Wednesday, February 27, 2019

Toll highways: When a Pitch has turned into a Promise but has now become a Problem

I was born and grew up from a "Project Perumahan Rakyat", one of the first of its kind during the 70s, when government during then was trying as usual solving housing problems. My parents was paying about RM36 a month to be able to rent the one bedroom 400+sq ft place which later on we were allowed to own. That by itself is a rent to own scheme. I know what B40 is about and obviously have gone through life being in that category. During then, the term B40 did not exist but in my community as a child, my grandmother was always careful that I do not take the elevator alone as there are a lot of drug addicts in the area where I dwell in. The place that I stay, we cannot fix a ceiling fan as the height of the unit is only about 8 ft. Among some of my neighbors, there could also be families with 10 people staying in a 400sq ft unit as during then and now, people are just hoping to have a roof over their heads.

Of course, over the period I have studied in a good public school and I have always been immersing myself with books and knowledge. My family as I can say it take books as our source of knowledge. I would claim that my fondness on numbers and later on finance and investment since young comes to the appreciation in understanding business. Of course, living in Malaysia, we have to understand politics and constant pressure faced by politicians. I am still learning and this is one area which I constantly overlooked.

2018 of course was unprecedented, and I do not need to say what happened as from May until now it is already 9 months. As in every Malaysian, we have to go on with life. We have to make Malaysia better under the constant pressure from new economic powers further from Malaysia or even among our neighbors. Today, North Korea's Kim Jong Un is talking to Trump on disarmament of nuclear weapons in a country called VIETNAM. Having that discussion in Vietnam itself is historic as who would have thought of that discussion being held in a country that just gotten itself out of war not too long ago. Malaysia is facing new pressure from these type of countries, never mind our four neighbours, Singapore, Thailand, Philippines and Indonesia.

In that, Malaysia has to move faster, smarter but still carefully. In my many discussions with businessmen who do business in Vietnam, Malaysia still has many advantage against that country. But yet, we are still competing against them on many fronts.

The new government in addressing the B40 (rightly so), still has to grapple with bringing the country forward. In that, the budget, expenses, policies and later deliveries have to right and precise. To bring forward economic comfort to the people, many forgot that one, as a country, we have to fix the economy first. With that, together we have to address the plight of the people. Of course, today the challenge faced by many government of the day is to fix the disparity of income. This is the flaws and product of globalism, where a particular company thrives and become stronger while few competitors survives. Example, how does one address a monopoly or soon to be of Grab, Lazada et.al.? We complained about the taxi license holder of the past but these are one company dominating an important space on the new economy.

The new government, unfortunately, with the manifesto, todate it is more of a filling the potholes from the promises provided during the election. Some of the people that I talked to, still felt that Malaysia has not gotten itself out of the election fever. True enough, in one seminar that I attended recently, one of the politician turned government hence policy maker today still talk about the triumph of May 9 - 9 months after.

Since liberal democracy has been proven to be a governing model, it has been seen that one of the way to fix the economy is to promote capital markets, direct investments and entrepreneulism. Malaysia, in that respect practices open economy. Our DNA has been about getting companies to take up risk and we encourage them by giving incentives. When companies profited, we can once a while complain but of course in the process, we see better Malaysian entities come out of it. In fact, our open investment policy also helped non-Malaysian companies to thrive out of Malaysia. If one goes to Penang or even Johor, we see many, but we just do not realise it. We helped many non-Malaysian companies to be successful and we should be proud if it. However, our bigger hope is to see Malaysian company that is able to compete globally.

The elimination of tolled highways is one of the promises among the many promises. I however felt that it is an over-promise which has not been studied carefully. If we put it and give a simple question to the masses, they of course will not want to be paying toll. Nobody wants to pay anything especially when the B40 and M40 earn below RM8500 household income. However, the past government, since 80s i.e. Penang Bridge have already started privatisation of roads whenever we feel there is a need to develop infrastructure. Fast forward today, that perhaps been slightly overdone - but it is not easy to reverse a strategy that has been created for so long. In getting private to invest and charge, our budget on development has been allocated elsewhere. More recent analysis has provided that to buy out all the concessions it will costs RM150 billion.

The government has talked about RM1 trillion debt. While RM1 trillion is deemed high, another RM150 billion is not helping. Every year, in our budget, Malaysia for quite a while has not been putting that much on development expenditure as our operating costs has been a bigger problem. We tried to solve that through private-public partnership (the 3Ps). It is a good effort, but as usual to make that happen the one that takes the lead i.e. PUBLIC has to make themselves consistent i.e. then only the companies will be comfortable.

While in my past article, I am supporting the purchase of Gamuda's toll concession assets, to do it much more aggressively on several others is a dangerous precedent. We just do not have the capacity. The public, like it or not has to be educated, just the same where they have to be educated on personal financial management - to fish rather than to be given fish is an old proverb but still relevant. This toll topic is hugely complex and I believe only a small percentage can comprehend, but nevertheless a policy has to be clear and we have to stick to it. Otherwise, fewer companies will be willing to invest and that could present a bigger PROBLEM to the country.

5 comments:

nixiao100 said...

Today AA Q4 result out. Huge losses.

felicity said...

Yup, Airasia's result is quite bad.Largely due to overcapacity, high oil price and weak currency. The yield is not good.

this result could mean a bigger problem, basically shows that consumption may be poor local and also regional.

Jun8 said...

Hey Felicity, are you still bullish on AA's long term future?

felicity said...

Hi Jun 8

Yes, long term future is intact. One can see that despite what AA is saying that because of their increased capacity, the pricing is weak over last quarter which is a surprise. This is also a worry as it indicates that economy is not doing well and people's propensity to spend is low. Top up with aggressive expansion by AA, it is a big quarter loss for AA.

I think AA is never better to be in a position to address that slowdown with the cash holdings that it has now. Strategically, there is a reason for AA to expand aggresively. Most of its competitors are not expanding and AA took that to be aggressive. If we believe that low costs airlines will be here to stay and be a big part of people's travelling, AA is in that strategy to do that.

June8 said...

Thanks for the reply!