The Penang chief minister is rushing to sign a project delivery partner (PDP) agreement with SRS Consortium to implement the controversial Penang Transport Master Plan (PTMP).
Initially proposed to solve Penang’s traffic problems, this transport plan has mysteriously morphed into a coastal reclamation scheme consisting of three islands totalling 1,821ha – bigger than Johor’s Forest City.
One could almost say that the Penang South Reclamation (PSR) project was sneaked into the state agenda inside a “Trojan horse” called the Penang Transport Master Plan.
Since 2013, the primary focus and goal of the PTMP have shifted, from “moving people” to “moving cars”, to a massive coastal reclamation called PSR. Civil society helped the state produce the Halcrow Plan to guide Penang towards a targeted state-wide 40% public transport ridership. After endorsing the Halcrow Plan, the state government put out a Request for Proposal (RfP), instead of an open tender based on detailed specifications.
Is the PTMP a “bait-and-switch” project?
The award went to the SRS Consortium plan, presented in a 20-volume proposal. In a business strategy reminiscent of a “bait and switch”, the state-endorsed Halcrow Plan was substituted with another plan, one in which the public transport objectives were so diluted as to bear little resemblance to the original.
The bait for the SRS proposal was that it would be “free” – the PTMP implementation 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 Aug 14 2015, SRS Consortium received a Letter of Award (LOA) from the Penang government appointing it as the PDP for the PTMP implementation. The latest LOA extension will expire on Feb 29, 2020. If the PTMP implementation is too risky, too impractical, or is not in the state’s interest, a protective clause in the original LOA 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 PTMP swelled from RM27 billion to RM46 billion. The bloated PTMP was a monstrous Trojan horse bedecked with jewels – LRT, BRT, monorail, tram, cable car; indeed, something for everyone.
The Penang government decided to prioritise three megaproject components for implementation: the RM8-RM10 billion LRT, the RM9.6 billion Pan-Island Link and the RM11 billion PSR project.
Ordinary people are not likely dwelling 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 one’s 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 LRT and the Pan-Island Link. Analysis after analysis showed that the PTMP reflects transport thinking that is stuck in time.
The SRS transport proposal is a fixed and opaque plan, unresponsive to exciting new mobility technology and strategies which could usher in a car-lite sustainable city.
But we might have missed the point entirely. What if the public-interest transport issue is just a Trojan Horse? A well-timed business gambit in a larger property play? What if the real prize all along is the PSR project?
The chief minister has gone on record more than once as saying that the PSR project is 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 imperative for Penang’s economic growth.
At the same time, the pretence of the PTMP being “free” has been dropped. The Penang government now wants the federal government to guarantee up to RM10 billion of its sukuk bonds to pay for the LRT.
The PDP 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 PDP had to be invited through the “back door” of the Trojan horse.
Some people might admire this clever business strategy, some 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 LRT) 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.
Furthermore, Penangites may have been led to think that the transport infrastructure to be built under the PTMP is primarily intended to solve their traffic congestion problems, whereas the LRT and Pan Island Link 1 (PIL 1) appear to be designed with an overwhelming consideration to serve the new townships of PSR in the south and STP2 (second phases of the Seri Tanjung Pinang reclamation project in the northeast coast of the island).
If that is true, it follows that existing Penang residents, through quit rent and assessment, might end up paying for or subsidising the cost of new infrastructure which was not principally designed for their convenience.
Why is the Penang government so keen on the PDP model?
First, let us look at the “birth” of the PDP model during the BN era. In 2012, DAP national publicity secretary and Petaling Jaya Utara MP Tony Pua launched a lengthy attack against the PDP arrangement for the Klang Valley–Sungai Buloh–Kajang MRT, which was estimated to cost RM18 billion.
Pua said that the 6% project fee for the PDP role played by MMC–Gamuda was “almost unheard of in a project of this scale”. The PDP fees alone would amount to RM1.08 billion.
After including reimbursables (overheads, fees for engineering consultancy, quantity surveyors and system integration works and fees for site investigations and topographical survey), the PDP might end up collecting RM3.93 billion 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 RM2.7 billion would be tolerated “without penalty”. True enough, the MRT ended up costing about RM21 billion.
“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,” wrote Pua in the DAP media statement. (Source: dapmalaysia.org)
Six years later, Pua, now as finance ministry expert, again called for the government to reject the PDP 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, Aug 29, 2018).
Citing the cost overruns in the Klang Valley MRT 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 the PDP 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 RM5 million master plan 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 complain of traffic congestion, overdevelopment and environmental degradation.”
In the past, the state relied on the Penang Development Corporation, not a private PDP, 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 RM30 billion worth of PTMP projects on Penang Island, stretched out over 10-15 years, or longer.
Bear in mind that after 11 years of the Pakatan Harapan government, Penang state is still without gazetted local plans for its 1.8 million population, more than half residing 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 RM5 million for a master plan for 400,000 future residents of the upcoming “Penang South Islands”. The question is, who will the master plan serve?
Privatising the profits, socialising the losses?
In undertaking the PTMP and the PSR project implementation, the Penang government will not be protected against possible losses. Penangites will mourn the “tragedy of the commons” and bear the heavy social-environmental costs of ecosystem destruction in the island’s south.
Penangites will also lose out from the “missed opportunity” to prosper Seberang Perai. Notwithstanding, the PDP will be assured of its fixed fees and reimbursables in managing a cornucopia of contracts.
In East Malaysia, the federal government has decided to axe the PDP model in the Pan-Borneo Highway project as a cost-saving measure (The Edge Markets, Aug 8 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 cronyistic ways of doing business, to fight corruption and to spearhead institutional reforms. It should start by carrying out a full-fledged review of the Penang PDP arrangement, the Penang Transport Master Plan, and the social and environmental impact of the Penang South Reclamation.
Khoo Salma Nasution is vice-president of Penang Heritage Trust.
The views expressed are those of the author and do not necessarily reflect those of FMT.