by Richard Teo
History has an uncanny way of repeating itself. During Mahathir’s tenure as PM the construction of the North-South Expressway in 1984 was awarded to UEM (owned and controlled by UMNO) on the basis of a design-build-finance and operate concept.
Although the lowest tender bid was $3.2 billion, UEM was awarded the contract. Prior to completion,construction costs escalated to a phenomenal $6 billion. The escalated cost which normally would be borne by the turnkey contractor was underwritten by a govt soft loan.
This effectively meant that a competitive bid for a project which would cost $3.2 billion ended costing $6 billion. Presumably,the toll collection period had to be extended from an initial 15 years to 30 years to accomodate the doubling of the project cost.
The burden for the extra cost was shifted to the road users who now have to content and endure the paying of road toll for an extra 15 years (1988-2018). Later, in exchange for changing the increase in toll rate from every year to every three years, the concession period was further extended for another 12 years(2018-2030).
Had the contract awarded to the lowest bid at $3.2 billion was accepted, the govt would have saved $2.8 billion (or a shorter toll collection peiod of 15 years).
However, with its questionable practice of awarding the contract to a dubious company closely associated wih the ruling UMNO party, the ordinary citizen is bogged down with an additional period of 27 years to pay for the usage of the North-South Expressway.
Come 2007 and the cycle is about to repeat itself again with the award for the construction of the Penang second bridge. There was no tender for the project and it was speculated the bridge would cost RM2.3 billion. However, even before it got started, NST June 24th reported that the bridge would now cost RM3 billion.
On 11th July, the star reported that Malaysia would secure a loan of RM1.7 billion (US$500 million) from China for the construction of the Penang second bridge. This latest revelation demands some explanation.
Is the total loan of RM1.7 billion from the Exim bank of China represent the actual total cost of the second bridge? If it is then why was it touted by the govt that the bridge would cost RM3 billion?
Or like the NSE Expressway, the additional RM1.3 billion would eventually be structured as escalated cost to be indemnified to UEM?
When the RM1.3 billion is added to the actual cost of RM1.7 billion, the total cost of RM3 billion will be factored in as the total construction cost for the Penang second bridge. This RM3 billion will be the benchmark for determining the toll collection period extended to the concessionaire.
It was reported in the media that UEM would soon be signing a joint venture agreement with China Harbour Engineering Company (CHEC) to build the second Penang bridge. For the sake of transparency and accountability it is incumbent upon the the govt to fully disclose the nature and substance of the joint-venture agreement between the two parties so as to ensure that the Malaysian public is fully aware of the total construction cost of the second bridge.
The disclosure of the actual cost is of paramount importance because it will determine the toll collection period that will be extended to the toll concessionaire. An artificial and inflated cost would only mean extending the toll collection period to an unreasonable time frame and consequently will cause additonal financial hardship to users of the second bridge.