Penang undersea tunnel: The mysterious RM336 million hike in road costs

Dato’ Eric See-To

How is it possible that the contract cost of the 1st road could jump by RM336mil (43%) in just 5 months?

In August 2017, fashion company Voir Bhd made a submission to Bursa Malaysia to explain why they are taking a stake in the Penang Undersea Tunnel Special Purpose Vehicle (SPV).

In that submission, Voir gave the construction contract value cost for all four packages (3 roads + 1 tunnel) of the Penang tunnel project.

Voir also declared that the SPV had received a letter of award from the Penang Govt on 9 May 2016 to undertake the construction works of Major Road 1 (Tanjung Bungah to Teluk Bahang) and Major Road 2, (Lim Chong Eu to Ayer Itam).

However, the contract value given by Voir Bhd in Aug 2017 is vastly different from what Penang EXCO for infrastructure Lim Hock Seng gave in his written answer to the Penang State Assembly in Mar 2017.

The contract value for all the 3 roads have increased significantly while that for the tunnel has decreased.

In particular, the first road contract cost has jumped 43% or RM336mil from RM776mil to RM1.1116 billion.


While the Tunnel contract cost has dropped 21% (almost RM800mil) from RM3.6 billion to RM2.8 billion.

Also of concern is that the reports cost for the first road is RM120mil – much higher than the RM96mil report cost for the more complicated tunnel that cost 10 times more to construct.

If you take into consideration that the Penang tunnel project is supposed to start many years later and that the SPV itself says there is no urgency to finish the reports for the tunnel itself, the massive shifting of the costs from the tunnel to the 3 roads raises the question if the Penang Govt is deliberately front-loading all the costs so that the SPV company can get as much payment as possible and as soon as possible?

Was there a move by the Penang Govt to front-load the project cost to benefit the SPV?

This has the effect that if the tunnel reports never get completed or the tunnel is never built, the impact to the SPV will be less as the bulk of the payment from the state govt would already have been made in the 3 roads components.

As the contract costs differs widely, did Voir made a false declaration to Bursa Malaysia (a serious offence) or did Lim Hock Seng mislead the Penang State Assembly (which is also a serious offence).

Can the Penang State Govt practice transparency and release the May 2016 letter of awards to confirm what are the exact construction costs for the first two roads?

Source: Eric See-To



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