Tuesday, August 12, 2014

Why spend RM1.3 bil on EDL, YB Wong Shu Qi?

The Eastern Dispersal Link (EDL) is an 8.1km expressway that connects the end of the North-South Expressway (NSE) at Pandan Interchange to the new Bangunan Sultan Iskandar, Custom, Immigration and Quarantine (CIQ) in the city centre. From Pandan Interchange to Bakar Batu Interchange, is a 4.1km dual three lanes at-grade, and from Bakar Batu Interchange to the CIQ, is the elevated 4km dual three lanes with wide shoulders.

The total construction cost of RM1.3 billion did not receive any public funds, except for a few reams of paper and printing ink that were incurred by the Works Ministry and the local authorities which shouldn't exceed RM1000.

This project had some challenges and high costs along the way. It wasn't so straight forward. A total of 146 lots covering about 59 hectares had to be acquired to make way for the project. The land acquisition cost incurred by the concessionaire, MRCB Prasarana Sdn Bhd, was approximately RM254 million.

To avoid any potential Excel error and further embarrassment to DAP, I must help Shu Qi to calculate this. The average land acquisition cost per hectare is RM4.3 mil. Break it down further, that is approximately RM40 per square foot.

But that's not all. There were villagers and squatters which MRCB had to manage. There were 424 families who were affected. MRCB allocated RM13,680 per family that was sufficient to cover some rent for a couple of years. On top of this, the families were also given a one-off RM2,000 in moving out expenses. That's another RM6.65 million added on to the project cost. I know that's not much to DAP. So, let’s laugh it off, shall we, Shu Qi?

From what I understand, the EDL project which costs RM1.3 billion has two liabilities – senior sukuk at RM845 mil and junior sukuk at RM199 mil. The monthly loan repayment should be approximately RM 10 mil per month. I stand corrected on this but let’s assume that it is true for argument’s sake.

Assuming that the annual toll-able traffic is 11 mil vehicles and they all pay an average of RM15 (both ways), the toll revenue collection should be approximately RM165 mil.

Less annual debt repayment of RM120 mil and O&M costs of RM10 mil (assume), EDL should be earning approximately RM35 mil per annum only.

I was told that the Service Concession Asset (SCA) of EDL is now valued at RM1.32 bil. If that’s true, with my limited accounting knowledge, the return on SCA is just 2.6%.

The ratio will drop if the toll-able traffic in EDL falls but of course, that’s not the Government’s problem since it is a private entity.

Should the Government buy EDL?

In 2012, the Government made an announcement that they are in the negotiations stage to take over EDL from the concessionaire, MRCB Prasarana Sdn Bhd. The Prime Minister said that there is a possibility that EDL will be a freeway.

They wanted to but clearly they have abandoned it. Question is, why?

If you are the Finance Minister, Shu Qi, will you approve RM1.3 billion to benefit 50,000 people who use the EDL to work in Singapore and earn Singapore dollars? That’s an average of RM26,000 per person.

If one can afford to drive a car all the way into Singapore, the incremental toll rate of RM13.60 (from RM2.90 to RM16.50) is less than the cost of a plate of chicken rice in Singapore. If you are taking the bus, the incremental cost is just RM11.00 per bus or RM0.42 per pax (both ways) in a 26 seater bus.
We are better off spending the money elsewhere and I am sure the users of EDL will understand this too

In his article - “Who is to blame for Selangor water woes?”, YB Khairy Jamaluddin said “Under the recent MoU, signed on Feb 26, the Federal Government agreed to provide a sum of RM9.65bil to acquire the water companies and release all water assets to the Selangor Government to operate.”

Don’t you think the RM1.3 billion is better spent in helping Pakatan Rakyat to resolve the water crisis in Selangor? Perhaps, that’s where the money really went to but you and I will never know, Shu Qi.

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