Tuesday, November 6, 2012

Resistance grows within BN against AES profits

Resistance grows within BN against AES profits

November 06, 2012
Malaysian Insider
KUALA LUMPUR, Nov 6 — A whopping 2.72 million speeding tickets will have to be issued in each of the next five years for the two concession holders of the controversial Automatic Enforcement System (AES) cameras to just recoup their reported RM700 million investments.

And considering the authorities had only collected an average of about 25 per cent of all traffic summonses a year — which increased to 65 per cent only after a general discount was offered last year — the two companies will have to issue far more summonses to account for the poor collection.

Such calculations have led to apprehension on the part of a growing number of Barisan Nasional (BN) politicians who are concerned about the profit motive that is built into the concession agreements.

“The privatisation of the AES could be seen as attempting to make profits because some (cameras) are placed in inappropriate places,” Umno’s Seri Gading MP Datuk Mohamad Aziz told The Malaysian Insider.

The two firms awarded the contract to implement the enforcement system — ATES Sdn Bhd and Beta Tegap — will spend between RM300 million and RM400 million each to set up traffic cameras at 831 “black spots” nationwide.

Both ATES and Beta Tegap are entitled to RM16 per valid summons for the first five million issued. They will then split the remaining revenue evenly with the government up to a cap of RM270 million each.

The firms will each receive 7.5 per cent from the remaining revenue and the government will keep the rest.
Based on the business model, both companies will collect RM80 million each for the first five million summonses issued by each company. This works out to a total collection of RM160 million.

Under the second tier of the agreement, the companies will get a total of RM540 million, bringing the total amount due to the two companies to RM700 million.

Based on the even split in revenue with the government, the RM540 million figure represents 3.6 million summonses of RM300 each.

To hit the RM700 million break-even mark, a total of 13.6 million summonses of RM300 each for speeding and other major offences will have to be issued via the AES cameras.

The two companies will have five years to get to the 13.6 million summonses break-even point before the entire system reverts to the government.

To ensure the companies profit from the deal with the government, they will almost certainly have to issue more than 13.6 million summonses a year.

All such additional summonses will see the two firms each receive a 7.5 per cent cut.

Assuming the two companies were targeting a total profit of RM100 million after five years, it would be 7.5 per cent of RM1.4 billion in summonses of RM300 each.

This works out to another 4.6 million summonses, bringing the total number to 18.2 million summonses for speeding and other serious offences for the two companies to pocket RM50 million each in profits after five years.

According to federal estimates for Budget 2013, the government expects to see an additional RM1.02 billion in revenue from its share of AES enforcement, but it has not stated how much will be paid out to the two companies.

While defenders of AES enforcement have attacked critics for being irresponsible over road safety issues, some BN politicians like Mohamad remain concerned about the possibility of voters being made to pay for the profits of the two companies.

“We have to suspend (the AES) so that the public is not pressured,” he said.

“We have to fine-tune the system before we introduce it.”

Gerakan’s deputy president Datuk Chang Ko Youn said he accepted that the private sector has to make a profit from any contract.

“But the terms have to be fair to the government and taxpayers,” he told The Malaysian Insider.
BN politicians are understandably concerned about the introduction of AES just months before elections are due.

Pakatan Rakyat (PR) politicians have already started using the controversial AES system as campaign fodder, and yesterday’s announcement that police speed traps would be maintained alongside the speed cameras could make things more difficult for BN as it seeks to maintain its hold on Putrajaya.

States controlled by PR parties have already given notice that they will block the installation of AES cameras as permits are required from local councils, in a populist move targeted at taking advantage of public unhappiness.

BN politicians and supporters have accused PR of being irresponsible and have argued that the AES was meant to ensure better road safety.

But opponents of the AES system have pointed out that opposition to the new speed cameras was a result of suspicions over the fact that enforcement has been privatised to companies that take a cut from summonses issued to motorists.

There is also growing concern among BN politicians that insisting on the AES could prove costly to BN in the next elections which must be called in the next six months.

Last week, Umno MP Datuk Bung Mokhtar Radin crossed the political divide and backed the opposition PR pact in calling for Putrajaya to suspend enforcing the AES, saying it could be used as campaign fodder against the ruling BN.

Bung Mokhtar, a seasoned Umno lawmaker, is the most senior member of the ruling coalition after Umno Youth leader Khairy Jamaluddin to urge the federal government to delay the newly-introduced traffic enforcement system.

Kedah, Penang, Kelantan and Selangor ― all governed by PR ― have decided to suspend approval for the AES that detects speeding motorists and issues fines.

Several influential non-government organisations including the umbrella body representing civil servants, Cuepacs, have also opposed the enforcement, saying the system was not currently suitable. They also want the government to review the locations where the AES would operate.

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