Tuesday, May 22 2012
Reconsider Penang Hill railway upgrade
Tuesday, 05 May 2009 13:39

By Ahmad Chik.

THE Public Works Department has called for a tender to upgrade the Penang Hill funicular railway. It is expected that the work will take about 10 months to complete. The project is part of the economic stimulus package and is being rushed through for that reason.

It is worthwhile to examine how much stimulus this package will provide for the economy. The difficulty is the lack of reliable data, but even so it is possible to make educated guesses and arrive at broad conclusions.

The contract is estimated to cost RM40 million, with a sizeable portion made up of electrical and mechanical works, most of which can only be supplied by a specialist foreign supplier of funicular railway equipment. Thus, it will be a safe assumption that at least half of the budget will be paid to that foreign company. The balance will be for the purchase of building material, services (transport, hire of equipment, etc), salaries and the main contractor’s profit. Most of the wages will be for foreign workers and will be repatriated, leaving perhaps 75% of the balance, or about RM15 million, to remain in the country to stimulate the economy.

Against this is the cost to the economy of stopping the railway service for at least 10 months.

During this period,  at least 500,000 tourists will not be able to visit the hill. Assuming that each tourist spends RM25 – a purposely low figure – the loss will be RM12.5 million. Based on previous experience when the funicular was down, about 150 tourists a day will visit the hill using the jeep track and spend about RM70 each – a purposely high figure – (mostly on taxi fare), injecting about RM3.1 million into the local economy. Offsetting this against the loss figure (RM12.5 million) gives a net total loss of about RM9.4 million. Hence, the actual gain to the economy is only about RM5.6 million (RM15 million less RM9.4 million).

It is evident that the actual stimulus to the economy is small, about RM5-6 million, if the contract is completed on time. If the project is delayed by, say, 18 months, as often happens, the result will be the opposite, and the economy will be de-stimulated.

Not included in the above calculations are the inconvenience to the hill residents, particularly those living in mid-hill, and the loss of a valuable heritage asset, which leads me to conclude that the planners have not diligently considered all aspects fully before deciding to upgrade the railway.

I have to add also that RM5-6 million over 10 months is a paltry sum and can easily be matched by merely encouraging economic development such as the development of Crag Hotel and abandoned government bungalows and quarters on Penang Hill.

**Republished with permission. This article first appeared in the May 5, 2009, issue of theSun. The author is the spokesperson for Friends of Penang Hill, an NGO that is against the upgrade of the funicular railway.

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