Chance at becoming a more contestable mart

KHAZANAH Nasional Bhd subsidiary UEM Group Bhd and the Employees Provident Fund (EPF) do not want to sell their respective stakes in PLUS Malaysia Bhd, the largest toll expressway operator in the country. Maju Expressway concessionaire holder Tan Sri Abu Sahid Mohamed is adamant about buying it.

A party that should win, is the people of Malaysia.

Abu Sahid will not be ignored, as evidenced by his media campaign which has lasted more than three months. The elements in his proposal are just too coveted to be pooh-poohed. A 20-year, no toll hike (its concessions end in 2038); a write-off of about RM900 million in compensation due to PLUS Malaysia for keeping toll rates, and some RM30.2 billion in contingent liabilities taken off the government’s books.

PLUS Malaysia operates the NorthSouth Expressway, North Klang Valley Expressway, Federal Highway Route 2, Seremban-Port Dickson Highway, North-South Expressway Central Link, Malaysian-Singapore Second Link, Butterworth-Kulim Highway and Penang Bridge.

As Sunway University Business School Professor of Economics Dr Yeah Kim Leng pointed out when contacted, the proposal contains major benefits to the country given rising transport costs, a key factor which will weigh on the economy in the future.

He opined that the government should set up a task force to scrutinise the deal to ensure that it is sustainable in the long term and not just a financial engineering exercise.

“Validation is very important. Ultimately it is the ability to ensure optimal operational efficiency, and that cost savings can be passed on (to the public),” Yeah, who is also director of Economic Studies Programme at Jeffrey Cheah Institute on Southeast Asia, said.

According to Bank Negara Malaysia statistics, government guaranteed debt has increased to RM195.7 billion as at the second quarter of 2017.

Based on the facts available, the proposal deserves a review, even serious consideration.

UEM and the EPF have said they are not interested to sell, but are reviewing the proposal. UEM declined to comment to queries on its review process and progress, while EPF stated that “there is no substantive update to the offer other than the fact that the EPF has no intention of selling its stake in PLUS Malaysia as it is one of its core investments which has been performing within its expectation”.

They could not be more clear in their views. What does that leave us with? Abu Sahid becoming even more determined to acquire PLUS, and the government to show the way forward.

Highway concessionaires are unique because the government holds a golden share to ensure that it has a say in the running of its strategic assets. In PLUS Malaysia’s case, its guarantee of a RM11 billion bullet payment at the maturity of PLUS bonds gives it added say.

So, in actual fact, the government decides.

And it is up to the government to give UEM and the EPF the opportunity to come up with a counter proposal should they find Abu Sahid’s wanting.

Yeah said, “If let’s say the current concessionaires are not agreeable to selling, then they should come up with a counter proposal. That way we can develop ourselves into a more contestable market ... it is a public asset that should contribute to the long-term sustainability of the economy.”

A contestable market allows for the threat of competition to promote efficiency and lower costs, which can later be translated into savings for the people.

And that is how the people can win.