Monday, January 03, 2011

How much is Gamuda-MMC paid to be MRT's PDP?

SPAD must lead the way in the Government Transformation Plan's (GTP) call to ensure “Performance Now” through transparency and accountability

The speedy response by the Land Public Transportation Commission (SPAD) to questions and criticisms with regards to the proposed RM47 billion MRT project on the 23 Dec last month is indeed praise-worthy and should be emulated by all other government agencies and departments which typically oblivious, intentionally or otherwise, to criticisms.

In the press conference, SPAD CEO, Mohd Nur Ismal Kamal stressed that the project delivery partner (PDP), MMC-Gamuda Joint Venture Sdn Bhd, would bear any cost over-runs to deflect concerns that the Government may be forced to bail out the contractors in the event of project failure.

On criticisms that the Government is commencing the MRT project before the Klang Valley Urban Public Transport Plan is ready, he argued that “the Bus Rapid Transit (system) is not practical as the main (transport) solution here in the city,” pointing out that the BRT required multiple-lane highways. He added that “we put out this rail plan first because rail is the backbone.”

The response by SPAD however, raises more questions than answers on Malaysia's largest ever infrastructure project, and possibly the riskiest ever due to its sheer size and scale.

Firstly, it is interesting to note that while MMC-Gamuda Joint Venture's is limited as the “project delivery partner”, it has to bear all cost over-runs of the contractors to be appointed by the Government for the RM36 billion project. To say that it is a heavy burden placed on the PDP would perhaps be a severe understatement. We call upon SPAD to disclose in full the terms of the arrangement with the PDP, including the fees being paid to MMC-Gamuda as the PDP.

Malaysians cannot be blamed for doubting the credibility of the Malaysian government as history has shown the complete lack of political will for the Government to take action against failing contractors despite clear legal provisions. For example, the government bore the cost to complete the MATRADE building where the cost of construction increased from RM167 million to RM287 million after nearly 10 years of delay in 2006. At the same time, the Government had to bear RM70 million of repair costs to the RM238 million Middle-Ring Road 2, while the contractors got away scot free.

Secondly, SPAD has indeed put the cart before the horse by proceeding with MRT project before the Urban Public Transport Plan is ready in September this year. While Nur Ismal claimed that the use of buses will be insufficient and ineffective is at best an intelligent guess for clearly a detailed study on routes, population density and growth, most efficient public transport mix has not been done or completed. I welcome SPAD to prove me wrong by publishing the full public transport requirement study which has taken into account the above, other than the MRT proposal submitted by the Gamuda-MMC joint venture.
Finally, SPAD has altogether avoided the question which I had posed earlier on how the RM47 billion MRT system will be made available at an affordable basis – what is the proposed fare structure? - without at the same time, become a long-term unsustainable burden for the tax-payers. For example, last year’s audit report on Prasarana showed that the current average LRT fare of RM1.60 has to be increased to nearly RM9 for the LRT infrastructural costs to be fully recouped within the next 20 years despite the LRTs costing the Federal Government less than RM8 billion, nearly 6 times less than the proposed MRT system. Are we going to take two centuries to pay for the RM47 billion MRT project?

As of today, Prasarana is already heavily indebted with RM8.5 billion in bonds which it is unable even to service its interest. This has been heavily criticised by the Auditor-General’s report in 2009 for making accumulated losses of RM840 million as of December 2007, in part due to suspicious activities and mismanagement. In the 2011 budget, the Government had to allocate RM2.5 billion of funds to bailout Prasarana-issued bonds which are due in November 2011.

We call upon SPAD to be completely transparent with the entire plan, design and financial impact of the MRT project to convince the rakyat that the MRT routes are optimised based on maximum public benefit, but also that it will not become an unsustainable project which will leave our future tax-payers with billions in debt.
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