MRT2 review saved taxpayers a massive RM8.82bil

 

From Tony Pua

As highlighted in Part I of my statement yesterday, it was reported that former Pakatan Harapan prime minister Dr Mahathir Mohamad made public his “grouses” in his upcoming book with references clearly targeted against me, even though I was not specifically named.

His additional remarks to the press yesterday in response to my statement, however, confirmed that I was the intended target.

I had clarified yesterday that I never threatened the developer referred to by Mahathir, Djoko Tjandra, because I had never met or spoken to him. All discussions and negotiations sanctioned by then finance minister Lim Guan Eng were led by top ministry officials and I was never present on those occasions.

I am disappointed that Mahathir continues to believe the words of an Indonesian businessman, who is now behind bars in Indonesia for fraud and corruption, instead of trusting his own MP.

Based on the excerpt from his book, Mahathir claimed that “there were also occasions when this adviser spoke publicly on behalf of the government despite having no standing to do so”.

In this case, Mahathir would be referring to a specific statement, or “open letter”, which I had issued on Oct 10, 2018 to the “directors of MMC-Gamuda” with regards to the MRT2 project.

I remember clearly that Mahathir was absolutely livid after the letter was published, summoning Lim to admonish him for my action.

It was a letter that lived long in Mahathir’s memory. Even late in 2019, more than a year after the letter was published and the matters involved were long resolved, Mahathir was still griping about it in his conversations with Lim.

The story

It was well known in the industry even prior to 2018 that MMC-Gamuda had the inside track with the Najib Razak administration to be awarded the Project Delivery Partner (PDP) of the extremely lucrative MRT projects via direct negotiation.

The ministerial reply to me in Parliament then specifically confirmed that MMC-Gamuda was awarded the project because they were the first to propose it.

Given the size and scale of the MRT2 project, which will indebt the government by at least RM50 billion (inclusive of land acquisition costs and interest payments), Lim directed the ministry to carry out a study to determine if the cost of the project was a fair price and whether any significant savings could still be achieved, given that the project at that stage was already 40% completed.

One of the largest engineering consulting firms in the region was appointed to carry out the review. The study concluded that there were very significant savings to be achieved via a re-negotiation, restructuring or a re-tender without sacrificing the functionality, viability and operations of the project.

In fact, the study discovered that comparative figures with regional MRT or equivalent projects which purportedly showed that Malaysia’s MRT1 and MRT2 projects were among the lowest price presented by the consulting engineers of the project were concocted.

To be absolutely certain, the finance ministry (MoF) even secured written confirmations by other large-scale contractors that they were prepared to bid at a lower price in the event of a re-tender for the balance of the project.

Extensive negotiations took place with the top management of MMC-Gamuda. In the end, as stated in my open letter, the MoF accepted a 23% reduction of the cost of the MRT2 Above Ground works from RM22.64 billion to RM17.42 billion, saving taxpayers RM5.22 billion.

However, MMC-Gamuda was not prepared to significantly reduce the cost of the MRT2 underground (mainly tunnelling) works. They made the final offer of a RM2.13 billion “discount” to the cost of RM16.71 billion.

The study by the consultants, however, estimated potential savings of between RM4.2 billion and RM5.8 billion, after taking into consideration all penalties and potential financial settlement to MMC-Gamuda in the event of a termination per the terms of the contract.

The question, then, was whether we were to give up an additional RM2 billion in savings.

The above was presented to the Cabinet for a decision, and it was decided on Oct 8, 2018 that the MRT2 underground contract with MMC-Gamuda would be terminated as per the terms of the contract, and there would be an open tender issued to complete the remaining works.

Stunned by the news, MMC-Gamuda immediately launched a massive public relations and social media campaign with the hashtags #pray4MRT2 and #save20kjobs.

This was to gain public sympathy over the termination, in an attempt to reverse the Cabinet’s decision. In the process, it demonised the government as cold, heartless, irresponsible, reckless and, perhaps, even vindictive.

Perhaps, under the old BN crony-friendly regime, such a campaign would have immediately caused capitulation and ultimately a U-turn on the decision. However, this wasn’t a BN government and the additional billions of savings for the Malaysian taxpayers was well worth fighting for.

Open letter

The finance minister refused to take the public affront lying down and instructed that I refute the public allegations, which I duly did with the open letter to the MMC-Gamuda directors.

The public support for my open letter was overwhelming. MMC-Gamuda responded immediately, halting their own campaign, to seek reopening of negotiations with the MoF.

To cut a long story short, we successfully reduced the cost of the MRT2 underground contract by an additional RM1.47 billion and reinstated MMC-Gamuda to complete the project.

Overall, the MRT2 review exercise saved taxpayers a massive RM8.82 billion, excluding savings on interest cost.

It must be emphasised that this was achieved without sacrificing functionality, viability and operations of the project, or caused any job losses for the workers.

The project has since proceeded smoothly and is due for completion by January 2023, after some Covid-19 enforced delays.

It proved beyond doubt the excesses of the past under the Umno-BN crony-capitalism regime.

The billions saved could now be spent on even more projects, creating even more benefits and jobs for Malaysians, boosting the economy further.

Appeasing Mahathir

The entire review exercise was completed in a little more than three months. (Yes, you can be assured that the then newly appointed finance minister worked his team really, really hard – and this obviously wasn’t the only project we were working on concurrently.)

However, things were not smooth behind the scenes. As was only to be expected, the directors of MMC-Gamuda had direct access to the prime minister. Throughout the entire negotiation process with the MoF, the directors made countless trips to lobby Mahathir. Mahathir was fed with many half-truths to justify the project cost. And each time, the PM would demand answers from Lim.

This is where I must give full credit to Lim. Each time, the team would scramble to prepare the immediate formal and detailed response for the minister to bring to the PM. Each time, Lim would patiently and diligently explain these issues to Mahathir, even when some of the issues raised had already been previously (repeatedly) explained.

It was a thankless task. It would have been so easy for the minister to just give up and move on. After all, whether we save “only” RM1 billion or we save RM8 billion, the rakyat would be none the wiser.

As tedious and as frustrating as it was – this was obviously not the only issue Lim had to appeal or explain to the PM (for example, The Exchange 106 project) – he persevered and he was determined to achieve the maximum possible savings for Malaysians.

To do so would help reduce the country’s debt and to have more funds for more projects and social programmes for the people.

I was genuinely “relieved” that I wasn’t wearing his minister’s shoes, and I had the much “easier” task of being his assistant to gather all the relevant facts and information for the cause.

Ultimately, the finance minister succeeded in convincing the PM (perhaps, reluctantly), and subsequently the Cabinet, that the best course of action was to terminate and re-tender the MRT2 underground contract.

However, when Mahathir read my open letter, he blew his top. The only reason why I was not fired as the political secretary to the finance minister, an appointment under the PM’s purview, was because Lim told him that I wrote the letter under his instructions (which was the truth).

After MMC-Gamuda sought to re-open negotiations, Mahathir advised Lim not to press too hard. He even told Lim how much was “enough”. Lim led the final negotiation with MMC-Gamuda himself and the final “discount” was arrived at relatively quickly and amicably to the satisfaction of all parties.

The directors even assured the minister that despite the significant cuts to the cost, the project was still profitable.

More than a year later, late in 2019, Mahathir still griped about the open letter to Lim. If I don’t recall wrongly, it was part of their conversation about being a “business-friendly government”. He took offence at the fact that I used the word “hell” in my statement, although he couldn’t remember the context in which the word was used.

Even I couldn’t remember using the word when Lim relayed the conversation to me. I checked, and this was what I wrote, “RM2 billion is hell of a lot of money when I see my MoF colleagues who are struggling and scrimping to find RM50 million savings here, and RM80 million cuts there for the upcoming Budget”. I’m pretty convinced that the term “hell” here is more than justified.

I have no regrets writing the open letter, even if Mahathir is still pissed about it (so much so that he actually included it in his memoir).

It says a lot about the man when he chose not to record the RM8.82 billion savings for the rakyat for the MRT2 project under his premiership in his memoir but instead whines about an apparently irritating political secretary.

On the other hand, I am extremely proud to be part of the team that brought these mega-multi-billion ringgit savings to the people, all within a very short 20-month stint at the MoF.

Even if it wasn’t instructed by the minister, I see nothing wrong with a political secretary or even a backbencher MP defending and explaining the policies of the government. Isn’t that precisely our role?

In my personal view, if there was a particular weakness in Pakatan Harapan’s time in government, there were too few leaders who were willing to stand up and be counted in times of controversy, for fear of rocking the boat.

But Mahathir would have none of it. Instead, he claimed that I “spoke publicly on behalf of the government despite having no standing to do so”.

It is really odd, and admittedly very disheartening, that defending the Cabinet’s decision is deemed an offence. Perhaps it is so, if his circle of business friends were at the end of the stick. - FMT

Tony Pua is the MP for Damansara.

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.