Prime Minister Najib Abdul Razak would not have replied to Penang's request for a loan from China for the Penang Transport Master Plan (PTMP), if the deal was not beneficial for the state or country, Penang Chief Minister Lim Guan Eng said today.

Lim said that approval for the loan from the National Finance Council, which is chaired by Najib, would be a "sort of" guarantee to ensure the borrowed amount is repaid, or else Putrajaya would have to come up with the funds.

Lim, who is also DAP secretary-general, was commenting on the state's plan to borrow from China-owned Export-Import Bank of China (Exim) to fund the PTMP, under the Penang Loan (Bank and Other Financial Source) Enactment 2017, which was passed unanimously by the state legislative assembly recently.

Penang's move to borrow the sum of less than RM1 billion for a repayment period of less than five years has raised concerns, with Teluk Bahang Umno assemblyperson Shah Headan Ayoob Shah Hussain, calling it a risky move.

Lim, however, told a press conference in Komtar today that the state's borrowing from Exim is a "different ball game", as the loan is being lent by the Chinese government, through the bank.

Najib, in replying Lim's letter, had also said that Penang must enact a law which allows loans from a financial institution - one which would require the state's legislative assembly to be informed prior. 

Lim said borrowing from China to fund a portion of PTMP enhances Penang's international reputation, by showing it has a triple A rating.

“If it is not good, would the PM reply to me?

“Furthermore, borrowing from China makes good corporate sense, as the interest rate would be lower when states borrow from a country,” Lim said adding that if the borrowed money were to be placed in a deposit, they would accumulate higher interests too.

Although Najib issued a response to the state's letter, Lim made it clear that the loan has not been approved yet by the National Finance Council.