BM 中文 English

Government must come clean on the compensation mechanism of Eastern Dispersal Link (EDL) in Johor

Our Prime Minister Najib Razak announced that there will be no collection of toll at Eastern Dispersal Link (EDL) in Johor next year.

Second Finance Minister Johari Abdul Ghani revealed in a recorded program on TV3 which was aired on 1st November, that the government had to absorb the losses incurred by the company involved and the government is expected to pay in cash compensation an estimated total of RM70 million annually for abolishing the toll on EDL.

EDL concession runs for a period of 30 years ending in 2042, that will make cash compensation for abolishing toll on EDL a whopping RM1.75 billion.

To recap, EDL is 8.1km long, of which slightly over half or 4.0km is above-ground or elevated. It was stated in MRCB 2011 Annual Report that the total investment cost of EDL was at RM1.2 billion, or RM148.15 million per kilometer, making it the most expensive highway in Malaysia. In 2014, BN Government has paid RM62,955,148 to MRCB for the delay in gazetting the toll collection.

However, it has been a drag on MRCB’s earnings and constitutes about 30% of its total debt as of June 30.

According to the MRCB 2016 Annual Report, EDL generated revenues of RM112 million in 2016, a decease by 2.6% from RM115 million in 2015.

Not only that, the average daily traffic for EDL further fell 6.6% to 39,264 for year-to-date-April 2017 following an increase in road charges on both sides of the Malaysia-Singapore causeway. Total traffic for 2017 is projected to fall 10%.

So how does MOF come to the figure of RM70 million per annual as compensation for abolishing toll on EDL? When profit of MRCB from EDL was only RM59 million in 2016.

It is not a secret that due to the cash flow mismatch between its toll collection and debt obligations, MRCB has tried to dispose of the EDL highway for more than a year. But they face some hurdles in selling the highway due to valuation disparities and the debt structure of the asset.

It is therefore understandable that MRCB will welcome the announcement of Najib to abolish the toll on EDL.

However, Government must come clean on the compensation mechanism, ie how did they arrive at the figure of RM70 million annually and if the Government is going to take over the RM1 billion bonds linked to the EDL highway in Johor. Because if that is the case, that will make the compensation for abolishing toll on EDL at RM2.75 billion! Rakyat need to know if the decision to abolish toll on EDL is people-centric or another bailout exercise.

DAP Assistant National Publicity Secretary & MP for Kulai
Media statement by Teo Nie Ching in Parliament on Tuesday, 14th November 2017