At the crossroads of highway policy, which way should Malaysia go?

  

SPECIAL REPORT The Malaysian Highway projects are the outcome of the privatisation agenda. Under the Public-Private Partnership (PPP) concept, the government awards concession contracts to highway companies, which in turn, build and operate the highways.

When the contract period ends, they will transfer the management of the highway back to the government.

On the government’s side, its aim is to save public expenses by handing over the management of the highways to the contractors - and it is dependent on the efficiency of these private companies to run the highways.

According to the PPP Unit under the Prime Minister's Department, the government had saved RM496.9 billion on these projects from 1984 to December 2014.

However, the privatisation of our highways is flawed as the government still needs to bear the risks and losses of these companies, despite handing over these projects to the private sector and government-linked companies (GLCs).

Should the government disallow the concessionaires to raise the toll rates, it must compensate the companies, as stated in the concession contract.

The lack of transparency in awarding the contracts has brought about allegations of cronyism.

Even former prime minister Dr Mahathir Mohamad and the current crop of Umno leaders had admitted that the North-South Highway (Plus) project was awarded to finance the Umno headquarters - Putra World Trade Centre - according to Malaysian Maverick: Mahathir Mohamad in Turbulent Times.

If the Malaysian highway policy is really that bad, what are the alternatives for us? Can we get rid of the days of paying toll or receiving the bad news of another toll hike, and of government compensation to the concessionaires in the future?

Malaysiakini studied the alternative proposal by the opposition, as well as the model adopted by some European countries, looking at advantages and disadvantages within these options.

Pakatan opposes profiteering, allows toll collection

Pakatan Rakyat had promised to take over the highways in stages and ultimately abolish tolls.

Pakatan Rakyat was dissolved last year and replaced by Pakatan Harapan. Since two of its component parties remain, it is believed that the alternative highway policy of Pakatan Harapan, which is expected to be launched this June, will be similar to what was proposed by Pakatan Rakyat.

While Pakatan Rakyat promised to abolish tolls, it wasn’t against the idea of toll collection but was against profiteering concessionaires, PKR secretary-general Rafizi Ramli (photo) told Malaysiakini.

Rafizi said if Harapan takes over Putrajaya, they will do a cost-benefit analysis on each highway and set up a Public Agreement Commission to evaluate whether there are any lopsided agreements, and come up with the remedy to make them fair to the public.

Rafizi said that the new government would then renegotiate the contracts with the concessionaires based on the suggestions and will take over the highways, on which the people will pay less toll.

The Pandan MP cited Plus as an example, saying that the toll collected and the government compensation given to Plus Malaysia Bhd has exceeded the maintenance cost of the highway. Thus it should abolish the toll and hand the North-South Expressway operations back to the government.

“The same case is applicable to other highways, especially in the Klang Valley, because they tend to be more profitable (despite higher maintenance cost per kilometre) because the traffic growth is expected to be higher,” Rafizi said in an email reply.

Users could pay lesser within shorter period

Rafizi said that neither Pakatan Rakyat nor Pakatan Harapan are against toll collection, but he hopes that the users could pay lesser toll within a shorter period.

“I am in favour of allowing specialised highway operators to build future highways in exchange for the right to collect toll in order to recover their investment; but with a reasonable share of profits – say between five and eight percent, depending on the benchmark industry return at the time.

“Once the concessionaire has fully recovered the investment and the agreed profit (say within 10 to 15 years), the asset will be returned to the government,” he added.

Asked the source of money to maintain the highways, Rafizi said it would be allocated through an annual budget and the maintenance contracts will be awarded via an open tender process, to make sure that the cost is reasonable.

He stressed that the rakyat do not have to pay higher tax for highway maintenance.

Universiti Malaya professor of political economy Terence Gomez (photo) is also against the current highway policy, saying that the road users do not need to pay toll since they are paying road tax.

However, Terence also agrees that the road tax collected is insufficient to maintain the highways and a minimum toll rate is required.

“So I think you have to look at them on a case by case basis.

“And I think they may need to see whether there may be a minimum toll to be imposed in certain places to make sure that there is sufficient money to cover the costs,” he told Malaysiakini when contacted.

‘Shadow Toll’ comes with higher fuel tax

Which country doesn’t require road users to pay toll? Some countries in Europe have implemented the ‘Shadow Toll’ system, where the government hands over the construction contract to concessionaires. These companies will provide free usage of the highway while the maintenance cost is borne by the government.

England, Netherlands and Finland have adopted such a policy. Since road users don’t need to pay toll, this is a better way of diverting the traffic in certain congested areas.

But the problem is that the government needs to find money to maintain the roads and compensate the concessionaires regularly.

In England, there are only three sections of highways that require toll payment but ultimately, the British people need to pay the price in the form of a fuel tax.

The Telegraph newspaper had reported in 2014 that fuel tax paid by British drivers is the highest in Europe. For every litre of unleaded petrol, the fuel duty and value-added tax is 61 percent, while for diesel, it is 59 percent.

The high duty and tax on fuel has sparked several public protests throughout the years.

In Norway, concessionaires bear the risk of financial loss

Perhaps the ‘Norwegian model’ is one of the references for the Malaysian government, so as to avoid the disgruntlement of the public due to tax or toll payment, and also to avoid public institutions from bearing the financial risk of managing tolled highways.

Norway adopts the ‘users pay’ concept for its highways; it even has more than 40 highway concessionaires in the country.

But different from the Malaysian PPP model, these concessionaires are only responsible for toll collection. The Norwegian Public Roads Administration (NPRA) does the design, construction and maintenance of the highways.

The highway project in Norway is proposed by the local county municipality and seconded by the NPRA, before it is approved by the Parliament.

The formation of the toll collection concessionaire is run by the county municipality and the local community as a non-profit organisation.

Should the toll collected exceed the targeted amount, the company must hand the extra profit to the government as funds for local services.

And if a company has successfully hit the target - even if the concession period is not over - it will close shop.

A research paper in 2001 shows that toll revenue represents 32 percent of the state budget for the national road system.

However, if the toll collected by any company does not reach the targeted number, it must bear the consequences and the government will not provide any subsidy.

Three PPP highway pilot projects approved

But there are weakness under the ‘Norwegian model’. The NPRA would face obstacles when delivering orders, such as the designation of the toll system to the toll collection company, as these companies are privately owned.

The effectiveness of these companies are also in question, as they are all small-scale players; it’s hard for them to train and retain talents as the companies will ultimately close down, once the target is achieved.

As such, NPRA had announced in 2014 that it will work together with technology company IBM to come up with a centralised national tolling system.

In order to overcome the problems of insufficient funds and project delays, the Norwegian Parliament had, in 2000, approved three pilot projects for toll highways to follow the PPP method.

The purpose of these three projects is to determine whether PPP projects are suitable for Norway.

Deal with highway projects transparently

If Malaysia wants to maintain its current highway policy, the government must take steps to make sure that it is done efficiently and transparently and in the interest of the rakyat.

It includes enacting laws to govern all the BOT (build–operate–transfer) projects, and enhancing the efficiency of the Malaysian Highway Authority by putting all the jurisdictions regarding highway projects within its ambit.

The government should do away with direct negotiation when it comes to awarding new highway projects, going through open tender instead and explain to the public how the decision is made.

The authorities also need to renegotiate the contracts with all the concessionaires to make sure no more compensation is given, no more minimum profit is guaranteed, and no more toll hike is allowed every three to five years.

Nevertheless, the government has managed to gain its profit share from the concessionaires a few years ago.

In 2013, then works minister Shaziman Abu Mansor said that the government had collected RM35.8 million from the profit made by the concessionaires for the first time, after the restructuring of the toll payments.

That there is profit to be made shows there is room - at the very least - for making the toll rate more people-friendly.

But beyond the reduction in the amount each driver has to pay is the larger issue of transparency of awarding contracts. There must be political will to reform the current award system to ensure the best interest of the rakyat is at the heart of every level of decision-making.

Mkini