PRESS STATEMENT: RIVER OF LIFE – A VANITY PROJECT THAT FAILS TO MEASURE UP

 

Press Statement dated 16 August 2019

RIVER OF LIFE – A VANITY PROJECT THAT FAILS TO MEASURE UP

 

C4 Center expresses concern over the state of the River of Life (ROL) project which was allocated a whopping RM4.4 billion for the redevelopment of 10 kilometres of the Klang River in central Kuala Lumpur and the clean-up of its waters and shoreline running 100 kilometres upriver. 

 

Over the few months, the media has painted an ominous picture of the project which is now ranked as one of the hardest and most expensive urban river restoration projects ever undertaken.

 

Overview

 

The ROL project, launched in July 2011, is to transform the Klang River into a vibrant and liveable waterfront with high economic value. It is one of the former Prime Minister, Najib Razak’s overambitious Economic Transformation Program, and a national strategy, to elevate Malaysia to a developed nation status by 2020.

 

There are three major components to the project which aims to transform eight rivers that are located within the Greater Kuala Lumpur/Klang Valley region:-

 

 

Component

Details

Led by

Project Costs^

1.

River Cleaning

Aims to improve river water quality along 110km from their current states into clean rivers that can support recreational activities.

 

Target completion by 2020.

Department of Irrigation and Drainage (DID)

RM3.4 billion

2.

River Beautification

Beautify 10.7km stretch along the Klang and Gombak river corridors. 

 

Target completion by 2019.

Kuala Lumpur City Hall 

(DBKL)

RM1 billion

3.

Commercialisation and Tourism

Maximise the social and economic potential of the Klang and Gombak Riverfronts.

 

Year 2020 and beyond.

Ministry of Federal Territories (FTM)

N/A

^ Initial estimated costs

 

Component 1: River Cleaning - what went wrong?

 

According to the 2015 Auditor-General’s Report Series 1, an audit was conducted on the sewerage projects under the Component 1. It has revealed amongst others, lack of feasibility studies, procedural missteps, lack of oversight, poor contract management and enforcement, which contributed to cost escalations and delays in execution. These flaws continued to prevail since no corrective and preventive action were taken to address them, as revealed in the subsequent audit in 2017. 

 

An extract of the first series of the 2017 Auditor-General’s Report on the river water quality control projects is tabled below:-

 

Klang River

 

Gombak River

Benteng Flood Reservoir Pool

Old Klang Road Market

Kuala Lumpur Wholesale Market

Precinct 7 – (Dataran Merdeka to Dayabumi)

Sub-projects

River Water Treatment Plant

Waste Water Treatment Plant 

Interceptor Plant

Contractors

Carta Indah

ABH Mega

Petrodec

Triple Albatros

JBS Engineering

Ekoriver Construction

Agency in charge

DID

DID

DID

DBKL

DBKL

DBKL

Extension of Time (EOT)

493 days

611 days

944 days

170 days

92 days

274 days

 

The audit conducted on 6 contracts (worth RM167 million) out of the 14 contracts (worth RM398 million) has revealed amongst others, the following:-

  1. as at October 2017, the costs of all 6 contracts increased by RM15 million to RM182 million;

  2. all 6 contracts could not meet the completion date and this lead to 19 EOT being granted, ranging from 92 days to 944 days;

  3. time-at-large issues regarding the delays of contract certification;

  4. inconsistent compliance of effluent river water quality standards; 

  5. the actual monthly operating cost of Water Waste Treatment Plant at Kuala Lumpur wholesale market was significantly material from 493% to 835% compared to the initial estimation by the consultant; 

  6. the operation at the Benteng Flood Reservoir Pool had ceased on 29 October 2015 (ie. 10 days after the Certificate of Completion and Compliance was issued) and the government had to incur additional unrecoverable costs of RM324,000 to fix the problem; and

  7. several thefts have incurred on the Benteng site resulting in further losses to the government.

 

Component 2: River Beautification - what went wrong?

 

The first phase of the River Beautification component is to transform the Precinct 7 - Heritage Quarter which covers 2.2km river stretch from Dataran Merdeka to Dayabumi into a riverfront esplanade. This involves installing weirs at several places.

 

However, The Star reported on May 2019 that the collapsible weirs costing RM35 million at the Dayabumi Complex and Brickfields, had been out of commission for months and in fact, one of the weirs failed to take off from the start. During the launch of Phase 1 in August 2017, the collapsible weirs were described as a stroke of economic genius and now years later, they are eyesores and white elephants.

 

The Star also reported on June 2019 that a newly constructed weir in Sungai Untut is being demolished for causing a series of flash floods in the neighbourhood since March 2019. This too indicates inadequate or poor project planning as well as procedural missteps.

 

Meanwhile, Ekovest Bhd’s wholly-owned subsidiary, EkoRiver Construction was appointed as the main contractor for three out of five beautification work packages worth approximately RM489 million. One of the package worth RM99.9 million is at the Taman Titiwangsa and the project was supposed to be completed within a period of 19 months from May 2018 till November 2019. However, a recent sight visit suggests that the contractor had no intention to make it work within the timeframe and the project is far from completion. In spite of their national importance and the impact they have on the economic viability of the ROL project, there seems to be inadequate monitoring and supervision by DBKL. 

 

Component 3: Commercialisation and Tourism - what went wrong?

 

Ekovest being appointed in 2011 as the Project Delivery Partner (PDP) in this joint venture, was also awarded the project worth RM130 million to build a gallery and surrounding facilities at the intersection of the Klang and Gombak rivers.

 

The then Kuala Lumpur Mayor Tan Sri Ahmad Fuad Ismail said “As for the incentives, after we beautify the whole area and state land has boosted in value, the PDP will get two percent of the land transaction’s total value...” This incentive is in addition to the basic fees for the PDP to coordinate the river beautification works. The fees will be a certain percentage of the project cost.

 

It is noteworthy that Ekovest has obtained the development order in October 2016 for its EkoGateway @KL River City project, which has a Gross Development Value (GDV) of RM2.6 billion. The project includes the construction of 300 units of 1Malaysia Civil Servants Housing (PPA1M). After the completion of this project, the Government will allocate a total of RM130 million facilitation fund to Ekovest. In addition to this, Ekovest has received the approvals for the proposed development of EkoPark Place, EkoAvenue, EkoTitiwangsa and EkoQuay, which has a total GDV of approximately RM2.8 billion.

 

It is not clear how the officials at the FTM cherry-picked Ekovest and other partners but fears are abounding since the transfer of government lands and approval of development orders took place during the tenure of the former FT Minister, Tengku Adnan. Tengku Adnan was charged on November 2018 with two counts of receiving RM3 million bribe from property developers.

 

In February 2019, the Malaysian Anti-Corruption Commission (MACC) has questioned 20 DBKL officers over this project. “They were involved in projects pertaining to cleaning and maintaining rivers in Kuala Lumpur. It is believed that they have been paid off by certain contractors” a source told the news portal. To-date, pertinent information on the investigation is not readily available.

 

Findings and Observations

The shortfall in terms of physical progress in different components of the ROL project along with an overall cost escalation is clearly a cause for concerns for tax payers. It indicates and raises the following observations:-

 

  1. lack of feasibility studies;

  2. lack of pertinent financial information and accountability;

  3. procedural missteps as well as poor procurement practices and contract management, tracking project progress and enforcement;

  4. glaring lack of oversight by the project authorities to ensure compliance with the contract terms, resulting in massive cost over runs; and

  5. lack of adequate and effective monitoring mechanisms and timely action to deal with breaches and damages.

 

These raise the following questions:-

 

  1. the 2015 and 2017 Auditor-General’s Report findings clearly indicate that there are grave and  critical areas that had been inadequately or poorly managed over the past nine years, resulting in tardy implementation and cost escalation. What has the Pakatan Harapan government and in particular the Federal Territory Ministry and DBKL have done to develop remedial changes to this project?

 

  1. as it becomes reasonably apparent that many work packages are badly behind schedule, some even by six years, were there any:-

 

  1. cancellation or reverse tendering of incompetent contractors and/or project consultants; or

  2. non-performing contractors and/or project consultants punished or blacklisted by DBKL?

 

  1. why were the DBKL’s lackadaisical attitude towards the critical defects of costly non-functional collapsible weirs were not detected or vetted by FTM and is the current FT Minister aware of this matter? and

 

  1. while the sale of government lands to Project Delivery Partners as well as awarding lucrative government contracts to incompetent contractors took place during the tenure of Tengku Adnan, are there any initiatives taken by the current FT Minister to reassess the land value as well as to re-examine the agreements and contracts to maximise government revenue? 

 

In order to uphold public accountability and transparency, an ethical and effective public service, good governance and sustainable development, we urge the current Pakatan Harapan government to perform the following:-

 

  1. a comprehensive audit on the entire ROL project;

  2. revise the initial plan(s) in relation to its design, requirements, functionality, challenges, etc. to ensure that the government gets value for money on this project;

  3. carry out a cost-benefit analysis to determine options which would provide the best approach to achieving benefits while maintaining costs to the minimum; and

  4. encourage collaboration and cross-pollinate ideas to increase the effectiveness and efficiency of this project since it involves too many stakeholders with different interests.

 

In Pakatan’s pledge to tackle entrenched corruption, C4 urges immediate steps for access to information for public feedback, greater scrutiny and oversight where sales of government assets and properties are concerned.

 

We further assert for Pakatan to lay down important rules and standards on accountability mechanisms, to assist in detecting fraud and assert our right to know, and the right to greater information over the dealings involving government and sales of government properties.

 

 

Released by:
Cynthia Gabriel (Ms.)
Executive Director, C4 Center

 

Lalitha Kunaratnam (Ms.), Senior Researcher, C4 Center