RAM Rating expects govt to consider all options on plan to abolish toll collection

KUALA LUMPUR: RAM Rating Services Bhd believes the government will strike a balance between its toll abolition plan and potential implications for the debt capital market.

Its infrastructure and utilities ratings co-head Davinder Kaur Gill said the rating agency expected the government to consider all options available to execute the plan to gradually abolish toll collection.

The toll-road sector represents one of the earliest and largest issuers in the domestic bond market, making up 12.7 per cent of total outstanding corporate bonds (excluding quasi-government bonds) with an outstanding value of RM56.16 billion as at Thursday. Such bonds are largely held by local institutional investors and government-linked pension funds.

“We expect the government to consider all options available on its plan to gradually abolish toll collections,” said Davinder.

The conclusion of settlement talks between the government and MRCB Southern Link Bhd last year vis-a-vis the cessation of toll collection for the Eastern Dispersal Link is regarded as a pivotal point for the sector’s various stakeholders.

“It sets the tone and serves as a benchmark deal for other toll-abolition cases in the future. Ultimately, timely and adequate payments in settlement of the concessionaires’ financial obligations are crucial towards ensuring the stability and accessibility to fund similar transactions via the debt capital market,” said Davinder.

RAM Rating, however, opined that the government’s proposed acquisition of four highways under Gamuda Bhd, and the introduction of a congestion charge in place of the current toll regime, was expected to complicate the issue of toll abolishment for the highway sector.

The four highways are Lebuhraya Damansara Puchong, Sistem Penyuraian Trafik KL Barat, Lebuhraya Shah Alam and the SMART Tunnel, which cater to one million vehicles daily.

From the sovereign’s budgetary perspective, the acquisition of the four tolled highways had not been budgeted for and would likely exacerbate the government’s debt burden, it said.

RAM’s ratings on Malaysia will consider the possibility of fiscally onerous political considerations.

“Nevertheless, RAM expects the government to be cautious in raising debt for this purpose, given its commitment to long-term fiscal consolidation.”