Possible financing schemes include securitisation of future revenue streams and transit-oriented development projects along the route
by PRIYA VASU
THE Penang government’s plan to establish its very own light rail transit (LRT) system could be achieved through public-private partnership and other private financing initiatives.
The state’s LRT project met with resistance when the federal government nixed promised funding of RM2 billion in November due to its own stretched financial position.
Although the absence of federal backing could paralyse the project, Chief Minister Chow Kon Yeow intends to carry out the project by seeking alternative funding under the Penang Transport Master Plan (PTMP), with no details yet to be disclosed on the financing.
Chow’s office did not respond to The Malaysian Reserve (TMR) questions.
Sunway University Business School economist Professor Dr Yeah Kim Leng said the state government will likely resort to private financing, among others.
“The possible financing schemes include securitisation of future LRT revenue streams and transit-oriented development projects along the transportation route,” he told TMR.
Yeah said the Penang government could also explore the possibilities of joint commercial developments with the participation of the private sector, with the state government providing the available land parcels along the route.
He also entertained the idea that the project could also be privatised in a similar manner to the LRT and monorail projects in Kuala Lumpur when they were first implemented, before they were acquired by government vehicle Prasarana Malaysia Bhd.
He added that although public-partnerships are usually risky should the private company fail to deliver on their contractual requirements, the state government has few options but to sell or jointly develop its land assets.
“The Penang government’s current borrowings from the federal government is relatively low since it was pared down several years ago.
“Even if it is financially strong to borrow on its own capacity such as issuing state government bonds, it will still require permission from the federal government.”
To recap, Putrajaya announced on Nov 27 that it had decided not to grant a government guarantee for a US$500 million (RM2.04 billion) loan application to partly finance the RM9.5 billion LRT project.
Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said the decision was based on the revised revenue and income projections for the country, as well as Putrajaya’s focus to revive the ailing economy due to the pandemic.
According to the Penang Economic and Development Report 2019/2020, the state government is estimated to have a smaller budget deficit of RM273.5 million in 2020 compared to RM395.7 million in 2019 — a decrease of 31% that makes it even more viable for the state to seek private funding.
Yeah opined based on the merits of decentralisation and the principle that well-governed states are rewarded with greater financial autonomy, the approval of the federal government is typically not an issue although there may be technical grounds for the refusal such as the need to cap the increase in the federal government’s total liabilities including loan or bond guarantees.
Chow Siew Cheong, a former employee of the Penang City Council, suggested that the state could seek offshore funding to take on the project by calling for open tenders.
“I support an open tender to first invite conceptual plans from international bidders, followed by a Request for Proposal to construct the infrastructure with adequate funding.
“I believe that the rivalry between the bidders in a post-Covid-19 environment will compel them to carry out in-depth research on transit ridership and the probability of some lucrative components of the project to cross-subsidise the loss-making ones,” he told TMR.
He favours an alternative construction of a coastal causeway from Gurney Drive to Bayan Lepas, which can accommodate a rail transit system, a tidal flood barrier, green energy generation systems (tide, wind or solar) and telecommunication relay stations (especially 5G).
He said a causeway could also house stations/berths for airlander and catamaran services, impounding reservoirs and desalination plants, seagrass farms, ponds for fish farms and a waterborne golf driving range, as well as land reclamation straddling both sides of the causeway to spawn sites for resettlement of impacted communities (including fisherfolk) and future mixed development.
The proposed 22km George Town-Bayan Lepas route will be the first LRT line in Penang as part of its PTMP plan. The route was finalised with 27 stations.
Gamuda Bhd, Ideal Property Development Sdn Bhd and Loh Phoy Yen Holdings Sdn Bhd jointly formed SRS Consortium as the PTMP project delivery partner in 2015.
Earlier in June, the federal government also cancelled the proposed Penang Hill cable car project after Perikatan Nasional took over.