Never-ending Penang bridge tolls – but nothing for Penang

The federal government should hand over both Penang bridges to the Penang state government – so that the state can use the tolls as a form of congestion pricing and finance public transport infrastructure in Penang.

The announcement that the expiry of the first Penang Bridge concession with UEM would be extended from 2021 to 2038 drew howls of protest.

But then this is a logical consequence of the decision to push for the second Penang bridge (a project which both the federal and Penang state government – current and previous – supported). The second bridge, we are told, would have a toll rate of RM8.50 for cars. (The first bridge has a toll rate of RM7.) After all, who would use the second bridge and pay RM8.50 in toll, when they could drive for free on the first bridge after 2021?

But hang on a sec. Wasn’t the 25-year concession for the first bridge supposed to expire in 2018?

When did it get extended to 2021?

According to UEM Builders Annual Report 2007:

The Government and Mekar Idaman Sdn Bhd entered into a Concession Agreement dated 30 September 1993 in connection with managing, maintaining and operating toll collection services of the Penang Bridge for a concession period of 25 years.

On 23 November 1995, Penang Bridge Sdn Bhd, (“PBSB”) (a wholly owned subsidiary) and Mekar Idaman Sdn Bhd entered into a Novation Agreement with the Government whereby, with the approval of the Government, Mekar Idaman Sdn Bhd assigned its rights and transferred its liabilities and obligations under the Concession Agreement to PBSB.

On 30 August 2007, PBSB has entered into a Supplementary Concession Agreement with the Government of Malaysia for extension of the Concession Period by 3 years and 7 months from June 2018 to 31 December 2021.

So there was already a quiet three-year extension from 2018 to 2021 to ‘compensate’ for the third time a toll hike had been cancelled. That’s ironic considering that toll revenue collected from the Penang Bridge far outstrips the cost of constructing the bridge. Now, the concession has been extended to 2038 – on what grounds I don’t know. (Oh, I forget what I said earlier, they have a new bridge which no one will use if the first bridge becomes toll-free.) And toll profits from both bridges will go to the federal government.

I was told by someone involved in the construction of the first Penang Bridge that Lim Chong Eu wanted the Penang Bridge to come under the Penang state government. But alas, it was not to be. When completed, the Bridge came under the federal government (with the Penang state government, if I recall correctly, getting a small share of the revenue). But even that disappeared in 1993, when the bridge was privatised to the UEM Group – at a time when Mahathir was PM, Daim Zainuddin was finance minister and Koh Tsu Koon was Penang chief minister – on the pretext that the Yen had grown stronger and the federal government wanted to repay the loan on the bridge in full. Since then, the bridge has generated huge profits for the concessionaire – with Penang state getting nothing.

Blog reader Plain Truth adds:

The parent company of Mekar Idaman was the Bursa-listed Intria Bhd, which was in turned controlled by UEM with Renong as the ultimate parent company. Both UEM and Renong had to be bailed out via a taxpayer-funded privatisation in 1999/2000.

These Umnoputras sat on cash cows, piled up the debts and proceeded to go bust. But then again, during Dr M’s era, these things were hardly amazing.

As usual, not a squeak from our … Koh Tsu Koon.

What would be a more progressive alternative?

It is important for both bridges to come under the Penang government as part of an overall restructuring of transport in Penang, in line with the principle of subsidiarity (local affairs managed by local government).

At present, PBSB comes under UEM Group Bhd, which is wholly owned by the Finance Ministry’s Khazanah. PBSB has probably collected many times the original RM800 million cost of the first bridge, which will now fall under a new company, Projek Lebuhraya Usahasama Bhd (PLUS), to be owned by UEM (51 per cent) and EPF (49 per cent).

The Penang bridges should be handed back to Penang state and a new Penang Transport Commission should be set up. This Commission should control the ferry services, both the Penang bridges, RapidPenang and the ferry services – all of which should be owned by the public/Penang state government. The Commission should also look into the possibility of surface rail – LRT and/or trams services.

Contrary to the calls for the first Penang Bridge toll to come to an end, the bridge tolls on both bridges could be turned into a form of congestion pricing for private motor vehicles or single-occupancy vehicles entering the island. The profits from both the Penang bridges could then help to subsidise passenger ferry services and Rapid Penang buses, including the shuttle bus service across the bridge. The bridge profits could also finance LRT/tram services in the state (including a cross-channel rail link), the construction of bicycle lanes and improvements in pedestrian walkways to make the streets more people-friendly.

Of course, none of this will happen as long as the BN insists on managing public transport in Penang by remote control from Putrajaya. Public transport in Penang must be managed and controlled by the Penang state government. And that is another reason why we desperately need change.