Malaysian govt bids to take over 4 toll highways for $2b

The Smart tunnel in Kuala Lumpur, one of four toll highways the Malaysian government wants to take over, in a move to fulfil its election pledge of removing or reducing toll charges as one way of lowering the cost of living for the people. PHOTO: THE
The Smart tunnel in Kuala Lumpur, one of four toll highways the Malaysian government wants to take over, in a move to fulfil its election pledge of removing or reducing toll charges as one way of lowering the cost of living for the people. PHOTO: THE STAR/ ASIA NEWS NETWORK

PUTRAJAYA • The Malaysian government has made a RM6.2 billion (S$2 billion) bid to take over four toll highways in the Klang Valley, in a move to fulfil its election pledge to reduce the cost of living by removing toll roads, or at least reducing the fees faced by road users.

The four highways, operated by units of listed infrastructure company Gamuda, are among some 20 expressways that criss-cross Kuala Lumpur and its Selangor suburbs.

These highways were built from the 1980s as the government under then Prime Minister Mahathir Mohamad had privatised their operations to make them more efficient. However, over the years, there have been complaints over ever-increasing toll charges.

The toll concessionaires have agreements in their contracts to raise toll fees every few years over the course of the 20-year to 30-year concessions, failing which the government would have to pay them compensation.

Tun Dr Mahathir, in his second stint as Prime Minister, must now undo how some of these highways operate as his four-party Pakatan Harapan government has promised to ease the cost of living by removing high toll charges.

"This is the first step of the government to lessen the burden of the highway users and fulfil the promises of Pakatan Harapan," Finance Minister Lim Guan Eng said in a statement yesterday, as quoted by Malaysian media.

He said taking over these four highways - called LDP, Sprint, Kesas and Smart - would save taxpayers RM5.3 billion in compensation to the concessionaires, Mr Lim said.

"The compensation need not be paid after the highways are taken over by the government. This means the government can allocate an extra budget of RM5.3 billion to assist the people in the coming years," The Star daily quoted him as saying.

Mr Lim said the success of the bid depends on due diligence, the support of shareholders and creditors of the four concession companies, and the final decision of the Malaysian Cabinet.

 

The takeover will be financed through a special purpose vehicle (SPV) company under the Minister of Finance Inc, a company under the Ministry of Finance (MOF). The SPV will issue bonds to pay for the highway concessions.

"The congestion charges are enough (for the SPV) to service the debts, including operational and maintenance costs without having to depend on allocations from the MOF," said Mr Lim.

The country's largest highway operator, PLUS Malaysia, is already owned by the government through pension fund Employees Provident Fund, and UEM Group, a unit of sovereign fund Khazanah Nasional. PLUS Malaysia operates the country's longest highway, the 772km North-South Expressway, and several other highways including Linkedua highway after the Tuas Second Link.

A version of this article appeared in the print edition of The Sunday Times on June 23, 2019, with the headline 'Malaysian govt bids to take over 4 toll highways for $2b'. Print Edition | Subscribe