While much attention has focused on BUCG’s removal from Consortium Zenith BUCG Sdn Bhd, perhaps it is time to take another look at how another state-owned firm from China, China Railway Construction Corporation Ltd (CRCC), ended up as the main contractor for Zenith in the tunnel, highways and property development project.

I spotted a Malay Mail report from 5 March 2013 (reproduced below). Some points and questions below:

  • Consortium Zenith BUCG’s Sdn Bhd’s shareholding structure has since changed. But back in 2013, BUCG was reportedly described by the Penang state secretary and the Penang state financial officer as “the main bidder which formed the SPV with Consortium Zenith”. BUCG is now being removed. What are the implications?
  • The Malay Mail report cited documents saying that China Railway Construction Ltd had tied up with IJM during the tender. They didn’t win. (Zenith-BUCG did.)
  • But then China Railway Construction Corporation (CRCC) became the engineering, procurement, construction and design consultant for Zenith-BUCG.
  • CRCC, BUCG and Consortium Zenith BUCG signed a preliminary agreement with the Penang government in October 2013 to carry out a feasibility study and detailed design work.
  • Are CRCL, CRCC and China Railway Construction Corp International different companies, related or one and the same?
  • If this CRCC is the same China Railway that had tied up with IJM… isn’t it odd that one of the losing bidders is now so heavily involved with the winning bidding team?

I am asking because this is what a World Bank report that discussed tenders for infrastructure projects like highways has to say:

Subcontracting as a facilitator of capacity-building and collusion

Allowing less experienced local companies to subcontract with experienced international firms gives them the chance to learn new techniques and build domestic capacity. However, when losing bidders are permitted to become subcontractors to the winning firm, subcontracting can be a way colluders pay one another off for sticking together. As suggested above, where the risks of collusion are high, consideration should be given to prohibiting subcontracting with losing bidders or at least monitoring subcontracting patterns to identify collusion risks.

 

The World Bank also lists 10 indicators that the US government uses to reveal collusive bidding. Item no. 3 (see page 12 of this link) is “Firms that submitted a bid later became a subcontractor on that project.”

So the practice of a winning bidder selecting a losing bidder as its subcontractor is not encouraged, even frowned upon.

In November 2015, I had also blogged:

Reuters reported in October 2013 that China’s anti-graft authorities punished eight people at a state-owned rail construction firm, China Railway Construction Corp. Ltd, for spending more than $100m on ‘hospitality’ in 2012. They had spent $135m on receptions for guests. One of the officials received a suspended death sentence, meaning life imprisonment.

[The company sounds familiar. In March 2013, a company bearing the name China Railway Construction Corporation International signed an agrement with the Penang state government on behalf of the consortium that won the bid for the Penang tunnel and highways project. Is this the same company? (Firms from China were also linked to the other bidders.)

And this is the Malay Mail report mentioned earlier:

Consortium Zenith is made up largely of CRCC

By A. Sangeetha, Zalinah Noordin | Malay Mail – Tue, Mar 5, 2013

GEORGE TOWN: Despite the tie-up with Beijing Urban Construction Group (BUCG), the special purpose vehicle company led by Consortium Zenith is made up of RM4.5 billion paid up capital, largely contributed by China Railway Construction Ltd (CRCL).

According to the documents, CRCL had tied up with IJM Corporation Bhd to bid for the tender but only proposed to build the 4.2km between Gurney Drive and Lebuhraya Tun Dr Lim Chong Eu coastal bypass.

In a joint statement issued by State Secretary Datuk Farizan Darus and State Financial Officer Datuk Mokhtar Mohd Jait stated that Consortium Zenith was specially set up to bid for the RM6.3 billion integrated road projects.

“Consortium Zenith and CRCL possess 70 percent equity with paid-up capitals of RM3.5 million and RM4 billion shares.

“The main bidder BUCG which formed the SPV with Consortium Zenith has a ten percent equity with a paid-up capital of RM541 million.

“Sri Tinggi Sdn Bhd and Juteras Sdn Bhd have a ten percent equity each with paid-up capitals of RM3.7 million and RM1 million, respectively,” they said.

Both Farizan and Mokhtar were debunking Barisan Nasional (BN)’s claim that Consortium Zenith was a RM2 with a paid-up capital of RM200,000.

Evidently, from the bids submitted by four companies during the request for proposal, three companies had tied up with China construction companies including VST Cemerlang with China State Corporation (VST).

Despite CRCL’s failed attempt to secure the deal with the assistance of IJM, it is apparent that they had managed to grab a chunk of the projects with its highest equity possession.

When asked, Chief Minister Lim Guan Eng not only conceded that the CRCL had the largest equity but also pointed out that CRCL is China’s biggest construction firm.

VST, on the other hand, submitted its proposal to build all four projects but due to its higher asking price of RM6.6 billion and a land swap deal of 171.3 acres, they were rejected.

The other company WCT Berhad, a Shah Alam based construction firm, tied up with Korean builder Daewoo Engineering and Construction to build the Teluk Bahang and Tanjung Bungah paired roads, and the Gurney Drive coastal bypass.

Their asking price was RM1.4 billion and 100 acres of land as part of the land swap deal but BUCG managed to win the bid after agreeing to RM6.3 billion and settled for 110 acres of land from Tanjung Pinang.

According to a company search, the RM2 special vehicle company Consortium Zenith and BUCG was set up on July 5 last year with two directors, aged 57 and 37, based in Kuala Lumpur and a 34-year-old secretary from Petaling Jaya.

It had a paid-up capital of RM200,000 but the joint venture company is believed to have increased its paid-up capital following the coming on board of CRCL and the two local companies, and the inclusion of BUCG’s investment.

The announcement of the road projects’ winning bid by Lim on Thursday had re-ignited criticism by environmental groups and Penangites.

The projects comprise a 4.2km bypass from Gurney Drive to Lebuhraya Tun Dr Lim Chong Eu, a 4.6km bypass between Lebuhraya Tun Dr Lim Chong Eu and Bandar Baru Air Itam, a 12km paired-road from Jalan Tanjung Bungah to Teluk Bahang, and the 6.5km Penang-Butterworth sea tunnel.

Lim had said the projects would be scrapped if the Detailed Environmental Impact Assessment (EIA) study revealed negative effects.

He also said the contract will only be signed after the general elections as the terms and conditions to the projects would be amended if Pakatan Rakyat took over Putrajaya.

“Due to the importance placed on public transportation in the PR manifesto, we would need to re-study the terms. If we win Putrajaya, we will be able to implement public transportation.

“Therefore, there will be a change to the projects. However, we still see the need to make road improvements and that is where the agreement with BUCG would be amended. Perhaps the projects will be on a smaller scale,” he said.

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60 COMMENTS

    • I believe Zahid Komidi has already given up on Gerakan/MCA. He would not be stupid to demand these 2 parties to embrace Umno culture with open heart without a motive. Knowing that BN could not win back Chinese votes in Penang, he is hoping that the malay votes would not be lost to 3M’s Bersatu, thus trying to exert Umno influence and malayness to appease the malay voters, and retain the Umno seats.

      Anyway, the non-Malays in Penang knew that Gerakan/MCA would not have guts to venture into the dark side of the corrupted realm of Umno. It would be suicidal even with young masters. So Teng CY got no choice but to hit back at Zahid.

  1. Only NGOs and individuals complaint (some call it make noises) about Penang Transport Masterplan, whereas UMNO or Gerakan or MCA is busy on somethjng else.

    Want to know why?

    Thry are too busy dreaming of how to recapture Penang.

    Today Zaid in Penang basically asks Gerakan and Penang to follow UMNO formula to be successful in GE14 (give up chairing be end of pulo pinang?)

    Then Teng Chang Yeow out of sudden borrow his Selangor brother guts to hit back at Zahid, claiming UMNO is the main cause why his team got zero seat last election. Teng after long self reflection now realize he doesnt want to called boh hoot and bestowed another infamous title to him after another fruit species in Penang.

    So internal fighting and they let NGOs and individual langs to find faults with present Pulo Pinang administration.

    • So ‘chun’ ah, your predictions?
      Why not peddle your trade instead of ‘kong-kong, shiok-shiok’ as Lau Ee Khua-Mia at the 5-foot way of Eu Yan Sang, Chulia Street?
      Good money you know, as many CAT minions will line up for rounds of ‘kong-kong, shiok-shiok’ so in the near future you can afford super condo @ Gurney Wharf!
      Pls try harder!!!

    • they take back pg gomen next election afterall whdn manhy think ph is even worst.mca and gilakan will supporr rich towkays and the other psrty will get more donation and get more cheap or free land

  2. Anil, u can do a SSM search on CZBUCG. Have a look at what is the paid up and also the profitably from them from just doing “reports”? Also have a look at what the shareholding that BUCG and CRCC has.

    http://www.malaysia-today.net/explain-super-profitability-of-company-doing-rm305-million-feasibility-and-design-studies-for-penang-tunnel-project/

    Then look at who is witnessing the signing of this and how much land it is: http://www.theborneopost.com/2016/01/16/ewein-subsidiary-acquires-land-worth-rm2-83-billion-in-penang/

      • i do not make false statements. they have been asking you to carry night soil when they are supposed to do it themselves unlike ah soon khor.

      • not sure gerry donates too. but the trinity has been giving instructions ( worse scenerio) or telling ( least scenerio) anil to do this or that as if they are tokongs. like warlords in amno.

      • Gerry, that kiamsiap kia knows how to “hee- haw” and “eeyore.”
        I believe Anil doesn’t need a drop of his donation.
        Suppose if he ever donated, Anil might be at his mercy for a few cents day in, day out!!!

    • The current share distribution is as it is (17.5 Million shares). The ratio is as such because BUCG opted no to increase their shares, and the state is aware of that and allow it.

      As for the profitability – one of the main lies by LSS and BN Cyber-troopers that meant to confuse readers.

      According to LSS, 2015 account states revenue to be RM51 Million, but profit is RM61 Million – thus they say this is super profitability – this is a lie. Because

      Revenue – Operating Cost = Profit ; How could Profit be more than Revenue ?

      This is because property gain is not recorded here. In 2015, CZBUCG receive payment in the form of 3.67 acre land from Penang State, and Ewein injected appx RM80 Million to CZBUCG

      In other words Revenue (51m) + Property gain (80m) – Operating Cost = Profit (61m) ; Operating cost ~RM 70 Million

      Also In previous years, CZBUCG operating cost is ~RM 92 Million…

      Means up to that point in 2015, CZBUCG operating cost has reached RM162 Million, so WHAT super profitability are they talking about???

      In 2016, Ewein and CZBUCG signed a MOC to solidify a deal, that once CZBUCG receive the reclaimed 50 acre land from state (once it’s reclaimed), to be sold to Ewein for RM2.83 Billion.. The state gov has not paid anything to CZBUCG (other than the 3.67 acre land).

      These are the truths… But LSS spins.

  3. As a Penangite, I have very little hope for the future of Penang property development, so no need for comparison!
    Read: Not okay for developers to be moneylenders
    http://www.malaysiakini.com/news/355321

    COMMENT The proposal by the Urban Well-being, Housing and Local Government Minister, Noh Omar, to permit developers to be moneylenders is fraught with risks.

    We all know that the property market is slowing down and developers are doing all they can to resuscitate the languishing market – ranging from giving free trips, cars, paying for settlement expenses; and now a proposal to give loans to buyers who don’t qualify for housing mortgages. In fact it was reported that house buyers be given loans equivalent to 100 percent of the house price. In other words, no downpayment is needed.

    This is a recipe for disaster for a couple of reasons. First, the normal and prudent downpayment ratio for house purchase in most countries is 20 percent. This equity contribution by the buyer acts as a safety buffer for bank lending.

    Second, zero downpayment is an incentive for a borrower to not walk away from his obligations and monthly payment in times of difficulty. Without this equity stake in the house, buyers would hand in their keys and happily walk away in the event of default.

    There is an inherent conflict of interest in having developers also provide loans. Developers would like to sell as many houses as possible and hence are incentivised to provide financing for the products they sell. Developers, unlike banks, do not have expertise to do due diligence and credit analysis.

    Developers are not deposit-taking companies that provide financing. They have to borrow from banks in order to on-lend to borrowers, earning a fee in between. This no doubt pushes up interest rates to borrowers (estimated at between 12 percent and 18 percent). Now, if a borrower does not qualify for a bank for at 5 percent interest rate, how is she able to service a loan at 12 percent? It just doesn’t make sense.

    Most developers are highly leveraged – they borrow from banks to purchase land and for working capital. If they provide loans to buyers, they will also be borrowing from banks to finance their house buyers and become even more leveraged.

    Presently, housing loans at RM418 billion is the largest category of bank lending accounting for 29 percent of total outstanding bank loans as at December 2015. By piling more financial risks on to developers who are now more closely connected to banks and the financial system, we are effectively introducing more risks and fragility to the whole financial system. Such lending will be outside the purview of Bank Negara which is in charge of financial stability.

    The problem with lack of affordable housing to a large portion of Malaysia’s population is not because of lack of financing. The primary reason is because house prices have run way ahead of income growth.

    A healthy and sustainable housing affordability ratio (ie, median house price divided by median household income), should be in the region of 3 to 4. However, this ratio is over eight times in Kuala Lumpur area and over 10 times in Penang island. This is totally unsustainable has to be brought down.

    House price inflation due to many factors

    House price inflation is due many factors such as low interest rate environment, too much purchases by foreigners and overseas Malaysians, marketing gimmicks by developers, and poor government policies that have not curbed prices but in fact encouraged speculation and housing price inflation.

    Bank Negara did introduce a few policies, though too little and too late, to control property price escalation. These policies include higher property gain tax for shorter holding period, and lower loan to house value ratio for purchase of third property.

    Policies curbing speculation should be further strengthened. State and local governments can also play their part with better policies that discourage building of expensive houses, and policies that encourage and incentivise building of affordable houses.

    The right to shelter is a human right while the right to ownership is not. Not every one has to own a home upfront. Different schemes have been introduced in other countries to provide affordable and decent shelter such as subsidised rentals, public housing, rent with option to own, shared ownership between state and private individuals. These should be explored and adopted.

    Finally, property growth and house prices cannot be expected to grow forever, defying the laws of gravity. Healthy and balanced development cannot be just adding more bricks and mortars in the economy. Certain amount of healthy correction can be expected in a property market. The last thing for the government to do is to encourage more speculation and unsustainable property market growth by allowing developers to become lenders.

    DR LIM MAH HUI is an economist and former international banker.

      • You should feel sad for the displaced Penangites who are economically displaced.
        Feel sad for the right reason, not for shiok-shiok politicians.

  4. Singling out Gerakan and MCA, Umno vice-president Datuk Seri Dr Ahmad Zahid Hamidi said the component parties should adopt Umno’s culture, tune and machinery to ensure Penang’s return to BN.

    “Umno is willing to help all component parties to recapture Penang. Umno is not stingy in sharing the party’s knowledge.

    “All the component parties have to do is to open their doors to accept Umno’s help. They cannot continue to be arrogant,” he said when officiating Umno Balik Pulau division delegates’ meeting here today.

    • “All the component parties have to do is to open their doors to accept Umno’s help. They cannot continue to be arrogant,” ???

      Umno’s helps by trampling on and tearing of bohoot CM Koh’s picture and barring Koh’s entering Bishop street by Umno youth in their gathering ? By scolding on Gerakan’s Dr.Teng and asked for a fight ? Siapa mudah lupa lagi ?

      • there are rats only and you want cm to be like one and not stand in parallel with those trying to push?

    • The biggest threat to Astro is the smart TV box that allows watching free TV shows and sports programs similar to its offering via internet on any TV, with only one-time payment for the box top. My neighbor is enjoying his TVB drama this way, but need to pay for Unifi.

  5. should provide a workable/economical practical solution instead of condemning the state development projects which bring economical grow to the state

    • he loves to see unemployment jobness and people begging in street and people resort to stealing and daylight robberies.

  6. As a Penangite, I have very little hope for the future of Penang when I compare KL and Penang, The Federal Gov sits pretty while Penang is going into a major congestion crisis, and to compound the problem, Penang Gov has to deal with all these NGOs and their inept and non comprehensive BCF plan.
    As a Penangnite, I directly appeal to the NGOs, Please Please Please stop being so selfish, Please try to come up with a Realistic Alternative Plan that can cover ALL areas of the Island and the Mainland with FAST public transport.
    We do not want to see this bickering anymore over this BCF and this pussyfooting by the NGOs around how much of the tramline has to be elevated.
    Please come up with realistic route maps and travel times for all area of the Island and Mainland if you want Penangites to take the NGOs seriously.
    The SRS has released route maps covering the ENTIRE Island and Mainland. Does the BCF choose not to do this because it will inflate the costs of the BCF? Can the BCF please provide one reason why a tram will be “faster”?
    I am resigned to the fast that it will always be incredibly stressful to get around the Island for the rest of my days.

    • More congest more co2 and more inhale smoker smoke. Never mind not important, cutting hills and building condons are bread and butter issues to pg lang

    • Many emphatize with you, Peter.
      Don’t lose hope.
      Mainland Penang still a nicer place to live, the island however have been war turf for NGOs, opposition and local gomen far too long that we prefer to enjoy leisure kopi at mainland now.

      • Peter is the voice of Prai, a reminder to Penang Forum that Penang is not just an island.

        I urge Peter to highlight to us the concerns of Prai folks for the attention of Anil.

      • anik thinks pg is only the island like malaysis is malaya. whst sabsh and sarawak? never hesrd before.

    • Looks like we need a leader like present Philippine president should LGE has to be replaced. A tough no nonsense guy can get things done fast effectively without distractions from others. Of course, those with differing views should not bite the bullets but need to be on the toe not to jeopardise matter at large but contribute in more positive ways.

      • Wasn’t it fated that the Penang purple shirt volunteer corp was dismantle?
        If not, some politicians may have excess compulsion to behave like President Rodrigo Détente to round up all who disagree or agree to disagree!
        But no all are easily bullied. Be careful!

      • Like barring federal mp and ngo from travellingeven they have passport. Maybe they look handsome or pretty than first couple. Also red shirts can go around KL chinatown. Next Penang be the next destination? There are non bumis joining. Good chance for those barking here to join?

    • The problem is that you lose hope for the future of Penang, but refuse to acknowledge the source of the problem. It is probably because he is the revered which you have lots of hope on and refuse to admit that he screw up lot of things.

      • Precisely, but the emo-problem of die-hard worshippers is perpetual self-denial even in the face of current issues done deal by the we know who. It is this politico-emo helplessness of no-other-alternative & knee jerking (at the slightest contentions) that is dragging down DAP to their graves together with the hopes of the hopeful emos.
        These Arrogants @ Komtar will never ever learn since they reaped the emo-hopeful-delirium souls of 308 but ‘short changed’ these souls in the name of Cosmopolitan Penang development.
        From botak hills, degradation of coastal seas, untouchable housing to selling our George Town to SingLanders. What comes next is anybody’s guess.
        We will more likely see emotional soul reapers @ work comes GE.

      • why not you take over with bn federal gomen in control? east malaysia are not states and they have better resources and 50 years are they better? what suggestions or solution to brighten the hope. every one easy to put blame but cannot suggest solutions. show us how you will do? cant?

  7. Who cares if BUCG is out of the game?
    The Pg Transport Plan is still going full steam.
    My observation:
    1) CAT latest antic of removing BUCG is more of a PR exercise of swaying perceptions to salvage it’s damaged public perceptions due to many contentious issues (land development, swap deals, environment mess, botak hills, etc) CAT: “Penangites are easy to sway comes timely hero actions. What better choice than to take hero action against a developer/contractor to shiok them”
    2) With a change of the consortium partnership (BUCG is out), the game plan of Pg Transport Plan may be easier to revise based on public sentiments & outcry.

    Who is your renewed Hero of Penang Opera Theater?

      • Your Niao Kong dropped BUCG from the consortium, paham kah???
        If don’t understand the obvious, go ask your Niao Kong why?
        Pls lah don’t ask me this stupid question so you can spin another time for Komtar Dedak!

      • lu tun lang and allow bucg like ship drop the hook anywhere as if bucg is your ah kong ang tokong. you worship bucg now

    • Tunglang’s consistent Cat bashing is a way to get invited as a member in PTC? Should first approach Parti Cinta Malaysia boss who can find him useful for ceramah as GE14 may happen by Match 2017?

      • To you, Niao Kong is so venerable, no one can or should criticise for the good of Penang.
        So you mean all the contentious development issues with botak hills, environmental degradation + dangers & above 250 ft threshold are AOK?
        Pls justify your stuffs of AOK with Venerable Niao Kong.
        Otherwise, don’t simply comment like a useless troll just b’cos we disagree with your Deity.

      • They bark because ph is easy meat to chew. Never when unmno back in power in pg. See how much noise they can bark. Kumuning resort is ready to reserve a place for them with kopi o kau kau

      • More people are affected by traffic jams and smog than isolated botak hills. Good luck to their health. Some botak hills are carried out by farmers and people on part time trying to earn extra income due to gst. Our money are like banana notes and better to invest in properties that putting them in local institutions. Even in shares, you want a better share earnings.

  8. CCRC in the early stage (allegedly) gave a quotation of RM4.08 billion to the state govenment. That is how lim Guan Eng end up using it in his speech at Rasa Sayang Hotel in 2011.
    Lim Then (allegedly) decided to jack up the price to RM6.3 billion and awarded the project to ZB.
    ZB end up gave the whole project to CRCC at the price of US$1.19 billion which is equivalent to RM4.08 billion at the exchange rate of 3.4 per dollar. The prevailing rate was 3.18 per dollar in 2011.
    Lim Guan Eng (allegedly) allowed an inexperienced RM2 company to earn a rip off profit of more than RM2 billion.
    The MACC in about two weeks ago accepted my complaints and started to launch an investigation to this (alleged) abuse of power and corruption.

    • Of course you have a lot of complains at PR and tin kosong on opposing side. Welcome opposing side in the next Gomen. Guess we have to call you YB soon.

      • If he does, Tony Pua will be summoned to HQ, Rangoon Rd & be screamed at:
        “Don’t you understand the meaning of Toe-ing The Line?”
        I admire Tony Pua’s courage in many issues affecting the nation & Selangor, but I don’t breathe any confidence of him if he ever does dare to touch anything of Penang!
        Tony Pua, you read this?

      • he find it is easy to grind ph meat otherwise he will land in kamunting resort eating curry rice or like maria chin unable to travel to LOS.

    • why not ask yourself nothing was done to billions and trying to cover low. of course another kg jaguh scare of kamunting resort.

    • Debunking Ong Eu Soon:

      1) Lim Guan Eng has withdrawn that figure (RM4.08 Billion), citing it as a typo. That was 2011.
      2) CZBUCG was awarded the tender at RM6.34 Billion in 2012.
      3) CRCC signed a JV agreement with CZBUCG to undertake 70% of the construction work for RM3.85 Billion; & to do part of the detailed design work for RM70 Million. Some medium quoted USD1.19 Billion or USD1.21 Billion depending on the then current rate exchange at that time (1:3.2)

      4) Originally, Ong Eu Soon alleged that CRCC’s contract was USD1.19 Billion = RM4.8 Billion (he applied at 1:4 rate)… Recently, he changed his story to say USD1.19 Billion = RM4.08 Billion to try to link the 2 figures together via self-created exchange rate. This is ridiculous. Despite sharing this argument with Datuk Huan and LSS, neither of them has used this in their stories… Because the argument is too flawed.

      5) CZBUCG has RM 17.5 Million shares. Plus CRCC’s JV they are more than capable to pull of the project. No rip off. Ong Eu Soon missed the part where CRCC only in charge of 70% of the work (initially), thus RM3.85 Billion.

      • anyway ah soon is a he man unlike others she man telling anil to carry …. but see if ah sooon is a political opportunist.so far very uiet from unesco about sia boey. pg forum quietly buried it? now top secret??

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