Abolishing tolls short-sighted policy

PAKATAN Harapan’s manifesto with its five pillars covering economic, political and social reforms, 10 promises to deliver within the first 100 days, and 60 promises during its first term is comprehensive and ambitious.

High marks must be given for the political and institutional reforms agenda. But what about its economic agenda? Efforts to address the economic woes of the people are commendable. It promises to deliver more services such as housing, public transport, health and basic food to the people, and at the same time reduce their cost of living by abolishing GST and highway tolls.

The first set of measures will see a rise in government expenditure and the second a fall in revenue. The Government plans to cover the gap through elimination of leakages and waste from unnecessary mega projects and corruption, and the replacement of GST with SST.

Politicians make all types of promises in their campaign, some of which they keep while others are simply a means to garner votes. After the dust settles and the euphoria subsides, they have to face the realities and examine what they can and cannot deliver.

The time for political campaigning is over; it is time to govern responsibly.

The promise to abolish toll is one that must be addressed responsibly and not politically, and there are pros and cons to this move.

The main opposition to toll collection is not so much the need to pay for using highways but the grossly unfair terms of concessions given to concessionaires by the Government. According to a senior transport engineer, toll concessions in Malaysia are highly unequal and unfair agreements that need to be urgently rectified.

Tolled highways are BOT (build, operate and transfer) projects. The concessionaires who operate the highways are often also the contractors who build them. They inflate their costs both at the stages of construction and operation.

Sometimes, the Government even subsidises these private companies for the construction and operational costs. For example, for the MEX Highway, the Government provided a RM1bil grant, equivalent to 75% of the construction cost, to the concession holder. The concessionaire invested only a small portion of the remaining costs and borrowed the rest.

Furthermore, for some highways, the Government compensates the concessionaire if the traffic volume or rate of return falls below a certain level. In 2016, the Government paid out over RM4.07bil as compensation for 28 highways.

Due to the fallout from the 1MDB scandal, federal debt has now exceeded RM1tril, posing huge challenges to Malaysia’s fiscal position.

The rakyat can understand that in order to meet these challenges, some economic promises may not be fulfilled for good reasons. The Government must do the following.

It must set up a committee to review each and every concession to rectify the unequal and unfair contracts. It must also appoint an independent group to estimate the costs of renegotiating or/and takeover of the tolled highways before making a final decision. Estimated costs of taking over the tolled highways range from RM383bil (according to Pemandu) to RM50bil (Pakatan). There were 31 tolled highways at the end of 2017.

Other options that can be considered are gradual or partial reduction of toll rates, introduction of different rates for different vehicle categories (for example, no toll for buses and public vehicles); and free or reduced rate for cars with three or more passengers.

The Pakatan Government has, at this juncture, the goodwill of the rakyat to accept these measures as long as it is transparent and provides good justification for its decision.

Abolishing tolls is a shortsighted policy for both economic and environmental reasons. Firstly, abolishing tolls benefits the upper 50% of the population more than the lower half. One often thinks it is fairer to keep all roads tollfree but studies have shown that the benefits of free roads accrue more to the affluent than to the lowincome group because the rich drive more.

Thus, abolishing tolls benefits people who drive but is unfair to taxpayers who do not drive. On the other hand, collecting tolls and using the revenue to subsidise public transport would be a much more equitable policy.

Secondly, abolishing tolls would only encourage ownership and use of private vehicles, placing more financial burden on the rakyat. Car ownership and use is expensive as it involves servicing car loans, paying for repairs, fuel, insurance and depreciation. All these easily account for 20% to 30% of a lowincome household’s expenditure. It is a heavy financial burden that would not be necessary if there is good public transport.

Hence, the Government should be directing all its transport expenditure into building a firstclass public transport system so that the lowerincome households would not need to be saddled with the financial burden of car ownership. This will immediately raise their level of disposable income.

The Government should also do everything possible to wean people away from private vehicles and move them into public transport particularly for commuting, as in Hong Kong and Singapore where public modal share of transport is well over 60% compared to below 30% in Malaysia.

When driving is no longer a necessity but a luxury, those who use roads should be paying for the privilege and this revenue can be used to subsidise public transport for the masses.

DR LIM MAH HUI Formerly a professor, international banker and Penang City Councillor