Malaysia due to begin Penang road and tunnel schemes after seven-year delay

An unusually financed scheme to build a tolled undersea tunnel and three highways to improve traffic at Penang Island, Malaysia, is set to begin this summer, now that the concessionaire has raised some cash through a land sale.

The concessionaire of the roughly $1.5bn scheme, Consortium Zenith Construction (CZC), was picked by Penang state government to deliver it in 2012, but the method of financing the scheme meant it had to sell some land first before it could start.

That is because the deal between CZC and Penang state sees CZC being paid with toll tunnel revenues and around 110 acres of reclaimed land, which CZC could sell to raise capital.

A map of Penang island, showing the proposed route of the tunnel (CC BY-SA 2.5)

Seven years on, it has sold a 23-acre parcel to Boon Siew, a well-known Malaysian private company set up by late Penang tycoon, Tan Sri Loh Boon Siew, for around $204m, and so work is expected to start in August, sources told Malaysian newspaper, The Star.

A source told The Star: "The Boon Siew group is a big name on the island and has a big balance sheet. Its entry to buy the land will give the land swap-funded infrastructure projects some credibility and certainty in terms of financing."

The first phase will be a 5.7km highway, costing around $200m. CZC awarded a construction contract for that last September to Vertice, a company that is also one of CZC’s main shareholders.

The second phase is a 10.5km highway due to begin in September next year – Vertice is expected to win that project as well.

Phase three is a 4km bypass, due to begin in August 2021.

The main element in the infrastructure programme is an undersea toll tunnel between Butterworth on the mainland and Gurney Drive on Penang island. This project will be carried out by China Railway Construction and is due to begin in 2023.

Top image: One of Penang’s two bridges (Helmut Kliemann/CC BY-SA 3.0)

Further reading

Story for GCR? Get in touch via email: [email protected]

Latest articles in News