15 March 2018

Wee: Penang People Suffer RM20 Billion Financial Loss Due To The Tunnel and Its 3 Related Road Projects

 1. Several members of the public including DAP veteran Ronnie Liu who had commented on my Facebook live cast had asked why I mentioned a figure as high as RM20 billion as the potential financial loss to the Penang people due to the Tunnel and its 3 related road projects.

2. Firstly, the project cost is RM6.34 billion. Many Penang NGOs including the Penang Forum have said that these roads and tunnel are unnecessary as they will not ease traffic on the Island and there is still ample capacity on the two existing Penang bridges - particularly the 2nd Penang Bridge which still has a 50% available capacity.

3. On top of that and despite Pakatan's promise to abolish all tolls, the Penang Government had also given the Tunnel SPV company a 30-year concession to charge for toll on the tunnel at the same rate as the 2nd Penang Bridge.

4. A normal toll concession project is where the concession holder funds the construction cost of the highway or tunnel by itself using loans and then collect tolls to finance their loans and make a profit.

5. However, In the case of the Penang Tunnel this is not the case, The Penang Govt is fully paying for the construction cost of the tunnel but still giving a 30-year toll concession. 

6. Not only can the Tunnel SPV make incredible profit from the construction of the tunnel but they will make additional profit from 30 years of collecting toll on the tunnel. This is the world's most lop-sided toll concession.

7. Would you pay a contractor the full cost to build a house for yourself on your own land and yet, still allow the same contractor to collect a further 30 years of rental on that same house? No one in their right mind would!

8. Based on a conservative average RM100mil per year in toll collection, which is less than what the first Penang Bridge is getting today, the 30-year toll concession will give another RM3 billion of Penang people's money to the Tunnel SPV.

9. The Penang state government also has the dubious honour of making history where a project is awarded in 2013 but allowed the winner to only start construction 10 years in the future in 2023.

10. Stranger still is that the RM3.6 billion cost of the tunnel itself is to be paid based on a set number of acres of prime sea-side land valued at RM1,300psf in the year 2013. Although the Penang Govt will claim that the official land cost is just RM475 psf, absolutely no one should be fooled that such desirable seaside land along Gurney Drive only costs so little.

11. In 10 years when the construction of the tunnel will actually begin, the value of this prime land will inevitably appreciate greatly as can be seen based on history. Therefore, the RM3.6 billion worth of land will be worth RM5.8 billion in the year 2023 if based on a mere 5% yearly appreciation. This means that the Penang people will have foregone another RM2.2 billion in land value.

12. On top of that, if you look at this diagram the Penang Govt will also be using RM9 billion in state funds and assets to build infrastructure that will chiefly benefit the RM15 billion Gross Development Value of the 100% privately owned project of the Penang Tunnel SPV.

13. This comprises the RM7.5 billion Pan Island Link (the most expensive highway in Malaysian history by more than double at RM385mil per km), Gurney Wharf and the planned RM400mil 8 lane Gurney drive road.

14. It is clear from the diagram who benefits the most from these projects.

15. If you add up RM6.34 billion, RM3 billion, RM 2.2 billion and RM9 billion, you will get RM20.54 billion of financial impact to the Penang people.

16. This clearly shows how lopsided the Penang Tunnel project is and how generous the Penang Government is to the Tunnel SPV company.

17. Add the RM20.54 billion financial impact to the fact that the Penang Govt does not seem to have taken any action due to the long delays in this project even after 5 years or that the Penang Govt does not seem to care if the Tunnel SPV has never fulfilled the RM381mil minimum paid-up capital to qualify for the project, you cannot blame the public for suspecting that there are persons in the DAP Penang state government  with vested interests - either in direct shares or held via proxies - in defending this project.

18. The big sum of RM20.54 billion involved could explain why some parties allegedly paid a staggering sum of RM22mil in cash in an attempt to stop MACC investigations into the Penang Tunnel project.

19. This big sum involved and the RM22mil payments is the main  reason why the Penang Chief Minister should debate me publicly instead of remaining the number one coward in DAP.

20. Be brave, dear CM

Datuk Seri Ir. Dr. Wee Ka Siong

MCA DEPUTY PRESIDENT

-MCA Online-