Saturday 1 September 2012

EDL takeover could weaken future toll projects, says economist

September 01, 2012
Highway concessionaires could no longer count on unyielding support for toll collections, said Yeah. — File pic
KUALA LUMPUR, Sept 1 ― A government takeover of the Eastern Dispersal Link (EDL) could undermine future toll projects given as concessionaires must be mindful that the government could reverse support due to public pressure, said RAM Ratings chief economist Yeah Kim Leng. 
This comes after reports on Thursday that the RM1 billion EDL, which has not been allowed to collect any tolls since it opened in April, will be taken over by the government ― a move that could potentially utilise taxpayer funds and increase the country’s public debt levels.

Yeah said future highway operators now needed to be mindful that government support for toll collection was fluid.

“It makes it more difficult for future projects,” he told The Malaysian Insider when contacted yesterday.

Yeah added that for government should first gauge the public’s willingness to pay the proposed toll for such future projects, as well as determine if taxpayers would agree to foot the bill for privatisation deals.

The Malaysian Insider reported last December that the RM1 billion highway built by Malaysian Resources Corp Bhd (MRCB) would force motorists making roundtrips to Singapore via the Johor Causeway to pay about five times more than the present rate of RM2.90.

The decision to bar the collection of tolls when the EDL opened was widely seen as a move to avoid a public backlash in the Umno stronghold state in the run-up to the general election.

The steep increase in tolls would have provided fodder for the opposition, especially PKR, which held its national congress in Johor late last year to signal its ready to take over the state despite not winning a single seat in the Umno fortress during Election 2008.

Over 50,000 vehicles cross the bridge daily, mostly Malaysians living in and around the state capital who commute to the island republic to work.

The lack of revenue prospects since the new highway opened, however, caused the Islamic bonds issued by EDL’s owner ― MRCB Southern Link Bhd’s ― to be downgraded by RAM earlier this month.

Malaysia has seen the sprouting of privately operated toll highways since the 1980s and tolls were a major issue during the last general election.

The Najib administration has attempted to address public unhappiness over tolls, and either reduced rates or completely abolished tolls at several highways in and around Kuala Lumpur.

PLUS Expressways Bhd, which operates the North South Expressway, was also taken over by the UEM Group, a government-linked corporation, and national pension fund EPF for RM23 billion in 2010.

After the takeover, PLUS Expressways said it would agree to lower toll hikes and forego compensation in exchange for a longer concession period.

The latest toll project to come under scrutiny from the opposition is the West Coast Expressway being built by Kumpulan Europlus for RM7 billion, due to its interest subsidies and RM2.24 billion soft loan from the government.

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