PLUS Ownership Should Remain Status Quo

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KUALA LUMPUR, May 4  – The North South Expressway (NSE), a critical national asset that crosses eight states in Peninsular Malaysia is a catalyst to the nation’s development and should remain with its current owners, says an analyst. Director of FA Securities Zakie Ahmad Shariff said PLUS Malaysia Bhd (PLUS), the concession holder, is owned by two government agencies, the Employees Provident Fund (EPF) and UEM Group Bhd, and as such, the proposal to nationalise the company is illogical. “The reason UEM and EPF were chosen to take over PLUS four years ago was to benefit the nation, to improve the company’s financial position as well as its maintenance, and they have performed very well,” he said when commenting on PLUS, now the target of a takeover by a private company. The current ownership puts PLUS not only as belonging to the people but also provides a direct benefit to some 14 million EPF contributors.

Instead, he suggests a third party should acquire inner city highways as these are frequently used by city folks in their daily lives as opposed to the out of town PLUS highway. “If you really want to help the people, look at the inner city tolls, not PLUS. If any company intends a takeover, why not consider existing toll concessions like the LDP and others,” he added. Zakie, who is an economist, also commented that as owner of the biggest asset which forms the backbone of Peninsular Malaysia’s transportation network, the PLUS ownership ought to remain status quo. “Consumers are more burdened by the intercity toll highways compared to the interstate highway. “We usually use highways such as PLUS to travel long distances, for example from Kuala Lumpur to Ipoh, from Kuala Lumpur to Penang or Johor. We do not use them daily,” he said.

He also said the PLUS highway network was constructed by the private sector based on the build-operate-transfer (BOT) concept in an effort to reduce the government’s burden. “The return of PLUS to government hands via EPF and UEM partnership is in line with the nation’s privatisation objective. “Enabling EPF and UEM, two government agencies, to generate returns from their investment, will only bring benefits to the people. I do not see the rationale Of having it revert to a private party,” Zakie added. He said the more than 20 year-old PLUS highway had matured and serves as a catalyst to the nation’s economy. “There were only four lanes when it first commenced operations. Rapid economic growth along the highway necessitated the construction of additional third and fourth lanes at several stretches to fulfill the rising number of road users,” he added.

PLUS has also upgraded and added several Rest and Relaxation (R&R) areas as well as Lay-Bys. Apart from this, PLUS also performs maintenance work, especially on the 4,000 slopes along the highway to ensure the safety and comfort of users. “This additional construction is actually borne by us the people, as we pay toll when using the highway. This toll collection contributes to PLUS’ operations,” Zakie said. The call for PLUS ownership to remain status quo was also echoed by Dr Ervina Alfan, Senior Lecturer at University Malaya’s Faculty of Business and Accountancy. “The public is much better off if the highway remains with the government. It is actually for their betterment as a whole,” she said.

Ervina said highway operations were subject to risks, be it from the political, market, construction or demand aspects, adding, prized assets like the NSE should not be in the hands of private companies to avoid being pledged as security to back up loans. There is now a need for the government to re-examine the frequency of toll hikes in view of the rising cost of living. PLUS however, has undergone several phases of restructuring to reduce the people’s burden, and currently its increases in toll rates are lower. In 2011, the toll rates for PLUS was reviewed following the takeover by EPF and UEM; lowered and maintained at a five per cent increase every three years, as compared to 10 per cent for the same period previously. The two government agencies had also waived RM2.9 billion in outstanding compensation as at December 2011 as well as RM3.6 billion in compensation as a result of the five-year toll freeze from 2011 to 2015.

The last toll hike for PLUS was in 2005, with the last revision in 2011. The next increase will only be in 2016 and this means the toll rate is maintained for 10 years. Zakie also thinks that the consistent performance by PLUS under EPF and UEM is reassuring, an indication that its ownership should not be transferred. When asked about the takeover offer for PLUS that includes a promise that toll rates would not be raised during the concession period until 2038, saving the government as much as RM40 billion, he said it was difficult to see how this could be implemented in an uncertain global economy, considering the volatility of the bitumen price and other costs in highway maintenance. “I feel it is unreasonable for a company to pledge or give an assurance that the toll will not be increased for 24 more years. The duration is too long,” he added.

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