Tuesday, January 31, 2012

West Coast Expressway: 134% Increase in Cost?!


The Prime Minister must justify how the cost of the West Coast Expressway (WCE) increased by 134% from RM3.015 billion to RM7.07 billion while its concession period also nearly doubled extended from 33 to 60 years

In Kumpulan Europlus (KEURO) Bhd’s announcement made to Bursa Malaysia on 25 May 2007, “the Board of Directors of KEURO wishes to announce that Konsortium LPB Sdn Bhd (“KLPB”), a subsidiary of the Company has on 25 May, 2007 entered into a Concession Agreement (“CA”) with Government of Malaysia for the construction of 215.8 KM West Coast Expressway (“WCE”) which will connect North South Expressway at Taiping in the North and to Banting in the South leading to Kuala Lumpur International Airport.”

The announcement further added that “the total Development Cost of WCE is RM3.015 billion”.

Hence it has come as a complete shock that after more than 4 years of delays and renegotiation between KEURO and the Federal government, the Development Cost of WCE has increased by 134.5% to RM7.07 billion as announced by the company last week.  Even more staggering was the fact that the concession period has been extended from 33 to 60 years.

The increase in cost and extension of the concession period comes together with new additional benefits where the Government will grant WCE a RM2.24 billion soft loan at 4% interest and an interest subsidy, of up to 3% from commercial loans for a period of 22 years.  As per the original concession term, the land acquisition cost amounting to RM980 million will also be borne by the Government.

One of the possible contributory reasons to the sharp increase in cost could be the extension in length of the highway from 216km announced in 2007 to 316km in 2012, an increase of 100km.   While the 100km or 46% increase in length cannot fully justify a 134% increase in cost, the more perplexing question is perhaps, how did the expressway suddenly increase by 100km between the townships of Taiping and Banting?

The BN Federal Government needs major improvements in negotiating its mega-project contracts.  Last month in December, it was announced by Boustead Naval Shipyard that they have received a letter of award from the Ministry of Defence to construct 6 second generation patrol vessels (SGPVs) for the amount of RM9 billion.  This was despite the fact that the Minister of Defence had himself stated in Parliament that the ceiling cost for the ships would be RM6 billion just 9 months before in March last year.

It seems that the more the Government negotiates, the higher the contract value and the more favourable the contract terms will be for the contracting business entities.

The Prime Minister must explain the above glaring discrepancies to demonstrate that he is truly transparent and accountable to the public.  Najib has embarked on a Government and Economic Transformation agenda since ascending the premiership nearly 3 years ago and yet today, Malaysians are still witnessing unbelievably lucrative concessions being awarded to the politically-connected and cronies of BN politicians.

Najib has also reneged on his promise to be a “people first” government.  The above highway privatisation deal not only uses tax-payer’s funds to provide financing for its construction, the same tax-payers and their grandchildren will have to pay for the next 60 years for the use the expressway.  This deal proves that no “transformation” has taken place, and the financial interest of political cronies outweighs the needs of the ordinary Malaysians.
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