Is Asas Serba’s plan brilliant or absurd?

By S. Jayasankaran (Business Times Singapore)

In May or thereabouts, Asas Serba Sdn Bhd – a private company little known to anyone in Malaysia – submitted a proposal to the Works Ministry to buy all the toll concessionaire companies in the country for RM50 billion, according to businessmen familiar with the proposal. There are 22 such companies in the country.

It doesn’t quite make sense. Most of the 22 companies are privately held, so the notion of going through the government seems unreasonable to begin with.

The biggest concessionaire, however, is state-owned Plus Expressways, which owns and manages a highway traversing the length of Peninsular Malaysia. So the application to buy that is at least grounded in some reason.

According to various reports, the promoters of the scheme argue that they would cut toll rates by 20 per cent and keep it that way in perpetuity. In return, they want the concession periods extended.

High toll fares are admittedly a pain for the people who have to use them regularly. In fact, that is why Nor Mohamad Yakcop, Minister in charge of the Economic Planning Unit, said recently that the government itself was planning to take Plus private – presumably as a prelude towards lowering toll rates.

Asas Serba probably thinks Nor Mohamad is planning to extend the government’s purchase to all the toll companies in the country. It would argue that it would be better for the private sector to take over the concessions rather than the government, which is already running a sizeable budget deficit; this year, it is expected to come close to 8 per cent of gross domestic product.

One can think of a few reasons why the government should not do what Asas Serba is proposing. Forking out RM50 billion for a mature business that does not create any new jobs or have any multiplier effects on the economy does not make any sense.

Indeed, putting that kind of money into new projects that would help kick-start the economy would be a far better proposition. In addition, one cannot forget the foreign shareholders of the concession companies who would simply repatriate the money out.

Should that be taken to mean that Asas Serba’s proposition has merit and should be considered seriously?

Not at all. Who is Asas Serba anyway? The market speculation is that Halim Saad, the former controlling shareholder of the now-defunct Renong conglomerate, is behind the deal. But Halim has publicly denied it and no one is any wiser.

According to news reports, the company comprises four people, two of whom are former senior executives of Renong.

But the point here is that none can be said to be any kind of corporate heavyweight, which begs the question: why would any bank want to get involved in the scheme in the first place?

RM50 billion is a colossal sum by any standards, and the only way to get this kind of deal going would be through government support; few banks would dare to participate without government aid. The Employees Provident Fund, which is the one institution with that kind of money, would not get involved without tacit government support.

In sum, for Asas Serba to succeed, the government must back its proposition – in word and in deed. That implies that Kuala Lumpur – which had to step in to save Renong after it crashed under the burden of its own debt – will have to intervene if anything goes wrong.

This scenario rings of an absurd play. If that is the case, then Nor Mohamad should just proceed with his own plan and forget about the critics.