Home Civil Society Voices Penang tunnel-highways: Place moratorium on projects; speed up MACC probe

Penang tunnel-highways: Place moratorium on projects; speed up MACC probe

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The Center to Combat Corruption and Cronyism (C4 Center) is concerned with the controversies and mysteries surrounding the undersea tunnel project and the construction of the three “paired highways”.

On 3 March 2019, a former Dato Seri, G Gnanaraja was charged in court for allegedly cheating by receiving up to RM19m in bribes to lobby the Malaysian Anti-Corruption Commission (MACC) to close its investigation into the main contractor that is building the undersea tunnel and three paired roads.

On 8 April 2019, the same accused was again prosecuted for 68 money laundering charges.


In January 2018, it was reported that the MACC was probing if money was misappropriated from the feasibility study awarded for the Penang undersea tunnel project.

It was also investigating payments of RM305m to the companies that conducted the feasibility study of the mega project. In that process, many individuals were arrested, offices raided and close to 100 witnesses interviewed.

Barisan Nasional leaders at that time had also raised many concerns and irregularities of statements by Penang government leaders and the Penang Public Account Committee report over payments and project cost.

In January 2018, the New Straits Times reported that it had sources alleging kickbacks had been given to “key politicians” in the Penang tunnel project. Without naming the sources, the newpaper claimed the information was based on “preliminary findings of the MACC investigation”.

While this may amount to hearsay, Zenith’s action to allegedly indulge in bribes to settle an alleged fraud case currently under investigation by the MACC raises eyebrows.

They should have made a complaint with the police and the MACC and go public if they were being victimised or targeted for exhortation. However they failed to do this in the first instance and instead paid what was termed as “consultation fee.”

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Consortium Zenith Sdn Bhd and Zarul Ahmad have lost credibility to carry out the tunnel and three paired roads highway project as they have been involved in such unethical way of conducting business. [But the Penang chief minister said later today that “MACC sent two letters [to both parties] (saying) that no action will be taken by them after they have conducted their investigation.” – Editor.]

The company has failed to live up to principles of good practices in doing business. It raises more questions why the Penang state government – which boasts of its competence, accountability and transparency principles – engages with a company with suspicious credentials to conduct such a massive project.

The project was also awarded through a request for proposal (RFP). An RFP is not transparent as in an open tender system. The public have no means to scrutinise or compare and to play the role of checks and balances under the RFP concept. There is also no standard yardstick to evaluate the different proposals submitted under an RFP model as opposed to an open tender system. This kind of procurement could give rise to rigging or abuse as stated by Dr Lim Mah Hui and Ahmad Hilmy in an article in July last year, titled “Request for proposal is not open tender”.

C4 notes that the preliminary agreement on the tunnel and three paired roads between Zenith and the state government contains a “Termination on Corruption” clause.

Article 14.5 states that if the company, its personnel, consultant or agents are convicted by a court of law for corruption in relation to the procurement, negotiations and conclusion of the agreement, the state government shall be entitled to terminate the agreement and claim losses, costs and damages. The state is also entitled to take back any land alienated to Zenith under the agreement.

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On the facts of the case, although no one has been convicted yet, Zenith has admitted to having paid the “consultation fee”. The demand letter send to Gnanaraja by Zenith requesting the return of the “consultation fee” [also suggests] that Zenith has been involved in unethical … business conduct.

As such,

1. C4 calls upon Penang Chief Minister Chow Kon Yeow and his government to place a moratorium on its agreement with Zenith until the MACC completes its investigation into the project and clears Zenith of any corrupt practices.

2. C4 also calls upon the state government to conduct an independent audit on Zenith’s entire consortium of companies and eliminate conflict of interest and potential corruption.

The Penang state government needs to send out a strong message that it will not compromise with unethical and corrupted practices and will live up to high standards of integrity and good governance

3. If Zenith is found to have been involved in corrupt practices by the MACC or the independent audit, the state should enforce clause 14.5 “Termination on Corruption” line with the preliminary agreement.

At that stage, it may be recommended that the state government may need to restart the tender process, engage more experts and conduct the entire process in an open tender system, allowing the public to play the role of checks and balances. This would encourage greater transparency and accountability.

The need for the project and the genuineness of the feasibility study are cast under dark clouds of doubt, in light of the company’s unethical way of conducting business.

4. C4 Center calls upon the Penang state government to ensure that it conducts business only with companies which have strong anti-corruption compliance mechanisms. This is more needed when projects worth millions of ringgit are awarded.

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Recent amendments to the MACC Act 2009, which has included provisions on corporate liability through Section 17A “Offence by Commercial Organization”, have also made it possible for company directors and owners to be held responsible for the corrupt practices of their staff, if they have not put in place adequate procedures to prevent corruption in the company.

Before engaging in business, the state should check the relevant company’s anti-corruption compliance structure and if they are ISO 37001 certified, which sets the requirements, guidance and standard in an anti-bribery management system for the organisation. The standards should be high. This is the message that we need to send out to the private sector.

5. C4 Center also calls upon the MACC to speed up its investigation and shed light on the many controversies surrounding the project. It now becomes imperative that MACC takes quick action against the bribe-giver, now that the receiver has been charged.

The scandals of Felda, Tabung Haji and 1MDB are great lessons on poor accountability and oversight. Billions of ringgit in public funds have been swindled through these structures and projects.

Such incidents should not be allowed to be repeated under the Pakatan Harapan government. The Penang government need to put in place practices of the highest standard when conducting business.

C4 understands that the reclamation of land in Gurney Drive is nearing completion. Lots from the said land will be transferred to Consortium Zenith once the reclamation is completed sometime in June this year to enable the Air Itam to Jelutong Expressway link construction to begin.

Once the transfer is done and when construction begins, it will involve a more convoluted task of removing Zenith from the picture. This is also why MACC must also speed up its investigation to shed light on all possible malfeasance.

We need urgent answers now!

Cynthia Gabriel is executive director of C4 Center while Sudhagaran Stanley is northern region coordinator.

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