Newsbreak: Federal and state governments wrangle over Sabah portion of Pan Borneo Highway

This article first appeared in The Edge Malaysia Weekly, on March 11, 2019 - March 17, 2019.

Construction has commenced in 12 out of 35 packages for Phase 1 of Pan Borneo Highway

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FIERCE legal wrangling between Putrajaya and the Sabah government over control of the Pan Borneo Highway has led to a great deal of uncertainty over the RM12.8 billion 700km-long Sabah portion of the highway, sources familiar with the matter tell The Edge.

It is understood that the disputes centres mostly on the project, and hinges on Borneo Highway PDP Sdn Bhd (BHP) as the project delivery partner (PDP).

BHP is 60% owned by Sabah-based Warisan Tarang Construction Sdn Bhd while UEM MMC Joint Venture Sdn Bhd owns 40% — itself 50:50 controlled by Tan Sri Syed Mokhtar Albukhary’s flagship MMC Corp Bhd and Khazanah Nasional Bhd’s UEM group.

In April 2016, BHP was appointed to implement Phase 1 of Pan Borneo Highway Sabah, and was tasked with widening existing roads into double lane dual carriageways, building new coastal roads and bypasses, and implementing, supervising, and delivering the project within the allocated time and cost.

The Sabah portion of the highway stretches from the Southwest Sabah-Sarawak border town of Sindumin to Simpang Mengayau in the North; Ranau to Mile 32 in Sandakan, Lahad Datu and Tawau in the Southeast. It is slated for completion by 2023.

Warisan Tarang has now come under the spotlight.

“Most of them (complainants) do not have any issues with MMC or UEM, but with Warisan Tarang. Many perceive it to be a company connected to the previous (Barisan Nasional and Umno) administration, especially (former chief minister) Tan Sri Musa Aman,” a source says.

The talk around town is that companies linked to Sabah Chief Minister Datuk Seri Mohd Shafie Apdal, are vying to dislodge Warisan Tarang from BHP and take over its role, thus controlling the PDP.

A check on RAM Credit information reveals that Warisan Tarang’s directors are Abdul Gani Zelika, Muhammad Yazrin Zaifuddin Zainuddin and Mohd Roslee Mohd Ali Lee. Its shareholders are listed as A Ashar A Paturusi (80% shareholding) and Muzalee Mujim (20%).

Both Ashar and Muzalee are not prominent corporate players nor are they politically well-connected individuals, but it is unclear if their shareholdings are merely a front.

As at end-December 2017, however, Warisan Tarang has yet to register any revenue although it had total assets in excess of RM9.04 million, and overall liabilities of RM7.71 million.

“There is very little work done thus far. Payments have been slow, and there have been issues with land acquisition, eviction of some residents — so it is a lot more than just politics,” another source from the construction industry says.

According to media reports, as at December last year, 12 out of 35 packages for the first phase had commenced construction while only 10% of the work had been completed as at January this year.

It is also interesting to note that BHP submitted a cost reduction proposal for the 12 awarded packages last October, and it is being reviewed. The cost reduction proposal came about following complaints that the highway was too expensive.

 

PDP to be removed?

Meanwhile, there are others who say that the entire PDP method of building the highway may be scrapped and the Sabah Works Ministry given a more active role to play.

The state government led by Sabah Infrastructure Development Minister Peter Anthony has sought to take over the implementation of the Pan Borneo Highway, and has even submitted a proposal to that effect.

While details of the proposal are scarce, it is known that the project would be spearheaded by Anthony’s ministry and the Economic Planning Unit under Sabah’s finance ministry. Perhaps more significantly, it is understood to involve cost savings of RM2 billion.

Federal Works Minister Baru Bian says that a decision for the state to take over an infrastructure project such as the Pan Borneo Highway is not his to make, but the finance minister’s.

Last December, BHP issued a statement — possibly to pre-empt such a takeover — pointing out that the PDP agreement to implement the Pan Borneo Highway Sabah project falls under the jurisdiction of the federal government, the Sabah government and the company.

BHP stressed that the project is regulated by processes that have been deliberated and agreed upon by both government parties. “Each and every stage of the implementation of the Pan Borneo Highway Sabah project has gone through deliberation and decision making-processes involving various stakeholders of the Sabah government and federal government.

“The Ministry of Works and Ministry of Finance at the federal level, as well as the Ministry of Infrastructure Development Sabah, and the Sabah Public Works Department at the state level, are key government agencies involved in the decision-making for implementation of the project,” according to its statement.

 

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