Highway concessionaire Plus is on the strike again! This time, it is further extending its toll collection period by another eight years, thus cumulatively stretching its original concession period of 30 years to a whopping 50 years!

Coming on the heel of the highly unreasonable toll hike of 10 percent, when the voices of angry protests have hardly faded, the Barisan Nasional government's current decision to further extend the concession period based on the flimsiest of excuses is a daring affront that will surely incur the wrath of the people.

Works Minister S Samy Vellu announced in Parliament on March 24 that the Cabinet has approved a packaged deal with Plus to widen certain sections of the North-South Expressway (NSE).

In consideration of Plus undertaking to widen two stretches of roads from four lanes to six lanes (Seremban-Ayer Keroh, Rawang-Tanjung Malim, totaling 119 km) and re-locating a toll complex (at Jelapang) and abolishing the Senai Toll, the government will write off a loan (to Plus) of RM962 million, hand over the existing Seremban-Port Dickson Expressway valued at RM50 million to Plus for toll collection, and extend the NSE toll collection period by eight years to 50 years. The arithmetic of this transaction is detailed as follows:

Preposterous proposition

It is seen from the above computations that the above upgrading works at the NSE will be completely paid for by the government.

It is further noted that the additional eight years of toll collections (from 2031 to 2038) as a form of compensation to Plus have been valued at a mere RM0.36 billion. What a preposterous proposition, when Plus toll collections in one year (2002) alone is already RM1.58 billion!

Considering the anticipated toll rate increases and traffic volume growth over the next three decades, toll collection levels in the 2030s will be many times the present levels, and the paltry figure of RM0.36 billion will then look like petty cash that could be recouped through one month's toll collections.

What in heavens name has caused our cabinet ministers to think that they can get away with such atrocious plundering on the people for successive generations?!

Apart from the Cabinet's blunders on quantum, the principle on which compensation is made to Plus for upgrading the expressway is also wrong. If there are defects and bottlenecks that need be rectified to ensure the smooth functioning of the expressway, it should be the obligation of the concessionaire to carry out such works at its own expense.

In particular, upgrading works designed to cater for higher traffic volume such as widening of road ways and extension of toll complexes. For, inherent in the toll rate, is the commitment to incur capital expenditure that will generate those toll collections. Bigger and better roads will bring higher income, so why should the government spend the money (the people's money) to do all these and let the concessionaire reap all the additional profits (from the people)?

It is only the dumbest government that will do a thing like this. Or alternatively, it is only the dumbest people who will elect such a government to make such suckers out of them.

Even without the recent 10 percent toll hike and the current eight year concession extension, the terms of payment granted to Plus have been grossly unfair to the public. In the 17 years of toll collections from 1988 to 2005, toll rates for cars have risen 172 percent from 5 sen/km to 13.6 sen/km, while consumer price index, compounding at an average of 3 percent per annum, has risen only 64 percent.

Since the purpose of rate review is only to cater for inflation/deflation, why should the government have allowed price escalation at the rate of three times the inflation rate?

(Toll rates must be viewed in the context that 40 percent of the 850 km North South Expressway were constructed and paid for by the government and handed over to Plus for toll collection at the time of award of the concession to Plus).

As if such abuse of the price adjustment mechanism for profiteering is not atrocious enough, the government added insult to injury by extending the toll collection period by 12 years, in addition to paying hefty annual compensations in a 1999 amendment to the original agreement to defer price adjustment from once a year to once every three years. (As an indication of the quantum of such annual compensation, Samy Vellu announced on Dec 16, 2004 that the compensation came to RM152 million a year).

Unbalanced contract

These completely one-sided concession terms favouring the concessionaire at the expense of the public must have made this into one of the most unbalanced contract in the world between the government and a private enterprise.

A bit of the relative historical backdrop will throw some light as to why the BN government has been going all out to favour Plus.

In 1988, the Malaysian government awarded the NSE concession to United Engineers Malaysia Berhad (UEM), a company owned by Umno trustee company Hatibudi Sdn Bhd.This award was heavily tainted with corruption allegations, as apart from conflict of interests, UEM was the least qualified among the four tenders submitted. UEM then formed Plus to undertake the NSE concession.

In spite of the fact that this was a privatised project which required the concessionaire to provide its own finance, the government provided a soft loan of RM1.6 billion which was half of the tender price of RM 3.2 billion (the construction costs were later reported to be double this amount, for reasons best known to Plus itself). Other over-generous terms given to UEM included annual increments of toll rates, guaranteed traffic volumes, various indemnities, the full details of which remain secret till this day.

When the recent Asian financial crisis struck in 1997/8, Plus took the role as cash cow to bankroll the UEM Group, which became largely insolvent, mired in debts that ran into tens of billion ringgit. The endless streams of toll collections from the NSE made Plus the rose among the thorns in the UEM Group, as far as credit standing was concerned. Plus naturally became the chief borrower of the group, incurring huge long term debts, in order to keep the UEM conglomerates afloat during the financial crisis.

This explains the unusually high gearing of Plus in spite of the fact its own highway operation is highly lucrative. It also explains the favouritism practiced by the BN government on Plus. Looking from this perspective, the people are now being made to carry the burden unshackled from the financial follies committed by the UEM Group.

In its heyday, the UEM/Renong group was the pre-eminent conglomerate in Malaysia's corporate world, having more than 10 listed companies under its wing. Being the favourite son to receive all the most lucrative contracts and privatised projects from the government, it has also been recognised as the very symbol of Malaysia's crony-capitalism of the Mahathir era.

Following the Asian financial crisis, when tens of billions of public funds failed to extricate the UEM/Renong group from the cesspool, the government made a grand bail out by buying over UEM completely and took over management control of the group. As a result, Plus is now majority owned by government investment arms and government controlled agencies.

Public viewing

Now that the government is in a position to call the shots in Plus, it should no longer shirk its responsibility to review the contract and rectify the injustice that has been done on the consumers. For a start, it should immediately freeze any proposal to further burden the consumers such as extension of concession period or toll escalation.

The government should also open the concession contract for public viewing now. Failure to do that would make further mockery of Prime Minister Abdullah Ahmad Badawi's oft repeated pledges to bring transparency and integrity to his government.

Finally, for the sake of cost saving for all parties concerned, the government should review the necessity to widen the road way. This is because congestion at the expressway is invariably caused by backed up traffic that emanate from the toll complexes. In other words, the bottleneck is at the toll gate, not in the expressway itself. Adding additional toll booths at the toll complex and improving traffic dispersal immediately after the toll will go a long way towards eliminating the traffic queue we use to see from time to time.

Another strong reason for deferring road widening now is that traffic congestions in the expressway only occur during a handful of public holidays in a year. These are the Hari Raya Puasa, Chinese New Year, and a few other public holidays that coincide with the weekends. Added together, these heavy traffic days do not exceed 20 days in a year. On these special traffic days, how about exempt the public from paying tolls so as to remove these bottlenecks?

Let the government compensate Plus for loss of toll collections on these days. After all, even after the expressway is widened, we will surely continue to see the queues at the tolls, as the traffic volume on these days are many times the normal volume, and no amount of road widening can eliminate these congestions.

KIM QUEK is a retired accountant.