Will it bankrupt Penang?
We do not have a clear idea of how much each part of the project will cost in terms of construction, much less the annual cost of operating and maintaining the proposed roads and public transport systems. RM46bn is such an astronomical figure it is hard to comprehend, but it’s equal to RM100,000 for every household and if RM46bn was stacked in a pile of RM100 notes it would be 6 times higher than Mount Everest, and outside the stratosphere! Literally astronomical.
These numbers are too vast for us to comprehend. So let us focus on the more immediate planned expenditure for the construction of the Pan Island Link (PIL 1) costing RM6.1 billion and an LRT line from George Town to the airport at a cost of RM6.3 billion, while Zenith BUCG are proposing to build the 3 roads between now and 2021. Have detailed studies been done for each and every project proposed? We must know in advance what kind of financial situation we are getting into before deciding on a project. A major reason for the financial failure of the KL LRT and monorail projects is the poor or inaccurate information given to the government, preventing it from making the correct decisions.
The Ampang LRT projected a daily ridership of 170,000 when it opened in 1996, but only achieved this by 2014, 18 years later than projected!
The Kelana Jaya LRT projected a daily ridership of 360,000, but after 18 years in operation is yet to reach 225,000!
The KL monorail projected 86,000 daily riders in 2002, achieved 75,000 by 2015, 12 years and it is still to reach its original ridership projection!
In KL both LRT companies ran into financial difficulties and could not service their debt. The federal government had to issue RM4.5 billion in bonds for the debts of these two companies while the KL Monorail was provided with a RM300 million soft loan. In November 2001, the Ministry of Finance purchased the outstanding debts of the two LRT companies totalling RM5.5 billion via another bond issue.
Kuala Lumpur has the Federal government as sugar daddy. But Penang state will have no such luck. Each and every Penangite will have to bear this financial burden!
We are told the stand-alone LRT line from Komtar to the airport will carry 116,000 a day in its first year of operation!
The Kuala Lumpur experience on the vast gap between actual and projected ridership is instructive. The average actual ridership for the three lines is just 18% of their projected number.
On the basis of three financial scenarios (based only on farebox revenue) with different ridership projections – 12.5 million (based on KL's experience), 25 million (based on PPHPD figures) and the SRS projection of 42.3 million (116,000 per day) it is projected that the Bayan Lepas LRT will be operating at a loss of between RM23 million and RM126 million every year! Putting these deficits into perspective, Penang state’s budgeted revenue in 2016 is RM700 million.
The state has said that it expects to make up the difference from advertising and property related businesses and points to Japan as an example. However, the Japanese experience is not easily replicable for historical and cultural reasons. Again, it is more relevant to look at Prasarana’s experience where its non-farebox revenue is only 15% of total revenue after 15 years of operation!
Putting these deficits into perspective, Penang state’s budgeted revenue in 2016 is RM700 million. Assuming the revenue doubles by 2023, RM126 million deficit on this one LRT line is about 10% of the state budget. What about the financial costs of all the other LRT, monorail, tram, BRT and highways?
Why is the state not presented with the financial projections and options of the different alternative modes of public transport – LRT, monorail, tram and BRT?
Why is SRS proposing and the state agreeing to an LRT system that not only is more expensive to build but costs two to three times more to operate and maintain?
Is the state able to afford to such high deficits from these projects? Will they impair the financial stability of the state?
What if the state is unable to finance the deficit and no financial help is available from the federal government? Will the project be stopped? Who will bail out the projects?
Penang could end up like Putrajaya or Jakarta if it is not careful.
The Putrajaya Monorail is an incomplete monorail system. Putrajaya was originally set to have a modern tram system, and construction of tunnels was ongoing, when plans were changed, and a SCOMI monorail plan was selected with two lines; Line 1, a 12 km monorail route with 17 stations and Line 2, a 6 km monorail route with 6 stations. These structures have been abandoned for 12 years, construction was halted in 2004. It is now revisiting plans for a modern tram. More recently, SPAD has commissioned a study to develop modern tramways in KL and Putrajaya.
Penang should learn from, and not repeat, Jakarta’s ‘Big Bang’ experience. It launched too many mega transport projects at one time – building highways, monorail, and waterways at the same time, only to see some of them running into difficulties, delayed or abandoned. Jakarta started its monorail construction in 2004, ran into trouble, aborted it in 2008, resumed in 2013 and finally abandoned it in 2015 despite some groundwork already laid. Urban planners have advised that Jakarta should focus on one public project at a time.