SRS Consortium rebuts ‘double dipping’ claim in Penang South Reclamation deal, insists state to benefit from man-made islands

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SRC Consortium has defended the controversial reclamation project despite an outcry from residents, including fishermen (seen protesting the project in this picture). — Picture by Sayuti Zainudin
SRC Consortium has defended the controversial reclamation project despite an outcry from residents, including fishermen (seen protesting the project in this picture). — Picture by Sayuti Zainudin

KUALA LUMPUR, May 22 — SRS Consortium today reiterated its confidence that the ambitious Penang South Reclamation (PSR) project will ultimately deliver more benefits to the state government and its residents, amid continued scepticism.

In a statement replying to a former Penang island town councillor Lim Mah Hui, SRS Consortium—the delivery partner for the mega infrastructure project—said the PSR which will see the development of three man-made islands to form the Penang South Islands (PSI) will create hundreds of thousands of jobs and generate high income for a long term future.

It also reiterated the safeguards placed by the state government on the companies contracted to develop the project to ensure its success.

“In this 70-30 joint venture arrangement, the state insisted on an enterprise, not only with a strong enough balance sheet to fully shoulder the funding liability of RM4 billion to deliver Island A, but also with the requisite track record of delivery of large infrastructure projects, on time and on budget, all the time. Furthermore, the same enterprise is also responsible for delivering Phase 1 of the reclamation.

“This will ensure that the project gets delivered and Penang benefits from the ensuing FDI (Foreign Direct Investment), estimated at over RM70 billion and the ensuing GDP contribution and job creation is estimated to be RM100 billion and more than 300,000 jobs respectively where at least half are knowledge and highly skilled jobs, over a 30-year development time-frame for the 3 PSI islands.

“And to ensure the delivery of the lands is done on the most cost-efficient basis, the state had also insisted on the appointment of an independent checking engineer (ICE), to oversee that cost estimates and work programmes are reasonable, fair and equitable. Thus, there is clearly no double dipping or leveraging off the state in any way,” SRS Consortium said.

The consortium was responding to assertions by Lim that it and construction giant Gamuda Bhd would reap greater profit from the project over the next decade compared to any benefit to the Penang government and its people.

Lim who is also a steering committee member of civil society Penang Forum had claimed that the state government would only gain RM600 million while Gamuda Engineering, a unit of Gamuda Bhd, will derive great profit from the reclamation works for the construction of the three artificial islands. He further claimed the company would win by “double dipping” in the profits.

“In reference to Lim Mah Hui’s article on 17 May 2021; the reality is anyone can selectively pick and choose excerpts from a request for proposal (RFP) document, take them out of context and spin a narrative.

“For example, he chose not to mention that for both the Penang Transport Master Plan (PTMP) and the Penang South Islands (PSI) reclamation projects, it is the State who is the Asset Owner; and as Asset Owner, it has to ‘take into consideration the need to adequately fund the PTMP and reclamation costs’ and ‘consider the matching of supply of these lands to balance with demand from the market’ (Chapter 4, page 3).

“This statement clearly highlights that under the Project Delivery Partner (PDP) model of the RFP, the State is indeed the ultimate funder of both the PTMP and the PSI projects, and apart from assuming all the financing risks, it also has to contend with the full assumption of market risks in selling reclaimed land real estate,” SRS Consortium said.

SRS Consortium and Gamuda are also the delivery partners for the RM46 billion Penang Transport Master Plan (PTMP) project.

For the PSR project, a 30:70 share joint venture company will be created between state government-linked company Penang Infrastructure Corp Sdn Bhd (PICSB) and SRS Consortium.

In today’s statement, SRS Consortium also said the request for proposal issued by the Penang government in August 2014, was done based on the Halcrow study that was conducted in 2013, where it had only estimated the PTMP at RM27 billion.

It added that at that time, the PTMP was only looking at a short term demand up to the year 2030.

SRS Consortium said this was why it had submitted its “alternative” Transport Master Plan for the longer term, until the year 2050.

“Upon appointment of SRS as PDP, the State with KPMG as their consultant was still the final arbiter and decision maker, and any decision it makes with respect to accepting the RFP’s proposed strategies (in part or in whole), is its prerogative alone,’’ said the statement.

“The [Penang] State then included additional public transport infrastructure in Seberang Perai and the ‘Three Major Roads and Third Link’ project into the final PTMP thus the final amount of RM 46 billion.

“As such it is clear that the PTMP transport components and the PSI are mutually exclusive components and not inextricably linked, as it is obvious the ‘Three Major Roads and Third Link’ have a separate source of funding and not via PSI,’’ said the statement.

SRS also stressed that one of the three artificial islands in the PSI, dubbed Island A, will become a pivotal addition and extension to Penang’s current electrical and electronics hub in Bayan Lepas and subsequently attract investment and create highly skilled jobs for the people of the state.

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