THE Penang government today explained why it paid Consortium Zenith Construction Sdn Bhd, the undersea tunnel and highways project contractor, RM208 million via land swap before the technical studies were completed and EIA (environmental impact assessment) approved.

State traffic management exco Chow Kon Yeow said everything followed the RFP (request for proposal) signed with the contractor.

He said it was not necessary to wait for EIA to be completed, although EIA approval was the prerequisite for physical work to start.

“As soon as Consortium Zenith was done with one part of the work, it could submit a claim for payment,” he said.

“But they won’t submit claims of RM1 million or RM2 million. It would be hard to cut out a piece of land worth a million. They will hold off until they can claim RM100 million or RM200 million.”

On Saturday, Penang Barisan Nasional chief Teng Chang Yeow questioned why the state government made the 5.54 hectare land swap before EIA approval for the highways was received in writing.

He also said state government had made the land swap payment before the highways’ feasibility studies and detailed designs (FSDD) were completed.

He cited a reply at the state legislative assembly on May 19, 2017 that FSDD was ready in May 2015, and for the purpose of payment for the completion of the studies, 5.54 hectare of land in Bandar Sri Tanjong Pinang was alienated to the consortium on February 17, 2015.

Chow said the land swap payment was checked and verified by the state’s independent checking engineer HSS Integrated Sdn Bhd.

“We did things according to the agreement. We hope Teng can understand. It is not that difficult to understand. If he chooses not to understand, then it is difficult,” he said.

Chow reiterated the state government provided no funding for the project, except the land swap.

He also said the two plots worth RM208 million had been reclaimed under the Seri Tanjung Pinang 1 (STP1) reclamation. 

The reclaimed land was surrendered to the state government before the agreement with Consortium Zenith was signed, he told reporters on a site visit on the land in Tanjung Tokong.

“They are now working with Ewein to develop the land. That is the consortium’s financing model to fund this project’s FSDD and construction.”

Consortium Zenith and Ewein have a joint-venture called Ewein Zenith, which is developing the seafront mixed development “City of Dreams” on the reclaimed land.

Consortium Zenith’s land swap payments will come from the multibillion ringgit STP project, another major reclamation development in Penang, involving developer Eastern and Oriental (E & O) Bhd. 

In its deal with the state government, which is separate from the tunnel and highways project, the developer will also surrender to the state 44.5ha of reclaimed land from its 356.4ha STP2 project.

The Penang government will alienate 20.2ha of the STP2 land it gets to Consortium Zenith as payment for the tunnel and highways project.

Chow said if the project is cancelled, the 44.5ha reclaimed land in STP2 would still belong to the state government.

State public works exco Lim Hock Seng, who was present, said the Penang government has not paid Consortium Zenith any part of the 20.2ha. 

“We showed them where the reclaimed land will be. We will pay them according to the work progress. 

He likened it to a typical sales and purchase agreement between a developer and a property buyer, where the latter would buy a yet to be built property from the former.

Lim said it was also normal for the consortium to sign memorandum of agreement for proposed projects on the parcels of land for the purpose of forward planning.

He said the previous BN administration had also entered similar deals involving reclaimed land wer.

“We want to ask Teng where was the reclaimed land promised to the state when they signed the deal with an IJM subsidiary to build the Jelutong Expressway,” he asked.

The building of the expressway, renamed Tun Dr Lim Chong Eu Expressway since December 2010, started and finished before the reclamations for the Bandar Sri Pinang and The Light projects were completed.

Lim cited another agreement inked by the last BN government with Rayston Consortium in 1999 involving the reclamation of 650ha of land off Butterworth in lieu of the Butterworth Outer Ring Road.

“Until today, no land has been reclaimed by Rayston, and yet Teng has not made any noise,” he said.

Chow said in August last year, federal entity Retirement Fund Inc signed a RM766 million deal with E & O to buy land yet to be completely reclaimed in Tanjung Tokong.

“If anyone used Teng’s logic, no government in the world can sign reclamation concession deals. You cannot create land in the sea before reclamation works.

“But it seems perfectly fine for the federal government to sign such deals but not for the Penang government,” he said. – January 29, 2018.