In reference to Dr Lim Mah Hui’s article on 18 May 2021; the reality is anyone can selectively pick and choose excerpts from a request for proposal (RFP) document, take them out of context and spin a narrative.
For example, he chose NOT to mention that for both the Penang Transport Master Plan (PTMP) and the Penang South Islands (PSI) reclamation projects, it is the State who is the Asset Owner; and as Asset Owner, it has to “take into consideration the need to adequately fund the PTMP and reclamation costs” and “consider the matching of supply of these lands to balance with demand from the market” (Chapter 4, page 3). This statement clearly highlights that under the Project Delivery Partner (PDP) model of the RFP, the State is indeed the ultimate funder of both the PTMP and the PSI projects, and apart from assuming all the financing risks, it also has to contend with the full assumption of market risks in selling reclaimed land real estate.
The other fundamental point worth noting is that the RFP called in August 2014 was based on the existing Halcrow study that was estimated at RM 27 billion but only caters to short term demand up to 2030. SRS Consortium (SRS) submitted the “Alternative” Transport Master Plan for long term demand up to 2050. Upon appointment of SRS as PDP, the State with KPMG as their consultant was still the final arbiter and decision maker, and any decision it makes with respect to accepting the RFP’s proposed strategies (in part or in whole), is its prerogative alone.
State then included additional public transport infrastructure in Seberang Perai and the ‘Three Major Roads and Third Link’ project into the final PTMP thus the final amount of RM 46 billion. As such it is clear that the PTMP transport components and the PSI are mutually exclusive components and not inextricably linked, as it is obvious the ‘Three Major Roads and Third Link’ have a separate source of funding and not via PSI.
Upon the formation of the Pakatan Harapan Federal Government in 2018, the State then had a renewed belief that they are able to obtain Federal Government allocations and/or loan guarantees to fund their PTMP components, just like other States have similarly already benefited from for their own transport infrastructure. For example, the LRT systems within Selangor’s borders and the Pan-Borneo highways in Sabah and Sarawak.
Subsequently in early March 2020, the RM10 billion loan guarantee that was promised for the State’s LRT was withdrawn. Nonetheless, the State still took the view that:
It would pursue the Federal Government for the LRT loan guarantee to be reinstated given it is purely a development expenditure for social needs of its rakyat; AND
The reclamation of the first island of PSI (Island A) must proceed forthwith to provide a pivotal addition and extension to the State’s E&E hub in Bayan Lepas, and attract E&E foreign investors – in doing so, there would be an influx of foreign direct investments (FDI) and tremendous job creation for Penangites, especially in the highly-skilled.
To achieve the 2nd objective of kick-starting the PSI Island A reclamation as a major economic impetus for Penang State, especially as a post-pandemic economic stimulus, it was agreed that a Joint Venture would be formed between SRS and Penang Infrastructure Corporation (wholly owned by Penang State Government) to enable SRS to fully fund the Island A development, whilst the State is absolved of all financing risks and costs of Island A’s development.
Even though the State has fully absolved itself of all risks, it still retains a substantial stake of 30% to reap in any rewards or profits from the Island A development. Not to mention the State can wield substantial influence of control via its 30% stake and its authority over all land matters, to ensure its socio-economic and land planning objectives are all met, for the people of Penang. For Federal projects, typically any privateer would reap 100% of the reward given it would absorb 100% of the risks. For independent power producers (IPPs), or highway concessions or developments, this is the underlying prevailing equitable rule. Yet, the Penang State has clearly done one better here for itself.
In this 70-30 joint venture arrangement, the State insisted on an enterprise, not only with a strong enough balance sheet to fully shoulder the funding liability of RM4 billion to deliver Island A, but also with the requisite track record of delivery of large infrastructure projects, on time and on budget, all the time. Furthermore, the same enterprise is also responsible for delivering Phase 1 of the reclamation.
This will ensure that the project gets delivered and Penang benefits from the ensuing FDI, estimated at over RM70 billion and the ensuing GDP contribution and job creation is estimated to be RM100 billion and more than 300,000 jobs respectively where at least half are knowledge and highly skilled jobs, over a 30-year development time-frame for the 3 PSI islands.
And to ensure the delivery of the lands is done on the most cost-efficient basis, the State had also insisted on the appointment of an independent checking engineer (ICE), to oversee that cost estimates and work programmes are reasonable, fair and equitable. Thus, there is clearly no double dipping or leveraging off the State in any way.
SRS CONSORTIUM SDN BHD
Project Delivery Partner of the Penang Transport Master Plan
22 May 2021