In God we trust, in highway trust we don’t

Before the government demands our agreement on this highway trust initiative, they ought to build our confidence first.

First, they should work on honouring their promises. At one time, it was about reducing toll rates and eventually abolishing tolls altogether. Given the choice, the majority of Malaysians wouldn’t want to pay tolls.

Second, the government should not extend the concession period. Simply because the toll rates were reduced by a mere 18%, a longer concession extension of 10 years followed almost automatically.

What issues might arise from putting all highways under a single trust body?

At this stage of the concession upheaval, this poorly thought-out strategy says nothing but is perhaps another political gimmick to shadow the error.

Not all existing highways are owned by Khazanah Nasional or the Employees Provident Fund (EPF), the two government-linked companies which, historically, have not been providing good dividends, both to the government or the contributors. So, what guarantees are there that things would be better under the trust?

Some highways are privately owned or owned by listed entities. Restructuring them all into a single trust entity with different concession periods would lead to new problems and unforeseen issues, both in terms of management and finance – unless the government is willing to forego future taxes.

Investment banks will no doubt welcome this approach. It’s going to be a massive corporate exercise that will affect the users.

How would a trust company help to reduce toll rates?

A trust company will still require a reasonable return on investment for all the payments made to the current highway owners. Based on that, toll reductions don’t seem to be likely.

Toll reductions have always been accompanied by toll concession extensions, which burden the users. Concession extensions only benefit the concession holders and their lenders, but not the users, consumers and the public.

Higher toll rates are known to add more to the transport cost of goods and people, so the total logistics costs plus the interests (on the capital and operating expenditures) tend to get passed on to the buyers or consumers. So, the public end up paying more in the long term.

How would the trust mechanism work?

The mechanism has not been revealed yet. So, for now, it’s all empty political talk and potential income for the right investment banks.

What should Putrajaya do instead?

Putrajaya should look at the balance of the concession periods for all the toll highways and offer to sell them to any privately owned interested parties to take over, especially highways owned by Khazanah and EPF.

The government should exit these corporate holdings and withdraw from any forms of conflict of interest as they should not be handling policy setting, on the one hand, and business ownership on the other.

By transferring the assets to the private sector, the government can be relieved of all government guarantees by the billions and let the private sector, with their private funding, take over the job of operating and maintaining the highways. Setting the right policies and enforcing them, are the two important roles of a government.

But a decision must be consistent. The highways should be allowed to operate up to the expiry date of the current concession period. There should also not be any extension of time, so upon its expiry, all toll highways will revert to the highway authority and will be free of any tolls.

By that time, if the highway authority wants to introduce the idea of turning them into a highway trust, then it would be worth considering. After all, toll-free highways would still need funding for their operations, maintenance and future improvements.

Where are the funds coming from?

A portion of the vehicle sales tax, road tax and fuel tax collected from vehicle owners could be channelled for this purpose. Vehicle owners contribute a massive amount of taxes yearly to government coffers.

Perhaps, another portion of these taxes could also be channelled to partially fund public transportation such as MRT, LRT, buses and commuter train services. Under this scenario, a transport trust, instead of a highway trust, appears to make more sense.

It could then be created and expanded to take a bigger and wider role, which is to manage and operate the entire network of toll-free highways and public transport systems.

This is what Malaysia needs. A new strategic plan that will revamp the old methods. We need an injection of fresh ideas, built on a much fairer and a more equitable framework that is not biased and selective in nature. Not just for highways but for other sectors, too.

Perhaps, a system that is more honest and trustworthy than what we are led to believe. - FMT

The views expressed are those of the author and do not necessarily reflect those of MMKtT.