Before the automated enforcement system (AES), we had the saman ekor (the summons that follows you) which did about the same thing and with a lot of success and covered a wider range of traffic offences.
To cut down on road accidents, the government had turned on the screws on errant motorists and road users by enforcing traffic rules. But extreme political pressure, a lot of it from within the ruling party, resulted in saman ekor being rendered virtually ineffectual.
Under saman ekor, the offences could be recorded by all means available to the enforcement agencies, including hidden speed traps. There was no necessity to warn road users as such. But strangely, the Road Transport Act was amended in 2011 making it mandatory for warning signs to be put up in areas where operations were being conducted.
The saman ekor system saw some 10 million summonses issued over a 10-year period to 2010 with billions of ringgit in summonses issued but the collection of these was very poor. Road users objected strenuously to summonses because often they became aware of them only when they renewed their road tax.
But after pressure, the enforcement through saman ekor trickled off. And then AES was implemented.
From the enforcement point of view, the public should really have no objection to AES. There are warning signs put up and if road users broke the law by beating traffic lights and speeding despite the warnings, then it is only fair they pay up the fines.
In fact, given the high rate of accidents and road fatalities in Malaysia (19 people die a day on the roads and last year 6,877 people were killed) among the highest in the world, it is necessary to do something drastic about this. And it must definitely involve monitoring of traffic offences and adequate punishment.
Huge profit motive
While the principle of an AES is undeniably good, and it can and should be extended to other areas, there are a couple of fatal flaws with it.
First, as in many things in Malaysia, AES has become a money-making venture for private, connected businesses when it was simple enough for the enforcement authorities to run it themselves.
And, second, because it was handed over to the private sector to implement, there is a huge profit motive behind it and high, inflated costs associated with its implementation, which has to be factored into returns to the investors.
The two companies eventually awarded the contracts to put up 831 cameras nationwide were Beta Tegap Sdn Bhd and ATES Sdn Bhd. But this was under a tender called for in 2006, six years ago.
The first question is why was it necessary to privatise this? It would have been simple enough for the government to have set up the AES by dealing directly with providers instead of going through the two companies, neither of whom had any expertise in this area and had mere links to overseas providers in Germany and Australia.
It has been reported that the two companies will spent some RM300 to RM400 million each or up to RM800 million to set up the 831 cameras. That works out to a cost of over RM960,000 a camera, which is rather expensive.
The internal rate of return (IRR - the true rate of return on investment based on timing of investments made and cash flows received) over the five-year period of the concession is capped at 17%. That is rather high.
By gearing up in an environment where debt carries an interest rate of 6% or less per annum, much higher rates of return on equity capital can be obtained. If the investment was 70% financed by debt and 30% by equity, a 17% IRR gives a return on equity of over 40%! And that too on investments whose costs may have been overinflated in the first place.
It looks like the government has learnt little from the concessions that were given over the years for toll roads and independent power production which in most cases had guaranteed toll increase rates and guaranteed take up of power or a fixed capacity charge.
Without details of the agreement being made public for the AES it is impossible to say if there have been other concessions made.
Keep it under gov't control
The right thing to have done is to have kept the AES under government control, invited international open tenders, without blood-sucking third parties, and got the best deal. That way, all the revenue that comes from summonses can remain in government hands.
That way too there would have been clear moral authority for the government to go ahead and push the AES through in the interest of providing greater safety on the roads and reducing the road kill which is already dangerously high.
And it would have been possible for the government to push through other measures such as saman ekor in a renewed effort to further improve safety on our roads, without the issue becoming politicised yet again.
We should be careful what we privatise. The original aim of privatisation, long since lost in the maze of patronage politics and plain cronyism and corruption, is efficiency and lower costs at the end of the day.
To cut down on road accidents, the government had turned on the screws on errant motorists and road users by enforcing traffic rules. But extreme political pressure, a lot of it from within the ruling party, resulted in saman ekor being rendered virtually ineffectual.
Under saman ekor, the offences could be recorded by all means available to the enforcement agencies, including hidden speed traps. There was no necessity to warn road users as such. But strangely, the Road Transport Act was amended in 2011 making it mandatory for warning signs to be put up in areas where operations were being conducted.The saman ekor system saw some 10 million summonses issued over a 10-year period to 2010 with billions of ringgit in summonses issued but the collection of these was very poor. Road users objected strenuously to summonses because often they became aware of them only when they renewed their road tax.
But after pressure, the enforcement through saman ekor trickled off. And then AES was implemented.
From the enforcement point of view, the public should really have no objection to AES. There are warning signs put up and if road users broke the law by beating traffic lights and speeding despite the warnings, then it is only fair they pay up the fines.
In fact, given the high rate of accidents and road fatalities in Malaysia (19 people die a day on the roads and last year 6,877 people were killed) among the highest in the world, it is necessary to do something drastic about this. And it must definitely involve monitoring of traffic offences and adequate punishment.
Huge profit motive
While the principle of an AES is undeniably good, and it can and should be extended to other areas, there are a couple of fatal flaws with it.
First, as in many things in Malaysia, AES has become a money-making venture for private, connected businesses when it was simple enough for the enforcement authorities to run it themselves.
And, second, because it was handed over to the private sector to implement, there is a huge profit motive behind it and high, inflated costs associated with its implementation, which has to be factored into returns to the investors.
The two companies eventually awarded the contracts to put up 831 cameras nationwide were Beta Tegap Sdn Bhd and ATES Sdn Bhd. But this was under a tender called for in 2006, six years ago.
The first question is why was it necessary to privatise this? It would have been simple enough for the government to have set up the AES by dealing directly with providers instead of going through the two companies, neither of whom had any expertise in this area and had mere links to overseas providers in Germany and Australia.
It has been reported that the two companies will spent some RM300 to RM400 million each or up to RM800 million to set up the 831 cameras. That works out to a cost of over RM960,000 a camera, which is rather expensive.The internal rate of return (IRR - the true rate of return on investment based on timing of investments made and cash flows received) over the five-year period of the concession is capped at 17%. That is rather high.
By gearing up in an environment where debt carries an interest rate of 6% or less per annum, much higher rates of return on equity capital can be obtained. If the investment was 70% financed by debt and 30% by equity, a 17% IRR gives a return on equity of over 40%! And that too on investments whose costs may have been overinflated in the first place.
It looks like the government has learnt little from the concessions that were given over the years for toll roads and independent power production which in most cases had guaranteed toll increase rates and guaranteed take up of power or a fixed capacity charge.
Without details of the agreement being made public for the AES it is impossible to say if there have been other concessions made.
Keep it under gov't control
The right thing to have done is to have kept the AES under government control, invited international open tenders, without blood-sucking third parties, and got the best deal. That way, all the revenue that comes from summonses can remain in government hands.
That way too there would have been clear moral authority for the government to go ahead and push the AES through in the interest of providing greater safety on the roads and reducing the road kill which is already dangerously high.
And it would have been possible for the government to push through other measures such as saman ekor in a renewed effort to further improve safety on our roads, without the issue becoming politicised yet again.
We should be careful what we privatise. The original aim of privatisation, long since lost in the maze of patronage politics and plain cronyism and corruption, is efficiency and lower costs at the end of the day.
That has hardly materialised, and almost every instance of privatisation in the last quarter of a century has been accompanied by higher charges for the common man to bear or the government to subsidise. Privatisation profits came out of the pockets of consumers and the government.
Unfortunately, the AES is going the same way. If it had been under government hands completely, things could have been very different and some real progress could have been made to reduce road kill without all that politicking.
Unfortunately, the AES is going the same way. If it had been under government hands completely, things could have been very different and some real progress could have been made to reduce road kill without all that politicking.
P GUNASEGARAM has been a journalist and analyst for over 30 years, having worked in key positions in Malaysian newspapers and magazines including Business Times, Malaysian Business, The Edgeand The Star. He has also worked as an analyst and head of equity research at local and foreign brokerage firms. Early next year, he will help launch business news portal KiniBiz in a joint venture withMalaysiakini.
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