Penang’s mega RM46bn project: Serious problem of conflict of interest

Throughout my (unsuccessful) stint as a member of the Penang Transport Council, I kept highlighting the problem of conflict of interest in the entire mega transport proposal put forward by SRS Consortium.

In summary:

Halcrow had come up with the RM27bn transport policy blueprint for Penang, which included the RM6bn tunnel and three highways which the state government badly wanted for reasons best known to itself.

SRS Consortium – comprising a major contractor Gamuda and two Penang-based property developers – was appointed to be the “project delivery partner” (PDP) or consultant to implement the Halcrow plan. As consultant, it would earn 6% of project cost in fees.

But SRS Consortium’s had come up with new plan that was radically different from Halcrow’s – and much more expensive – RM46bn. SRS proposed expensive light rail transit (assuming a ridership of 42 million per year in an island with a population of 700,000) and an extravagant RM8bn 19.5km highway with over half of it in four tunnel stretches on hilly terrain – which was not in the Halcrow plan.

SRS proposed massive land reclamation to finance the project. Its very name SRS – Southern Reclamation Scheme – suggested that this was a major motivation behind the whole scheme.

A related major question: will any of the companies in the consortium (the consultants) or their associates or indirect interests be allowed to bid for the jobs in this project or to develop the reclaimed land being sold to finance the project?

Even Gamuda founder Koon Yew Yin had highlighted the problem of contractors acting as consultants in Penang. “Never invite contractors to submit project proposals for any mega project because each contractor will submit his own planning and design which will be impossible for the tender board to evaluate. You cannot compare the cost of an apple with the cost of an orange, a banana or a pineapple. A contractor should not be permitted to take on the role of the engineering consultant responsible for design as well as that of the role of a construction contractor responsible for the project implementation as the two roles are of conflicting interest. If the company is permitted to do so, it will lead to public perception of abuse and corruption.”

Finally, the Pakatan Harapan federal government is discarding the discredited project delivery partner model in the case of the Pan-Borneo Highway. The works ministry is taking over the project. The ministry said the cabinet had decided to implement the project “conventionally”, in line with the government’s effort to optimise the cost of projects that have high financial implications for the country.

So if the PDP model is discarded for the Pan-Borneo Highway, why is it being used in Penang? Don’t we need to review the billions being spent in Penang, raised from selling the Commons (the sea, which is now earmarked for massive land reclamation), which belongs to the public?.

Unfortunately, the Penang state government has refused to recognise the serious concerns over the PDP model. What does the federal government have to say about the PDP model being dropped for the Pan Borneo Highway but still being used in Penang? Why the exceptionalism for Penang?

Take the time to read this excellent piece by independent transport researcher Roger Teoh:

Is there a conflict of interest between SRS Consortium and the PTMP?

By Roger Teoh

This article is written in response to SRS Consortium’s letter to the editor “Debunking 5 arguments against the Penang Transport Master Plan (PTMP)”.

The arguments put forward by SRS Consortium, the project delivery partner (PDP) for the PTMP, continue to turn a blind eye to basic common sense, scientific evidence and statistics.

Questionable population projection is “borderline ludicrous”

SRS’ ‘PTMP’ proposal projected a Penang state population of 2.45 million people by 2030 with over 350,000 people on the three reclaimed islands.

But according to data from the Malaysian Department of Statistics:

• the population of Penang state is only projected to be 1.94 million by the year 2040
• the annual net migration has averaged only around 9,400 people in the past 20 years.
• net migration to Penang was only 1,300 people in 2013.

Therefore, to reach SRS’s projection of 2.45 million people by 2030, Penang would need a massive net-in migration of over 50,000 people every year. In other words, Penang’s net migration would need to grow by over 3700% from 2013 and be maintained at five times the average of the past two decades.

Such massive and sustained increases in migration only generally occur in response to famine, war or internal displacement of people.

In addition, SRS Consortium also projects the population in the three reclaimed islands will grow at around 6,000 to 7,000 people per year. By looking at the annual net migration for the whole Penang state over the past 20 years (9,400 people), this would imply that 75% of all the net migration to Penang state will go to the three islands. Again, is this realistic?

SRS Consortium then attempts to mislead the ordinary reader by arguing that the population density for Penang Island plus the three new islands would be 5,000 people per sq km. This is disingenuous.

What we are questioning is whether it is credible to project a density of 21,636 people per sq km (367,379 people/17 sq km) for the three islands, a density that is higher than Hong Kong (17,000 people per sq km, as quoted by SRS Consortium).

It is important that Penang state government policies be based on evidence and credible data, and not frivolous speculation of the project proponent. What is so interesting in or around the three reclaimed islands to the point that 75% of all migration to Penang would settle in these islands and to the point that 367,379 people would squeeze themselves in these three islands when there are less dense areas available elsewhere in the state?

High costs of the PIL1 highway remains unaddressed, unjustified

Firstly, I accept that the comparison of construction costs of highways and railways is akin to comparing apples and oranges as they have different technical specifications.

Be that as it may, it is generally the case that the cost per km for a railway is more expensive relative to a highway because of the need for additional systems such as power, signalling, tracks and rolling stock.

But questions must be raised in this case, where the cost per km for phase one of the Pan Island Link highway (PIL1) is 56% higher relative to more advanced transport infrastructures such as the KL-Singapore High Speed Rail and around 7.5 times higher relative to the revised price tag of the East Coast Rail Link (ECRL).

SRS Consortium was quick to claim that the high costs of the PIL1 relative to these other infrastructures is due to the need for larger tunnels, complex cable bridge and viaduct systems, and hilly terrain.

But this skirts the most basic question: Are all these complex and expensive engineering solutions really necessary to solve Penang’s transportation woes, especially when cheaper alternatives are readily available?

Expensive PIL1 highway fails to address other bottlenecks in Penang’s road network

To make matters worse, various transport studies have consistently provided clear evidence that new highways, such as the PIL1, will significantly increase the amount of vehicular traffic within urban centres – which will further worsen local traffic congestion and parking problems.

In addition to the “independent studies from local universities and NGOs”, whose work I cited in my previous article, I would also like to remind SRS Consortium that even the consultants who wrote the detailed environmental impact assessment (EIA) for the PIL1 also came to a similar conclusion: they forecasted that traffic congestion would return to Penang within just seven years of PIL1’s operation (see Chapter 8, page 8-79 in the detailed EIA).

This is exactly the reason why the transport consultant Halcrow advised against the Penang Outer Ring Road, the precursor of to the PIL1. The present Chief Minister Chow Kon Yeow himself vehemently objected to that ring road when he was an opposition member of parliament in 2002.

Despite these warnings, SRS Consortium not only continued to push for the PIL1 highway at all costs, but also repeatedly ignored my critical question: what solutions does SRS’ proposed PTMP have in place to resolve the localised traffic congestion and parking limitations that arises after the PIL1 is operational – especially when local urban centres in Penang island are already so land constrained?

LRT ridership projection fallacy

Together with the unrealistic and unjustifiable population projection for Penang, SRS Consortium is shameless in continuing to defend the highly ludicrous LRT ridership projection of 42 million within its first year of operations (or a daily ridership of 115,000) and provided no additional details as to how it arrived at this figure. The metric that SRS presented on the “daily passengers per station” is irrelevant and an obfuscation of the issue.

It is more likely that the SRS arrived at the 42 million ridership via this reasoning: SRS has estimated the annual operating cost of the LRT at RM170m and the average cost per trip at RM4. To break even, annual ridership would have to reach 42 million per year, or a daily ridership of 115,000 (RM170m/RM4 = 42.5 million).

Somehow, SRS Consortium believes that miracles can be achieved where the Penang LRT (with a much smaller population catchment area) is able to achieve a ridership that is about double the KL Sungai Buluh-Kajang (SBK) MRT, at annual ridership of 22.25 million (or a daily ridership of 61,000 at year one).

Another relevant comparison is Rapid Penang’s total ridership which amounted to only 90,000 per day (22% lower than the projected daily LRT ridership, at 115,000) after more than 10 years of operation with 305 buses plying 71 routes throughout the whole state. Does the 42 million ridership forecast for the Penang LRT within its first year of operations not seem ridiculous to SRS Consortium?

While there is no doubt that most governments usually fund the initial operations of public transport systems with a small deficit, the problem for the Penang LRT is the magnitude of deficit that might not be sustainably covered by the state, given the highly inflated ridership projection.

By scaling the ridership numbers down to more sustainable levels of 10 million per year, it is projected that the Penang state will be staring at an annual deficit of at least RM120m, which is 24% of the estimated revenue for the Penang state budget in 2019. The use of excessive financial leverage also threatens the state’s financial health and increases the probability of bankruptcy, requiring a bailout.

40% public transport modal share illusion

No one in Penang (or globally) is campaigning for everyone to use public transport (100% public transport modal share), nor is anyone urging for a complete ban on all privately owned cars from the road.

Rather, what is being campaigned is to place more emphasis on reducing Penang’s car dependence by significantly expanding and improving Penang’s public transport network.

There is an urgency for Penang to increase its public transport modal share from a current low of 5% to catch up with more advanced cities with a 60% public transport modal share (such as New York, Singapore, Seoul, London and Tokyo – which has been constantly quoted by SRS Consortium).

SRS’s main arguments are that (1) it is possible to attain a 40% public transport modal share by 2030, and (2) roads are still needed to cater for the remaining 60% private modal share.

Firstly, there is no roadmap to show how the 40% public transport modal share will be achieved. Instead, all the pointers are that it will not. For a start, phase one of the PTMP (LRT, PIL1 plus the three Zenith paired roads and tunnels) will cost RM24bn, of which RM16 billion would be spent on constructing 70km of highways relative to RM8bn for one 30km LRT line.

Clearly where is the priority given to public transport?

Worse, by making it easier and more convenient for car users to drive to Penang airport in 15 minutes on the PIL1, isn’t this encouraging people to drive rather than to use the LRT to the airport (when the same trip by LRT could take at least four times longer)? Wouldn’t the PIL1 cannibalise the LRT ridership and undermine its financial viability?

Secondly, the repeated argument that more highways are needed to cater to the remaining 60% has since been falsified using the data projections provided in the Halcrow Report. Calculations have showed that the road network in Penang, at its present form is more than sufficient to cater for the 60% car modal share by the year 2030 and beyond, because the total number of cars travelling on Penang’s road network in 2030 will be lower relative to today (due to the car modal share reduction by 36.8%, from a high of 96.8%), even after accounting for population growth.

Is conflict of interest being SRS Consortium’s ultimate motive to bulldoze through the PIL1 and LRT at all costs?

The ignorance of these critical questions, the continued emphasis on the PIL1 highway and the piecemeal thinking (in their recent rebuttal article) clearly shows that SRS Consortium is only interested in bulldozing through the PIL1 highway and LRT at all costs, without holistically considering the unintended consequences and spillover effects to other areas of the transport network.

It again prompts one to ask these critical questions:

• Given that SRS Consortium stands to gain in fees (6% of the total project cost) as a PDP, is this the reason why they are pushing for the most expensive transport options available on the table?
• Is there a serious conflict of interest for SRS Consortium in functioning as a proposer, planner and project delivery partner in the PTMP?
• If SRS Consortium is so confident about its proposed PTMP, why is it not open to an independent review of the PTMP by professional transport bodies such as the World Bank, the Institute for Transportation and Development Policy or the International Association of Public Transport?

Given the lack of capacity and technical advisers (as highlighted in the failure to identify drawing errors for the PIL1 highway), it is not surprising that the Penang state government has become dependent on SRS Consortium. It apparently sees no other option than to go along with these misguided proposals with limited options put forward by its consultants for the PTMP, despite the potentially grave conflicts of interest. It seems that the Penang Chief Minister has been taken for a ride.

Roger Teoh (https://www.imperial.ac.uk/people/roger.teoh15/) is a PhD postgraduate studying at the Centre for Transport Studies, Imperial College London. The opinion of the author is expressed from a neutral standpoint, and he is not a member or affiliate of any political party or NGO in Malaysia.