Friday, August 30, 2019

The PLUS asset should remain where it is now

Frankly, with proposals by various parties on the toll assets - where it is reported there are a total 15 highways in proposal and under review. Among them, the Gamuda, IJM and PLUS's highways. Let me put these thoughts from the 3 proposals perspective:

1) proposal by MOF to buy the 4 highways controlled by Gamuda - which we know is the government's money, although Tony Pua's argument is that the government does not need to come out with extras. That's what he said. But he also claimed that Malaysia's debt has exceeded RM1 trillion. Buying the Gamuda's highway will add the debt no doubt, despite it is ring-fenced against the proceeds from the toll collection. The idea is buying over the assets will increase the country's debt no doubt. Additionally at a time where we are promoting privatisation for Malaysia, this act is in the opposite which is nationalisation of assets. This is also against PH's manifesto.

2) proposal by Khazanah - it is reported that Khazanah has submitted a proposal to purchase 15 highways owned by Gamuda, IJM and including the PLUS highway. Among them, the largest in contention is the PLUS asset. As we know, PLUS is already controlled by Khazanah through its 100% unit - UEM. In my opinion, Gamuda and IJM can manage these assets better than Khazanah. Can Khazanah have other ways besides not collecting toll? If yes, I would like to listen. The largest asset among the many is the PLUS asset which is around RM30 billion or more. Can Khazanah afford to reduce the toll collection fee? The other 49% owner of PLUS highway is owned by EPF which is the bulk of Malaysians money anyway - the owner is the one which will use the assets anyway. Why pass to the government. As an EPF contributor, I would prefer this asset. Can EPF find any better alternative after this sale? Also, this exercise seems like a left pocket - right pocket exercise as IJM and Gamuda are largely owned by the Malaysian institutional funds anyway. Why give more fees to the investment bankers and for them to take home more bonuses next year? Isn't that what we do not want? Giving money to the rich again for doing nothing much but shuffling assets.

3) proposal by Maju - Maju is a private party. In the past, its proposal was backed by Evercore - a large Private Equity. Maju as it is, is not very rich. Tun Mahathir's past has shown that he was willing to support entrepreneurs if they are willing. (Think Yahaya Ahmad, and many more) However, tolled highways are not difficult assets to manage, as long as managed well - unlike building a car. Hence, there is a huge probability that foreign PEs will make a killing as Maju itself may not have the capability financially to do this. Why give a large part of EPF's earnings for example to parties like Evercore and several more? They do not bring any additional value to us besides again shuffling papers.

All in all - I feel that it should remain status quo as the assets are owned largely by Malaysian institutions. This is just like what we like to term "Small little problem, but we go and dig (create) for more problems."

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