Why PLUS should not be sold

17 Oct 2019 / 19:05 H.

THE hottest corporate news this past week or so has been the intense interest generated by five multi-billion ringgit proposals from the private sector to buy out PLUS Malaysia Bhd, the country’s largest toll highway concessionaire.

And a new twist was added to this corporate drama when Finance Minister Lim Guan Eng dropped a hint just before he unveiled Budget 2020 in Parliament last Friday that even the government was also weighing the possibility of taking over the company.

I have been gathering expert views from industry players familiar with such mega deals, especially that involving toll highways and not surprisingly they were unanimous in saying that PLUS should not be sold.

The most compelling argument I got was that PLUS belongs to the rakyat as it is owned by Khazanah Nasional (51%) and more importantly by the Employees Provident Fund (EPF) at 49%.

By owning PLUS, EPF has been able over the years to pay consistently higher dividends to more than 14 million people.

Toll collections also go to Khazanah which in turn can fund more development such as for hospitals, public amenities and other services.

PLUS is an industry leader and a model of a successful privatisation exercise by the government of which PLUS itself was a pace-setter in the more than 30 years of its existence.

It is often used as a reference by other countries embarking on highway projects.

It is also one of the world’s Top 10 highway concessionaires and a model for other concessionaires in the region.

Selling PLUS to a private entity will deprive the existing 14 million EPF members in these trying times as well and millions of others coming on board in future years.

Most of the goodies or carrots dangled by the five bidders have already been part of the DNA of PLUS.

It has not raised toll rates for the past 14 years apart from giving toll rebates and discounts every festive season when highway usage is at its peak.

Providing 10,000 jobs within the highway eco-system and business opportunites as well as regular corporate social responsibility programmes are very much part of the PLUS brand. These include upgrading of local roads and road safety education.

Industry players also argued that selling PLUS will not contribute to the abolition of toll.

Tolls still need to be collected to maintain the North-South Expressway (NSE) and highway maintenance is very costly.

NSE is a national strategic asset and a critical link connecting the north and south of Peninsular Malaysia and is the nation’s transport artery.

Daily 1.7 million vehicles use the NSE connecting major ports and airports and its existence paves the way for development of new townships such as Seremban 2, Bandar Baru Nilai, Proton City as well as industrial areas like Senawang, Ayer Keroh, Nilai, Seberang Perai and Juru.

Another economic spin-off is the boost to tourism in states like Malacca, Penang and Kedah.

Selling PLUS, said the experts, would also mean extending further the concession period.

This means highway users will have to pay for a longer period as the new concession will have to be revised and extended to pay for loans.

The original PLUS concession was supposed to end last year but was extended till 2038 because with no toll hike since 2005, the government and PLUS agreed to refinance the loans.

It is here that it makes more financial sense and wiser for the government to allow for the scheduled toll hike instead of otherwise as a populist move usually under the guise of reducing the burden of highway users.

Highway users will lose more actually with the extension of as long as 20 years such as in this case instead of not paying for toll when the concession should have ended last year as per the original concession.

Abolishing toll is also not necessarily a wise move, according to another view.

Look at Federal Highway Route 2 between Batu Tiga and Sungai Rasau in Selangor after toll was abolished last year. This stretch is now poorly maintained and road safety suffers as a result.

Other views that I gathered are in favour of PLUS taking over other highways given its solid track record of being an industry leader with over 30 years of expertise.

This would ensure standardised services and facilities as PLUS has the best highway talent and experts not only in the country but also in the region.

The bottom-line is that there’s no guarantee that the new owner can do a better job.

The bidders neither have the experience nor have they managed operations of a similar scale so far.

Besides, a new operator will also face and have to overcome a lot of unique and challenging issues which beset highway operations and management.

The reassuring statement for EPF members from the finance minister as the industry keenly awaits the final decision on this potentially largest corporate deal is that any offer to buy out PLUS has to be at a price that both Khazanah and EPF would agree upon.

He said if PLUS’ toll assets were to be sold at below cost, the government would be accused of directing Khazanah and EPF to sell.

A big Thank You to Lim Guan Eng for this good news.

In the final analysis, it would also be unthinkable for Khazanah and EPF to let go of their gold mine.



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