Nazri: McKinsey gets RM8.2m for MRT study

By Clara Chooi

Malaysian Insider, March 15, 2011

 

Nazri

KUALA LUMPUR, March 15 — The Najib Administration has revealed that American consultants McKinsey & Co will be paid RM8.2 million to study the proposed Mass Rapid Transit (MRT) system.
The consultancy which previously helped set up government think-tank Pemandu will now look at the cost effectiveness of the intended 51km rail system.

Minister in the Prime Minister’s Department Datuk Seri Mohamed Nazri Aziz told Parliament today that the consultancy was appointed without going through a tender process as it was merely commissioned to conduct the value management study (VMS) on the multibillion ringgit rail project.

PKR MP Chua Tian Chang however questioned the appointment, revealing that while the firm was commissioned to study the full potential of real estate value for the project, the government has been disposing parcels of valuable land to “crony” companies at below market value.

In a press conference this afternoon, the Batu MP revealed five such cases of disposal where land was sold or swapped at below cost, some with a difference of up to RM10 billion.

In one example, he pointed to the sale of a 2,675 acre plot of Malaysian Rubber Board land in Sungai Buloh worth RM12 billion to the Employees Provident Fund (EPF) at RM2.62 billion.
Other examples include the sale of a 8ha land at KTMB Bangsar worth RM500 million to Pelaburan Hartanah Bhd at RM200 million.

“The question arises here over the government’s rationale in disposing-off these plots of land when they could have reaped greater returns by selling it through open tender instead of direct negotiation,” said Chua.

Citing the Hong Kong MRT as an example, the PKR vice-president explained that government there had gazetted the land surrounding the rail system and sold parcels through open tender.

“Now, the Hong Kong MRT has reaped returns of between 30 per cent and 50 per cent from its income through the construction of commercial complexes, housing and advertising alone.

“Yet, it has not raised its MRT passenger fares in the past 15 years. At least 90 per cent of its commuters use the public transport there,” he said.

Chua also pointed Syarikat Prasarana Negara Bhd’s bailout of both the failed Star (RM3 billion) and Putra LRT (RM5.25 billion) rail systems, and questioned if the firm would be able to bear the cost of the MRT, said to be at least RM36.6 billion.

Last week, in his explanation on McKinsey & Co’s RM8.2 million bill to study the MRT, Nazri revealed that the government would bear the entire cost of the study via a special entity - Infrastructure Funding Entity (IFE).

“Through the entity, the financial requirements of the project will be identified and the best mechanism to procure allocations will be used.

“For example, through long-term government bonds,” he had said in a written response to Chua.
McKinsey & Co is the same consultancy that was instrumental in setting up the proposer of the MRT project  - Pemandu.

The VMS is to help decide the selection of the proposed alignment and station locations and help the project regulators to unlock the full potential of real estate values in locations where the stations are located.
It is also supposed to determine and study the cost-effectiveness of the project.

The MRT system is an entry point project identified for the Greater Kuala Lumpur/Klang Valley National Key Economic Area (NKEA) and aims to increase public transport modal share from 18 per cent to 40 per cent by 2020.

With the 40 per cent public transport modal share, the government hopes that at least four million trips of the estimated total of 10 million are made via public transport.

The remaining six million trips will continue to be made via private vehicles.

Public viewing on the MRT’s Environmental Impact Assessment (EIA) ends today and the Department of Environment will soon announce its decision to approve or reject the project.

The Sungai Buloh-Kajang line alignment map is however still up for public viewing until May 14 at seven locations across the city.

They are Kuala Lumpur City Hall, Petaling Jaya City Council, Shah Alam City Council, Selayang Municipal Council, Kajang Municipal Council, Bangsar LRT station and the SPAD office in Menara Dayabumi.

Upon the end of the public scrutiny process, the Land Public Transport Commission (SPAD) has promised to consider all feedback obtained before proceeding with the project.

The public can provide their feedback on the project via email to feedback@kvmrt.com.my or through the SPAD toll-free line at 1-800-82-6868.