Wednesday, January 10, 2007


Toll-Tally Out Of Order


As reported in Screenshots:


1 ) January 8, 2007: Litrak CEO responding to Malaysiakini in Kuala Lumpur:
Litrak CEO Sazally Saidi told Malaysiakini in a written response that issues raised with the revision of toll rate along the LDP should best be posed to the relevant authorities. “This is because all those issues had been thoroughly discussed between the company and the authorities, where details were tabled, audited and scrutinised. Thus, the authorities are the best parties to provide answers as this will prevent any misunderstanding or misrepresentation of information with regard to the issues,” he said.



2 ) January 9, 2007: PM Abdullah Ahmad Badawi responding to Bernama in Putrajaya : Abdullah said the decision to allow the recent toll increase was based on representations by the concessionaires on their toll collection. "And what they proved to us, to the government, was that the toll had to be increased," he said. Asked whether details of the toll collection to date should be released to the public, he said: "All are public limited companies." Abdullah said that the projections of future traffic volume were made when the concessions were negotiated and the present-day conditions had to be taken into account. "We cannot deny them that. And if today, the situation warrants that we take action to raise the toll, we have to do it. Otherwise, we'll have to subsidise some more. How much more can we subsidise, how can we subsidise everything," he said.


3 ) January 9, 2007: PM Abdullah Ahmad Badawi responding to theSun in Putrajaya : Abdullah continued to defend the recent toll increase, however, adding that the government could not continue compensating highway concessionaires with no toll increase. Abdullah said when negotiations on the concession agreements were going on, a study was done on the traffic volume annually by the respective companies and the findings were presented for discussion and approval. When told that highway concesssionaire Litrak reported in its 2006 annual report a RM80 million profit and why there was a need for the government to still compensate the company, Abdullah said: "We had a lot of discussion on this. We did what we felt was right. If you (reporter) have more information on what you just said, please let us know." When asked about Mahathir's statement that the traffic volume on highways had probably increased five-fold and that the government had a share in the excess collection, Abdullah did not offer a reply.


4 ) January 9, 2007: Minister S. Samy Vellu responding to Bernama in New Delhi: Works Minister S. Samy Vellu said the cabinet has to give the green light for highway concessionaires to reveal details of toll collection and the volume of traffic using their highways. "I will bring it up to the cabinet on whether we can allow highway concessionaires to release these figures. If the cabinet agrees, then we will ask the companies involved to come out with the details," he said.


5 ) January 9, 2007: Minister S. Samy Vellu was quoted as saying in The Star: On the calls for a review in the concessionaire agreements, he said the Government would have to pay compensation if the agreements were reviewed.


Do we expect to pass the buck for another 24 years till LDP's concession expires in 2031?


My Unpopular Lima Sen


1) Can only blame Mahathir and Samy as the concessions were signed during their time.


2) Government stopping subsidy is correct.


3) Traffic has jumped 5-fold, but concession agreement was flawed as it failed to take into account "contingent situations such as these".


4) Renegotiating the agreement, while good, will BE VERY VERY BAD in the eyes of institutional and foreign investors. It will be taken to mean any agreement can be stopped and renegotiated, especially when it favours the "investing company" - what kind of message will that send? You can still renogotiate but the government will have to pay a very sizable compensation, and you would WANT to pay a sizable compensation - at least that will be a one off thing and no more "same hoopla" every few years when Litrak increases the toll.


5) If government now feels that they have the short end of the stick, instead of just subsidising the bloody thing - just get Khazanah to do a General Offer to buyout Litrak and take the bloody thing private. How much will that cost? RM1.4-RM1.6 billion. Hey, best to get EPF involved, at least its money well spent, and the tolls go straight to EPF profits, dividend back to the people. What this lesson tells us is the government MUST BE SMARTER = you still give out toll road concessions as the government need not shoulder all the infra risk and capital deployment; just structure better agreements in that, after certain milestones where the concessionaire makes "supernormal profits", that the government would have a call option buy back controlling stake at a certain premium, that way everyone happy and smarter.


6) What the government must avoid doing is to send the message that agreements can be changed when it suits the government to do so as the ramifications would be too enormous and would not be best global practice. Yes, the previous people in charge did a poor job in drafting the agreement. Don't blame the present new leader. Yes, the current government can do some thing to alleviate the situation, but its not Litrak's fault also.

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