By P. Gunasegaram
Toll roads have an interesting, colourful history that one has to simply get into to understand the origins of the problem. In history too may lie the eventual solution to the problems of tolls in Malaysia.
There is a word in whose name a multitude of sins was committed in Malaysia – privatisation. It is a concept introduced, by for instance the likes of Margaret Thatcher in the UK, in the ’80s to sell or assign what was done by government previously to the private sector.
The idea was if the private sector undertook it, then it would be done more efficiently instead of a bureaucratic government with obstacles and problems at every twist and turn. It was envisaged – wrongly – that services provided by government could be done more cheaply by the private sector.
In Malaysia, then-prime minister Dr Mahathir Mohamad, appointed in 1981, latched on to the idea of privatisation and enthusiastically embraced it for what it clearly was – an instrument to dispense corruption and patronage, cultivate a coterie of businessmen who will not only provide for politicians but will ensure party funding in future, and incidentally some social restructuring of millionaires and billionaires according to race.
As all Malaysians now know if they admit the truth to themselves, privatisation did not bring prices down, but increased it substantially. It increased corruption and patronage by leaps and bounds with all its attendant costs, re 1MDB and the RM2.6 billion donation; it created new billionaires, enriched old ones further and made many other multi-millionaires overnight; and it put in place a system which will be hard to dismantle in future making Malaysians pay too much for services, supporting corruption and patronage in the process, and setting our country behind by decades.
If anyone sat down and thought about it enough, privatisation would have been thrown out the window straight off – if a layer of profit has to be introduced by getting someone to provide the services in return for a good return, it stands to reason as certainly as a clear sky is blue (we have not seen much of that by the way) that prices will go up.
We paid toll for roads where virtually none existed before, and the government forgot about providing viable alternative routes and even allowed concession operators to charge tolls on roads they merely upgraded eg the Federal Highway, and an access road to it near the Guinness brewery.
And we paid more for electricity and made billionaires out of some independent power producers who never knew the difference between a kilowatt and an hour, let alone kilowatt-hour. Ditto for water and millions of hectolitres.
Consider our first major toll road concession operator, Projek Lebuhraya Utara Selatan or PLUS. Project cost was supposed to be RM3.5 billion in 1985 but ballooned to RM6 billion for the North-South Expressway (NSE), the main earnings contributor to PLUS.
By 2012, Plus did expand, and its market worth, based on its concession agreements was around RM30 billion in 2012, over eight times the original projected construction cost of the NSE. Revenue was around RM4 billion a year, more than the original cost of the entire construction of the NSE.
Clearly, toll roads were a great business to be in. It was a template to guaranteed profits and riches. First, construction costs were allowed to be high, simply because the toll operator also constructed the toll road. The higher the cost initially, the more toll can be collected later to justify the high costs.
On top of high costs, the profit margins on construction were obscenely high – as high as 20% or more (5% to 7% should have been the norm) on project costs which were already highly inflated, a terrible double whammy inflicted on an unwitting public by a conspiratorial government.
Not only were toll rates high, the government agreed to provide soft loans in instances when traffic fell below a certain minimum, a triple whammy if you will.
And because toll concession agreements are a secret until this day, no one knows for sure what is the split with the government, or even if there is one, when traffic projections are exceeded as they must have been for many toll road concessions.
Halim Saad
It was very lucrative business and over 20 other toll concessionaires followed Plus, originally owned by Umno-linked business person Halim Saad, into the business, some of them collecting hundreds of millions of ringgit in toll every year.
And the tolls were not only for intercity roads but began to be imposed in some cases for construction of a mere flyover or a bypass plus some widening of road areas. If you travelled within Kuala Lumpur, you end up paying several tolls.
And needless to say, most of them were not done under open tender. Curiously, the first one was. There were four bidders for the NSE but the lowest bid was not chosen. Very few concession contracts after that were by open tender. On top of that, there was no attempt to keep construction and toll operations separate.
Currently almost all toll concession have detailed agreements, none of which are public. In Jamaica, they are made public – you can download them here in KL from their website there, you don’t have to risk going in under the Official Secrets Act here which provides for mandatory jailing via a Mahathir-inspired and initiated amendment to the Act.
Clearly there must be something to hide in these contracts, and everything else here which make such secrecy for commercial contracts between the government and the private sector so necessary.
But what is clear is that these agreements have built-in guarantees to ensure profitability for toll operators in most cases, especially the early ones. This includes guaranteed toll increases or compensation by the government in lieu.
That brings us to today. Simply put, the government has decided to do away with years of compensation by allowing toll to be raised, in some cases by as much as a 100%. At the very least, the burden could have been minimised by spreading out toll increases over several years.
Why the government has chosen to do this now, is anyone’s guess – ranging from not enough money in the government kitty to more money for handouts, and elections being some way off which provides a window for the increases now.
Whatever the reasons, toll increases are an unnecessary toll on the public which should never have been allowed in the way it was done before and briefly outlined here. As with independent power production and others, it was a clear abuse of the privatisation process in favour of the ruling party and politicians.
It is therefore necessary that the government reexamine the entire toll scheme and scheming, and look at some way it can hold toll concessionaires more accountable to the public and invest more in infrastructure to serve the public.
Perhaps we can’t do away with tolls completely but we can certainly renegotiate lower rates going forward, especially when the tolls are due for expiry. The expiry of toll concessions is a leverage that can be used for negotiation to bring rates down now or moderate increases going further out.
Meanwhile, toll booths are causing traffic congestion which tolls were supposed to alleviate. Even if we can’t do away with tolls, we can do away with toll booths.
Technology is already there to use gantries to deduct the fare from toll cards automatically but toll operators seem to be slow in adopting them. Or is because of increased costs and they want to be compensated for these too either by the government or the public?
For these changes to tolls to take place, it needs a nudge from government or more specifically politicians. But are they too afraid to bite the hand that feeds and therefore will continue to sanction highway robbery?
GRRRRR!!!
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