The federal government must carry out a fully fledged review of the Penang project-delivery-partner arrangement, the bloated transport proposal, and the impacts of massive reclamation, writes Khoo Salma Nasution.
The Penang chief minister is rushing to sign a project delivery partner agreement with SRS Consortium to implement the latter’s controversial transport proposal, dubbed the “Penang Transport Master Plan” (PTMP).
Initially formulated by Halcrow consultants to solve Penang’s traffic problems, the Penang transport blueprint mysteriously morphed into a coastal reclamation scheme comprising three islands totalling 4,500 acres – bigger than Johor’s Forest City. One could almost say that this reclamation project was sneaked into the state agenda inside a Trojan horse called the PTMP.
Since 2013 the primary focus and goal of the Penang transport masterplan has shifted, from “moving people” to “moving cars” to this massive coastal reclamation called the Penang South Reclamation (PSR).
Civil society had helped the state produce the Halcrow plan to guide Penang to a targeted state-wide 40% public transport ridership. After endorsing the Halcrow plan, the state government put out a “request for proposals” instead of an open tender based on detailed specifications.
Is PTMP a bait-and-switch project?
The award went to the SRS Consortium plan, presented in a 20-volume proposal, made according to a developers’ brief. In a business strategy reminiscent of bait and switch, the state-endorsed Halcrow plan was substituted with another plan, one in which the public transport objectives were so diluted they bore little resemblance to the original.
The bait for the SRS proposal was that it would be “free” – its transport infrastructure proposal would be financed through land sales from three reclaimed islands, and the Penang government would not have to come up with “a single sen”.
On 14 August 2015 SRS Consortium received a letter of award from the Penang government appointing it as the project delivery partner for the PTMP implementation. The latest letter of award extension will expire on 29 February 2020. If the PTMP implementation is too risky, too impractical or is not in the state’s interest, a protective clause in the original letter of award allows the Penang government to “walk away” without paying any compensation.
Within a few months of getting SRS Consortium on board, the cost of the proposed Penang transport infrastructure swelled from RM27bn to RM46bn! The bloated PTMP was a monstrous Trojan horse bedecked with jewels – highways, elevated light rail transit, bus rapid transit, monorail, trams, cable cars; indeed, something for everyone.
The Penang government decided to prioritise three mega-project components for implementation: the RM8bn–RM10bn elevated light rail transit, the RM9.6bn Pan Island Link highway and the RM11bn PSR project. Ordinary people are not likely to dwell on the fact that most of the remaining transport components will take decades to roll out, by which time the long-awaited transport modes might already be obsolete.
Keeping an eye on the PSR prize
While the PSR scheme was slowly set into place, the first few years of public discussion dwelt on the merits of the PTMP. Civil society champions wrote extensively about the cost-benefit weaknesses of the elevated light rail transit and the Pan Island Link. Analysis after analysis showed that the PTMP reflects transport thinking stuck in a time warp. The SRS transport proposal is a fixed and opaque plan, unresponsive to exciting new mobility technology and strategies that could usher in a sustainable city with fewer cars.
But we might have missed the point entirely. What if the public-interest transport issue was just a Trojan horse – a well-timed business gambit in a larger property play? What if the real prize all along was the PSR project?
The chief minister went on record more than once, saying that the PSR project was needed to pay for the PTMP. But he has now changed his tune, insisting that, regardless of the transport plan implementation, the PSR project is essential for Penang’s economic growth. The pretense of the PTMP being “free” has been dropped. The Penang government now wants the federal government to guarantee up to RM10bn of Sukuk or Islamic bonds to pay for the elevated light rail transit.
The project delivery partner arrangement, ostensibly made to carry out the PTMP, might well have been crafted to sanction a close collaboration between a segment of the government and certain privileged developers. The common objective is apparently to create a property development land bank on an unprecedented scale. Knowing that the reclamation proposal might draw flak from the public or unwanted attention from rival developers, the “project delivery partner“ had to be invited through the back door, ie through a Trojan horse.
Some people might admire this clever business strategy; others might find the ethics questionable. However, the main issue with the PTMP is whether the Penang government is being responsible, honest with its citizens and acting consistently in the public interest.
In hindsight, the SRS proposal can be described as a plan to build a new township on reclaimed land south of Penang Island and additionally, to build transport infrastructure (highways and elevated light rail) to provide connectivity for this new township. New political constituencies will eventually be formed on these three artificial islands.
People have a right to know what is happening to their city. Malaysian citizens have rights under the Town and Country Planning Act to be consulted about major town-planning developments. If the PTMP turns out to be a misrepresentation of the true nature of the plan, then it could be said that the Penang state government has deprived the Penang people of the right to be consulted, apart from being shown a grafted outline of the three islands in the under-discussed Penang Structure Plan.
The people of Penang may have been led to think the transport infrastructure to be built under the PTMP is mainly aimed at solving their traffic congestion problems, whereas the elevated light and Pan Island Link appear to be designed with an overwhelming consideration to serve the new PSR townships in the south and second phase of the Seri TanjungPinang reclamation project in the north. If that is true, it would mean that existing Penang residents, through quit rent and assessment, might end up paying for or subsidising the cost of new infrastructure that was not principally designed for their convenience.
Why is the Penang government so keen on the ‘project delivery partner’ model?
First, let us look at the birth of this model during the Barisan Nasional era. In 2012, DAP national publicity secretary and MP for Petaling Jaya Utara Tony Pua launched a lengthy attack against the project delivery partner arrangement for the Klang Valley–Sungai Buloh–Kajang mass rapid transit, which was estimated to cost RM18bn.
Pua said that the 6% project fee for the project delivery partner role played by MMC–Gamuda was “almost unheard of in a project of this scale”. The project delivery partner fees alone would amount to just over RM1bn. After including reimbursable expenses (overheads, fees for engineering consultancy, quantity surveying and system integration work, and fees for site investigations and topographical surveys), the project delivery partner might end up collecting almost RM4bn for “playing the role of a project manager”.
Pua concluded that “the overall cost of the project is incentivised to be inflated”. Due to a cleverly negotiated “allowed contingency” of 15%, cost increases of up to RM2.7bn would be tolerated “without penalty”. True enough, the mass rapid transit ended up costing about RM21bn.
“Any ordinary man on the street will know that it is ridiculous to ask a contractor to start the kitchen renovation without first agreeing to the cost,” Pua wrote in a DAP media statement (source: dapmalaysia.org).
Six years later, Pua, now as Ministry of Finance expert, again called for the government to reject the project delivery partner model. He was speaking at a seminar on “Procurement as part of good governance in new Malaysia: Challenges and Recommendations”, organised by the Center to Combat Corruption and Cronyism (C4) (The Edge Markets, 29 August 2018).
Citing the cost overruns in the Klang Valley mass rapid transit project built during the BN era, Pua said, “In PDP contracts, they get 6% of the cost of the project. The incentive is for the project managers to inflate the cost of the project because it is 6% of whatever the cost of the project is.”
The added attractiveness of this model, in the case of the PTMP, is that it provides the Penang government with the flexibility to modify or deviate from any plan, as political expediency dictates.
No local plans, but a RM5m masterplan for ‘Penang South Islands’?
The chief minister proclaimed in Penang 2030 that “the future of Penang is in Seberang Perai”, promising to address development imbalances in the state. Penang Island is neither an island state nor an island nation like Singapore. More than half of Penang’s population lives in the city of Seberang Perai, and they complain about traffic congestion, lack of quality development and quality jobs. Penang Islanders, for their part, complain of traffic congestion, overdevelopment and environmental degradation.
In the past, the state relied on the Penang Development Corporation, not a private project delivery partner, to manage its industrial expansion. With the airport coming up in Kulim, Kedah, an opportunity presents itself to develop a new free industrial zone corridor on the mainland, supported with proper planning and investment. Yet, the Penang government seems intent on focusing the first RM30bn worth of PTMP projects on Penang Island, stretched out over 10–15 years or longer.
Remember, after 11 years of a Pakatan government in Penang, the state is still without gazetted local plans for its 1.8 million population, more than half of whom reside in Seberang Perai. While failing to provide its own citizens with the full benefits of proper town planning according to the Town and Country Act, the chief minister has allocated RM5m for a masterplan for 446,000 future residents of the upcoming “Penang South Islands”. The question is whom will the masterplan serve?
Privatising profits, socialising losses?
In undertaking the PTMP and the PSR project implementation, the Penang government will not be protected against possible losses. The people of Penang will mourn the tragedy of the commons and bear the heavy social and environmental costs of ecosystem destruction in the island’s south. Penang residents will also lose out from the “missed opportunity” to bring prosperity to Seberang Perai. Notwithstanding, the “project delivery partner” will be assured of its fixed fees and reimbursable expenses in managing a cornucopia of contracts.
In East Malaysia, the federal government has axed the project delivery partner model in the Pan-Borneo Highway project as a cost-saving measure (The Edge Markets, 8 August 2018). This has given rise to controversy and allegations of double standards: why should the federal government turn a blind eye to Penang exceptionalism?
The Malaysian government vows to abandon the old ways of cronyism in business, to fight corruption and to spearhead institutional reforms. It should start by carrying out a fully fledged review of the Penang project-delivery-partner arrangement, the PTMP, and the social and environmental impacts of the PSR.
Khoo Salma Nasution, an Aliran member, sits on the steering committee of Penang Forum, a coalition of prominent Penang-based NGOs.