Second bridge needs multi-dimensional solutions

The new Penang government deserves a compliment for its efforts reported in your article Second bridge: 7-man body set up. It shows the new state government is more willing to stand up against the federal government, conduct its own "thinking" and analysis to avoid being led by the nose by the federal government, and yet deal with the federal government in a cordial and professional manner. To increase the chance of a successful resolution on the second bridge issue, I suggest the committee should also look into these strategies and tactics. First, the committee should go as far as proposing an alternative bridge structure, contracting arrangements, and a financial plan that are independent of the federal version. Why? This healthy competition of ideas will nudge the federal government to speed up and modify its current version to make it feasible sooner. If so, Penang will benefit. Moreover, nothing focuses the mind and digs up as much information as a moneyed and detailed plan. The information generated will inform the state government and enable the civil society to probe into the federal version. If Pakatan Rakyat comes into power, this alternative plan can be developed into the new federal version, with less time wasted re-examining the contracts. Second, the Penang government should take advantage of a media law loophole to disseminate these bridge findings. Robust coverage will ensure that, even if the state version is eventually pre-empted by a federal bridge, the people will be informed enough to monitor the federal bridge, and the PR state government will receive some credit. Commentator Wong Chin Huat has been arguing that the State government can take advantage of a loophole in the Printing Presses and Publications Act to issue its own publishing license to groups of independent-minded journalists, such as here and here. Such state-franchised, but privately funded and independently operated press has the potential to paralyse the PPPA, paving the way for the repeal or deep reform of PPPA. The alternative bridge proposals and contracts should be made public. Taking advantage of this transparency, the federal cronies will likely attack the state proposals as inadequate here and there. Then civil society will have the media space to respond by asking the federal government to reveal details to support its contentions or shut up. Without announcing supporting details, any federal attack will look awkward and lack credibility. Third, reduce the cost of the planned bridge by promising to conduct open tenders for all bridge contracts and also enact an Equal Employment Opportunity Act at the state level. Given the secrecy of the federal plan, I have no problem asserting that the real cost of the second bridge can be cut by more than 50% with an open tender. If the federal government disputes that, let them prove it -- by making all the planning documents and contract proposals public information. To make the open tender politically feasible, and taking an opportunity to experiment with a progressive law to show the way for the federal government, the Penang government should enact an Equal Employment Opportunity Act at the state level (again, this is Wong Chin Huat's idea). Create two ferry companies This EEOA should require that contractors looking to bid for state government projects comply with the new state law to employ engineers, planners, contractor, and technical workers of all races, gender, age, physical capability, and backgrounds. It should be flexible enough that it does not become a rigid and counter-productive quota system, and should NOT be applied to non-government-contract contractors until the experiment is well tested and debated. It can legislate an independent arbitration panel for employment disputes.The emphasis should be on honest and vigorous efforts to create opportunities and a diverse working and recruiting environment. One of the goals is that, as non-Malay-owned contractors win more contracts in an open tender system, there will be an increase of Malays in these firms, and vice versa. It is not reasonable to decide that a Korean company in early 1980 could build the first Penang Bridge at a reasonable cost, but that Malaysian firms cannot build the second bridge today, also at a reasonable cost. It is also unreasonable to deny Chinese-Malaysian contractors building the second bridge, only to award the contract to a communist Chinese firm. How ironic is this? I am not fixated on getting contractors from any country or any race, only pointing out our seeming blind spots. Fourth, the state government should consider financing the bridge with a private, corporate bond to be repaid from the toll fee. When the bond is paid off, either eliminate the toll or reduce it to finance the third bridge. The cost reduction from competitive tenders will make this possible. The state government should avoid guaranteeing any principal amount of the debt, perhaps only committing to guarantee up to a limited amount of the interest payment after a safe delay, and let the physical bridge itself be mortgaged. So what if some foreigners take over the bridge in case of failure? They can't move it to Sumatra. The government can allow part of the nearby land leases to be taken over by the creditors in case of failure, but not the permanent title of the land. What entity will bear the main risk then? Incorporate a bridge-owner company that can be later listed on the stock exchange, and legislate to allow a equity return rate range, of say 10%-15% (this rate is higher than borrowing rate because owning stock equity is riskier than owning debt). The formula can allow the eventual reduction of toll fees when bridge traffic reaches a large volume, because it can be designed to put a cap on maximum return, without guaranteeing a minimal return, except for the best effort by the state government to adjust bus and ferry access. The precise rates and formulas can be decided upon financial advice - which may be eagerly offered by local and foreign merchant banks who want to build their reputation in this area. The Penang government can promise in a contract to adjust its ferry services for so many years, to help ensure but not guarantee that the bridge's traffic volume reaches a minimum level. Which brings us to the next point: the ferry service. Fifth, the Penang state government should take over the money-losing ferry service, conduct open tenders to invite new owners, and create two ferry companies for indirect and strategic competition. Similar to public transports such as bus networks that have to bear some money-losing routes, we should not be looking for the two ferry companies to compete directly, but should look to create independent benchmarks to compare operating efficiencies. (‘Compared to the other company, how much is your repair cost, fuel consumption, manpower cost, etc, per ferry, per trip, per km, per year, per employee, broken down by route, by time of day, per pessenger, per car, etc?’) Complexity of problems Then, establish new ferry routes. The first route expansion should be the Batu Maung-Batu Kawan ferry route, to ‘pre-link’ the second bridge. The ferry terminals (and connecting bus terminals) should be 2km to 5km away from the future bridge landing points, to avoid direct duplication of routes when the bridge is completed. It will benefit the second bridge to pre-establish a commuting pattern even before the bridge is completed, so that the second bridge can ‘hit the ground running’ having an immediately sizable commuter demand upon completion. By establishing the ferry service a few years before the bridge, families living on the island will start buying houses in Batu Kawan while families from Serang Prai Selatan can start taking up employment in Bayan Baru, for example. These developments will ensure Batu Maung and Batu Kawan will have vibrant job and family connections early on. Such early ‘ramp up’ of commuting demand will further assure the financing success of the second bridge, reducing the borrowing costs. With the volume brought by the ferry, bus routes - which also require years to build ridership - can start spanning out from the Batu Maung and Batu Kawan terminals more quickly. As soon as the second bridge opens, the Batu Maung-Batu Kawan ferries should be reduced to mostly passenger, non-car, services. The remaining ferries should be diverted to open new routes around Penang, such as Weld Quay-Batu Maung, Batu Maung-Gertak Sanggol, Weld Quay-Teluk Bahang, and Tanjong Tokong-Kuala Muda. This will divert most of the car traffic to the second bridge. It will be within the power of the Penang government to promise in a contract to reduce car-carrying ferries along the Batu Maung-Batu Kawan route to ensure the financial feasibility of the second bridge, until a certain volume is reached a few years later. In the end, I feel such boldness and creativity in development planning and the accompanying demands illustrated above -- to solve the multi-dimensional problems that will arise from the media, employment, contract, transport, planning, financial, development, environmental issues -- will best be balanced and solved through an intensification of the local democratic process. That is why some of us continue to demand direct local election so impatiently. I understand the short-term difficulties, see some improvements in the new local council appointments, and see responsiveness to try to explain the appointment shortcomings. But, the complexity of the problems are way beyond what any one of us, or teams of us, can take responsibility for. So do push the calendar for direct local elections please. CHEAH KAH SENG is trained in investment and portfolio analysis, considers himself a student of the Austrian School of liberal economics. He is currently interested in how Web databases reflect individual freedom of choice and the aggregate learning process. This article was originally published on Apr 30, 2008, in MalaysiaKini.com as an opinion piece.