This article first appeared in The Edge Malaysia Weekly on August 17, 2020 - August 23, 2020

Mega infrastructure projects are not a strange phenomenon in Malaysia. In fact, the entire 22 years of Tun Dr Mahathir Mohamad’s first round of premiership was characterised by the government’s penchant for spending billions of ringgit on state aggrandisement projects.

With the country being run by a powerful federal government despite its national make-up, few state governments could actually propose to undertake huge infrastructure projects. Most mega infrastructure projects in Malaysia have been spearheaded by Putrajaya.

That is why when the Penang government — under the leadership of Lim Guan Eng — proposed a master plan to upgrade the state’s public transport and road network infrastructure in 2012, the public paid attention.

How would Penang, governed by an opposition party, fund such a massive undertaking? The state does not have ample natural resources either, unlike Sabah and Sarawak, whose annual budgets run into billions of ringgit.

The thing that Penang is short of has become one of its most valuable resources — land. Land scarcity and the state’s status as a manufacturing and tourism hub make land prices on Penang island among the highest in the country.

While the state government aims to develop Penang’s transport network over the next decade almost completely independent of federal government funding, its civil society — mostly those under the banner of Penang Forum — is seeing red. That is because the Penang Transport Master Plan (PTMP) has evolved from a modest project of only a few billion ringgit to a mega project that could put some of the most ecologically sensitive areas in the state at risk.

Their vocal opposition to the PTMP has become a thorn in the state government’s flesh. That is because previously, public opposition to massive development projects in Penang had caused the then ruling power of the state to collapse.

To understand the evolution of the PTMP from a modest proposal to a mega infrastructure project, The Edge looks at the chronology of the plan.

In the 12th general election in March 2008, the opposition coalition comprising Parti Keadilan Rakyat (PKR), Parti Islam se-Malaysia (Pas) and the Democratic Action Party (DAP) took control of five state governments, including Penang.

In Penang, DAP replaced Parti Gerakan Rakyat Malaysia (Gerakan) at the helm of the state government. State legislative assemblyman for Air Putih Lim Guan Eng was appointed chief minister.

Penang has been a manufacturing and tourism hub in Malaysia since the 1970s, when the then state government led by Tun Dr Lim Chong Eu charted the industrialisation of the state. The industrialisation plan led to Penang receiving a lot of foreign direct investments and being dubbed the Silicon Island of the East. Once a thriving free port, the state was transformed into an industrial hub producing semiconductors and electrical and electronic products.

The success of Penang’s industrialisation led to an influx of workers from across the country, as well as foreign labour from neighbouring countries. This influx led to high demand for properties and choked the island with traffic.

But, as is the case with the rest of the country, the public transport infrastructure has not kept up with the development of the state. Whether by natural progression or design, road networks have instead expanded to almost every nook and cranny of the peninsula.

So, in 2009, the Penang Transport Council (PTC) — comprising various stakeholders, including non-governmental organisations (NGOs) and state councillors — requested the state government to commission a master plan to address the issue of transport planning in the state over the long term. The terms of reference were then drafted by the PTC and a tender exercise to appoint consultants to conduct studies and draw up a proposal for the state’s transport master plan was conducted in 2010, according to an Oct 16, 2012 Facebook post by Chow Kon Yeow, the current chief minister, who was the then state executive councillor for local government, traffic management and the environment.

In April 2011, the Penang government, together with the Northern Corridor Implementation Agency (NCIA), appointed AJC Planning Consultants Sdn Bhd — in association with Halcrow Consultants Sdn Bhd and Singapore Cruise Centre (SCC) — to conduct a study for a transport master plan. The consultants were given the terms of reference to formulate a transport strategy that would form and deliver “a well developed, sustainable, comprehensive urban transport master plan”, according to Chow’s Facebook post.

The plan had to provide a holistic approach leading to a paradigm shift in accessibility, hence “moving people, not cars” and making roads safe and user-friendly for everyone, especially pedestrians, cyclists, the elderly and the disabled community. It had to move towards a private vehicle to public transport modal split of 40:60 as well.

The plan also needed to ensure the integration of transport systems and development plans by delivering a multi-modal system that integrated the traffic and transport plans of the island and mainland.

However, just as the consultants were being appointed, Penang signed a memorandum of understanding (MoU) with the Beijing Urban Construction Group Co Ltd (BUCG) on April 28, 2011, for the construction of an undersea tunnel and three road expansion packages. The signing of the MoU was witnessed by the then prime minister Datuk Seri Najib Razak and his Chinese counterpart Wen Jiabao. BUCG is the contractor responsible for the construction of the Beijing Olympic Stadium, popularly known as the Bird’s Nest.

The four 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.

“At the time, people were already asking why the state government engaged BUCG when it had already engaged a consultant. So, while the consultants came up with the master plan, other people came up with the tunnel and three highways,” says Anil Netto, a Penang-based social activist.

It is not clear how the MoU came about. The Penang government has always maintained that all contracts are awarded on an open tender basis. It deems a request for proposal (RFP) exercise as a form of open tender.

As the MoU was signed with BUCG, the study by the consultants had to include the tunnel and three highway projects, even before it concluded and presented the master plan, says Anil. In an earlier draft, the Halcrow report stated that the tunnel should only be considered by 2030, he adds.

In October 2012, Halcrow submitted its findings, which included the public transport approach, highway-based strategies, accessibility report and institutional reforms.

According to Chow’s Facebook post, the reports provide a setting for identifying both a future overarching transport strategy for the state and subsequently developing individual proposals that may assist in implementing that future strategy.

Based on the Halcrow report, the public transport strategy included more bus service networks, bus rapid transit, trams and a light rail transit (LRT) system. The strategy also included long- and medium-term planning of setting up hubs and park and ride stations to attract more users to utilise public transport in Penang.

The highway-based strategy included improvements and widening of roads, as well as key projects to elevate congestion and support and complement the public transport strategy.

According to Anil, the Halcrow master plan, which includes the tunnel and three highways, came at a cost of RM27 billion. The cost of the public transport network would cost about RM10 billion while the highways and tunnel were estimated at RM17 billion.

“Why did the state government push ahead with the tunnel and the three highways? Why not give Halcrow a chance to work out the plan?” asks Anil, when contacted by The Edge last Wednesday.

Despite the MoU between the Penang government and BUCG, the state still called for an RFP from local construction companies to bid for the tunnel and three highways project, with a pre-qualification exercise held on Nov 14, 2011.

BUCG partnered with little-known Zenith Construction Sdn Bhd to form a consortium called Consortium Zenith BUCG Sdn Bhd. The company was incorporated on July 5, 2012, and submitted an RFP on Oct 15, 2012.

On Feb 6, 2013, the consortium received a letter of intent (LoI) from the Penang Tender Committee to appoint it as the principal contractor of the four projects. A preliminary agreement was signed between the state government and Consortium Zenith BUCG on Oct 6, 2013.

Subsequent to that, a feasibility study and preliminary detailed design work for the project was carried out by the consortium. It received conditional approval for the environmental impact assessment from the Department of Environment.

According to the tender agreement, the state government will not pay anything to Consortium Zenith BUCG for the four projects. Instead, 110 acres of reclaimed land near Bandar Tanjung Pinang will be allocated to it as payment in lieu of cash.

The consortium is also not allowed to collect any toll on the three highways. Toll equivalent to the rates on the Second Penang Bridge is allowed to be collected for the undersea tunnel during a 30-year concession period.

The Bandar Tanjung Pinang land was part of a land reclamation agreement between E&O Bhd and the state government, which would release parts of the land to the consortium. The land will only be released in stages, beginning with the completion of the feasibility study and final implementation of the project.

In a press conference in March 2013, then Penang chief minister Lim Guan Eng said four bidders had participated in the RFP, including Consortium Zenith BUCG. The consortium won the tender after offering the best deal, which would cost less than RM8 billion.

“BUCG offered the best deal, which would cost less than RM8 billion. The terms were improved after we accepted their proposal and they agreed to a lesser cost, although they asked for 150 acres of land. We said no to that. The other bidders asked for 400 acres, but we didn’t agree to that either,” Lim said during the press conference, as reported by the Malay Mail on March 1, 2013.

However, BUCG exited the consortium in September 2016 after one of the cranes that it used in a development project in Jalan Raja Chulan, Kuala Lumpur, collapsed and killed a woman. Since then, the consortium has been known as Consortium Zenith Construction Sdn Bhd (CZC).

On Aug 14, 2015, the Penang government announced that it had appointed SRS Consortium Sdn Bhd as the project delivery partner (PDP) for the entire PTMP, except for the three highways and tunnel project being undertaken by CZC. SRS Consortium comprises Gamuda Bhd (60% stake), Loh Phoy Yen Holdings Sdn Bhd (20%) and Ideal Property Development Sdn Bhd (20%).

The consortium won the contract against five other bidders in an RFP tender exercise. The other bidders were IJM Corp Bhd, WCT Holdings Bhd, Prasarana Malaysia Bhd, Singapore-based CGC Group Pte Ltd and two Hong Kong-based investors represented by independent strategic adviser Datuk Dr Nik Zamri Majid.

To part finance the PTMP, the PDP will be awarded the reclamation rights of 1,500 acres (607ha) of land. Initially, the land to be reclaimed would be on the Middlebank — a grassy, muddy sandbank in the middle of the Penang channel. However, after a public outcry against the reclamation of an ecologically sensitive area that is home to a variety of marine life, the state backtracked on its plan.

One of those against the reclamation of the Middlebank was the Penang Inshore Fishermen Welfare Association (PIFWA). Claiming to represent almost 10,000 fishermen in the state, its chairman Ilyas Shafie aired the association’s grouses over the plan.

As more and more of the seabed is reclaimed in Penang, fishermen have been faced with smaller catches every day as the reclamation destroys the breeding grounds of fish and other marine life in the coastal waters of the state, said Ilyas.

On Nov 18, 2015, Chow confirmed rumours that areas off the coast of Permatang Damar Laut had been identified for future land reclamation projects to fund the PTMP.

He said the development of the site was expected to have a five-time economic multiplier effect amounting to RM100 billion. The reclaimed land would not only fund the PTMP in phases but also be a catalyst for growth for the state until 2050. “The reclaimed land is expected to house the new Penang International Airport and provide additional space for industries, hence the growth catalyst for Penang,” he added.

But the PTMP kept evolving, with more aspects being added. This caused the estimated costs to balloon beyond the already massive RM27 billion. It is not clear who was the consultant that advised the state government to add more projects onto the master plan.

In December 2016, Gamuda managing director Datuk Lin Yun Ling said he was not aware that the cost of the PTMP had ballooned to RM46 billion, as reported in the media. 

According to the Penang government, the PTMP was derived from the state commissioned Halcrow report, which was produced in 2013. However, the report was only conceptual. 

When the Penang government called for the RFP exercise, it allowed bidders to propose creative solutions in the form of an alternative transport master plan to further complement and enhance the recommendations of the Halcrow report. The bidders’ recommendations also had to be supported by relevant studies and reports.

When SRS entered its bid, it submitted a proposal modelled after the Halcrow report that included an alternative mode of transport (Bayan Lepas LRT) and a highway network (Pan Island Links), supported by feasibility studies and preliminary engineering designs of other transport network lines.

Now, the PTMP consists of seven public transport projects, two highways, two road expansions and the three major roads and tunnel project. There are also provisions for “missing links” projects to complement the entire network.

The cost of the plan to reclaim the land off Permatang Damar Laut — called the Penang South Reclamation (PSR) — had also almost tripled in size. Now, the project calls for the reclamation of 4,100 acres off the southern coast of the island.

The PSR project entails the reclamation of three islands off Gertak Sanggul and Teluk Kumbar on the southern part of Penang island measuring 800 acres, 1,300 acres and 2,000 acres respectively. The plan to reclaim land off the southern coast is opposed by many in Penang’s civil society.

The late Consumer Association of Penang (CAP) president S M Mohamed Idris said in a statement that the fishing communities in the area had raised serious concerns over the proposed reclamation project. He added that previous reclamation projects in the state had affected the fishing communities negatively.

“For example, the fishing communities in Tanjung Tokong and Sungai Gelugor face a significantly smaller catch due to reclamation projects. Fishermen in these areas are not only forced to go further but also to spend more time and expenditure for a catch of sufficient size,” said Idris.

“Based on CAP’s observation, the reclamation projects not only lead to a shrinking fishing zone and destruction of fishing grounds but also sea pollution and sedimentation. Besides declining fish and prawn population, which make up the bulk of the fishermen’s catch, the breeding areas of cockles and mussels are also badly affected, leading to their extinction.”

Idris passed away on May 17, 2019.

Prominent activist and historian Salma Khoo Nasution too spearheaded the public’s opposition to and concerns over the PTMP, especially when it came to the reclamation of the three islands off Permatang Damar Laut, as well as the Pan Island Link highway. She started a Change.org petition against the reclamation of the three islands in May 2019, which has now received more than 115,000 signatures. In the petition, Khoo called for the National Physical Planning Council (NPPC) to reject the PSR.

However, the NPPC gave conditional approval for the PSR on April 18, 2019. Chow, in his capacity as chief minister of Penang, said the NPPC had agreed to the implementation of the project as long as it adhered to the 18 conditions set.

One of the conditions is that consideration be given to the impact the reclamation projects may have on the local community, including 805 fishermen families (a total of 3,140 people), in the context of providing new employment opportunities, relocation and opportunities in the new economy.

“We will adhere to all feedback from the relevant technical departments regarding the implementation of the project in line with Section 2A(2)(b) of the Town and Country Planning Act 1976,” said Chow.

Note that the approval given by the NPPC is not the only one needed. The Penang government is also required to obtain the approval of the Department of Environment in terms of the environmental impact assessment as well as the detailed design of the reclamation project.

Despite the opposition from civil society, the state government pushed for the first highway project to start on Oct 31, 2019. The highway will link the Thean Teik Expressway to the Tun Dr Lim Chong Eu Expressway at a cost of RM851 million.

On July 1 this year, Gamuda announced that the Penang government had entered into a master agreement to confirm the appointment of SRS as the PDP for the master plan. The consortium will be paid a fee of between 5% and 5.75% based on the project cost.

Under the agreement, SRS will deliver various public transport components, including highways. Additionally, it will provide new reclamation sites comprising Islands A, B and C for the PSR project.

Gamuda will provide a funding plan that includes a RM1.3 billion bridging loan to the Penang government for the reclamation of Island A. According to a stock exchange filing, being the PDP, the company will also oversee the creation and formation of Island A under the PSR.

On Aug 13, 2015, Ewein Zenith Sdn Bhd — a joint venture (JV) between Ewein Bhd and Consortium Zenith BUCG (later CZC) — announced that it had entered into an MoU with the consortium to develop three parcels of land measuring 50 acres in Penang.

Ewein Zenith has been granted the sole rights to acquire 50 acres of to-be-reclaimed land at Gurney Drive within a 10-year period for RM2.83 billion. The land will be divided into 10 parcels and be developed over 10 years accordingly.

A wellness resort with facilities such as a mall, apartments, retirement and healthcare residential suites, a business and specialist centre as well as a hotel has been planned for the 50 acres. The development is called City of Dreams.

Although initially met with resistance from the residents in nearby Bandar Tanjung Pinang, the first phase of the City of Dreams project — RM800 million worth of luxury seafront serviced apartments — was developed on a 3.67-acre tract and completed by 2019.

This shows that a portion of the 110 acres to be alienated to CZC as payment in lieu of cash for the three highways and tunnel project had started to be transferred in stages to the consortium.

In August 2018, Ewein deputy chairman and group managing director Datuk Ewe Swee Kheng told The Edge that the group had acquired another 5.5 acres of land from Consortium Zenith BUCG to develop the next phase of its City of Dreams project. Phase 2 of the City of Dreams project will also feature luxury serviced apartments, which will have a gross development value of RM1.2 billion.

Ewe said the group had even signed term sheets with an “international hotel brand” to manage the upcoming property. The concept is based on a format similar to the Marriott Residences Penang and Ascott Kuala Lumpur.

Ewein increased its stake in Ewein Zenith in January and May 2018 from its partner, ending with 89% equity interest in the JV company.

However, on July 1, Ewein said its indirect subsidiary — Ewein Zenith II Sdn Bhd (EZII) — had terminated its JV agreement with CZC for the development of City of Dreams 2. The group first announced the JV on Dec 2, 2019 for the development of a 4.34 acres land. The reason given was that Ewein had not been able to obtain shareholders’ approval to enter into a JV agreement with CZC at an extraordinary general meeting that should have been convened by March 31.

One of the criticisms of the PTMP’s funding model is that the property market has slowed considerably over the last few years, even before the Covid-19 pandemic. While the PSR will only be developed over a course of 30 years (to be completely developed by 2050), there is still scepticism as to whether the islands can actually attract the more than the targeted 440,000 residents.

“The conditions in the property market have changed. Who will live on the three islands? Penang island itself took about 200 years to arrive at the current population of about 800,000,” says Anil.

“If they can’t attract the population, will they need to build and sell high-end properties on the islands? Will these be islands for the wealthy? We already have a glut of high-end properties in the state, so these have not been properly explained.”

With so much opposition to the plan, will the PTMP see the light of day, especially those projects that require funding from the sale of reclaimed land off Permatang Damar Laut?

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