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Buy back toll concessions January 10, 2010

Posted by nikmj in General, harakahdaily, Malaysian Mirror, National, news, Oil.
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Malaysia’s plan to set new toll rates that are ‘reasonable’ and that reflect the ‘high quality of the nation’s highways’ has sparked grave concern amongst economists and consumer groups that a cascade effect on a broad range of prices, already anticipated, will be even more pronounced than feared.

najib razak.jpg“We are now in the final stage, and I will make an announcement,” Prime Minister Najib Abdul Razak, who is also finance minister, had said. “Additional lanes should be added to congested stretches immediately. As for the cost, this can be negotiated with the government because we practice the principle of cost-sharing.

“The people will not mind if there is a slight increase in toll rates, provided traffic flow is smooth without any congestion,” he added.

Not the right timing

But few are likely to share his optimism. Despite promising signs of economic revival, analysts point to growing fears across world markets of a double dip in economic growth and cite the recent Dubai debt debacle as an example.

“It is not the right timing,” Azrul Azwa, an economist at Bank Islam told Harakahdaily. “It is still too early to presume global recovery will be strong. The latest signs show the possibility of a double-dip. The growth that we anticipate may not sustain if some of the European economies stall and suffer setbacks like Dubai.”

Najib did not offer details on the new toll structure but said they would be ‘reasonable’. But already, Malaysians are unhappy to pay toll, protesting that it had become impossible to travel far without bumping into a payment kiosk.

They have lambasted the government for poor planning, accusing its top leaders of corruption and giving huge road contracts to their cronies at the expense of the citizenry.

toll.jpgIndeed, independent analysts and consumer NGOs have calculated that it was cheaper for the Finance Ministry to buy back the existing toll road concessions rather than allow the pre-contracted, staggered rate hikes to take place.

“Definitely the new toll rates will be higher. And when compounded with the higher petrol price, it just keeps pushing up our cost of living. Malaysians are feeling the pinch,” said Azrul.

Imprudent polices, consumers bear the brunt

Malaysia expects its recession-hit economy to finally come out of the woods, with GDP growth poised to exceed three per cent in 2010. According to Najib, the country needs to grow at least six per cent per annum in order to achieve a developed status by 2020.

But imprudent policies and aggressive fiscal pump priming of past years have made a huge dent in the nation’s finances. The 2009 budget deficit swelled to over 7.4 per cent of GDP – the highest in 20 years. This has forced Najib to announce plans to cut the government’s operating expenditure and bring the deficit down to 5.6 per cent this year.

“If you consider the macro picture, there is very little room left for Najib to maneuver, simply because there is very little money left in the kitty. So that’s why he has to cut expenditure and subsidies and at the same time find ways to boost revenue. All this points to higher prices for consumers,” an economist at a foreign bank told Harakahdaily.

“Furthermore, Najib is relying on a cheap ringgit exchange rate to maintain Malaysia’s export competitiveness. So there’s no way he can allow production costs such as salaries to go up. This again hits back at consumers. They will get stuffed all ways – through imported inflation and domestic policies like GST, reduced subsidies, higher petrol, sugar and now toll.” – harakahdaily

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1. Buy back toll concessions « The Blog Of My Life Search Engine - January 11, 2010

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