Is the RM46bn Penang transport proposal headed for financial trouble?

In this piece Roger Teoh, a PhD postgraduate studying at the Centre for Transport Studies, Imperial College London, points out that the projected ridership for the RM8bn Penang LRTis highly unrealistic and will probably be missed by a significant margin.

• SRS Consortium forecasted an annual ridership of 42m for the Penang LRT, a number that is significantly higher than most MRT lines in London, Singapore and Kuala Lumpur on a per capita basis.
• If a more realistic ridership projection for the Penang LRT is used, the loss in ticket revenues could amount to at least RM1.2bn over 10 years, threatening the financial viability of the LRT project and the state’s financial health.
• Why did the Penang government insist on bulldozing through the SRS-recommended LRT and monorail as the preferred public transport systems, as opposed to trams and BRTs which are shown in the Halcrow Report to be cheaper to build, operate and maintain?

Over the past week, we have observed a renewed interest from the public regarding the debate on the SRS-proposed Penang transport masterplan.

Various concerned NGOs, academics, consultants, park users and resident and parent-teacher associations have spoken up en masse to highlight the lack of transparency and the ineffectiveness of the SRS transport masterplan.

Rather than clearing the air, we have witnessed continued attempts by the Penang state government to engage in rhetoric and to suppress productive debate by saying concerned parties are “spreading fake news”.

Regardless, we will continue to raise awareness on the deficiencies of the SRS transport masterplan directly to the public. This article will focus on the Bayan Lepas–George Town LRT project, where the ridership projection by SRS Consortium was identified as highly suspicious and unrealistic. These concerns, if left unchecked and unexplained by relevant authorities, could easily result in a financial problem as will be highlighted in this article.

Ridiculous ridership forecasts for Penang LRT

The annual ridership for the Bayan Lepas–George Town LRT forecasted by SRS is 42m passenger trips within its first year of operations. Such ridership figures are partially derived based on a population projection which is not supported by data from the Department of Statistics.

To give the public a better perspective of how ridiculously high this forecasted LRT ridership is, comparative data on actual ridership for other mass transits lines in various cities around the world are presented.

The metric of “annual passenger journey per person” used in this comparative study is calculated by dividing the annual passenger journey by the city population for a fairer comparison of cities with different population sizes.

For the case of Penang, SRS Consortium projects that 42m Penangites will use the Bayan Lepas–George Town LRT in just the first year after the LRT is operational.

Dividing this number by the population of Penang island (approximately 800,000) translates to around 52.5 annual passenger journeys per person. In other words, this implies that on average, every person in Penang island is expected to make 52 trips using the LRT in a given year.

This analysis shows that the forecasted annual ridership for the Penang LRT (52.5 annual passenger journeys per person) is only around 10% lower than the Singapore East-West Line (58.5 annual passenger journeys per person) and 30% higher than the London Docklands Light Railway (37.0 annual passenger journeys per person).

Remember, these annual ridership numbers for the Penang LRT are forecasted to be achieved within its first year of operations, while the Singapore East-West Line and the London Docklands Light Railway have been operating for 31 years.

Looking at our capital city Kuala Lumpur, actual data collected from the new Sungai Buloh–Kajang (SBK) MRT line showed that it only managed to achieve an annual ridership of 22.25m (or 11.1 annual passenger journeys per person) during its first year of operations in 2017 – 48% lower than the forecasted annual ridership for the Penang LRT in absolute terms despite having a bigger population relative to Penang.

Even the Kelana Jaya LRT line in Kuala Lumpur, opened in 1998, is only able to achieve an annual passenger journey of 30.6 per person after 19 years of operations, compared to the 52.5 annual passenger journeys per person for the Penang LRT.

So how is it possible for the Penang LRT to have an annual passenger journey per person much higher than most MRT lines in London, Singapore and Kuala Lumpur when it is also not expected to have any interchange stations with other rail links during its first year of operations?

To make matters worse, the heavy prioritisation on motorised vehicles in the SRS transport master plan will inevitably make it more attractive for Penangites to drive than to use public transport. For example, the proposed Pan Island Link 1 (PIL 1) highway operates in a similar North-South corridor and is expected to wrest modal share away from the LRT. Why would Penangites choose to use the LRT over driving if journey times take around 15 minutes using the PIL 1 highway but one hour using the LRT?

Therefore, based on this analysis, we have a high degree of confidence to conclude that the projected ridership numbers for the Penang LRT are highly unrealistic and will likely be missed by a significant margin.

What happens if the Penang LRT fails to achieve its forecasted ridership?

Using Kuala Lumpur’s new SBK MRT line as a benchmark, we estimate that the annual ridership for the Penang LRT should be adjusted down to 10m (12.5 annual passenger journeys per person), not 42m (52.5 annual passenger journeys per person) as claimed by SRS Consortium.

The scaling down of the annual ridership projection from 42m to 10m will no doubt bear negative consequences that will affect the financial viability of the Penang LRT project.

Without sufficient ticket revenue, the heavy operation and maintenance costs of the LRT will result deficits. If the ticket fare for the LRT is assumed to be RM3.50 per trip, the losses could amount to at least RM1.2bn over a 10-year period. Even with a scaled down annual ridership of 10m for the Penang LRT, this could still be an overestimate.

When this financial problem eventually happens, it is the Penang state government that will be forced to bail the LRT project out of this mess, not SRS Consortium. We can only speculate that this heavily inflated ridership forecast is done for the sole purpose of boosting the benefit-cost ratio and to justify the high price tag of the LRT project (RM8.4bn).

Are NGOs really against all state developments?

In a desperate attempt to rally public support, the Penang government has relied on tarnishing the credibility of NGOs and opponents of the SRS transport master plan by falsely accusing them of “spreading fake news” and being “against all state developments”.

To set things straight, we would like to reiterate that NGOs are not against all state developments. Any developments made by the state have to be financially, socially and environmentally sustainable, but this has clearly been lacking in the SRS-proposed transport masterplan.

Why is the Penang government insisting on bulldozing through the SRS-recommended LRT and monorail as the preferred public transport systems, as opposed to trams and BRTs that are shown in the Halcrow Report to be cheaper to build, operate and maintain?

Why are there double standards where the Environmental Impact Assessment is uploaded online for public scrutiny but not the 20-volume SRS proposal? Is the Penang state government trying to cover up these ridiculous LRT ridership forecasts and the lack of justification in selecting the most expensive public transport option from public scrutiny?

It is time for the Penang state government to live up to its Competency, Accountability and Transparency slogan and stop this mess from heading into financial trouble.