Singapore Straits Times on Toll Hike Delay

Toll hike delayed for fear of voter backlash

But it will have to compensate toll operators if it disallows the hikes
By Carolyn Hong, Malaysia Bureau Chief The Straits Times

TOLL charges on eight Malaysian highways are slated to increase by 10 per cent next year, putting the government in a dilemma as it struggles to tackle public anger over rising inflation.With three months to go, the government has been waffling about this issue because it can ill afford to upset voters when the general election is around the corner. The last time toll charges were raised earlier this year, hundreds of people held street protests for several weeks.

In a statement issued on Monday, the Federation of Malaysian Consumer Associations said a toll hike would mean higher prices all around. Aware of the political impact, the government has been quick to deny that a hike is imminent. Deputy Prime Minister Najib Tun Razak was quoted by The Star yesterday as saying that the Cabinet had yet to decide on the issue.

But if the government refuses to raise tolls as allowed under the agreements with toll companies, it will have to pay them millions of dollars in compensation. This no-win situation underscores the government's difficulty in trying to roll back subsidies without stoking public unhappiness too much. Surveys have shown that the cost of living is likely to be a big issue in the general election, as spiralling inflation has hit the people's pockets hard. The local media has been reporting daily complaints about higher food prices, partly due to higher global prices for corn and wheat.

Political analyst Khoo Kay Peng said people's resistance was to be expected as only 10 per cent of the country's 11 million workers earned more than RM3,000 ($1,300) a month. For low-income earners, half of their pay typically goes to food and transport. 'People find it hard to cope,' Mr Khoo said.

But from the government's perspective, it spends more than RM25 billion on subsidies a year - nearly 10 per cent of the annual budget. It has said that the money could be better used for building schools or roads. So far, the government is treading cautiously, and is likely to hold off unpopular measures such as toll hikes or raising fuel prices amid expectations that elections could be held within the next six months.

Last year, when the government raised fuel prices by 20 per cent after global oil prices rose above US$70 a barrel, hundreds of Malaysians protested on the streets for weeks. Crude oil prices have since risen above US$80 a barrel.

The government has promised to maintain fuel prices for the rest of the year, and has held off a request by national oil company Petronas to raise the price of gas used for cooking, natural gas-powered vehicles, and generating electricity.

Like many analysts, Mr Khoo said the government cannot continue paying such hefty subsidies. 'It has to address fundamental issues like creating a more vibrant private sector and raising income levels,' he said.