According to IFR Asia the Malaysian federal government has decided to take over the Eastern Dispersal Link (EDL) road in Johor Bahru from concessionaire MRCB (Malaysian Resources Corporation Berhad).

Why?  Well this is the case of the concession granted to build and operate a toll road, followed by a law passed to prohibit tolls being charged on the road at all.

The EDL expressway is an 8.1km long road which opened on 1 April 2012.  Johor Bahru is effectively the border town between Malaysia and Singapore, and the highway provides an enhanced link within the border region.

However, the Malaysian Government decided when the road opened that it would not permit tolls to be collected on it, so the concessionaire has faced the past few months negotiating with the government a compensation deal to make up the difference, and meanwhile has been servicing the debt for the road without any revenue.

The report notes as regards the concession there is :

only M$21m in the company’s cash reserves, hardly sufficient to meet a M$47m cumulative interest payment due December 21 on its M$1.04bn senior and junior sukuk, as well as on a M$220m syndicated bank loan. The shortfall is a reason Ram Ratings downgraded the long-term ratings on the M$845m senior bond to BB3 from A2 and the M$199m junior sukuk to C1 from BBB2.

(A sukuk is essentially an Islamic financial instrument with some parallels to bonds).

Curiously, the owner of the concession, MRCB, which is no small company, has indicated that it doesn't intend to contribute funds to meet the shortfall, threatening a default - a first for Malaysian toll (or rather highway) concessionaires, which is perceived as likely to embarrass and disrupt plans for ongoing private investment in infrastructure in the country.   However, the Malaysian Federal Government has previously supported concessionaires more widely in other sectors through extending concession periods or buying bonds to restructure their debt.  It is not shy about interfering in what it deems to be the public interest.

The result of negotiations appears to be a government takeover of the concession, although the article suggests that tolls may yet be imposed, but probably at a price lower than the M$6.20 (US$2.01) per trip suggested.   One controversy is apparently that all users of the new Customs/Immigration/Quarantine complex located near the end of the expressway will pay a toll to contribute towards the road's costs, whether or not they actually use the road.

Overall it implies a conflict between seeking private finance to build and manage roads with tolls, and then taking relatively ad-hoc decisions around abandoning or discounting tolls for political reasons. Elections are due in the coming months, whereby the ruling UMNO party is expected to win (as it always does), but is facing ever growing pressure from growth in support from opposition parties.  It would appear Malaysia is not immune from concerns over opposition to tolling in certain situations.

Reuters reports that the Malaysian Prime Minister has announced that he is “soliciting industry views” on freezing, cutting or abolishing tolls on privately owned toll roads in the country.

He has also called for no extensions to concessions and no compensation for any reduction. In short, it looks like a measure to gain favour with voters in advance of the election.

It followed the announcement by operator, MTD Capital, that it was freezing tolls without any government compensation. The other major operator, PLUS Expressways has since supported another toll freeze proposal. Both companies are currently subject to takeover bids by their own major shareholders (plus being taken over by an employees’ fund and Khazanah Nasional). It is thought that the offers by MTD and PLUS to freeze tolls are intended to improve their chances of winning future concessions, as the government intends to build five major new highways (but also announced a freeze on tolls on four PLUS highways).

What does this all show? It is that the line between government, private enterprise and the transparency of decisions on concessions in Malaysia is very blurred indeed.

Consider this. PLUS Expressways is being “privatised”. It is Southeast Asia’s largest toll concessionaire and the eight largest in the world according to Wikipedia. It is owned by UEM Group (United Engineers Malaysia). UEM Group is a fully owned subsidiary of Khazanah Nasional. Khazanah is the government’s investment company. Khazanah owns just under 15% of PLUS Expressways, whereas it owns the rest via UEM Group.

Yes, this is state capitalism on a grand scale. So in any case, it is hardly surprising that the Prime Minister can tell a state owned toll concessionaire to freeze tolls!

South African politician concerned about proposals to introduce tolling on existing roads to fund maintenance. (His concerns are valid if other charges are intended to cover such costs, but tolls can be set to recover long run capital and operating costs, including renewals).

Radio discussion about whether Michigan will embrace tolling, although the key motivation appears to be to toll existing roads to raise money for transport more generally.

New likely bidder for PLUS toll road operator in Malaysia raises share price to record levels.  MMC, a Malaysian private investment company involved in "transport & logistics, energy & utilities and engineering & construction".

New 11.5km toll road to be built in Bali, Indonesia between Sarangan and Nusa Dua, fully toll funded at a cost of 1.6 trillion Rupiah (US$177 million).

Finally, the dreadful floods in Brisbane, Australia have seen construction on the AirportLink toll road suspended, whilst the nearly bankrupt Clem 7 toll tunnel under the flooded city centre remains open (and toll free until Monday).

PLUS Expressways is Malaysia's biggest concessionaire toll road company, and one of the largest toll road companies in Southeast Asia.  It is part of the UEM Group, which itself is a wholly owned subsidiary of Malaysian government investment company Khazanah Nasional.   So PLUS is a government owned company.

It owns subsidiaries in Malaysia, India and Indonesia.  973km of tolled expressways in Malaysia are under the responsibility of PLUS.  PLUS is an acronym for its first concession company formed in 1986 - Projek Lebuhraya Utara Selatan -which itself is responsible for the North-South Expressway from the Thai border to Kuala Lumpur and south to Johor Bahru (border with Singapore), otherwise known as Routes E1 and E2.

PLUS subsidiaries are:

- ELITE (responsible for the E6 North-South Expressway Central Link, effectively a Kuala Lumpur bypass).

- LINKEDUA (Malaysia-Singapore Second Link and associated expressway);

- KLBK (E15 Butterworth-Kulim Expressway);

- PHS (Helicopter charter company);

- TERAS (E-commerce and online facilities management);

- PLUS BKSP (India responsible for the 21.6-km Bhiwandi-Kalyan-Shil Phata Highway in the state of Maharashtra);

- LMS (Indonesia responsible for the 116-km Cikampek-Palimanan toll highway); and

- CCTW (Indonesia responsible for the as yet incomplete 25.4-kilometre Package 4 Cimanggis-Cibitung Toll Road).

Maps are on the PLUS website, showing how it is responsible for most of the major routes in Malaysia.  It is proud of its rest areas, laybys, viewpoints and even roadside motels and restaurants.  Given it competes not only with free existing roads, but also the railway and airline services, it clearly seeks to attract motorists.  Tolls are manual with barrier based ETC, but a transition has already started to create fully electronic free flow toll points such as on the Malaysia-Singapore Second Link.   It is government policy to move all toll roads to multi-lane electronic free flow tolling to reduce congestion.

It even has its own highway patrol unit.  Another feature of PLUS is a loyalty programme, whereby motorists earn the equivalent of frequent "drivers' points", based on distance travelled.

PLUS was listed on the Malaysian stock exchange in 2002.   45% of the company is not held by the Malaysian government, but divided between a pension fund and a wide range of small shareholders.  

However, the privatisation being touted in Malaysian media actually does not necessarily mean the private sector buying out the state shareholders, but may include the state shareholders buying out the private shareholders as well  - privatisation meaning removing it from being publicly listed.

The reason for the state shareholders to seek to buy out the private sector is because government recently announced tolls would be frozen for the next four years, making it a less attractive investment in some eyes.

Still, once again it shows how highways can be managed, by and large, commercially and operate effectively and efficiently.  It's a model virtually unknown in North America.