KUALA LUMPUR (Feb 18): The appointment of KJS-SEP Synergy to develop a proposal for the Multi-Lane Free Flow (MLFF) system conflicts with existing concession agreements that grant exclusive toll collection rights to highway concessionaires, according to the Public Accounts Committee (PAC).

The proposed MLFF system, estimated to cost RM3.46 billion, aims to replace the current booth-based toll collection across 33 highways in the country, with overhead gantries that use radio-frequency identification (RFID) technology and an automated number plate recognition system.

In a report released on Tuesday, the parliamentary watchdog stated that the appointment letter for the joint venture (JV) between Konsortium Jaringan Selangor Sdn Bhd (KJS) and SEP Synergy (M) Sdn Bhd as the central tolling company for the RM3.5 billion barrierless toll system was signed by the caretaker government on Nov 17, 2022.

KJS, a wholly owned subsidiary of YTL Power International Bhd (KL:YTLPOWR), holds a 60% stake in the JV, while the remaining 40% is owned by Bumiputera-based SEP Synergy.

For context, the 15th general election was held on Nov 19, 2022, following the dissolution of Parliament by the Barisan Nasional-Perikatan Nasional administration, led by then-prime minister Datuk Seri Ismail Sabri Yaakob, on Oct 10, 2022.

"The appointment of KJS-SEP Synergy as the central tolling company, which was granted the right to collect tolls comprehensively, conflicts with the terms of the privatisation of concession companies, which have exclusive toll collection rights as stipulated in existing concession agreements," the PAC noted.

The PAC said that the appointment of KJS-SEP Synergy ended on Dec 16, 2024, at no cost to the government, but it may expose legal risks if terminated early based on the principles of quantum meruit and legitimate expectation.

The PAC also called on the Ministry of Works to immediately decide on the direction of the MLFF system, following the expiration of the appointment agreement.

However, the appointment agreement signed between the government and KJS-SEP Synergy is not a concession agreement, but rather for negotiations with highway concessionaires, according to Siti Rafidah Zainuddin, the deputy legal adviser at the Ministry of Works.

"This appointment agreement is solely for appointing the company to discuss and negotiate with the concession companies, and it is not a concession agreement," she said during a proceeding on Feb 26, 2024.

According to the PAC, KJS-SEP Synergy submitted an unsolicited proposal for the implementation of the MLFF system to the Ministry of Works in February/March 2021.

Through the proposal, KJS-SEP Synergy introduced the central tolling agency and central tolling company, along with the development of the MLFF system, which is estimated to cost RM3.46 billion, but without involving government funds.

The Cabinet, on Dec 17, 2021, granted approval in principle to KJS-SEP Synergy to negotiate with highway concessionaires for three years, until Dec 16, 2024. The letter of intent was issued on Jan 22, 2022.

The PAC added that on Oct 7, 2022, the Cabinet agreed to prepare the appointment agreement for KJS-SEP Synergy as the central tolling company, with negotiations continuing for the same three-year period until Dec 16, 2024. The appointment agreement was signed on Nov 17, 2022, during the caretaker government period.

The PAC also noted that highway concessionaires generally support the implementation of the MLFF system. However, issues in enforcement, legal, commercial, financial matters, and the business model remain as hurdles that still need to be resolved.

It said that the Ministry of Works will present the details of the negotiations and options for implementing the MLFF system, including the request for proposal, business-to-business (B2B), and a hybrid model, to the government for further decision.

The PAC believes that the MLFF system will not completely solve traffic congestion on toll highways. It called on the Ministry of Works and the Malaysian Highway Authority (LLM) to conduct a more detailed cost-benefit analysis, as the system is estimated to cost billions of ringgit.

The parliamentary watchdog also urged the Ministry of Works to seek detailed advice from the Ministry of Finance or the Public-Private Partnership Unit (UKAS) for the best procurement method.

"The MLFF system must be implemented in the best way, without causing any cost implications for the government or users," it added.

The PAC considers it inappropriate for the government to sign high-impact agreements during the caretaker period.

It also called on LLM and highway concessionaires to improve toll collection efficiency.

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