Extending concessionaire for PLUS benefits road users and pensioners

Projek Lebuhraya Utara-Selatan Bhd (PLUS) is owned by Khazanah (51%) and EPF (49%).[1]

PLUS' 2018 revenue was RM3.83 billion, with after-tax loss of RM93.53 million. Even with debt of more than RM30 billion, PLUS' cash flow remains very strong and its operation profitable, so much so that 4 private companies have expressed interest to buy over PLUS.

The bidders were very keen over PLUS that they were competing to outbid each other by raising their offering price, with some went as high as 30% more than the initial RM5.2 billion.[2]

EPF's 49% share in PLUS also works out well for the pension fund, ensuring high dividends that benefit retirees. In 2017 and 2018, PLUS paid out a total of RM1.15 billion dividends to shareholders. Profit from the concessionaire had improved Rakyat's retirement security.[3] 

With regards to the extension, EPF chief executive officer Tunku Alizakri Raja Muhammad Alias remarked, "This decision is a clear indication the government is appreciative that the interests of our 14.6 million-strong EPF members must be protected at all times."[4]

Pakatan Harapan (PH) government's 20-year extension of concessionaire enables the government to freeze toll price without compensating PLUS. Under previous arrangement, PLUS will increase toll price as scheduled, to which it will receive compensation if hike is not allowed.[5]

With the extension, PH is expected to save RM42 billion compensation money for the government, while at the same time successfully reducing toll price and freeze it for the next 38 years. With reduction and price lockdown, coupled with compounding rise of market value for the next four decades, the toll price will be gradually and relatively cheaper in real value.[6]

In summary, PH's move to extend PLUS concessionaire for 20 years has successfully reduced toll price by 18%, fixed toll price without hike for at least 38 years, saved government RM42 billion compensation money, improved 14 million Rakyat's retirement security through PLUS's dividends to EPF, and retained ownership of strategic assets (road infrastructures).

As the senior analyst at Affin Hwang Investment Bank Bhd, Loong Chee Wei remarked, “At the end of the day, it is consistent with the government’s policy of retaining ownership of strategic assets and reducing toll rates... It is also consistent with the government’s aim to acquire concessions that have been privatised, such as other highways, with the intention of reducing toll rates there as well.”[7]

The highways under PLUS include the North-South Expressway, New Klang Valley Express, North-South Expressway Central Link, Malaysia-Singapore Second Link, East Coast Highway Phase Two, Port-Dickson-Seremban Highway, Butterworth-Kulim Expressway, and Penang Bridge.[8]

Reference

1)https://www.pmo.gov.my/2020/01/government-not-selling-plus-18-per-cent-toll-rate-reduction-pm/

2)https://www.edgeprop.my/content/1634474/%E2%80%98plus-concession-restructuring-entails-rm75b-securitisation%E2%80%99, https://www.nst.com.my/node/539380, https://www.edgeprop.my/content/1633667/khazanah-govt-has-been-engaging-us-over-plus, https://www.theedgemarkets.com/article/cover-story-bids-and-people-behind-them

3)https://www.edgeprop.my/content/1634474/%E2%80%98plus-concession-restructuring-entails-rm75b-securitisation%E2%80%99

4)https://www.edgeprop.my/content/1634850/epf-cabinet-decision-not-sell-plus-will-facilitate-implementation-18-toll-reduction

5)https://www.edgeprop.my/content/1634748/khazanah-and-plus-will-reveal-details-toll-restructuring-initiative-later

6)https://www.edgeprop.my/content/1634575/pmo-no-toll-hike-plus-highways-until-2058

7)https://www.thestar.com.my/business/business-news/2020/01/17/plus-likely-to-restructure-bonds

8)https://www.theedgemarkets.com/article/highway-users-relieved-over-toll-rate-reduction

Will Malaysia Baharu surpass economic expectations again?

Earlier last year, 22 economists projected Malaysia’s gross domestic product (GDP) to be 4.3%.[1] By the second quarter, our GDP hit 4.9%, surprising the market and outperforming economist expectation.[2]

For the overall 2019 economic gain, the RAM Ratings fixed their estimation at 4.6%, corresponding to the projection by Malaysian Institute of Economic Research and the World Bank.[3] This number still outperformed the 4.3% projected by said 22 economists.

For 2020, several readings indicate that Malaysia’s GDP will be in the realm of 4.3% to 4.8%.[4] Will Malaysia under Pakatan Harapan be able to pull through another economic surprise in 2020, outperforming expectation?

Global economy is currently affected by the escalated tension in the middle east. Coupled with the uncertainty of US-China trade war, the market remains volatile and investors are cautious. Political instability stemmed from local racial unrest and rising extremist threat will further erode traders’ confidence in Malaysia market. Along with the rise of regional competition, it'll be a very challenging year for Penang and Malaysia.

Nevertheless, studies from the AllianceDBS Research show that the various upcoming infrastructural projects such as Penang Transport Master Plan, East Coast Rail Link, and Pan Borneo Highway will boost the country’s economy to a projected growth of 4.5%.[5]

Despite criticism from anti-development NGOs, these projects will generate dynamism in the market to ensure that graduates get employed, parents can put their children in school, and working adults can provide for their elderly parents.

Anti-development NGOs say that it's the government's responsibility to manage the economy. However, when development plans such as the Penang South Islands and Penang Hills cable car services were unveiled, these NGOs object and demand for their cancellation without providing better alternative. 

The world doesn't stop for us. If we continue to waste time with those anti-development NGOs, Malaysia will regress from being a developing nation to an underdeveloped wasteland.

True, each project must be examined. However, there is a huge difference between constructive critique that fine-tune development plans and idly complaint.
 

Malaysia’s GDP growth will likely be sustained above 4% in 2020, given the various initiatives introduced in Budget 2020. Whether will it surpass economist expectation again is still an open question, depending on how those upcoming infrastructure projects pan out.

Reference

[1]https://www.bloomberg.com/news/articles/2019-05-16/malaysia-s-economic-growth-slows-as-exports-investments-slide

[2]https://www.nst.com.my/business/2019/08/513518/strong-gdp-growth-continues-highlight-malaysias-resilience-mof

[3]https://www.nst.com.my/business/2019/10/530888/malaysias-rm145-trillion-economy-grow-46pc-year-ram, https://www.malaymail.com/news/malaysia/2019/07/29/mier-revises-2019-gdp-growth-forecast-upward-to-4.6pc/1775745, https://www.malaymail.com/news/malaysia/2019/07/01/world-bank-expects-malaysias-gdp-to-grow-4.6pc/1767049

[4]https://www.theedgemarkets.com/article/gross-domestic-product-growth-slow-43-2020-%E2%80%94-marc,https://www.theborneopost.com/2020/01/05/malaysia-gearing-up-for-2020/, https://themalaysianreserve.com/2020/01/07/malaysia-can-achieve-4-5-growth-this-year/

[5]https://www.malaymail.com/news/money/2020/01/06/domestic-demand-to-support-malaysias-2020-growth-says-alliance-dbs/1825109