Penang Tunnel project reports: RM305 million for essentially just paperwork

Rahman Dahlan

Abdul Rahman Dahlan 
BN Strategic Communications Director 

1. In November 2015, a BN Ahli Dewan Undangan Negeri (ADUN) from Penang moved a motion to subject all reclamation projects to public hearing. However, five PKR ADUN abstained from voting while another one from DAP voted in favour of the motion.

This incident had incensed Penang Chief Minister and DAP Secretary General, Lim Guan Eng, who then accused the six ADUN of “back-stabbing” him.

2. Consequently, in February 2016, DAP Penang State Government sacked two of the dissenting PKR ADUN from being a director at Penang state companies. The duo were then replaced with two DAP Member of Parliament (MP) from Negeri Sembilan and Selangor.

3. On 24 February 2016, one of the sacked PKR ADUN, YB Cheah Kah Peng, exposed to the media that one of the reasons why the 6 PKR and DAP ADUN’s decision not to vote against the BN motion was due to a Major Road and Tunnel Project Report published by the state Public Accounts Committee.

The report stated that the DAP Penang State Government had agreed to pay RM138,971,572.61 for a feasibility report and design when the Penang Tunnel feasibility report and the required environmental impact assessment (EIA) was not completed.

YB Cheah added that the many ADUN found it hard to justify such an enormous payment for a feasibility study.

4. Based on our research and public announcements made by the DAP Penang State Government, we believe that the payment is part of the total sum amounting to RM305 million, which has been allocated for feasibility studies, detailed design and EIA report for the controversial Penang Tunnel and three associated road projects.

Rahman Dahlan

RM305 million for essentially just paperwork

5. We share the concern of the 6 dissenting ADUN that RM305 million is a high price to pay for what is essentially just paperwork and reports. In addition thereto, the necessity of the project remains doubtful when the traffic along the second Penang Bridge is still relatively low.

We believe the amount of RM305 million could be better utilised for the welfare of Penang people. RM305 million is almost double the RM176 million that DAP Penang State Government had spent from the 2009 to 2015 for Emas Welfare Programs for senior citizens, single mothers, people with special needs, students, housewives, newborn and undergraduates.

6. Moreover, the DAP Penang State Government had awarded Consortium Zenith BUCG (CZBUCG) to do these feasibility reports to determine if the project is feasible. CZBUCG is also the very same company that will be constructing the project itself if deemed feasible.

Evidently DAP Penang State Government has no understanding about the term “conflict of interest”.

In fact, the first sub-contractor company engaged by CZBUCG in 2013 to do the feasibility study was Astral Supreme Construction Sdn Bhd, who in August 2014, admitted that it had failed to complete the report.

Further check at Registar of Companies reveals that the controlling shareholder of Astral Supreme is also a substantial shareholder of CZBUCG – paving way to another conflict of interest.

At the time the project was awarded in 2013, CZBUCG had said that it expected to complete the feasibility study by April 2014.

Subsequently after many delays, we are now informed that the completion of the feasibility study has been further delayed to an undisclosed date – giving indication that the completion for the entire project will be substantially delayed.

There are now media reports suggesting that the entire project can only be completed earliest by 2025.

7. A Bursa Malaysia filing by Ewein Berhad dated 31 March 2015, confirms that the DAP Penang State Government made the first payment on 17 February 2015, in the form of prime seaside land. From the Bursa disclosure, Ewein’s joint venture company had already purchased this land from CZBUCG.

8. Further disclosures by Ewein Berhad shows two agreements dated 28 December 2015 and 15 January 2016 were already signed to purchase two other plots of prime sea-side prime land near Gurney Drive from CZBUCG.


Ewein Bhd’s City of Dreams, Penang

Added together, these three agreements in total is to purchase RM3.14 billion worth of land from CZBUG that the DAP Penang State Government has already given or will give as payment for the project although the required feasibility studies have yet to be completed.

9. It is understood that the full construction cost of RM6.3 billion will be funded by the DAP Penang State Government through payment-in-kind of a fixed and identified 110 acres of prime beach-front land valued at 2013 price.

What raises curiosity is why would DAP Penang State Government fix the value of a prime land at 2013 prices for a project that will only be completed 12 years later in 2025?

As prime Penang beachfront land is a fast appreciating asset, this could mean the 110 acres would be worth double or triple its price by 2025 – meaning the project could end up costing the rakyat of Penang up to RM20 billion or more.

10. In addition to fully funding the entire RM6.3 billion cost, the DAP Penang State Government will also grant CZBUCG a 30 years concession to collect tolls for the tunnel.

This is a huge departure from a standard concession agreement practice where the concession company would fund the project and collect tolls to recover their investment.

In this case, it appears that the DAP Penang State Government will fund the entire construction cost to allow the company to make construction profits and still reward them future profits from toll collection.

And isn’t toll roads against Pakatan manifesto?

Ewein Penang

Ewein subsidiary acquires land worth RM2.83 billion in Penang

11. Continued exposes in Taman Manggis and the Chief Minister’s under-priced bungalow at Jalan Pinhorn have thrown a spotlight on the numerous state land deals entered into by the DAP Penang State Government since 2008 which totals an approximate RM40 billion or more.

Therefore we call on the DAP Penang State Government to clarify the followings:

1) Explain why the total cost of various studies for the project, which is essentially mostly paperwork, could reach a staggering RM305 million?

2) Was the award of these studies based on open tender? If in the affirmative, please explain why was the initial feasibility study awarded to a related party who did not appoint necessary consultants or expertise to complete the job and had to subsequently give up.

3) Why was the private company already paid an advance payment of RM139 million even though the studies have yet to be completed?

4) If the feasibility study is unfavorable, can the DAP Penang State Government recover any of the RM139 million already paid?

5) Was the private company penalised for failure to adhere to the agreed project timeline?

6) Despite agreeing to pay the full cost of the construction, why did the DAP Penang State Government agree to give a further 30 years toll concession to the company?

7) Why did the DAP Penang State Government agree to pay using 110 acres of prime seaside land – valued at RM6.3 billion in 2013 – for a project that may only be completed in 2025 at the earliest, given that this pre-identified land could be worth double or triple the RM6.3 billion in 2025?

Does this mean that the true cost of the project to the Penang Rakyat could be tripled and could reach RM20 billion?