Alternative Views: Changes in Adil Permata may come with a price

This article first appeared in Forum, The Edge Malaysia Weekly, on July 4, 2022 - July 10, 2022.
Alternative Views: Changes in Adil Permata may come with a price
-A +A

The norm is for the government to replace a contractor that fails to deliver projects. Rarely do top government officials delve into the issue of a change in ownership of a construction company that has failed to deliver because it could open up a host of other issues that would be difficult to explain.

Among them are whether there would be an escalation of cost with a change in shareholding, would anyone profit from the change, or if anybody would be penalised for possible delays.

Which is why the normal practice is for the government to terminate a contract because of non-delivery and replace the contractor with another which can ensure that the job is completed on time and within cost. As for the old contractor, it will blacklisted as a penalty for not delivering.

Adil Permata Sdn Bhd, the company that was given the mandate to complete the infrastructure works for the Rapid Transit System (RTS) Link project in Johor, can count itself as relatively fortunate. Based on the latest development, the government is endorsing a change in shareholders as long as the job is completed on schedule.

The subject of cost overruns for the RM3.7 billion project, to ensure it is done on schedule, has not been raised just yet.

Last week, Transport Minister Datuk Seri Wee Ka Siong confirmed the entry of a new shareholder into Adil Permata to complete the remaining works for the RTS Link project. In elaborating on the entry of a new shareholder, Wee said that the government’s priority is for the civil infrastructure works to be completed by December 2024.

This is to ensure that the system works can get started and for the RTS Link to be operational by end-2026. By Jan 1, 2027, the RTS is slated to be fully operational.

The RTS project is different from other rail-related public transport projects because it is a joint effort with Singapore’s transport authorities. It is a four-kilometre light rail system connecting Bukit Chagar in Johor Baru to Woodlands in Singapore.

The civil works in Malaysia and Singapore are awarded by the respective governments but the systems works come under the purview of RTS Operation (RTSO) — a joint venture between Prasarana Malaysia Bhd and SMRT Corp of Singapore.

It was reported in Singapore that RTSO is a company incorporated there that will manage and maintain operating assets of the RTS Link, including the trains, tracks and systems as well as the depot in Wadi Hana in Johor Baru.

In May last year, it was reported that RTSO had already awarded the systems works, which comprises rolling stock, signalling and communications for the project, which are slated to be completed by December 2026. The civil works portion is scheduled to be done by end-2024.

So far, only 17% of the civil works have been completed and the minister was quoted as saying that “we are chasing against time”. In essence, keeping construction works to schedule was, and continues to be, a critical factor in the RTS Link project.

Considering the importance of the contractor keeping to schedule, one would have thought that MRT Corp would have given the job to a contractor with a track record in rail infrastructure.

How Adil Permata, a low-profile contractor, managed to get the award is obscure.

There does not seem to be any news of a competitive or restricted tender for the main civil works contract of the RTS Link project. And none of the big boys were in the running for the job.

So far, there has been no response from MRT Corp on how Adil Permata landed the job.

The shareholders of Adil Permata are not known to be from the construction industry. But among its board members, they have a seasoned hand in Tan Sri Zaini Omar, the former director-general of the Public Works Department.

The groundbreaking ceremony for the RTS Link was held in November 2020, by which time the Perikatan Nasional government was at the helm in Putrajaya. But even before that, the project was already mired in controversy.

First announced in 2010, it was designed to make travel seamless for the thousands of people who commute between Johor Baru and Singapore daily.

On Jan 16, 2018, former Malaysian prime minister Datuk Seri Najib Razak and his Singapore counterpart, Lee Hsien Loong, signed a legally binding agreement to build a mass rail transit (MRT) line across the causeway.

It was the second major rail project signed by both prime ministers, with the first being the now-shelved high-speed rail in 2016.

Within two weeks after Jan 16, 2018, Singapore’s Land Transport Authority (LTA) had already published the contenders for the main civil works. Malaysia and Singapore were supposed to assign a joint venture company to own and operate the RTS Link by June 2018.

The Pakatan Harapan government took over in May 2018 and sought more time to firm up the JV company with a view to reduce the cost.

The scope of the project was changed from MRT to LRT and the status of the land in Bukit Chagar, Johor, came into question.

The land, initially thought to be under the federal government, was reported to belong to the Johor Palace. The Sultan claimed he was not aware of the ownership of the land.

The project cost was estimated to increase to RM5.3 billion if the land had to be acquired. Tun Dr Mahathir Mohamad, the prime minister then, had said that the federal government would not pay for the land.

Pakatan Harapan extended the deadline to form the joint venture company three times until April 2020. By February 2020, they had been replaced by Perikatan Nasional.

Some 18 months after the groundbreaking ceremony, Adil Permata is poised to see a change in shareholders. Tan Sri Lim Kang Hoo of Ekovest Bhd is looking to emerge in the company. Lim has a track record in the construction industry and should be able to complete the job on time.

But will it be within the original cost? If the government were to incur higher cost, would anybody pay the price, other than the taxpayer?

M Shanmugam is a contributing editor at The Edge

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.