Understanding The Penang Undersea Tunnel Project

In early August 2020, a series of headlines in Malaysia’s major newspaper received national attention which stated that the former finance minister Lim Guan Eng was arrested by MACC on corruption charges linked to the RM6.3 billion Penang undersea tunnel project. Lim, who had served as the Penang chief minister from 2008 to 2018, was charged under Section 16(a)(A) and Section 23 of the MACC Act 2009 and Section 403 of the Penal Code. He pleaded not guilty to all charges.

Date

7th August 2020

10th August 2020

11th September 2020 Offences

Section 16(a)(A) of the Malaysian Anti-Corruption Commission Act 2009, punishable under Section 24(1) of the same Act.

Section 23(1) of the Malaysian Anti-Corruption Commission Act 2009, punishable under Section 24(1) of the same Act.

Section 403 of the Penal Code Charges

Requesting 10% of the profits from the undersea tunnel project from Consortium Zenith Construction Sdn Bhd senior executive director Datuk Zarul Ahmad Mohd Zulkifli, as a bribe in order to get the contract for the project.

Using his position as the then Penang chief minister to obtain RM3.3 million gratification as an inducement for helping Datuk Zarul Ahmad Zulkifli’s company to secure the RM6.3 billion undersea tunnel project.

Causing the Penang Land Registrar to dispose the first state land – PT Lot 702 in Bandar Tanjong Pinang, worth RM135,086 million to Ewein Zenith Sdn Bhd.

11th September 2020 Section 403 of the Penal Code Causing the state land registrar to dispose another plot of state land at PT Lot 10012 in Bandar Tanjong Pinang, worth RM73,668 million to Zenith Urban Development Sdn Bhd.

What is the Undersea Tunnel project about?

The RM6.3 billion project consists of four components, including three toll-free roads on the island and a tolled tunnel. The 7.2km undersea tunnel will connect George Town on Penang Island to Butterworth on the mainland and the three main highways comprising the 10.53km Tanjung Bungah-Teluk Bahang paired road, 5.7km Air Itam-Tun Dr Lim Chong Eu Expressway and 4.1km Gurney Drive-Tun Dr Lim Chong Eu Expressway paired roads.

Was there an open competitive tender?

The tender process began in November 2011. Sixty companies, including 43 local and 17 international firms took part in the pre-qualification briefing, but eventually, only eight were invited for the Request for Proposal (RFP). The bid was won by Consortium Zenith BUCG, a special purpose vehicle (SPV) made up of a Malaysian-Chinese joint venture company.

Penang DAP has defended the project saying it was carried out through an open tender procedure in line with the state government’s CAT principle of competency, accountability and transparency but some have argued that the RFP used to award the tunnel project was not an open tender.

Open Tender

Price is the primary consideration. The project will be awarded to the lowest-cost provider, without contract negotiations. Request for Proposal (RFP)

Price is not the only consideration where other factors will also be considered. The project will be awarded to the ‘winner’ based on the preference of the party that calls the bids.

Procedure:

- Allows public to submit a tender for a job that blueprints will be fully laid down by the party calling the tender.

- Interested parties will be required to give a time frame for completion of job and quote their price for the job.

- Have clear and objective evaluation criteria for the selection of bids. Procedure:

- Request interested parties to send in their proposals for a job which has no blueprints have been laid down.

- Interested parties will need to prepare their own blueprints and quote their price for the job.

- No standard criteria are set for the selection of RFP bids.

How will the three major road and tunnel projects be financed?

The total cost for this project is RM6.3 billion. The feasibility study and detailed design (FSDD) component will cost RM305 million, while the land acquisition will cost RM546 million and the balance of RM5.49 billion will be spent on construction.

According to the preliminary agreement, the state will hand two plots of land in Sri Tanjung Pinang (STP1) to the SPV in exchange for the FSDD (Part 1) while another 110 acres of land in STP2 will be handed over in for the construction and toll collection component (Part 2). Both STP1 and STP2 are reclaimed land in the northern parts of Penang Island.

The state government will grant the company the right to the concession to operate, maintain and manage (including toll collection) in relation to the undersea tunnel for an initial period to be determined in the final agreement, but which in any event shall not be less than 30 years.

FSDD: RM305 million

(a) Three major roads Feasibility study cost: RM31.269 million Detailed design cost: RM177.485 million *Lot 713 - Not yet develop

Total: RM208.754 million

(b) Undersea tunnel project Feasibility study cost: RM20 million Detailed design cost: RM76.248 million Part 1: FSDD

(a) Payment was made via land swap - 2 plots at STP1 = RM208 million

*Lot 702 - City of Dreams (Project worth RM8000 mil) Total RM96.248 million

(b) According to Penang government, no payment has made for FSDD as the studies have not completed.

Land Acquisition: RM546 million

Construction: RM5.49 billion Part 2: Land acquisition and construction

Payment will be made via land swap (110 acres in STP2) and undersea tunnel’s 30 year toll concession

Did the state government pay any fees for the Undersea Tunnel?

The Penang government claimed that it never paid anything to Consortium Zenith Construction (CZC) Sdn Bhd, whether by cash or land, for the feasibility study of the Penang Undersea Tunnel project because the feasibility studies have yet to be completed. However, according to Consortium Zenith’s chairman Datuk Zarul Ahmad Zulkifli in an interview with The Edge Financial Daily, the company has been granted some nine acres of land (3.64ha) on Seri Tanjung Pinang 1 (STP1), worth RM305 million, by the Penang government to finance the cost of the initial FSDD works in the RM6.3 billion Penang undersea tunnel project.

Does Penang really need an Undersea Tunnel?

Many NGO’s and experts on traffic and transportation have reiterated the fact that the RM6.3 billion Undersea Tunnel is not going to help solve the island’s traffic problems. The tunnel would only bring in more vehicles especially to those already congested areas, such as Tanjung Tokong, Tanjung Bungah, Batu Ferringhi, Pulau Tikus and Gurney Drive.

How can you support us?

Gerakan has launched a petition in July 2020 to protest the state’s action dealing with the Undersea Tunnel project. There are many things about the project left unanswered and the people have every right to know the truth. We hope you will stand with us and support our petition to demand the truth from Penang government.

Sign the online petition: http://chng.it/WgdTcddp Scan to support: