Indecent haste over RM230 billion mega projects

QUESTION TIME |

The indecent haste with which projects worth RM230 billion are being pushed through without proper consideration and without enough information raises serious questions over the re-emergence of patronage.

Once these contracts, the sizes of which have not been seen before, are awarded, it would be very difficult to reverse them, whether by another government or by a new leader.

In the haste to push these contracts through, there is much that has not been answered, reflecting non-adherence to the competency, accountability and transparency (CAT) tests announced by the DAP way back in 2008. To that, add one more - good governance.

Let’s start with the East Coast Rail Link (ECRL), then over to Bandar Malaysia, and finally move on to the Penang Transport Master Plan (PTMP), all of which show a lack of procedures, inadequate justification and enormous costs, which will cost the country dearly. They are all about how the new government should NOT execute mega projects.

ECRL - no account of RM20 billion in over-pricing

The revised ECRL was widely reported to have saved the country some RM20 billion, but that’s not true. The government, through Prime Minister Dr Mahathir Mohamad and Finance Minister Lim Guan Eng had earlier admitted that there were RM30 billion of overpricing in previous contracts with China.

As I explained in this column, this comprised some RM20 billion as overpricing in ECRL itself, and a further RM10 billion involving pipeline projects. Unless RM30 billion is recovered, then the deal does not recover the money lost through corruption. 

Also, a further RM10 billion in saving was obtained by realignment and the scrapping of a tunnel, according to reports. Therefore the full “saving” was RM10 billion and not RM20 billion as reported. That leaves RM20 billion, out of overpricing of RM30 billion, which is yet to be “recovered”.

Former finance minister and Mahathir buddy, billionaire and businessman Daim Zainuddin (photo, above), was given sole responsibility to undertake the negotiations with China for this important deal. This should have, instead, been undertaken by a multi-disciplinary team headed by a respected professional.

Daim said the negotiations took some 10 months, a long enough period to have done a new feasibility report. None was done. Also, despite a major realignment of the route via Negeri Sembilan to Port Klang, no environmental impact assessment has been done. The 10 months would have been enough to do that too.

Ironically, in a Bernama report, Mahathir blamed the past government for lack of transparency in the negotiations with China, conducted without a detailed study. “It was the former prime minister (Najib Abdul Razak) who conducted the negotiations. There was no due diligence, no feasibility study,” Mahathir told a Malaysian media conference on April 28, after the end of his five-day visit to China to attend the second Belt and Road Forum for International Cooperation (BRF).

It’s strange of him to say this, considering that no new feasibility study has been issued or a new environmental impact study done for the new ECRL without a tunnel and a new realignment that takes it through a swathe of Negeri Sembilan.

Daim revealed in a Bernama interview that there were feeble attempts to justify the ECRL as a Mckinsey recommendation that was presented to the Economic Council in 2015 and 2016.

"I was reliably informed that the study recommended the ECRL alignment stretch from Tumpat to Gombak and the project was to be phased over a period of 18 years with a cost of RM47 billion. This was in recognition of the low economic returns and hence the report proposed that Phase 1 should be Mentakab to Dungun and be built for freight traffic only.

"Well, we all know what happened. The former PM instead signed an ECRL deal costing RM66.7 billion and decided to implement it in one go,” he said.

In the same interview, Daim said: "The former PM says he has 'reservations' about the new ECRL deal. I would like to remind him that the whole of Malaysia had many more 'reservations' over the old ECRL deal – its shady conception, lack of transparency, lack of integrity, hasty approval, its vague details, its hefty cost, the absence of accountability to the rakyat, etc."

These statements from Daim are puzzling. One alternative was to build the ECRL in stages over 18 years. The new Harapan government went ahead and signed the agreement for the whole stretch, just like the old government. Why? The new deal still continues to be shady, is not transparent, has vague details and hefty costs.

At the end of the day, the government should not have done such a deal with a party that conspired with the previous kleptocratic government to cheat us of RM30 billion, when the clear opportunity was there to repudiate this corrupt deal and save as much as RM44 billion instead.

Bandar Malaysia - 1MDB could have done the job itself

As I had written in this column, the RM140 billion development value Bandar Malaysia project, originally owned by 1MDB, need not have been partially sold in the first place. The previous Najib Razak regime had reversed this sale because of what it said was non-fulfilment of the contract by the purchasers.

Bandar Malaysia development

Mahathir said it was unfairly terminated. He has reinstated the agreement, with the only additional requirement being that the consortium pays a further RM500 million, in addition to the original RM741 million deposit.

This project, which involved a sale of 60 percent of Bandar Malaysia, the project company, to a Malaysia-China consortium for RM7.41 billion, had been terminated by the previous regime because scheduled payments had not been made.

Under the renewed deal, a 60 percent stake in the Bandar Malaysia land is to be sold to the initial contractor IWH CREC Sdn Bhd - a consortium comprising Iskandar Waterfront Holdings Sdn Bhd (IWH) and China Railway Engineering Corp (CREC).

IWH is reportedly owned 60 percent by prominent businessman Lim Kang Hoo, through his private company, Credence Resources Sdn Bhd, while the remaining shares are held by Johor government company Kumpulan Prasarana Rakyat Johor (KPRJ). According to its website, KPRJ, which is wholly owned by the Johor government, was set up in 1995 and has a paid-up capital of just RM1 million. The remaining 40 percent of Bandar Malaysia is owned by TRX City, a wholly-owned subsidiary of the Finance Ministry.

The question is why not allow Bandar Malaysia to initiate the master plan through international tenders and then, based on the master plan, sell the land to be developed according to the plan. That way it could have made all the profits the private consortium is going to make and in time could have recovered more than the estimated RM30 billion 1MDB lost.

Questions over the Penang Transport Master Plan

Finally, the RM46 billion PTMP. I wrote about it in this column. In effect, what is happening will be a massive transport plan which will be paid for by reclaiming land - three man-made islands will rise from the sea. 

According to the Penang Chief Minister Chow Kon Yeow (above), the man-made islands, on resale, will raise RM70 billion for the state to more than pay for the RM46 billion cost of the PTMP. But there are no statements as to costs.

All these three projects involve a total of RM230 billion, or nearly a quarter of the national debt of RM1 trillion as claimed by Lim Guan Eng. The questions arise as to whether these projects are desirable in the first place, and even if they are, whether they have been executed in the right way to get the maximum benefit for the country and the people.

As it stands, the best we can say is that we don’t know. That does not say much for competence, accountability and transparency. And for good governance too!

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P GUNASEGARAM says its high time we recognise patronage as a form of corruption too and legislate it accordingly. E-mail: t.p.guna@gmail.com. - Mkini