Putrajaya to pay up to RM1 billion for failed traffic enforcement system

One of the seven automated enforcement system, or AES, cameras operating to nail down traffic offenders. The system is a now bane for Putrajaya as it may dole out RM1 billion for a settlement package. – The Malaysian Insider pic, February 4, 2015.

Putrajaya is close to finalising a settlement package with Beta Tegap Sdn Bhd and Automated Traffic Enforcement System (ATES) Sdn Bhd, having abruptly taken over the controversial automated enforcement system (AES) from the two private operators some two years ago.

The settlement with these two companies could cost Putrajaya a hefty sum, as much as RM500 million each, said a source close to the matter.

The AES was supposed to be launched nationwide in September 2012, but Putrajaya backtracked on its push to get the automated traffic enforcement system off the ground due to resistance from opposition and Barisan Nasional members of parliament

Beta Tegap and ATES, operators for the AES, have taken their case to be settled at the Kuala Lumpur Regional Centre for Arbitration (KLRCA), after Putrajaya backtracked on its contract with the two companies.

The case that has been under arbitration for more than two years now is due for hearing within the next two weeks.

When contacted, Treasury Secretary-General Tan Sri Mohd Irwan Serigar Abdullah told The Edge Financial Daily that the matter will be settled soon.

“I cannot elaborate [on the settlement package] as the negotiations are ongoing,” he said.

Another source close to the matter said Putrajaya and the two companies were working out a settlement and it needed to be kept under wraps until it was completed. Otherwise, the deal could unravel.

Under the agreement that was signed in early 2012 and implemented from September 2012, Beta Tegap and ATES were to build, operate and maintain the equipment and systems for the AES, to be handed over to the Road Transport Department (RTD) at the end of the five-year concession period.

The two companies had invested a huge sum just in the initial rollout of the AES — setting up of several secure facilities nationwide, including in Sabah and Sarawak, to house the RTD enforcement team and the monitoring system.

Based on the contract, the rate of return for both companies was capped at 17%, and it was to be remunerated based on a three-tier structure. Under the first tier, both companies would be entitled to RM16 per valid summons up to five million summonses.

After hitting more than five million summonses, tier two would kick in, with the additional revenue to be split evenly between the two companies and Putrajaya up to a cap of RM270 million each.

After hitting the cap, tier three would kick in with the companies each receiving 7.5% from the remaining revenue and the government the rest.

But both companies would only be paid if motorists settle their summonses — which is where the snag lies because motorists are not compelled to settle them.

After a huge public outcry over the system in 2013, then acting transport minister Datuk Seri Hishammuddin Hussein announced that a wholly-owned government unit, AES Solutions Sdn Bhd, would take over the management of AES from ATES and Beta Tegap.

Hishammuddin also announced that the government was willing to give a 50% discount on the AES summonses, if traffic offenders paid up quickly, meaning that those fined RM300 only need to pay RM150.

From what appeared to be an ambitious nationwide project to nail down traffic offenders, there are only seven cameras in operation to-date, a small number out of the planned 404 cameras that were supposed to be rolled out under a plan by the Ministry of Transport targeted for September  22, 2013. – The Edge Financial Daily