By Stephanie Jacob
In the third of our series on the RM6.3 billion Penang tunnel and associated roads, KiniBiz delves into the intricacies of the land-swap deal worth a similar amount that effectively pays for the project. NGOs and others object to lack of transparency over valuations and competence of joint-venture partners while Lim Guan Eng insists it is a deal which is of benefit to Penang and its people.
The Penang government’s massive traffic alleviation project will consist of four major parts. Three of these will be highways on the island which will serve as bypasses around the city centre – a 4.2km road from Gurney Drive to Tun Dr Lim Chong Eu expressway bypassing the city centre, a dual-carriage road from Tanjung Bungah to Teluk Bahang and a 4.6km road linking Air Itam to Tun Dr Lim Chong Eu expressway. The fourth will be a 6.5km under-seabed tunnel link connecting the island to Bagan Ajam on the mainland.
It is anticipated that all four parts combined will cost the state around RM6.3 billion and construction will likely begin in 2015, following the completion of feasibility and environmental studies, says the state government. Construction should be completed 10 years later by 2025.
The tender process kicked off in November 2011 with a pre-qualification exercise and this saw 11 companies participating, out of which eight were selected. Then the process moved on to request for proposals in July 2012 where eight companies were invited to submit their proposals, out of which five were selected. It was from this shortlist that Consortium Zenith BUCG Sdn Bhd was selected.
The consortium is a special purpose vehicle and it is made up of a Malaysian-Chinese joint venture company, which consists of Zenith Construction Sdn Bhd with a paid-up capital of RM3.5 million and China Railway Construction Corp Ltd a paid-up capital of RM4.0 billion (70 percent); together with the Beijing Urban Construction Group a paid-up capital of RM541.0 million (10 percent), Sri Tinggi Sdn Bhd a paid-up capital of RM3.7 million (10 percent) and Juteras Sdn Bhd a paid up capital of RM1.0 million (10 percent).
Not much is known about the three local companies which are part of the consortium. Critics have called on the state government to release more details on the three, and explain what their contribution (aside from small amounts of paid up capital) they bring to this massive project.
The tender process has also been mired in controversy and opposing NGO’s and the Barisan Nasional opposition have voiced their concern over both the process itself and the consortium that was ultimately awarded the job.
Questions over the tender process come from the fact that a Memorandum of Understanding (MoU) was first signed with the Beijing Urban Construction Group in early 2011. This was before the tender process even began towards the end of 2011. Detractors have suggested that this pre-empted the tender process and limited the amount of companies that participated in the process.
H’ng Khoon Leng
Consortium Zenith BUCG has also been drawn into the crosshairs as its experience and expertise is being called into question. In a report in a local English daily, Barisan Nasional Penang Youth information chief H’ng Khoon Leng questioned the decision to award the job to Consortium Zenith BUCG, which he says is a RM2 company with only RM100,000 in authorised capital. He added that if the company were to fail, it would leave the state saddled with billions of ringgit in debt.
Penang Chief Minister Lim Guan Eng has denied that the tender process was flawed and says that the small number of participants stems from the complexity of the project, particularly with regards to the under-seabed tunnel link rather than as a result of the MoU. He also has assured that the consortium comprises of experienced companies with a combined paid-up capital of around RM4.5 billion, sufficient to ensure that it can complete the project.
But the biggest point of contention with regards to this billion ringgit project so far, at least in monetary terms, is how it is going to be funded.
At a cost of RM6.3 billion, the project is way out of reach for the Penang government to pay for in cash. The state’s budget now sits at around RM1.1 billion and has a surplus of around RM138 million. With a project costing almost six times that amount, the government had to find an alternative way to fund the project.
As such, prospective bidders were offered a land-swap deal instead. Penang’s chief minister Lim Guan Eng called the deal a win-win solution for both the state and the developer saying that it was smart economics. “The most viable method is to make available land for vital economic and infrastructure projects to benefit the state,” explained Lim. Furthermore he says, as the process was conducted via a competitive tender it ensured that the minimum amount of land would be swapped.
The project was given to Consortium Zenith after they agreed to accept 110 acres of land as payment for the project. Lim says that this will come from “land that will be reclaimed by E&O in Tanjung Pinang area, which was approved by the previous government in 1999.”
In the agreement between the developers and the previous government, 10 percent of the reclaimed land was to be set aside for the state government. However says Lim, “The PR Penang state government had managed to increase the amount of land to be given (to) the state from 10% to more than 20%, which will be used to finance the construction of the four major highways.”
The land in question is controversial because it is at the centre of an on-going back and forth between the current Pakatan Rakyat government and the previous BN led state government. Lim Guan Eng has accused the previous government of “selling the land at a song at RM1 per square foot.” BN has denied the accusations.
With the current deal, if the RM6.3 billion project cost is divided by the 110 acres to be used as payment for the traffic projects – it comes up to RM1,300 plus per square foot. Lim says by using this land in the swap deal, the existing state government at least can regain some of what was lost when the land was given away so cheaply.
In addition to the land payment, the Consortium has also been given a 30-year concession and will be allowed to collect toll for the tunnel link at the same rate of the second bridge.
Eyebrows have been raised over the fact that the Consortium will receive not only the 110 acres of land, but this lucrative concession as well. In a letter to the press, the Penang Citizens Awareness Chant Group (Chant) questioned the decision, asking “how did the state government arrive at the quantum of the payment?” Furthermore say Chant, the gross development value (GDV) of the land has also not been released. The group have called on the state government to release its financial projections for public scrutiny.
It is a call being echoed by a host of other NGO’s and civil groups who want the government to live up to its CAT (competency, accountability and transparency) pledge – and show the Penang people why the project’s billion ringgit bill is in fact fair value for three highways and a tunnel link.
Tomorrow: The Lim Guan Eng interview – the chief minister defends the deal
Yesterday: All roads lead to criticism
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