PENANG today defended its plan to take loans from China to fund its ambitious multibillion ringgit Penang Transport Master Plan (PTMP).

Chief Minister Lim Guan Eng said the move was nothing like the 1Malaysia Development Berhad (1MDB) scandal.

He said the loans would be subject to the approval of the National Finance Council, which is chaired by the finance minister, and the government of China.

“Some have linked this to 1MDB. But that is a private enterprise that deals with commercial and private banks. How they spend money is up to them.

“This is a government-to-government dealing. The loan comes from the country, China; not a private bank. There are strict terms and conditions to follow,” he told reporters in Komtar today.

“I want to tell those who still don’t understand or are pretending they don’t understand.

“If China wants to lend us money, they cannot give us the cash directly. They do it through their bank, or the Export-Import Bank of China.”

The Penang legislative assembly yesterday passed the Penang Loan (Bank and Other Financial Source) Enactment 2017.

The enactment authorises the state government to borrow money from any bank or financial source approved by the federal government, for the purpose of financial investment; implementing physical, economic and social development in Penang, or other matters.

Lim yesterday said loans taken under the enactment must not exceed a period of five years and it will have lower interest rates.

Before the law was passed, concerns were raised by several Pakatan Harapan backbenchers about the loan including checks and balances to ensure that the government does not over-borrow.

Lim said the new legislation was passed unanimously without objection even from the BN opposition after the state government explained it in length.

He also reiterated that the willingness of China to loan money to Penang meant the country recognised the state’s solid and healthy financial standing.

Lim said out of all states in Malaysia, Penang currently has the least outstanding debts.

“We have the least debts among the states at RM64.5 million. That is only 0.4% of the total RM17.9 billion outstanding loans by state governments.

“We have administered the state well. Our debt is at the lowest. We can afford to borrow some more,” he said.

Pahang, Sabah and Sarawak have the most debts at RM3.1 billion, RM2.8 billion and RM2.5 billion respectively.

Asked how much Penang could borrow from China, Lim said the amount ranged from a few hundred million ringgit to a billion.

“RM1 billion at most, but I doubt it since we have to pay back the money in five years, and you know the LRT is at least a 10-year project,” he said.

The state, he said, might have to offer securities in assets like land for the loans but it was still premature to discuss that now.

On BN’s Teluk Bahang rep Shah Headan Ayoob Hussain Shah saying the state should not take the loan to fund the PTMP as it would not generate enough revenue to repay the loans, Lim said Penang would not have trouble paying back China.

“Of course we can pay it back. We have our own financial model. If we have no ability to pay, China – a country so particular with its national sovereign funds – surely won’t be so silly to lend us money.

“That is not a factor. Finally, it is whether the federal government wants to approve the loan application,” he said. – May 26, 2017.