RM46b PTMP is a risky undertaking that must be reviewed By P Gunasegaram

RM46 billion PTMP is a risky undertaking that must be reviewed

Nov 1st, 2019 (Updated Nov 1st, 2019)

P Gunasegaram

QUESTION TIME | The RM46 billion Penang Transport Master Plan (PTMP), expected to span 30 years, is a major risk, whichever way one looks at it because there are way too many imponderables and assumptions made - which may impact the viability of the project further down the road.

The entire project hinges heavily on the reclamation of three islands. The Penang state government says that the land reclaimed - islands A, B, and C - will have a sale value of RM70 billion for 1,800 hectares (about 4,448 acres). However, cost breakdowns and timelines are not available.

The other thing is the high cost of the projects, with activist groups claiming that many of the highways and other links involved in the project may not be needed. If these are scrapped, the cost could be much lower.

Also, the development is skewed to Penang islanders, largely ignoring the mainland part of the state which is Seberang Perai.

Another factor is the environmental damage caused by land reclamation and the livelihood of some 5,000 fishermen, while highways and LRTs will have damaging effects in terms of noise pollution in residential areas and affect heritage and recreational areas.

In terms of cost, the RM46 billion for the PTMP comes close to that of the greater Kuala Lumpur MRT and LRT systems which have an estimated cost of around RM50 billion.

But Penang’s population is 1.77 million, including Seberang Perai which has the majority of the population, roughly 54 percent of the state population. This means the population of Penang Island (area of 293sq-km) itself of just 814,000, is the main beneficiary of the PTMP. Seberang Perai (area 757sq-km) has 956,000 people.

In contrast, Kuala Lumpur has an estimated two million people in an area of 243 square kilometres, smaller than Penang Island. But greater Kuala Lumpur, or the Klang Valley, which the RM50 billion MRT and LRT serve, has an estimated population of some eight million, about four times that of Kuala Lumpur and nearly nine times that of Penang Island.

Tellingly, the PTMP, on a comparable basis in terms of population to greater Kuala Lumpur, is nearly nine times as expensive, which indicates that the amount of money spent per person on transport in Penang island is out of all proportion to greater Kuala Lumpur.

Seberang Perai, with 54 percent of the population, has more than two-and-a-half times the land of Penang island. This raises the wisdom of reclaiming land from the sea off the island, which will further raise the population there and put pressure on infrastructure.

Instead, there is both a social and economic need to develop land more cheaply on the mainland and bring Seberang Perai residents more into the mainstream development of Penang.

Which brings us to the next point about the PTMP - the way it is being financed. Information is rather thin here. The state government now says that there will be affordable housing on the islands which are being reclaimed.

If that is the case, won’t such a move depress land prices and reduce the amount of revenue the state government can get from land sales? And won’t the relocation of large numbers of people on these three islands put further pressure on the island and result in more traffic and other forms of congestions and pressures? Why have a master plan to reduce this when the master plan itself is contributing to the problem?

The other issue is why the state cannot undertake land reclamation itself by directly subcontracting it out to several parties to spread out risks, as well as to benefit more contractors, instead of concentrating it under the project delivery partner (PDP), the SRS Consortium.

SRS Consortium comprises Gamuda Bhd (60 percent), Penang-based Loh Phoy Yen Holdings Sdn Bhd (20 percent), and Ideal Property Development Sdn Bhd (20 percent).

A year ago in Kuala Lumpur, finance minister (and former Penang chief minister) Lim Guan Eng and his special officer Tony Pua engaged in a war of words with the PDP for the KL MRT, the MMC-Gamuda consortium, over a price reduction. But in Penang, the DAP state government is still stuck with an outmoded PDP system for the PTMP. This begs questions.

How does the state government propose to get RM70 billion to pay the RM46 billion for the PTMP, the cost of which would have escalated by a tremendous amount by that time? How much is the SRS Consortium getting as PDP? What kind of measures will be taken to ensure everything is above board?

This is a rather complex project and until there is greater transparency and more detail about how this will be undertaken, there is a real danger that much money will be siphoned off and the eventual benefits to the state will be much diluted.

Reclamation costs are not going to be static and will rise over time - reclamation alone is expected to take at least 15 years. It would be rather tenuous to depend on this to finance the project as cash flows from the reclamation may not match project cost payments.The cost of failure will be pretty high.

Other things remain puzzling. New highways, including elevated ones, are being constructed, at very high prices. When there is a need to reduce the number of vehicles on the road, the definite priority is affordable public transport instead of highways which will put even more cars on the roads.

That RM6.3 billion tunnel, which was going to be built because the previous federal government would not allow a road and bridge to be built, should be postponed now so that other alternatives such as bridges and ferries should be pursued in consultation with the federal government. But strangely, there is no sign of that.

To sum it up, the PTMP is a high-risk project that is being too hastily pushed through and which may result in rather dire consequences for the state (and even the country), further on. If for any reason the project fails, it will result in the crystallisation of a contingent liability on the state and, eventually, the federal consolidated accounts.

Simple prudence and good financial management require that the PTMP should be thoroughly reviewed independently, and the required modifications made before it is permitted to continue. Otherwise, we will have another mega-problem on our hands.

P GUNASEGARAM is the editor-in-chief of Focus Malaysia. 

My comments : 

This project is indeed mind bogglingly huge.   Neither Tony Pua nor Lim Guan Eng have had any experience planning or managing any project of this size. 

For me the real red flags are the time frames. Those three "man made islands" are going to take 15 years to be reclaimed from the sea. 15 years is a very long time.

This entire project is going to be fully completed in 30 years.

Guan Eng will be 90 years old.  

I dont think there will even be a DAP in 30 years.

So they are embarking on a project which they know they will not be present to see its completion.

This is strange behaviour for politicians who usually like to see something completed BEFORE the next general elections. 

It is going to be a very long 30 year journey before this project arrives at its conclusion.  

They wont be around to see this project completed.

Obviously Tony Pua and Lim Guan  Eng are planning to enjoy the journey only.