A Bridge Too Far

Hakim Joe 

In July 2007, the Second Penang Bridge was first estimated to cost RM2.8 billion to build. Four months later in November, this estimate was revised to RM3.0 billion. Yet another two months after that, the new estimates came to a whooping RM4 billion. Finally, in April 2008, the government of Malaysia announced that the real cost to build Penang’s third link is RM4.3 billion. That’s a 53.6% increase from the original estimates in a matter of nine months.

Will the final cost exceed RM4.3 billion? Bet on it.

Penang’s Second Bridge was first conceived when AAB became the Malaysian PM but it was not until August 2006 that the federal government unveiled the plans to build in under the 9th Malaysian Plan (2006 – 2010) and Northern Corridor Economic Region (NCER) planning. Initially this included the RM1.6 billion, 37km Penang Monorail but plans were shelved indefinitely after a mid-term review of the 9MP.

On November the 12th, 2006, the 5th Malaysian PM conducted the ground breaking ceremony. The UEM Group (owned by Umno) was “awarded” the contract to build this span through a “Private Finance Initiative” (whatever it means), and to manage, operate and maintain it thereafter. Incidentally, UEM is also the concession holder for the present bridge link to the mainland built in 1985.

Was there an open tender held for this construction? Of course not. It also does not matter that UEM is Umno-owned as AAB said, “UEM is a company which has extensive expertise and experience in the matter”, nor that AAB was the Umno Chief then. The official reasoning for the award was to prevent the “cannibalisation of the first bridge” and to avoid competition that would “menjejaskan daya maju jambatan yang pertama”. What does it mean? It means that the toll charges for both bridges will be controlled by UEM. Try RM9.70 (as proposed by UEM) per trip. Events have since overtaken this when AAB was “toppled” by his own friends. UEM might not after all be awarded the concession for toll collections, if one can believe what the mainstream media is espousing. Remember who owns UEM?

First the construction was awarded to an Umno-owned company. To rub salt into the wounds of all non-Malays, Second Finance Minister Tan Sri Nor Mohamed Yakcop said that the government of Malaysia wanted to fast track the construction of the Second Penang Bridge “to ensure that it benefits bumiputera entrepreneurs in Penang” and that the government will ascertain that “the Malay entrepreneurs enjoy the spill over effects of this project”. The distinction between 1st class and 2nd class citizens suddenly emerges forth.

Let’s go back to the “Private Finance Initiative” as stated above. This actually means that the government will not be paying for the construction of the bridge and that UEM will be solely responsible for the financing part. Isn’t this the same scenario where PKA was supposed to fund the construction of PKFZ without government aid? Deja vu, man!

As with the PKFZ fiasco where Tiong King Sing and his company Kuala Dimensi Sdn Bhd featured so eminently, here we “had” Patrick Lim and the Equine Group. “Had” as in the past tense because AAB is no longer the Malaysian PM and therefore no longer calling the shots. How prominently will the Equine Group feature now? Let’s look at it this way.

Equine Capital Berhad (ECB) had acquired (I did not say purchased) a large tract of land around the second bridge area one full year before the government announced the 2nd Penang Bridge Project. Coincidental or merely having a good fung-shui teacher? Anyway, the boss of ECB, one Mr Patrick Lim Soo Kit just so happens to be a good family friend of AAB (and SIL), so good a friend of the 5th Malaysian PM that the 4th Malaysian PM calls him “Patrick Badawi”, not Patick Lim.

Additionally, how did Fung Yik Fai (CEO of ECB) feature in this? You see, Fung came from old megabucks (his daddy owned YK Fung Securities Sdn Bhd in Ipoh – now known as OSK Securities Berhad) and was working in his daddy’s firm as Operations Manager (1988 – 1993) before becoming a remisier. In 2001, he joined the ECB Group as the IT and Admin Manager. In 2004, he became the CEO – meteoric rise, one would say. Not bad for an old Michaelian (St. Michael’s Institution old boy) who quit his family business to venture out on his own (if you believe it).

Anyway, that is all under the water as the 6th Malaysian PM is now in charge of all proceedings. Former Terengganu MB, Idris Jusoh must be well pleased with the outcome of it all. Ironically, he is no longer the Terengganu MB to enjoy it.

So, how much does it really cost to construct the 2nd Penang Bridge? Back in January 2008, someone from inside the “Establishment” leaked some information out stating that the entire job will soon be subcontracted to a consortium of Mainland Chinese construction companies. The cost of subcontracting this job out? USD650 million or RM2.4 billion. Now, use your brains and do the maths – RM4.3 billion take away RM2.4 billion equals RM1.9 billion. And who owns UEM?

So, is a profit of RM1.9 billion sufficient? Evidently, it isn’t. The RM4.3 billion approved budget does not include certain things. The preliminary estimate of land acquisition in 2007 is approximately RM110 million. What is it now? There was never any mention of compensation to the fish and cockle breeders affected by this project, but there is such a compensation scheme – a RM110 million scheme, that is. There is also the “Project Development Costs” that has yet to be finalized. The figure mentioned in 2007/2008 was RM285 million and nobody seems to know what these “developments” are or how much the final bill will be.

From the above, there is already an additional (minimum of) RM505 million that was never accounted for. Add that in and the RM4.3 billion has already inflated to RM4.8 billion discounting the VO (Variation Orders) claims that will be omnipresent in all Malaysian government projects.

Let us make some comparisons here. The Jiaxing-Ningbo 6-lane, 36km (27km over sea) bridge in China cost RMB11.8 billion to build (RM5.3 billion) at RM147 million per km. The 4-lane, 24km (17km over sea) 2nd Penang Bridge will cost RM4.8 billion to erect (at RM200 million per km). How is it that a 6-lane bridge is comparatively far cheaper to construct than a 4-lane bridge? Perhaps the Chinese were building bicycle lanes instead of automobile lanes.

Anyway, let’s get back to the project. The “leak” took on new perspective when it was announced that the Bridge will be built by a JV company between UEM and China Harbour Engineering Co. Ltd. (CHEC). Initial estimates were for the project to be completed in 2011. Right after the Political Tsunami where DAP trounced PGRM and formed the Penang State Government, the federal government suddenly announced that the project will be delayed by 9 months due to land acquisition and design issues. Coincidence? Yeah, sure…

Then came the announcement that the two viewing platforms will not be built to cut cost – cutting the balls off, one might say, but yet the final cost of construction did not come down. In fact it went up. On July 2nd, UEM officials said that the final cost might be as high as RM4.58 billion, or even more, citing the spike in raw materials costs. What spike? As far as commodity prices are concerned, the price of crude oil has fallen from USD74.43 per barrel in July 2007 (3rd week) to USD59.99 per barrel in July 2009 (3rd week), and the price of carbon steel (steel wire rod) has fallen from USD540 per MT in July 2007 to USD515 per MT in July 2009 (when the announcement was made) and average cement prices fell from USD105 per MT in 2007 to USD77.40 per MT in 2009.

Okay, where did the funds to construct the Bridge came from? China. Not only are they providing the funds of USD800 million to finance this construction, they are also providing the knowledge, the technical know how and the labour force. BTW USD800 million equates RM2.96 billion. If UEM did not come into the project with any money and if the final cost could be as high as RM4.58 billion, where did the RM1.62 billion mineralize from? Could it be that the subcontract cost (hence the REAL cost) is only RM2.96 billion? (Since China is said to be FULLY financing this Bridge?) What a laugh and if it wasn’t ultimately costing the taxpayers, it’ll be [beep] hilarious!

Okay, let’s look at the additional RM285 million that UEM is trying to claim, the so-called “Project Development Costs”. Early this year, UEM told the media that the RM285 million was for design, concept and preliminary work. However, industry sources begged to differ as the design and concept of the span was allegedly developed by China Harbour Engineering Company and not UEM.

The chapter with regards to the final cost of building the 2nd Penang Bridge will not be closed until this amount is revealed to the Malaysian pubic. Once again, will the final cost exceed RM4.3 billion? Bet (your life) on it.