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Tuesday, October 19, 2010

RM64 billion bill compensation to PLUS to freeze toll rates

PLUS toll plazaThis is a scandal of foisted upon Malaysians by UMNO/BN who under Dr. Mahathir, signed grossly lopsided agreements with PLUS and other toll road operators with obscene guaranteed profit and regular toll rate increases. Now because UMNO/BN fears upsetting the voters, they have frozen toll rates for 5 years and open themselves to potential RM5 billion compensation to PLUS for the five years. If toll rates are frozen till the end of the concession agreements, the compensation balloons to RM64 billion. What has UMNO/BN wrought upon the suffering nation:

'Populist' toll freeze may cost rakyat RM64 bil
Joseph Sipalan
(see video)

The government may end up forking out RM64 billion to compensate Plus Highways Berhad, if it intends to freeze toll rates till the end of the concession term in 2038 as a populist move, said DAP publicity secretary Tony Pua.

Taking the going estimate of RM5 billion in compensation for the recently announced five-year freeze on toll rates on four of Plus' highways, he said it makes no sense for the government to make such an “obscene” pay-out just to keep voters happy.

“Given the circumstances where the government is fearful of increasing any toll rates due to a potential voter backlash, should the toll rates be frozen all the way till the concession expires, the total compensation that needs to be paid over the next 28 years will amount to a mind-boggling RM64 billion,” said Pua at a press conference in the parliament lobby today.

Pua (right), who is also Petaling Jaya-Utara MP, said it would be more sensible if the government instead takes over Plus Expressways Berhad rather than to allow the Employees' Providence Fund (EPF) and UEM Berhad to buy over the toll concessionaire

Repeating the DAP's proposal to nationalise toll concessionaires, he said it would cost the government RM23 billion to buy-over Plus, based on the RM4.60 per share offer by the UEM-EPF joint venture.

Assuming that the toll rates are then frozen for 14 years, the government would still recoup its investment and allow it to either make the highways toll free or charge just minimal fees for maintenance, he said.

“It absolutely does not make sense for the government to be compensating an obscene amount of RM5 billion to the concessionaire, or possibly even as high as RM64 billion over the entire period, when the cost of directly acquiring Plus will only be RM23 billion as offered by UEM-EPF.

“Unless of course, the government is intent on making Malaysians suffer,” he said.
Najib's (left) Budget 2011 speech last Friday highlighted a freeze in the earlier planned toll hike on Plus highways, one of many populist moves that prompted critics to label the budget an “election budget”.

Earlier, Pua had criticised the planned buy-over of Plus Expressways Bhd saying that while the EPF's main task is to ensure fund contributors receive dividends, Plus was "sucking" ordinary citizens who are paying high toll rates due to lopsided highway concessions.

"This is not the way for EPF to generate returns for the people. The government might as well just create more highways with unfair contracts and let EPF manage them.

Source: Malaysiakini: 'Populist' toll freeze may cost rakyat RM64 bil

From Malaysian Insider: Guan Eng says toll-freeze meaningless:

Guan Eng says toll-freeze meaningless
By Clara Chooi October 19, 2010
KUALA LUMPUR, Oct 19 — Penang Chief Minister Lim Guan Eng threw a wet blanket today over the five-year toll freeze for Plus highways, pointing out that it was “meaningless” and would only lead Malaysians into greater debt.

He explained in a statement that while the people would save on toll money, they still end up paying toll-road concessionaire Plus Expressways Bhd large compensations.

UEM Group managing director Datuk Izzaddin Idris revealed yesterday that the five-year toll freeze could cost the government some RM5 billion in compensation payments, which is about RM170 per Malaysian.

If added to the outstanding RM2.5 billion presently owed to Plus, the government would have to foot a staggering RM7.5 billion bill to the company.

Izzaddin however added that although compensations averaged at RM1 billion each year in the past, the actual sum to be paid to Plus for the five-year toll freeze still needed to be finalised with the government and could cost less than RM5 billion.

Lim said today that the compensation payments would only lead to an unhealthy increase in both Federal government debt and debt service charges.

“DAP is shocked at the revelations by UEM Group’s Datuk Izzaddin Idris that toll highway operator Plus could be compensated as much as RM5 billion by the Federal government over the next five years for not raising toll rates.

“Clearly freezing toll rates is meaningless as the people still has to pay through compensation payments by the government,” said Lim, who is also DAP secretary-general.

He suggested that the government consider a one-off nationalisation programme limited to toll concession agreements to prevent irresponsible companies from reaping extraordinary profits at the expense of the public.

“Nationalisation is necessary when toll concession operators like Plus have not only recouped their investment and construction costs but also maintenance costs and are earning pure profits from toll rates revenue collected.

“Failure to do so will not only create an unbearable financial burden to the people but also strain our country’s finances for the foreseeable future,” he said.

Lim revealed that according to the Finance Ministry’s Economic Report 2010/2011, the total federal government debt would soar by 12.6 per cent from RM362.4 billion in 2009 to RM408.2 billion in 2010.

This, he pointed out, meant every Malaysian would be in debt of RM15,118 as at 2010.

“In other words for every Malaysian born, he or she will be immediately in debt of RM15,118.

“If we take into account paying an extra RM1 billion every year to Plus, it is an expense and a debt burden that the country can ill-afford,” he said.

Lim also said that corresponding to the increase in federal debt, debt service charges had also increased from RM14.2 billion in 2009 to RM15.9 billion in 2010 and was expected to soar to RM18.6 billion in 2011.

“Many Malaysians are unhappy why the country has to carry such a huge debt burden borne by 27 million Malaysians for the benefit of one company.

“Clearly unless drastic action is taken, 27 million Malaysians will lose out to enable a company comprise of BN cronies to gain,” he concluded.

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