Letters: The Penang government has no power to issue bonds to finance the three reclaimed islands project costing RM11 billion without the approval of the federal government.
Article 111(2) of the Federal Constitution makes it clear that a state is allowed to borrow, for a period not exceeding five years, from a bank or other financial source only with the approval of the federal government.
Further, under Article 111(3), a state shall not give any guarantee except with the approval of the federal government. By issuing bonds, the state is borrowing money from the bondholders.
When investors buy government bonds, they are lending money to the government in exchange for interest and the return of principal at maturity.
Thus, in view of Article 111 restrictions, how can the state government raise funds for the mega project by issuing bonds without getting the approval of the federal government? Any attempt to do so will be illegal and unconstitutional.
It is strange that the state government sought advice from financiers and not the attorney-general or the state legal adviser on whether federal government approval is needed to issue its bonds.
This raises a serious question on the functioning of the state government. Is it being run by businessmen or by elected members advised by constitutionally appointed officials?
Why was the state government in a hurry to sign the agreement with SRS Consortium — made up of Gamuda Bhd (60 per cent share), Ideal Properties (20 per cent) and Loh Poh Yen Holdings (20 per cent) — when major issues have not been resolved?
There is a challenge to the approval of the Environmental Impact Assessment report for the project with the Appeals Board that has yet to be heard. What happens if the decision is against it and in favour of the fishing community? The rakyat will have to bear the claims, if any, arising from the contract.
The issue of financing the project has not been settled. Why not seek assistance from the Finance Ministry or the Economic Planning Unit? Why rely totally on the private sector, which has vested interests?
It is highly irresponsible of the state to burden itself and the people with legal commitments to the consortium when there are so many uncertainties in the economic environment, arising principally from the Covid-19 pandemic.
Many economists are predicting a serious recession. Projects are being shelved and large companies are going bankrupt. In this adverse economic environment, the state government inked the agreement with the consortium.
Penang Chief Minister Chow Kon Yeow said the reclamation of Island A to the southeast of Penang island would be given priority to cater to the booming manufacturing industry in Bayan Lepas. But there is no "boom" that we know of in the industrial area. What we are now hearing of is retrenchment and lay-off of workers.
If space is needed for industries, there is plenty of land in Seberang Prai. It makes no sense that the state government wants to undertake massive reclamation of the sea that will have disastrous consequences on the environment, fisheries and the socio-economic status of the fishing community.
Chow said the Penang Transport Master Plan (PTMP) was of paramount importance to improve the worsening traffic situation in the state, but the PTMP was not drafted by an independent traffic consultant.
The cost is also exorbitant — RM46 billion. The reclamation project will cost RM11 billion and take more than 35 years to complete. The focus of the consortium proposal appears to be increasing the land bank and not alleviating traffic congestion.
Civil society organisations have criticised the PTMP with facts and figures and proposed a much cheaper alternative to ease the state's traffic problems without having to resort to the disastrous reclamation of the sea.
The state government has turned a deaf ear to their appeals and insists on proceeding with the mega project that will place a terrible financial burden on the people.
It has been reported that the consortium will receive five per cent of the cost of the project, which will run into billions of ringgit.
We call on the Penang government to release to the public the agreement signed with the consortium and reveal whether there is an exit clause. The federal government should not approve the issuing of any bonds by the state or guarantee loans to finance this mega project.
Mohideen Abdul Kader
President, Consumers Association of Penang
The views expressed in this article are the author's own and do not necessarily reflect those of the New Straits Times