1. DAP YB Tony Pua's accusation that the government is bailing out a crony by extending the concession period of the Ekspres Rail Link (ERL) is yet another example of Pakatan's Zombienomics.
2. It betrays Pakatan's lack of understanding of how the real world economy works and what are the inter-relations between concession holders and their funders.
3. Tony Pua's call to let the ERL company raise fares and let it go bust is very simplistic. I do not believe this YB is ignorant but he is making this statement for political purposes only.
3. Firstly, the ERL company has RM2.8 billion in liabilities. Much of these are bonds and loans owing to Tabung Haji and banks. Tabung Haji also has a 40% stake in ERL that they invested in when the ERL project started in 1997.
4. If ERL goes bust as what Tony implies then Tabung Haji will incur billions of ringgit in losses while banks will also have to write-off their loans. The govt has to think of these implications too - implications that Tony does not think of when he frequently make statements like this.
5. Secondly, there is an existing RM2.9 billion in outstanding compensation due to ERL that would have to paid now if the concession agreement was not extended. The government may have decided that paying this amount now is not in the best interest of the people.
6. As Tony correctly pointed out, consumers do not lack choices in transportation to KLIA now. Options will expand further when the MRT2 line that goes to Putrajaya, closer to KLIA is completed. This means that consumer choices and rights are not severely impacted should the ERL continue to be run as a concession for an extended period as long as fares are reasonable.
The ERL is not an essential service that will "oppress the rakyat".
7. For some strange reason, the Mahathir administration also agreed to pay a certain percentage from the Passenger Service Charge (PSC or Airport Tax) collected by KLIA for both international and domestic passengers regardless of whether the passengers took ERL to the airport or not.
8. Thankfully these payments will end in 2029 and will not be extended even if the ERL concession period is extended.
9. Given these PSC payments as well as the wildly optimistic revenue projections as per the original concession agreement which opens the government to large compensation, I do agree with Tony that the terms appear lop-sided.
10. However, Tony must ask his Pakatan Chairman Tun Mahathir why he had agreed to such terms in the first place.
11. As with the lop-sided IPP deals and the full take-over of PLUS highways by the government and EPF, the government continues to correct the many legacy mistakes of Tun Mahathir which includes the ERL concession.
12. The government believes by not allowing ERL to raise its fares and extending the concession period in lieu of paying the RM2.9 billion while expanding transportation options is the most balanced option to address this to protect the interest of the people.
Eric See-To
Deputy Director,
Barisan Nasional Strategic Communications.
17 November 2017.
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