll rates will also be reduced by as much as 40% over three to five years. Concession agreements will, however, have to be extended to perpetuity since it is a perpetuity debt. Yes, we hear louder voices of disapproval because the concessions will be in perpetuity. But the highway trust is not owned by private businesses or cronies. It is owned by the government, that is, all of us. There can also be an option for the bonds to be redeemed eventually, meaning collection of tolls can also end.

Through either of the two solutions, there will be no complaints about the government favouring one of the four businessmen who have put in bids for PLUS. A decision to allow one of them to take over PLUS is bound to trigger allegations of cronyism. Just let PLUS remain with Khazanah Nasional and the Employees Provident Fund.

It will also diffuse allegations by some that the finance minister wants to buy the Gamuda concessions for RM6.2 billion to give it the cash to finance the massive infrastructure project it is undertaking in Penang with the state government.

Already faced with so much criticism, the PH government can do without opening another front to be attacked by its detractors.

Just take the straightforward route to reduce toll rates.

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