When the Road Tolls

Asas Serba is proposing to take all of the nation’s 23 toll road concessions private for RM50 billion and in exchange is promising to give a 20 per cent discount on toll rates as well as no further rate increases.

Asas Serba’s proposal to acquire all toll road operators in Malaysia is indeed welcomed news. I dare say almost everyone has to take at least one if not more tolled road everyday and a 20 percent reduction in toll rates is definitely appreciated.

However, having said that, is Asas Serba’s proposal feasible?

Local research house OSK Research said in a report that the Asas Serba bid to acquire toll concessions from a combination of public and private sector entities is complex and gaining approval from shareholders will be “daunting”.

Can Asas Serba, being an unknown entity with presumably little or no track record raise RM50 billion from the market?

At current prices, PLUS has a market value of RM16.6 billion and the shareholders will definitely demand a premium. After paying for PLUS, Asas Serba might not have much left to pay for the other toll concessionaires.

The government is legally compelled to subsidise the concessionaires in the event the toll rates are not raised. Can’t the government find a way out of this? My socialist side suggests that the toll concessionaires be made a minimum profit organisation* to ensure the welfare of the public is taken care of.

Whatever it is, any proposal to reduce toll rates will be welcomed with open arms.

* I would define minimum profit organisation as businesses which places social welfare above profit maximisation at all cost. Such organisations will have the same objectives of making profits but at the same time ensure that prices charged to end consumers are not burdensome.