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Tuesday, January 09, 2007

Of Toll Agreements and Stupid Cabinets

The former Prime Minister is now trying to make excuses for the unfair agreements the government has signed with toll operators that gives them such a lucrative business model but is usually reserved for favoured operators.

It all harkens back to the first major highway project, the North-South Highway that was given to UMNO-related parties. At the time the highway had been largely completed from Penang to near Air Keroh with a few stretches in Perak incomplete.

The main job was to link up to Johor Bahru, about another 200km south.

Looking at the latest toll agreements, it seems that some operators have honed the art of squeezing poor road users to a fine art.

Any commercial project like tolled roads must be based on:

Expected revenue
Acceptable risk
Public good
Reasonable cost

The Litrak project is a good example where road users have been given a poor deal as “the government did not read the fine print” when they signed the agreement.
What balderdash!!

The Cabinet may not be familiar with all the project details but they must design proper policies so that those implementing the projects must ensure that the basic principles are adhered to. Furthermore this is not the first toll project so one can only wonder what changes were made or what principles were ignored.

The buck must stop somewhere and it is definitely not at the office boy.

This is a very rational proposal from the DAP on how the government can extricate itself from the toll predicament.

The business magazine The Edge Daily has some very interesting articles on Litrak and other companies. If you use their search feature and enter “Litrak” many article are available for your research.

This particular article gives me a few interesting thoughts:

I have rounded the numbers to make reckoning simpler:

40% of company equals 200m shares
so 100% of company equals 500m shares

Market price is about RM3

The government can therefore takeover this company for RM1.5b with finance from the EPF and other funds. After all the EPF does have problems finding good companies to invest in.

After the takeover, the company’s profits at the previous toll rate can be channelled into a special fund that will be used to buy back the toll companies so that all these companies will charge reasonable or reduced rates in future.

One of the articles also shows why that 30% magical equity stake cannot be maintained.

The toll agreements are perceived to be contrived schemes to enrich the few cronies with unjust toll agreements that have been shrouded with great secrecy.

It is time for the government to come clean now and not just blame the civil servants who cannot reply to criticism by the public or the leaders.

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