Penang’s RM8 Billion Road & Underwater Tunnel Project is A Symptom of Dap-PR Inability to Govern Prudently

ARCHIVES 2013

By MT Webmaster On Mar 1, 2013

Khoo Kay Peng

The Dap-led Penang state government has awarded the RM8bil tender to construct road and undersea tunnel projects on the island to Malaysia-China joint venture Consortium Zenith BUCG Sdn Bhd.

The project consists of a 6.5km Gurney Drive-Bagan Ajam undersea tunnel, a 4.2km Gurney Drive-Lebuhraya Tun Dr Lim Chong Eu bypass, a 4.6km Lebuhraya Tun Dr Lim Chong Eu-Bandar Baru Air Itam bypass and a 12km road connecting Tanjung Bungah and Teluk Bahang.

Penang Chief Minister Lim Guan Eng said the construction company would be given 44.51ha of reclaimed land in Tanjung Pinang in phases.

One of the four conditions set by the state government is that the concession period for the third link will only be for 30 years and the toll charges must be similar to the second Penang bridge.

It is difficult to understand why the state government is insisting on going ahead with these projects although a number of parties have voiced their reservation that this is not a long term solution to solve congestion problem in Penang.

There are a whopping 2.4 million cars in Penang. More than 110,000 new cars are being registered annually in Penang. The construction of more highways are not going to contribute towards a gradual reduction of private cars and vehicles on the road.

Lim’s road and tunnel projects have created a dilemma for the Pakatan Rakyat. On one hand, the coalition is proposing to increase the number of public buses through a RM2 billion allocation. One the other hand, the Penang state government has approved road and tunnel projects worth a record high of RM8 billion to a vendor. There is definite a policy inconsistency.

There are several serious issues with the award:

1. It appears that these projects have been awarded way before the launch of the Penang Paradigm. For something so significant, the state government should have incorporated these projects within the framework of the Penang Paradigm and allow the residents/stakeholders to evaluate and ponder over these projects. It is unfortunate that the government has chosen to award the project while the Penang Paradigm has just been released for public consultation.

2. The state government should not have awarded the project until at least a new mandate has been given to them in the upcoming GE. Any government rushing through such significant public projects so near to a GE is unfair and unscrupulous. The next GE should be used as a referendum for these projects. Hence, it is prudent for the current state government to defer and retract its award announcement until after the GE.

3. The mode of payment/compensation to the vendor is most controversial. The state government is giving 4,791,016.5 acres of reclaimed land in Tanjung Pinang in phases to the developer. There are two major issues of using land to swap for infrastructure projects. Firstly, land is a scarce commodity in Penang especially on the island. The public can expect only expensive developments will be launched on the land. Rising property prices are going to make home ownership issue even more chronic and severe in the future. Second, infrastructures depreciate but land will appreciate over time. Hence, the state could be paying escalating future prices/costs for the projects.

4. Penang CM Lim Guan Eng said that the infrastructure project is estimated to cost less than RM8 billion. Hence, is the state paying a fair price for it? At present value, the land is expected to fetch over RM2.5 billion (RM520 per sq. ft.) and could escalate up to RM5 billion over the next 3-5 years. Some properties in the Tanjung Pinang area are already selling above RM1,000 per sq. ft.

The state is giving a 30-year concession period to the developer for the third link (the Bagan Ajam-Gurney Drive underwater tunnel). Based on a rough calculation (100,000 vehicles average a day x 30 years x RM8 – without factoring in any increase in toll charges), the developer is expected to rake in RM8,760,000,000 or RM8.76 billion.

Eventually, the estimated gross development value (GDV) of the Tanjung Pinang land could be well over RM50,000,000,000 or RM50 billion.

In sum, for infrastructure projects worth less than RM8 billion the developer could end up raking in more than RM58.76 billion in revenue.

It is crystal clear that using land swap, especially prime land, as a mode of payment for infrastructure projects is untenable and a bad financing option.

5. The state government has not been able to provide any convincing evidence that these expensive projects could help solve Penang’s traffic congestion problem in the long run. The reason is simple. Building more highways, roads or tunnels are not going to help solve our congestion problem. It can only be solved through prudent policy intervention to reduce the number of private cars and vehicles on the road.

Sadly, the PR coalition – both at the federal and state levels – does not have a viable solution. The Penang state government’s decision to build these expensive highways and underwater tunnel is not only going to burden the people financially but it is going to create deep social repercussion for the state too. If the number of new cars registration does not go down, it does not take us long to render these new highways helpless against congestion. Additional new cars every year is going to choke off these highways and render the secondary roads inaccessible.

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