Resistance grows within BN against AES profits

By Leslie Lau and Md Izwan
The Malaysian Insider
Nov 06, 2012

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.

  1. #1 by sheriff singh on Tuesday, 6 November 2012 - 10:04 am

    Hapuskan the AES blood-sucking mosquito before it spreads the contagious ‘kroni’ disease during this monsoon period.

  2. #2 by Jeffrey on Tuesday, 6 November 2012 - 10:06 am

    The trouble with concessions is that once public sentiments arise against it that will cost votes, the concession is not easy to reverse because of financing arrangements already entered into between the concessionaire (& its special purpose vehicle (“SPV”) and financiers/banks. It’s like the PKFZ scenario, the banks and financiers leveraging on govt’s sponsorship and support and getting a good rating from rating agencies -and assured of cash flow with receivables channeled straight back to them for repayment& interest/dividends- have already disbursed the loans utilised by concessionaire/SPV for acquiring the infrastructure for the project, and if one were to reverse the concession, due to political pressure, how do the banks and financiers get repaid??? From the concessionaire/SPV?? They have nothing other than infrastructure & assets acquired from loan which are already mortgaged to the financiers/banks. These infrastructure/assets cannot be easily sold by financiers in open market to recover the loan because there is unlikely any taker, for same reasons of lack of their use, if and when the govt itself has itself already rescinded the concession earlier given and is unlikely to give another one to another for the same reasons why it revoked the first one.

  3. #3 by Bigjoe on Tuesday, 6 November 2012 - 10:10 am

    When to a wedding dinner this weekend and its the talk of everyone especially the older ones who are set in their ways. All of them got tickets in empty roads with low speed limits. I was hugely surprised how many tickets in such a small group considering that there is so few installed only…

  4. #4 by Jeffrey on Tuesday, 6 November 2012 - 10:12 am

    The problem is the project financing arrangement entered into by concessionaires with third party financial/debt market for funding the project basedon govt’s sponsorship. Like PKFZ the govt won’t rescind the concession as it will impair its credibility to the financial market. If the financial integrity of all concessions now and in the future is so damaged by the rescission, financiers/banks won’t lend to anyone having to do with govt sponsored projects and concessions. No more projects and concessions means no development – also no opportunities for cronies to make money for round tripping. This an intractable problem. Public is at receiving end- if concessionaire reneges, govt uses public purse to bail it out to repay financiers; otherwise if financiers fail to recover and banks fail, again govt will use public funds to bailout the financier/bank. If neither scenario happens, the public will have to directly lose money by paying AES fines.

  5. #5 by sheriff singh on Tuesday, 6 November 2012 - 10:26 am

    The common denominator of all these recent expose is that some UMNO / BN crony always get to pocket huge, huge sums of ‘donations’ often at taxpayers expense.

    With the elections now very near under the law, the people should now know how to react.

    The RAHMAN prophecy will most certainly come to pass. The people have been thoroughly sekrewed with impunity by Ah Jib Gor and his geng. No amount of ‘tembikai’ will save him. Not even from the riled up Little Indians from Brickfields who saw their Deepavali businesses affected by the government’s high-handedness.

  6. #6 by Godfather on Tuesday, 6 November 2012 - 11:54 am

    This is another Ah Cheat Gor flip flop. The PDRM complains that a big source of its livelihood is going to be hijacked by AES, so what does Ah Cheat Gor do ? He tells the police they can continue with their parallel radar traps. So now we could have two summonses for the same offence. To avoid this, the police could simply drape a black cloth over the AES machines, and continue on their merry flag-downs of offenders. Then AES doesn’t make enough money, and so they put more traps in the 50 km/hr or 90 km/hr areas.

    Ah Cheat Gor’s goose is cooked.

  7. #7 by Godfather on Tuesday, 6 November 2012 - 11:57 am

    In truth, the AES is a UMNO-MCA joint venture. Gerakan realises this, and is already making some noise. Gerakan and MIC are not on the PKFZ gravy train, and it now appears like they are not on board the AES gravy train either. Poor sods, who is going to fund their election campaigns ?

  8. #8 by cseng on Tuesday, 6 November 2012 - 12:46 pm

    No body is objecting the enforcement of vehicle speed limit for public safety.

    What public could swallow further is the ‘piratisation’, rip-off of public fund, cronyism, and ‘corruption’ element of AES.

    These are 2 separate issues, since BN government could not rectify the perceived ‘corruption’ issues, better scraped the whole idea.

    We must maintain zero tolerance toward ‘institutionised abuses of public fund’ or ‘legalized corruption’.

  9. #9 by dagen wanna "ABU" on Tuesday, 6 November 2012 - 2:06 pm

    So we all can see the problem coming. The real profit comes from overpricing the equipment as well as the installation charges. Thereafter, the entire system will just sit wherever they are – unmaintained – and will soon fall into disrepair.

    And what about the difficulty in recouping all of that 700m initial investment cost? Oh that is not important. The two companies together with the unrecouped debts will be taken over by the umno gobermen (actually, bailed out). In short, it will become rakyat’s debt. Easy. No problem. No fear. No worries.

  10. #10 by Noble House on Tuesday, 6 November 2012 - 2:46 pm

    Some forms of institutional corruption are distinguished from bribery and other kinds of obvious personal gain such as:

    1. Bribery
    2. Trading in influence
    3. Patronage
    4. Nepotism and cronyism
    5. Electoral fraud
    6. Embezzlement
    7. Kickbacks
    8. Unholy alliance
    9. Involvement in organized crime.

    A state of unrestrained political corruption is known as a “kleptocracy”, literally meaning “rule by thieves”. Malaysian should be too familiar with all these by now.

  11. #11 by SENGLANG on Tuesday, 6 November 2012 - 4:05 pm

    Honestly we have to admit that these cronies are real genius. They are the most creative people who will keep formulating scheme to milk the tax payers moneys. They will come with ideas and scheme from time to time. We have PKFZ the biggest ever and we also have NFC, now we have another big one call AES. It all start with the evil intention to suck the money in the name of enforcement and save life. We all know it was evil when ever a scheme of payment is tied to the collections from the traffic samans. Anything that have to do with the scheme of commission has the evil side of it. One party is going to suffer and pay the benefit of the other. No one against the any efforts to reduce the traffic offenders but we can not accept the fine collected is to be share with a commercial entity. All law enforcement and its implementation must be carry out by the relevant authority.

    Are we also out sourcing our army when there is a war? Are we outsource the policeman simply they are shortage of them? So a security firm will be outsource to replace polic patrol too.

    BN has lost it moral of governing

  12. #12 by Winston on Tuesday, 6 November 2012 - 5:05 pm

    The PR must do a complete and immediate review of all agreements signed by UMNO/BN with their cronies during their long reign and any agreements that are lopsided and against public interests will be abrogated.
    This will stop such unfair agreements from continuing and also to teach a lesson to those involved.
    To take it a step further, all those who signed such crony agreements, at the expense of the Malaysian public, be they government officials or cronies, will also be penalised for their acts.
    As it is the ruling party is going “hell for leather” to sign and implement all sorts of such agreements/projects even when their citizens objected vehemently.

  13. #13 by rockdaboat on Thursday, 8 November 2012 - 12:14 am

    The introduction of AES at this time tells us at least two things:

    Either BN is stupid or BN knows that it will not win the 13th election!

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