SOMETHING’S is not quite right about the third MRT proposal as MRT Corp has opted for the turnkey model instead of the project delivery partner (PDP) model, said Petaling Jaya Utara MP Tony Pua.
 
Pua said MRT Corp’s recent announcement that it had chosen the turnkey model had stunned the infrastructure and investment community.

“The PDP model used in the MRT1 and 2 projects saw the participation of local companies who were to ensure the on-time delivery the project.
 
“But in the turnkey model, a single contract is awarded for the entirety of the project, which is estimated to worth between RM40-50 billion,” said Pua in a statement today.

Pua said the MRT1 and 2 projects saw the participation of Malaysian in all levels of the project but it was less likely for local firms to participate in MRT3, unless they formed consortiums or were hired as subcontractors by the turnkey developer.

“Why is the government so intent on hiring foreign contractors when we already have all the expertise locally?”

The DAP publicity chief said the turnkey approach was also used in the East Coast Railway Link (ECRL) project financed and built by China Communications Construction Company Ltd (CCCC).

This includes picking the subcontractors for the development, he added.

Turnkey costs more

“Under the revised scheme, MRT3 requires the winning bidder to provide at least 90% financing with an eight-year moratorium whereby no repayments on the principal and interest of the financing will be paid to the government.

“On top of that, it requires the repayment period to be no fewer than 30 years.

“MRT Corp has said that the turnkey financing model is aimed at attracting foreign companies who may provide better financing options for the line.

“MRT Corp CEO Shahril Mokhtar claims the borrowing costs from DanaInfra at 5.1% ‘would kill us…if foreign parties can give us at 3%’,” said Pua.

But Shahril’s argument did not address the actual project costs, said Pua.
 
“If the actual project cost is say, 20% higher, then a 2% lower financing cost will still cost MRT Corp more in the end.

“It is the same for the ECRL project – what is the point of awarding the RM55 billion contract directly to CCCC without any open tender merely for 1% lower in financing cost, when the government’s own consultants estimated the project to cost less than RM30 billion? 

“What’s more, the unprecedented stringent financing requirements seem intentionally designed to disqualify local, experienced major infrastructure builders like Gamuda Bhd or MRCB,” said Pua. – November 11, 2017.