No toll promise by Pakatan, unrealistic, says economist
KUALA LUMPUR:The Pakatan Rakyat coalition has always pride itself with ideas that is for the rakyat and ways to ease the burden of Malaysians. Some of its major plans include, the promise of cheaper cars, reducing oil prices and to abolish tolls.
Pakatan’s strategy director, Rafizi Ramli also took the trouble to simplify the ideas so that it can be understood better by laymen who do not have economic backgroud. In three Youtube videos uploaded about two weeks ago, Rafizi explained how Pakatan was going to ensure that their plan for the said matters materialise.
As enticing as it sounds, promises are made to look and sound good and at the same time soothes those who want to be soothed. Many of us who are not well-versed in economics would automatically be impressed.
The Mole was recently contacted by an economist who was concerned about the simplistic views brought forward by Rafizi in his explanations.
Speaking on the basis of anonimity, the economist gave a rebuttal to each point that was highlighted in the video focusing on abolishment of tolls.( Rafizi’s proposals are in bold)
1. Toll increases transportation cost and which makes price of goods more expensive.
The toll price for the North-South Highway has not been hiked since 2005, but the price of goods continued to increase due to CPI (consumer price index) which increases at 2.6 per cent every year.
There is also no direct correlation between food prices and toll. Never in any article by professional/economist mentioned that the cause for food price increase is toll imposition.
Based on table below, transportation cost in 2011 increased by 4.4 per cent, but toll for PLUS remain unchanged in 2011. F B prices also increase every year.
2. Every year the rakyat is estimated to pay about RM5 billion to toll concessionaires.
The amount is not accurate. It’s much, much lower than that. But one tends to forget that toll is pay-per-use model – how different is this from paying for Astro, use of mobile phone, Internet etc.? Thus it’s a choice by motorist. 99 per cent of PLUS’ highways have alternative roads.
Revenue for Celcom alone in a year is RM7.2bil. DIGI’s revenue is RM5.9bil in 2011 – we pay so much for mobile services but we still get / endure dropped calls.
3. Taking over of tolls which already have its return on investment
Apart from the initial construction cost, huge money has been invested and spent on maintaining and upgrading of expressway network and facilities. For example, 4th lane widening at cost of RM1.6B is fully funded by PLUS for the rakyat.
UEM and EPF acquired PLUS at RM23bil. Reason for the acquisition is to reduce toll for the benefit of rakyat, but at the cost of the concession company through loan obligation of RM30B.
4. Taking over of tolls in stages and staggard payment is done yearly for the takeover cost.
Takeover on stages basis is illogical and unfounded from commercial point of view. Lenders would definitely not agree to such a deal whereby the borrower is one entity without ANY source of revenue and hence, no security against the borrowing. Severe impact to the entire bond market of Malaysia as well as global debt market, as PLUS Sukuk is the biggest global Islamic Sukuk. There would also be implication to the FDI and Islamic financing market.
5. PLUS is owned by government strategic investment fund Khazanah Nasional Bhd and the Employees Provident Fund
As PLUS is owned by “badan rakyat”, any profit will flow back to the rakyat either via EPF or others.
6. Pakatan will discuss with Khazanah and EPF on the amount of yearly payment to be given to bondholders.
This is unprecedented. Never has there been a stake acquisition that involves annual payment of takeover cost! Will not bode well with investors and bondholders
7. The estimated cost to take over PLUS in order to abolist toll is RM4 billion each year
Where will the funds come from? National income will be affected and how would this expenditure address the country’s budget deficit?
Would it be fair to takeover of a highway located in West Coast Peninsular Malaysia at the cost of other rakyat especially those living in Sabah, Sarawak and East Coast? Amount used for takeover could deprive Sabah Sarawak and East Coast of good infrastructure
8. The breakdown given by Rafizi for yearly payment are:
– RM1.473 billion to buyover bonds owned by Khazanah and EPF at the rate of 50 per cent of the yearly toll collection
What is the basis? Why based on 50 per cent of annual toll collection? How could equity acquisition use 50% revenue as the acquisition cost and payable on an annual basis?! The takeover cost of PLUS for Khazanah and EPF was RM23 billion. Divestment would definitely affect both Khazanah and EPF’s investment return.
The RM800 million figure is just on maintenance. Why is there a need to expand the highway? Where would the cost come from and who is to bear this cost if without any toll income? PLUS’ 4th lane widening project cost RM1.6billion is fully funded by PLUS.
With free-toll, more people will be using the highway and this will jam up the highways even more quickly – coupled this with the fact that PR plans to reduce car prices, double whammy!
With more motorists on the road, more pavement maintenance work would be needed, more lane widening projects would have to be undertaken to ease traffic, more cost to maintain the RR and more complaints from the rakyat! All these cost will escalate significantly over the years and, who to bear?
- RM1.5 billion to be used to repay for bond/sukuk loan which is left behind by Umno/BN amounting up to RM30 billion
The Sukuk was issued by a corporate entity under a comprehensive regulatory framework with good governance. Malaysia continuing to dominate as the destination choice for Sukuk issuances in the global Sukuk market.
Based on RAM report in 2013, Malaysia issued US$97.1 billion of Sukuk last year, accounting for 69.7 % of the total globally. Continuous development plans especially in the infrastructure sector ensured the growth of the Sukuk market.
- Will save RM1.1 billion to pay for Sukuk bond loan made by Umno
Changing the Sukuk terms will dampen investors’ confidence and ultimately, the future of Sukuk and debt market in Malaysia
9. When toll is abolished the government will save up on several yearly expenses such as :
- RM800 million compensation paid yearly to PLUS
PLUS had in 2011 announced the restructuring of toll — with no increase for 5 years and rate of increase for future years has alsobeen reduced from 10% to 5% every 3 years) and no compensation payable to PLUS.
- RM50 million saved from operational cost
There won’t be any savings, in fact, operations and maintenance cost will increase with the sharp rise in traffic volume on a toll-free highway.
Whether this saving eventually benefits the right group of people? The ones who are paying toll are those who can afford to own a car, and pay for the road tax and fuel.
10. Every year Malaysians pay RM3 billion to PLUS and the government uses the rakyat’s fund to pay a compensation amounting to RM800 million to PLUS. The cost borne by Malaysians every year is RM3.8 billion
Again, no compensation payable to PLUS. During the corporate restructuring of PLUS, both UEM Group and EPF agreed to waive RM2.9bil compensation owed by Government.
Yesterday it was reported that, Pas president, Datuk Seri Abdul Hadi Awang had admitted the opposition’s promise to abolish toll was difficult to be carried out.
Hadi said, ”Pakatan needs to make detailed research before abolishing tolls to avoid any financial burden to cover the cost of managing a highway.”
Responding to this deputy prime minister, Tan Sri Muhyiddin Yassin stated that Malaysians are not a gullible lot and won’t be easily duped by the Opposition manifesto.
Meanwhile, in another report several state BN leaders have called Pakatan bluff over a towering promise it made to build a toll-free Pan Borneo highway, calling the promise bewildering, especially since PR is still grappling with unresolved issues in the states under its administration.
“Many promises were made in Selangor and Penang and what do we see now? Only 15 per cent of those promises were fulfilled.
“Now, they want to do the same thing in Sarawak. So far, we have seen several PR members elected into Sarawak DUN. What did they promise the people before they got elected? said Sarawak BN youth chief Datuk Fadillah Yusof in the report.
Source: MOLE
