* MTD proposes toll freeze on two highways; terminates
concession on a third
* Move seen to be politically beneficial for ruling party
ahead of polls
* MTD and PLUS likely candidates for new toll concessions
(Adds details on bid by MTD Capital's chairman and CEO)
By Min Hun Fong
KUALA LUMPUR, Jan 28 Malaysia's private sector
toll road operators were asked to freeze, cut or abolish tariffs
by the country's prime minister on Friday after the country's
number two operator, MTD Capital proposed a toll
freeze on two of its highways without compensation.
Prime Minister Najib Razak, who is expected to call
elections either later this year or next, well ahead of the 2013
due date, told a press conference that the government would
solicit industry views.
"I have asked concession holders to retain toll rates or to
reduce or abolish them. So they have come up with various
suggestions. Whichever we can accept, we can go ahead first,"
"Apart from that, I have asked that the period of concession
not be extended and that there will be no compensation from the
government for suspended toll collections."
Najib also announced that the toll concession on a third
highway belonging to MTD will be abolished in May, ahead of its
expiry in 2018.
An analyst, who cannot be identified as he was not
authorised to speak to the media, said that MTD's proposal to
freeze rates was similar to the proposal by PLUS Expressways
, Malaysia's largest toll operator.
Both MTD and PLUS are presently the targets of a buyout from
their respective shareholders, and both buyers of the companies
are promising to implement toll freezes should the deal go
MTD has so far received two offers, both of which involve
the company's executive chairman Nik Hussain Abdul Rahman.
The first offer was an $830 million takeover offer from a
consortium of local firms linked to Nik Hussain. The second,
which came from Nik Hussain and MTD Capital CEO Azmil Khalid on
Friday, was an offer to buy MTD's concession-holding
subsidiaries, MTD Prime and Metramac, for $1.15 billion, also
The proposed toll freezes were included as part of the
second offer and not in the first offer.
Meanwhile PLUS is being targeted by a joint venture between
its largest shareholder UEM Group and the Employees Provident
"PLUS and MTD will likely remain in the government's good
books by promising a toll freeze should their respective
privatisations take place, which will be an asset when the
government decides to award the new concessions announced in the
budget last year," the analyst said.
In the 2011 budget presented in October last year, Prime
Minister Najib Razak had announced the establishment of at least
five new highways and the freezing of toll rates on four
highways owned by PLUS Expressways for five years.
POLLS AND SUBSIDIES
Najib's action on the tolls is also politically motivated
ahead of a general election as it hits on two heated topics,
namely subsidies and toll rates.
Malaysia's government spends billions of ringgit a year on
subsidies for road tolls and its bill for subsidising food,
transport and fuel runs at 24.9 billion Malaysian ringgit ($8.2
A government policy think-tank recommended that toll
subsidies be cut and prices raised in a bid to rein in
Malaysia's budget deficit which is expected to be 5.6 percent of
gross domestic product this year. It identified savings of 240
million ringgit from price hikes in 2010 and 693 million in
However, the government baulked at radical cuts to the
subsidy budget and has implemented gradual price hikes for
petrol, sugar and cooking gas, adding around 0.2 percentage
points to December's consumer price inflation index
which recorded a rise of 2.2 percent year-on-year.
($1 = 3.053 Malaysian Ringgit)
(Additional reporting by Royce Cheah; Editing by David Chance
and Miral Fahmy)