Monday, December 20, 2010

How will the MRT be funded?

Datuk Seri Najib Abdul Razak must disclose how the MRT will be financed and why the project is expected to commence before even the urban public transportation plan is ready

We welcome the Prime Minister’s announcement on Saturday which announced that Malaysia’s largest ever infrastructure project, the Mass Rapid Transit (MRT) system, will be tendered openly via 9 project parcels. This is after strong criticisms against the Prime Minister’s initial proposals and admission in October that “there are some contracts that you just cannot tender out”.

The announcement also indicated that the Government will own and finance the project in its entirety. However this raises further questions on how the Government, via Syarikat Prasarana Negara Bhd will be able to bear the entire cost of the project, estimated at RM36 billion before taking into account land costs of an additional RM10 billion.

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.

The Prime Minister must come clean with the entire funding process as it will not only affect the Government’s financial position, it will also affect finally the fees to be charged for the MRT commuters when it is ready for use. While Malaysians, particularly those who reside in the Klang Valley look forward to better public transport facilities, they must be made available at an affordable basis without at the same time, become an 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 5 times less than the proposed MRT system.

What is perhaps most worrying is the fact that the Government is rushing headlong into the project without the newly minted Land Public Transport Commission (SPAD) first coming out with the 20-year urban public transport plan for Klang Valley, which is only expected in September next year. The Cabinet has however decided to award the relevant contracts and commence construction works for the MRT in July 2011, even before the holistic public transport plan, which will include buses and other rail systems is finalised!

In fact, SPAD is still unable to declare, as of today, backed by a thorough and professional study that the MRT is the best option for the Klang Valley in the near future, as opposed to cheaper alternatives like buses or even trams based on travel patterns and population statistics.

It is highly misleading for the Prime Minister to espouse the viability of the project by claiming that it will generate gross national income of up to RM4 billion per annum when the interest servicing cost for the project at completion may in itself come up to more than RM2 billion each year.

We call upon the Government 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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