Shocking – Lim Guan Eng’s House of Cards (Part 2: the PISA- sPICE project)
The Third Force
On the 17th of August 2010, Majlis Perbandaran Pulau Pinang (hereinafter referred to as MPPP or simply, ‘the council’) issued a call for qualified bidders to submit proposals on the construction of a “sub-teranean Penang International Convention & Exhibition (sPICE) Centre” with the capacity to accommodate 450 banquet tables when ready.
Apart from sPICE, the RFP attracted a bid to refurbish and upgrade facilities within the state’s existing international sports arena, or PISA, which had for years housed conventions and events of sorts without a problem. Notwithstanding, the RFP also effected a bid towards the development of a new seven-acre public park and the construction of a new hotel, car park and retail outlets.
As usual, Lim Guan Eng began to put his mouth where his conscience wasn’t and referred to the RFP as part of an open tender process. Guan Eng consistently impressed upon the public that the state government’s Competency, Accountability and Transparency (CAT) policy required all state projects to be awarded through open tender processes.
I have given sufficient nuance to the terms open tender, RFP, RRFP and OCT in part 1 (refer http://www.malaysia-today.net/shocking-lim-guan-engs-house-of-cards-part-1-taman-manggis/), and explained how and why Guan Eng’s ignorance may have been nothing more than role play to divert attention from the fact that most deals under his purview were likely negotiated through the kitchen door.
Back to the story – from the word go, sPICE racked up quite a list of grouses, the most poignant being the manner the CM had eclipsed the council’s mandated role. It seems that the CM and his office had consistently stuck its oars in decision making processes by the council with the excuse that state councillors had “a lot on their hands.”
Were you recovering from a bad concussion, you might have found that excuse acceptable. For everyone else, that load of bullshit was just pure Guan Eng. Not only is he cocky and despotic, he rubbishes criticism from councillors and state assemblymen all the time, to the extent that none is able to save him from the clutches of his own stupidity – he second guesses his own party comrades and thinks that every ounce of critique in them, however well intentioned, is crafted to bring him down.
And when councillors notified Guan Eng that sPICE was projected on council land and not state land, the CM went on the offensive and gave these ‘dissenters’ a hard time. All they were telling him was that the RFP came under the purview of the council and not the CM’s office, but Guan Eng turned a deaf ear and pressed ahead with his plans.
Finding his demeanour to be highly irregular, former Bukit Gelugor PKR division head Lim Boo Chang set himself on a collision trajectory with the CM, who he claimed was bigoted and tended to politicize petty issues. A former councillor himself, Boo Chang quit that post in 2011, citing Guan Eng’s “arm twisting tactics” which were meant to intimidate as reason.
That same year, Boo Chang relinquished his membership in PKR on grounds that the party was too subservient to Lim, and as Nibong Tebal Member of Parlaiment (MP) Tan Tee Beng had once put it, “to the extent that it (PKR) is willing to cover up all his weaknesses.” Tee Beng, who quit PKR the year before, recounted Guan Eng’s dictatorial attitude which Boo Chang later extended to mean ‘abusive’.
Boo Chang’s main issue with Guan Eng was the fact that the CM treated the MPPP like a rubber stamp and overshadowed the council in decision making processes. And that is true – Guan Eng eclipsed the council from the day sPICE was conceptualised to the day the project was awarded to Eco Meridean Sdn Bhd (hereinafter referred to as Eco).
Both Boo Chang and Tee Beng made their exits from PKR on the commonality of principle – they found the party to be fawning in its devotion to Guan Eng despite the CM’s meandering and shady ways.
By mid February in 2011, several concerned citizens began pointing to private projects on the island that had factored in convention centres of their own. These projects, they argued, were scheduled for completion by 2018 or 2019 and were likely to run sPICE into bad debt.
Guan Eng rebuked by saying that the completion dates of those projects were far ahead and that the state couldn’t wait that long. But from the looks of it, I doubt that sPICE is truly what it is hyped up to be, and we’re just two to three years away from the nascence of convention centres the concerned citizens had pointed to.
As I noted earlier, the whole sPICE project was pure Guan Eng all the way, almost as if sPICE was a CM office concern. But it wasn’t – PISA stood on council land and was managed and maintained all these years by Pen Events Sdn Bhd, a company that was run by a Mr. Ong Ban Seang. But ever since sPICE was announced, Pen Events gradually drifted to the back pages of the CM’s book which seemed to contain elaborate plans for PISA on its front cover.
And Boo Chang was right – the CM’s office was definitely seen to be taking over the role of the council in very decisive and despondent ways. While council president Dato’ Patahiyah Ismail was seen slanting in favour of the sPICE project, she may have been left with little choice but to abide by decisions that seemed to emanate from the CM’s office.
On the 16th of January 2012, the CM himself announced the construction and management of sPICE by Eco in a press statement from Komtar, which is ironical – the announcement should have been made by Patahiyah herself, or at the very least, a senior council member. What business did the CM have announcing the award on behalf of the council?
More to the point, the project was awarded to Eco following negotiations that did not go through the proper channel – several state councillors, when asked, could not recollect any submission or discussion of agreements that related to sPICE at a full council meeting at any point since the project was conceptualised.
As a matter of fact, copies of the agreement (between Eco and MPPP, hereinafter referred to as ‘the concession agreement’) were kept from the state EXCO, a fact that was corroborated by EXCO member Chow Kon Yeow on the 29th of September 2011. On the same day, Kon Yeow defended Guan Eng by saying that the agreement did not need to go full council.
“Otherwise with so many agreements around, only a handful of agreements can be completed,” he added.
Can you imagine a state EXCO member saying that?
And in case you’re wondering, Eco is a subsidiary of SP Setia Sdn Bhd (hereinafter referred to as SP), one of Malaysia’s foremost property developers. According to Kon Yeow, there was a call for open tender, but there were no takers. So the open tender process was ended. Subsequent to that, an RFP was issued by MPPP inviting proposals from qualified bidders.
Note a point in Kon Yeow’s statement – the open tender process had ended. Meaning, Kon Yeow admitted that the RFP wasn’t part of an open tender process. But didn’t Guan Eng tell us that it was? So how did Kon Yeow manage to give nuance to the two terms despite Guan Eng failing to do so?
According to Kon Yeow further, the state received three proposals through the RFP, which is what Guan Eng has been keeping secret from us – the crucial details to the competition. I sincerely hope that the CM comes out to name the remaining companies – as a matter of fact, I dare him to do so.
Moving on, MPPP appeared to agree to terms that were heavily partisan and disadvantageous to island dwellers. The terms are contained in the concession agreement which isn’t readily accessible to the public despite Guan Eng’s claim of strict abidance by CAT principles.
Obviously, the CM has something to hide – I’ve been told that those wanting to get hold of the concession agreement would be forced to sign a Statutory Declaration (SD) to the effect of not sharing its content with anyone. That means, if you were to buy the document and read its content out to your father, you’d have flouted the law.
And yes – the document isn’t free – you’d have to buy it.
All said and done, it’s about time we got some answers from Guan Eng – no recycled bullshit, no spins – just the straight dope. Listed below herein are questions that Guan Eng has been shrugging off for the past four years, which I sincerely hope he addresses in the spirit of Competency, Accountability and Transparency (CAT).
Following are my questions:
1. What are the names of the companies that submitted proposals through the RFP process that concerned the sPICE project?
2. Is the CM willing to publically disclose the contents of all proposals submitted through the RFP process in accordance with principles of Competency, Accountability and Transparency?
Late in 2012, he told an assembly of state legislators that parcels of land at Taman Manggis were negotiated through a Request for Proposal (RFP), which he then said was part of an Open Competitive Tender (OCT) (you can read more about it in a preceding article by following this link: http://www.malaysia-today.net/shocking-lim-guan-engs-house-of-cards-part-1-taman-manggis/).
Since the CM is of the opinion that an RFP is a part of an OCT, I fail to see any reason why he isn’t willing to publically disclose the contents of the proposals that were solicited through the RFP process.
As a matter of fact, I dare the CM to do so.
3. It is said that the CM’s office had more or less approved Eco’s participation in the project on behalf of the council. It is further said that a full council meeting was never held, and that the terms contained in the concession agreement were in fact negotiated through the CM’s office. Further to that, copies of the concession agreement were never given to the EXCO and never read in a full council meeting.
Can the CM confirm if all of this is true? If it is, why did the CM’s office meddle in the affairs of the council to such extremes?
4. Was Kon Yeow correct in saying that the concession agreement did not need to go full council? Was Kon Yeow speaking in his capacity as a citizen of Malaysia or in his capacity as state EXCO member?
5. Is the CM willing to publically disclose the content of the concession agreement in the spirit of Competency, Accountability and Transparency (CAT)? Is the CM willing to have the terms contained in the concession agreement published in Malaysia Today and in major dailies with no strings attached?
6. If the CM has nothing to hide, why did he not allow the concession agreement to be posted on the MPPP and state government websites?
7. It is said that the CM’s office had conducted a meeting together with SP on terms of the concession, and it is further said that both the CM and Dato’ Patahiyah Ismail – who was announced as the new mayor of MBPP (previously known as MPPP) on the 24th of March 2015 – had handled the RFP from before it was issued to the award of project.
Can the CM confirm if this is true?
8. Is it true that SP and Eco had requested for the state government to pump RM50 million worth of cash into the project, and is it true that the CM and/or his office had instructed MPPP to shoulder that burden?
9. If the answer to question numbered 8 is ‘yes’, can the CM explain why MPPP was tasked with issuing the fund? Conversely, why did the state government not choose to shoulder that burden, considering that it was better capacitated to do so? Was the CM not aware that the council was already hard-pressed for funds?
10. Was the RM50 million to be incurred by MPPP deliberated and approved by a full council meeting before the concession agreement was signed?
11. How much can MPPP expect as returns for its RM50 million investment and by when?
12. The project was put at RM300 million at the time of award. Can the CM confirm if Eco’s anticipated cost for the project was estimated at RM250,955,249.00? Can the CM at least reveal the breakdown of that cost as it was stipulated in the concession agreement?
13. I am told that under the terms of the concession agreement, part of lot 7481 (3.1381 acres) adjacent to the site of the convention centre was leased out for a period of 99 years to the concessionaire (Eco) at a price of RM100 per square foot, or RM13,669,980.00. The category of land use was listed as ‘building’, and the express condition of development was termed ‘hotel’.
As per the agreement, Eco would (and has already begun to) build a four-star 300 bedroom hotel at the leased site. My question is this: what was the valuated net worth of the parcel that was leased to Eco? Was it RM300 per square foot? If so, why was the parcel leased to Eco for a period of 99 years at one third of its market worth? Can the CM provide a detailed account for the anomaly?
14. According to the CM, MPPP would only be paying a net sum of just over RM11 million (actually, the correct figure is RM11.3 million) to Eco less savings of RM25 million on future upgrading and refurbishment works and the RM13,669,980.00 MPPP stood to gain from leasing out part of lot 7481 to Eco.
What about hidden costs and opportunity costs that may not have been reflected in the RM300 million, especially the interest lost by the MPPP on the RM50 million?
15. It is said that the CM had chaired a closed door question and answer session that was held on the 15th of February 2011 at the Town Hall in Penang. It is further said that those who had participated numbered a handful (I was told they numbered less than ten) and were there on invitation.
Question is, why was it not Patahiyah who chaired the session, and why wasn’t the session open to public? It seems that both council staff and representatives from SP were present at the event. So what business did the CM have chairing the session?
16. During this meeting, the CM was asked why the decision-making process for the sPICE project seemed different. The CM was also asked if the approval for the project had gone full council. The reply to the second question was vague. To the first question, the CM iterated that anything involving MPPP landed property or the lease of land needed approval from relevant state authorities. I can hardly call this a reply.
Can the CM confirm if the above is true? Can he also repeat those answers while explaining to the public why the decision making process for the sPICE project was different? Can the CM also cite relevant clauses to any Act that gives jurisdiction to the state government to conduct RFPs and approval processes in the manner they were conducted in the sPICE project?
17. It is said that MPPP had unconditionally and irrevocably granted Eco and SP the right to develop land on the island at a density of 147 units per acre, far surpassing the 87 unit cap that applied to other developers.
In retrospect, the CM’s administration almost tripled the allowable density in residential areas from 30 units per acre to 87 units in 2010, purportedly to make housing more affordable. Ever since, prices of property on the island have been soaring sky high, to the extent that the island is now being dubbed the “next Hong Kong.”
Despite the ballooning price bubble, the CM forewent a Low Medium Cost (LMC) housing project and incurred the state some RM11-12 million in losses by sanctioning the sale of land at Taman Manggis below its valuated net worth.
Can the CM explain why Eco and SP were granted the right to develop land on the island at such high density, far surpassing the cap that was imposed by his own administration in 2010?
18. It seems that the CM’s administration had requested Eco to build some 450 LMC residential units, which Eco agreed to but not before exacting some specific conditions, among which include:
a. the need for the selling price of each LMC unit to be no less than RM72,500.00 and commensurate with the prevailing price at the point of construction,
b. the need for the state government to provide land for the development of the LMC units for free,
c. the need for the land provided to be suitable for development without the need for excessive earthworks, piling or a retaining wall,
d. the need for the project to be carried out within a term not exceeding 20 years from the execution of the concession agreement, failing which Eco would not be obliged to build the LMC units, and
e. the need for the developer of the LMC units to be solely entitled to proceeds from the sale of the units
I am told that both the CM and MPPP agreed to these conditions, which is ironic – under the BN administration, LMC units on the island were sold for no more than (and not no less than) RM72,500 per unit.
Can the CM issue a public statement on all the above?
19. I am further told that Eco was awarded the right to manage sPICE for a period of 30 years with an option to extend the term for 15 + 15 years. Prior to this, Pen Events had managed PISA (as I have pointed out above herein this article), but channelled almost all of its proceeds to the council less operational costs incurred and a profit margin as jointly agreed upon with the council.
Can the CM reveal if his office and MPPP had granted Eco the right to entitlement of all proceeds from activity Eco conducts at sPICE pursuant to the 30 + 15 + 15 year contractual period of management?
