A (very) short history behind the latest Causeway tolls hikes
So, as forewarned by the Land Transport Authority, Singapore has matched Malaysia’s toll hikes at the Causeway. This was a long-time in coming.
As a result of the angst this issue has created, some Singaporeans feel our Government should bear the blame for this by increasing Vehicle Exit Permit (VEP) charges in July this year, thus giving Malaysians an opportunity to respond in kind. The history behind this issue is a little murky so here is my attempt at shedding some light to the matter.
In 2008, it was reported that the Malaysian government had awarded a RM 1.2 billion contract for the Eastern Dispersal Link (EDL) to Malaysian Resources Corporation Berhad (MRCB), a company linked to the ruling UMNO party. Contract promoters saw it as a way to alleviate congestion in Johor Bahru city but the contract contained a lucrative 34-year toll concession for MRCB. The contract also called for the collection of this toll not on the road itself, but at the Malaysian side of the causeway.
On the EDL project information sheet for investors, the toll charges would range from RM$6.20 for cars to RM$12.40 for lorries, with rates to be reviewed every three years, peaking at RM$14.60 for cars, and RM$29.20 for lorries.
On 1 April 2012, the Eastern Dispersal Link finally opened to traffic but no decision was taken by the Malaysian Government about imposing tolls. Apparently, Malaysia did not take a decision on the matter largely because of their upcoming general elections, and the effect of such a toll on voters, especially on Malaysian businesses that rely on Singapore as a source of supply.
As early as 2012, the Singapore position has been clear. Any toll hike will be met by Singapore, on the basis of “some form” of a matching principle.
The matching principle originated when the Second Link was opened in Tuas in 1998. Then, the Government said it was entitled to charge a toll as it spent some $600 million dollars on building the second link bridge in contrast to the $200 million spent by Malaysia.
Today, this matching principle appears to have found itself a new basis – ‘we will raise if you raise, we will reduce if you reduce’. (see 2014 parliamentary exchange below).
But the basis behind this matching principle, if accurate, appears to be at odds with the Government’s public messaging about Iskandar Malaysia, an area of land about three times the size of Singapore in Johor, that has been vaunted as complementing Singapore.
In May 2014, PM Lee, at a Malay-Muslim business conference was quoted as saying that Small and Medium Entreprises (SMEs) seeking to venture abroad should seriously look at Iskandar:
“All SMEs want more foreign workers…..SMEs will have to turn away business because they cannot find workers….(SMEs) can take advantage of lower costs, and greater supply of land, while staying close to Singapore…..I encourage companies to consider this seriously.”
A month earlier in April 2014, at a joint press conference with the Malaysian Prime Minister, PM Lee was quoted as saying that Iskandar was a “strategic play” that can lift Malaysia above its global competitors and help Singapore maintain its competitive edge.
The contradictory forces generated by Singapore’s decision to match Malaysia’s toll hikes on the one hand and the complementary economic relationship of Iskandar to Singapore on the other aside, it would appear that Singapore’s coffers will see a windfall shortly (assuming conservatively that only 10,000 cars cross the causeway each day, on the basis of 30 day month, the government will collect around $23m a year).
Where did Iskandar figure in Singapore’s toll hike? Could it have considered a less steep hike in toll charges in view of the fact that Singapore did not contribute to constructing the EDL? Even so, if a decision had been taken by the LTA not to increase toll charges, it would inevitably have been read as a signal by some in Malaysia, that Singapore will not react to terms in contracts such as those that led to MRCB being awarded the concession for the EDL, with potentially more road construction in Malaysia ultimately funded mainly by Singaporean taxpayers. Perhaps this is what the Senior Minister of State for Transport Josephine Teo meant when she said in parliament, “there is no assurance that toll charges foregone by one side will be translated into lower total charges which benefit motorists.”
But in the meantime, the lustre of Iskandar has gone a little dull with no connection made by the Government of its decision to match Malaysian toll rates at the Causeway and in the same breath, its promotion of Iskandar to SMEs.
Malaysia is in the meantime looking into the prospect of introducing its own Vehicle Entry Permit for foreign cars (read Singapore and Thailand) in the near future, with some unverified reports touting figures of up to RM$50 per vehicle. It is not known what effect this would have on the Iskandar project, unless Malaysia has calculated that it can go it alone with capital from other investors such as the Middle East, at the same time concluding that a more crowded Singapore and increased business costs in the city-state in the years to come would guarantee enough Singaporean business and tourist visitors anyway.
Source: PM Lee Twitter
In anticipation of the Singapore’s toll hikes, the Singapore Chinese Chamber of Commerce and Industry (SCCCI) and the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) met in Batu Pahat, Johor last month to solicit feedback on the issue. In their joint statement, both parties called for an “extensive study…to alleviate the burden on various parties.” This carefully-worded statement make it clear that the toll hikes go well beyond Iskandar.
Should more have be done by both Malaysia and Singapore to alleviate the burden of increased tolls on ordinary Singaporeans and Malaysians? One would have hoped so. But in the final analysis, Iskandar did not matter, both for Malaysia and Singapore.
Now with talk of a “Friendship Bridge” between Singapore and Malaysia mooted in April 2014 by PM Najib and PM Lee, the financing of such a link may well be the first issue for both Singapore and Malaysia to resolve.
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Useful Links:
1. PM Lee urges SMEs to consider Iskandar for expansion: http://www.todayonline.com/business/pm-lee-urges-smes-consider-iskandar-expansion
2. Iskandar strategic to Singapore and Malaysia, says PM Lee: http://www.singapolitics.sg/news/iskandar-strategic-singapore-and-malaysia-says-pm-lee
3. Parliamentary Question on Matching Toll Charges at the Causeway and Second Link (9 Sep 2014)
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Parliamentary Question on Matching Toll Charges at the Causeway and Second Link
Mr Pritam Singh asked the Minister for Transport whether LTA plans to review its long-standing policy of matching toll charges at the Causeway and Second Link to those set by Malaysia in future; and (b) whether a Whole-of-Government study has been carried out by Singapore to assess the prospect of higher toll charges on Singapore businesses operating in the Iskandar zone in Johore.
Mrs Josephine Teo (for the Minister for Transport): Mdm Speaker, toll charges at the Causeway and Second Link were introduced by Malaysia in 1998. Our matching policy reflects the shared nature of the two crossings, and ensures a fair distribution of total revenues from the crossings. Without a matching policy, lower toll charges by one side may simply be offset by higher tolls levied by the other side. There is no assurance that toll charges foregone by one side will be translated into lower total charges which benefit motorists.
Hence, in response to Malaysia’s Causeway tolls revision on 1 August 2014, we have announced Singapore’s intention to match Malaysia’s new and increased toll charges in due course.
The Government has limited information on the cost structures and market conditions of Singapore businesses operating in the Iskandar zone in Johore. But clearly, there will be some impact on their costs.
In this regard, we note reports in the Malaysian media that the Malaysian authorities will review the tolls. Should Malaysia reduce or do away with the toll charges, Singapore will follow suit. This would be welcomed, I think, by both Singapore and Malaysia businesses on both sides of the Causeway.
Mr Pritam Singh (Aljunied): Mdm Speaker, I would like to thank the Senior Minister of State for that very helpful clarification. I have three supplementary questions for the Senior Minister of State. First, did the Malaysian government forewarn Singapore their intention to raise toll charges at the Causeway on 1 August, and have there been any joint discussions about this round of toll hikes since 1 August so as to manage costs for Singaporeans and Malaysians travelling to and fro both countries?
The second question is: did the Singapore Government inform its Malaysian counterparts when it planned to increase VEP charges in July this year, and if not, does it plan to do so going forward?
Finally in view of the close relationship between Singapore and Malaysia, especially between the Prime Ministers in recent years, has the Government suggested to the Malaysian authorities to consider tagging the additional toll from 1 August along the Eastern Dispersal Link rather than at the CIQ, so as not to penalise drivers who do not use the Eastern Dispersal Link and only travel into Johor Bahru city?
Mrs Josephine Teo: Mdm Speaker, the answer to the Member’s first question is “No”. We were not informed in advance of Malaysia’s intention to increase the tolls at the Causeway. The answer to his second question is “Yes”. We informed our Malaysian counterparts in advance why there is a need to revise the VEP fees. As I have explained in my answer to the first question, is really because the cost of owning a Singapore-registered vehicle and using it on Singapore roads has risen, whereas the VEP fees which was meant to equalise the similar cost for a foreign-registered vehicle had largely remained unchanged. And so, yes. Our Malaysian counterparts were aware of the intention to raise VEP fees.
The answer to the Member’s third question is “Yes”. We very much would like our Malaysian counterparts to come to the discussion tables, and look at what are the better ways of managing this issue of the Causeway tolls. Our long-standing policy is well known to our Malaysian counterparts, and that means if the Causeway tolls levied by the Malaysian side were to be reduced or removed, we would do likewise.
Ends.
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