20-year concession extension for PLUS Malaysia a positive trade-off; 18% discount still viable
It appears that the government’s decision to not sell PLUS Malaysia could likely help put a lid on inflationary pressure on transportation costs, The Star reports. The agreement, according to Sunway University economist Professor Dr Yeah Kim Leng, is part of a plan to not burden the public with cost-of-living pressure caused by toll increases.
The professor also added that toll rate increments are supposed to take place once every few years under the original concession, but the 20-year extension, which lengthens PLUS Malaysia’s revenue cycle, was a trade-off so the company could reduce toll rates by a minimum of 18% without losing the ability to maintain its highways.
“It is not expected to be a big issue because the toll collection is still more than sufficient to pay the maintenance costs. According to some estimates, maintenance costs only make up about 10% to 25% of the concessionaire’s total costs,” Dr Yeah explained.
As you may know, UEM Group (a subsidiary of Khazanah) holds a 51% share in PLUS Malaysia, while the remaining 49% is owned by the Employees’ Provident Fund (EPF). Naturally, there are concerns that the potential decrease in toll collection could lead to smaller payouts for EPF, but Dr Yeah disagrees.
“PLUS is a profitable and matured asset. It is good for it to remain indirectly in the hands of the government, especially because EPF contributors are members of the public,” he said.
Socio Economic Research Centre executive director Lee Heng Guie also welcomed the move to reduce toll rates. “It is good news at a time when we have to cope with the rising cost of living. I believe the government has weighed all the options and considered the rakyat’s welfare,” he said.
The CEO of Institute for Democracy and Economic Affairs, Ali Salman chimed in on the matter, adding that a transparent divestment process must be in place before the government engages in the privatisation of its assets. “It is imperative on the part of the government as guardian of national assets to produce and communicate a comprehensive divestment policy framework. The framework should also fully consider the implications of government-linked companies reforms, which may entail asset sales, to the broader socio-economic dynamics,” he said.
Meanwhile, finance minister Lim Guan Eng recently announced that the government will continue freezing the increase on toll fares across the country this year, but told reporters that the move would cost RM1 billion in compensation to concessionaires.
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