PERIKATAN Nasional did not withdraw the US$500 million (RM2.04 billion) government guarantee for Penang’s light rail transit (LRT) project, said Finance Minister Tengku Zafrul Tengku Abdul Aziz.

He said the issue of “withdrawing” the guarantee did not arise as no approval was given in the first place.

Explaining the issue, Tengku Zafrul told the Dewan Rakyat the government received a letter from the Asian Development Bank (ADB) on January 25 last year, suggesting three financing options.

The first, said Tengku Zafrul, was through a direct loan to Penang, guaranteed by the federal government, direct loan to Malaysia with re-lending to Penang, or direct loan to a special purpose vehicle with guarantee from the federal government.  

“Further discussions were held among ADB, the federal government and Penang on July 17, 2019 and it was decided that ADB should carry out due diligence.

“On July 18, 2019, former finance minister Lim Guan Eng issued a letter to say the government did not object to due diligence. 

“This letter does not compel the federal government to do anything,” he said.

However, Tengku Zafrul said on July 19 last year, the cabinet decided Penang could not borrow money that involves a government guarantee without approval from Putrajaya.  

“As such, the government did not receive the due diligence from ADB and the issue of a guarantee for ADB did not arise as the subject has never been approved by the cabinet,” said Tengku Zafrul during the committee stage winding up speech for the Finance Ministry’s budget today.

He said the ministry decided not to proceed with the guarantee as it is a financing matter and not about cancelling the project.  

“All development projects have to be submitted to the Economic Planning Unit for consideration,” said Tengku Zafrul. 

It was reported last week that Putrajaya decided not to proceed to grant a government guarantee for a US$500 million loan application by Penang to partly finance its RM9.5 billion LRT project.  

Tengku Zafrul told Parliament in a written reply the decision was in line with the revised revenue and income projections for the country, as well as the government’s focus to restore the economy, following the Covid-19 pandemic.   

Should the loan go through, Tengku Zafrul said it will increase the federal government’s commitment on operational and development expenditure, as well as other off-budget projects borne by the government, such as the Mass Rapid Transit Line 1 and 2 (RM71 billion), LRT3 (RM17.7 billion), the Pan Borneo Sarawak Highway (RM13 billion) and the East Coast Rail Link (RM48.85 billion). – November 30, 2020.