Tun M Left Us A Problem (Legacy) That We Need To Solve.

For example, the concession agreement given to PLUS, which was privatized to crony Halim, allowed for a 10% increase every 3 years - meaning that tolls will increase 46% in about 10 years - or get compensated by govt for it.

Yes, the govt made a mistake during Tun M's period of awarding Toll concessions with automatic toll increases every few years - even as traffic increases. 

While understanding that private concessions was necessary for quickly developing world-class highways, the concession terms could have been structured more fairly instead of getting us to pay increasingly more every year for the mistakes of the past.

Tun M left us a problem that we need to solve. And to solve the problem will involve big bucks.

You can't just simply cancel their contracts as it will cause great damage to the financial system as existing bondholders and shareholders will cry foul. 

For example, the concession agreement given to PLUS, which was privatized to crony Halim, allowed for a 10% increase every 3 years - meaning that tolls will increase 46% in about 10 years - or get compensated by govt for it. 

The year before PLUS was taken back by Govt and EPF, Govt paid RM800 million in compensation for that year alone.

Govt had said that it paid RM1.1 billion for the period 2008-2013 to compensate the toll concessions that just announced toll increases - an average of RM183m per year. But for 2014, the compensation amount is RM403 million.

This means that toll compensations will continue to increase every year - an increasingly heavy burden that future govt budgets have to bear.

In the case of PLUS, the Najib Govt solved this problem by buying back PLUS and restructured the agrement to keep tolls hopefully constant forever - on top of all those discounts given for frequent toll users (meaning effective toll rates paid has reduced).

This is why the govt was confident to make this a promise in their GE13 manifesto to gradually reduce INTER-CITY tolls (antara bandar). 

(BTW, there is some confusion on this as the Malay version clearly says "antara bandar".

In the rest of the other languages, Cina, English, Tamil, it says "Intra-city".

However, it is important to note that the promise for toll increases comes under the section called "rural transformasi" - suggesting that the Malay version is the correct one whereas the rest are wrongly translated.)

In the period before GE13 where govt had stopped tolls from rising and even closed down many toll plazas but this did not translate to increased support for govt from city-folks.

Additionally, the govt has spent tens of billions and is spending tens of billions more in upgrading inner city public transports - more buses and commuter trains, MRT1, MRT2, LRT 1 extension, LRT2 extensions, LRT3, BRTs etc.

Govt can't be spending so much to build public transport and at the same time try and discourage its usage by continuing to keep tolls cheaper - that's contradicting policies.

Therefore, from a political point-of-view, the govt will not be badly impacted by these rises in inner city toll roads - especially since East Malaysian and rural population have always complained why their tax money is being used to subsidize city-folks.

I am not a supporter of "abolish tolls" as this is unfair and goes against the concept of user pays - but I am certainly no supporter of tolls keep increasing heavily forever even as traffic increases.

The question is, how do we solve the remaining toll concessions in a similar way?

Would the way to restructure toll highways be similar to how the govt has restructured the water industry by buying back private water concessions nationwide using a SPAN like vehicle to issue cheaper govt-guaranteed bonds?

Post from Mr Lim Sian See