Business & Economy Malaysian government offers $2bln to take over four toll highways

Malaysian government offers $2bln to take over four toll highways

The government promised in its election manifesto last year it will remove toll gates but a year later, failure to do so sparked massive criticism against the ruling coalition

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Malaysia’s Ministry of Finance (MoF) is pushing the government’s agenda for reform and for the respect of the ruling coalition’s promises for free tolls in the country with an offer to buy over four toll concessionaires valued at RM6.2 billion (Singapore dollar 2 billion).

The four highway concessions at stake are Damansara-Puchong Highway (LDP), Sistem Penyuraian Trafik KL Barat (Sprint), Shah Alam Expressway (Kesas) and the Storm water Management and Road Tunnel (SMART).

The breakdown of the offer prices are LDP for RM2.47 billion, Sprint (RM1.98 billion), Kesas (RM1.38 billion) and SMART (RM369 million), the ministry says in a media release.

Finance Minister, Lim Guan Eng says, thanks to negotiations with Gamuda, the Finance Ministry has issued offer letters to the four concessionaires on June 21, 2019 with the above value offer price.

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“The completion of this offer is subject to due diligence, the requisite shareholders’ and creditors’ approval for each concessionaire and the final approval by the cabinet,” he says.

“If the acquisition process of these highways is successful, the government will acquire the highway concessionaires on Dec 31, 2019, through a special purpose vehicle (SPV) wholly owned by the Minister of Finance (Incorporated),” says the minister.

Lim also says under the new congestion charge system, commuters using these four highways will save as much as RM180 million per annum, and these savings will go straight into the disposable income of Malaysian households.

The Pakatan Harapan government promised in its election manifesto last year it will remove toll gates but a year later, the situation has not evolved and this has sparked massive criticism against the ruling coalition.

In addition, the acquisition of these four highways will also directly save taxpayers from having to pay compensations of more than RM5.3 billion to toll concessionaires needed to freeze toll rate hikes until the end of the respective concession periods.

“The government will no longer be required to pay such compensations after acquiring these four highways.

“This means that the government will allocate additional spending of more than RM5.3 billion in the coming years for the benefit of Malaysian citizens across the country.

“In other words, not only will this measure benefit commuters using these tolled highways, Malaysian citizens all across the country will enjoy the benefits too,” says Lim.

He says the government had negotiated earnestly with the concessionaires to make a fair acquisition offer, such that it maximises the returns for the people, and not result in any financial burden for the government at the same time.

“The SPV will finance the offer of RM6.2 billion through bond issuance. The collection of congestion charge will service the debt, and to finance the operation and maintenance costs of the highways without requiring additional budget allocation by the Finance Ministry.

“In other words, the acquisition cost will be self-financing through the collection of congestion charge and will not require any government expenditure,” he says.

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