Why we should kiss the RM46bn ‘PTMP’ goodbye

Anil Netto explains why a sustainable mobility plan should replace the ill-fated reclamation-driven “transport plan”.

The coronavirus pandemic has given us some space to reflect on the so-called “Penang Transport Master Plan” – in reality, a developers’ plan to reclaim three islands in the name of providing extravagant transport infrastructure for Penang.

The idea was that the state government’s sale of reclaimed land would raise funds to finance the RM46bn transport infrastructure proposed by SRS Consortium. The consortium is 60% owned by construction giant Gamuda with two Penang-based developers controlling 20% each.

The 4,500-acre three-island project in Penang was supposed to house over 446,000 people, most them in expensive homes. Many of them would probably have been foreign buyers, likely from China.

Reality check: foreign buyers, themselves reeling from the pandemic and a severe recession in their own countries, are now unlikely to be coming to Malaysia soon.

Let’s learn from the Dubai experience and see how it is struggling with its own overly ambitious land reclamation plans (see video above).

Covid-19 has left property prices in a slump, not only in Penang but also globally, especially as more people including the young are now unemployed.

One sign of this is that people can barely afford to buy even the so-called “affordable homes” in Penang, forcing the state government to reduce the prices of homes above RM72,000 by 10%. So “affordable homes” on Peang Island that used to be priced between RM150,000 and RM300,000 will now go for RM135,000 to RM270,000. (What about all those add-ons like “renovation costs” and “car parks”?)

To clear the large glut of high-end homes, the eligibility threshold for foreigners has been slashed by 20% for apartments and a staggering 40% for landed property. This means foreigners will now be allowed to buy apartments on the island priced at RM800,000 (previously RM1m) and landed property priced at RM1.8m (previously RM3m). Instead of forcing the developers to take a “haircut” and reduce their prices to bring them within reach of local spending power, what we have here is a rescue plan for developers by allowing them to flog off more of their expensive homes to elusive wealthy foreign buyers.

This is a clear indication that the forecast selling prices of homes on the proposed three islands have been overrun by current market conditions. This downturn will affect the selling prices that the state government had hoped it could fetch for the sales of reclaimed land to developers.

This plunge in real estate values has thrown the financial model for the PTMP upside down. Remember, revenue from the sale of reclaimed land amounting to RM70bn was supposed to have financed the Penang transport infrastructure.

To make matters worse, a prominent economist, Nouriel Roubini, who predicted the 2008 global financial crisis, says the world is heading for a prolonged U-shaped or close to an L-shaped “Greater Depression” that could last a decade.

Even if you don’t agree with Roubini’s alarming forecast, it will take years for the property market to reach pre-coronavirus levels, when prices were already flagging. Let’s not forget the other massive reclamation projects now in progress in northeast and eastern Penang Island will add more high-end homes to the glut in the coming years.

And then, there are the ecological problems that will haunt the project. Even before reclamation in southern Penang Island could begin, we have just heard reports of thousands of dead fish in Penang and Perak, apparently from aquaculture farms. What triggered this toxic algae bloom or red tide is still unclear. Wild fish were not affected.

But wild fish will be hit when the three-island land reclamation degrades, if not destroys, the prime fishing waters and breeding grounds off the southern coastline of Penang Island.

It is not just the NGOs who have warned of the harmful impact of land reclamation on the marine ecology. In December 2007, just months before Pakatan Rakyat captured Penang, the political secretary of a top DAP official, in a statement released in Chinese, called for a ban on land reclamation in Penang. “The Penang state government must immediately order the prohibition of all reclamation projects to avoid serious damage to the marine ecology!”

Late last month, we heard that plans by construction giant Gamuda to divest its highways to the federal government for over RM6bn – a figure which some reportedly felt was too high – may have been aborted.

It remains a mystery where the working capital for the project will come from. Even before the coronavirus pandemic, the working capital requirements for the project seemed to be rising – presumably the effect of a slowing property market affecting revenue from projected sales of reclaimed land.

This prompted the Penang government to announce last year it would soon issue a RM10bn sukuk bond to finance the Bayan Lepas elevated light rail project. The state government said the then-Pakatan Harapan government in Putrajaya would grant a federal government guarantee for the bond financing, raising concern that the public would be exposed to huge debt if the project ran into problems.

Such a staggering amount of bond financing was not mentioned in the original proposal for financing in the PTMP put forward to the Penang Transport Council, when I was in it. What we had before us back then was much smaller “bridging finance” ie about RM2bn ringgit, which was said to be the “finance gap” as late as three years ago. Apart from this couple of billion “finance gap”, wasn’t the PTMP model supposed to be self-financing? So how did that this gap balloon to RM10bn last year?

With the cash-strapped backdoor federal government now led by Perikatan Nasional, the PH Penang government may not find it easy to secure approval for this RM10bn bond financing backed by a federal government guarantee.

Already, the PN federal government has correctly refused to provide a RM100m allocation for the ecologically problematic cable car project in Penang Island.

We have lost almost a decade just because some politicians and their contractor-and-developer partners had grandiose plans for Penang – just like Dubai once had.

Let us put the ill-fated PTMP out of its misery and come up with a more sustainable mobility plan. No need for six-lane highways tunnelling through sensitive hill slopes or expensive elevated rail systems. Save, also, the RM50m to be spent on wastefully widening Mount Erskine Road and use that money to improve the bus system for the whole of Penang.

Now that the roads in Penang are less congested than before, let us learn from what enlightened city planners are doing in developed nations to make their streets friendlier for pedestrians, cyclists and buses while discouraging the use of private vehicles.

If the Penang government really believes in a “green agenda”, it should go back to the drawing board and commission independent sustainable mobility experts to produce a genuine sustainable mobility plan that doesn’t focus on cars and highways – and dump the ecologically harmful land reclamation. The federal government, for its part, must back this as a more viable alternative to the PTMP. That is, if both political coalitions really have the people’s interests – rather than vested corporate interests – at heart.

While this is going on, we could easily create dedicated bus lanes, put in more buses, improve last-mile connectivity and expand the ferry system by constructing more ferries. The bonus is that all this investment in sustainable mobility infrastructure will help to create lots of new jobs – and improve the quality of life for the people of Penang. - ALIRAN