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MANAGEMENT AND SCIENCE UNIVERSITY

Usamah Hj Zaid
usamah@asetsb.com.my

Issues and problems with mega projects (million and billions of $)

SCHOOL OF GRADUATE STUDIES
MANAGEMENT AND SCIENCE UNIVERSITY, SHAH ALAM

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Issues and problems with "mega projects" (millions and billions of $)
Usamah Bin Zaid



INDIVIDUAL ASSIGNMENT

Name : Usamah Bin Zaid
Student ID :012014050841
Date Of Birth : 23 Aug 1983
Contact Number : 019-602 2006
Email Address : usamah@asetsb.com.my
House Address : Lot 10, Jalan SP 6
Sri Petaling,
57000, KL
Occupation : Business Executive
Employer : Alam Sekitar EcoTechnology Sdn Bhd

SCHOOL OF GRADUATE STUDIES
MANAGEMENT AND SCIENCE UNIVERSITY, SHAH ALAM

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Issues and problems with "mega projects" (millions and billions of $)
Usamah Bin Zaid
TABLE OF CONTENT

1.0 Overview...3

2.0 Case study : Stuttgart 21..4

3.0 Local Mega Projects6

4.0 Conclusion...8

SCHOOL OF GRADUATE STUDIES
MANAGEMENT AND SCIENCE UNIVERSITY, SHAH ALAM

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Issues and problems with "mega projects" (millions and billions of $)
Usamah Bin Zaid
1.0 Overview: "Megaprojects" is the term applied to multi-billion dollar infrastructure
developments such as massive dams and bridges, and to elaborate railways and highways.
The "megaprojects paradox" is that more of these projects are being implemented, but such
projects typically perform very poorly, often with substantial cost overruns and market
shortfalls. (Wikipedia)

The reason for these poor performances is that many of the participants in the process have
incentives to underestimate costs, overestimate revenues, undervalue environmental impact,
and overvalue economic development effects. The central problems are lack of accountability
and inappropriate risk sharing which can be improved by reforming the institutional
arrangements of decision making and to institute accountability at the project development
and evaluation stages.( Megaprojects and Risk: An Anatomy of Ambition is a 2003 book by
Bent Flyvbjerg, Nils Bruzelius, and Werner Rothengatter,)

There is a paradox here, however. At the same time as many more and much larger
infrastructure projects are being proposed and built around the world, it is becoming clear
that many such projects have strikingly poor performance records in terms of economy,
environment and public support. Cost overruns and lower-than-predicted revenues frequently
place project viability at risk and redefine projects that were initially promoted as effective
vehicles to economic growth as possible obstacles to such growth. The Channel tunnel,
opened in 1994 at a construction cost of 4.7 billion, is a case in point with several near-
bankruptcies caused by construction cost overruns of 80 percent, financing costs that are 140
percent higher than those forecast and revenues less than half of those projected (see chapters
2-4). The cost overrun for Denvers US$5 billion new international airport, opened in 1995,
was close to 200 percent and passenger traffic in the opening year was only half of that
projected. Operating problems with Hong Kongs new US$20 billion Chek Lap Kok airport,
which opened in 1998, initially caused havoc not only to costs and revenues at the airport; the
problems spread to the Hong Kong economy as such with negative effects on growth in gross
domestic product. After nine months of operations, The Economist dubbed the airport a
fiasco, said to have cost the Hong Kong economy US$600 million. The fiasco may have
been only a start-up problem, albeit an expensive one, but it is the type of expense that is
rarely taken into account when planning megaprojects. (Bent Flyvbjerg)

SCHOOL OF GRADUATE STUDIES
MANAGEMENT AND SCIENCE UNIVERSITY, SHAH ALAM

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Issues and problems with "mega projects" (millions and billions of $)
Usamah Bin Zaid
Many of megaprojects attract many issues and long heated debates either in Parliaments or
amongst public people in the restaurant, many street demonstration even downfallen of
political party and government due to wrong decision making and mismanaging public
related mega projects. In Malaysia itself many unsolved issues regarding expenditure of
KLIA2 or Penjara Pudu or even Sungai Besi Airport yet to be answered. Debates of Istana
Negara 400 million Ringgit or 800 million are still being talked about openly.


2.0 Case Study :
Lets get a look at one failed megaproject in Germany, called Stuttgart 21. Project history
goes back to the late 1980s, when results were sought to stretch forth the high-speed train
connection Mannheim-Stuttgart to Ulm and Munich. Due to Stuttgarts complicated location
geographically in a narrow and small valley and the existing stations terminal's character
which requires trains to stop, turn, and leave the situation the way they came, initial plan was
to make a new HST track along the Neckar valley that would have bypassed the Stuttgarts
city center in favor of a through-station north of the city center (Rosenstein). In response to
this proposal, state, regional, and local stakeholders demanded a further examination, and
after various discussions. One proposed plan has been launched by the name of Stuttgart 21
which Reuter described as expansive redeveloped and sold to refinance part of the schemes
expensive infrastructure investments. Resource protection and urban growth are their main
critical policy objective.

In the proposal stated few key areas will be provided.
1. Promote environmental friendly way of transfer.
2. Improving region access.
3. Connection to extra local transport infrastructures.

They promise to municipal and government body all areas surrounding train station will be
develop two new urban areas and will be developed to the higher value community. Turn it
into the high value real estate.



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Issues and problems with "mega projects" (millions and billions of $)
Usamah Bin Zaid


Project Opponents and Alternative Plans

Ever since introduction in the early 1990s, Stuttgart 21 has been an extremely contested
project, the public did not get clear objective of our goals of idea building this megaproject,
many oppositional political parties, the oppositional community-based groups, civic
associations and environmental friendly NGO confront Stuttgart 21s planning ideas. From
time to time they become more organized and vocal and protest and demonstration become
the norm in the city, supported by opposition party (Green party) which has spoken out
during the initial stage, multifaceted campaign involving legal action, petitions, the
organizing workshops and other community event.

Opponent directly questioned all aspects planned schemes from efficiency, financing and
environment sustainability of transport investment to urban development impact. Widespread
criticism relates to the schemes cost. Even the Federal Court of Auditors facing few issues,
example
1. Criticized the assessment as not accurately describing the project exact cost.
2. Risks are disproportionably underwritten by public sector by significantly reduced its
financial exposure over the long time.
3. Wonder who is truly guilty of misusing public resources.

Stuttgart 21 main objective is to improve public transportation, even the junction of
railway been challenged. Critics also argued the projects extensive tunnel constructions
endangers Stuttgarts ground water level and mineral springs. Historical preservation and
urban development concerns also soon emerged as focal points of debate, Stuttgarts
landmarked central station was an icon of 1920s architecture will be partial demolish was
criticized as a continuation of destructive, modernize urban renewal.

While the proposed land use and physical development measures were attacked as
primarily reflecting profitability concerns and not encouraging vibrant, socially integrated
urban regeneration. The concern shared by large of Stuttgart population. This style has
become visible during the mayoral election in 1996, candidate from The Green who
SCHOOL OF GRADUATE STUDIES
MANAGEMENT AND SCIENCE UNIVERSITY, SHAH ALAM

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Issues and problems with "mega projects" (millions and billions of $)
Usamah Bin Zaid
strictly opposed the project took in more than 43% local votes. In 2009 The Green Party
won municipal election in this traditionally conservative city.

During late 2001 a petition against Stuttgart 21 was launched, it has attracted more 67,800
people to sign, over the year more people bring together the mass meeting against this
proposition. Most notable during 2010, mass protest held in the city centre attracted
hundreds and thousands. During August 2010 when construction about to start, protester
decorated the construction fence with protest flyer and messages. People permanently
began to occupy park ground adjacent to the station. Police were called to vacate the
ground to prevent the protester, as a consequence many were injured, including sixty five
year old man became permanently blind by police water cannon.



3.0 Local Megaproject
Let us take this case study and look at Malaysia scenario, example of Double Track Train,
from Malaysia to Singapore, River Of Life (ROL) planning was proposed many years
ago, because of public, political and NGOs involvement, project still seem far away from
kick off let alone completion, ROL initiated by Malaysian Prime Minister not long ago
for a value of Billion Ringgit Malaysia, awarded to foreign company, despite the
billboard on advertisement on every corner of Kuala Lumpur to promote to people to
show improvement its bringing to Klang Valley resident, raise value of real estate,
promote Klang River to be like Thames River in London, but people would still argue, if
its bring any benefits to people. Price of houses roared, while many lower and middle
SCHOOL OF GRADUATE STUDIES
MANAGEMENT AND SCIENCE UNIVERSITY, SHAH ALAM

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Issues and problems with "mega projects" (millions and billions of $)
Usamah Bin Zaid
class people yet to own a house. Why spend billion on the river, when you can use that
money to make a shelter for poor masses.



Is this mega project willing benefits countrys people as a whole or just a few people,
lets get a look at one megaproject as Sewerage Treatment Plant Pantai 2 in the Klang
Valley, the proposal is to demolish old Aerated Lagoon and turn it into higher population
equivalent of 1,400,000, awarded to BEWG for closed to Ringgit Malaysia One Billion
(1,000,000,000), initiated during the Malaysian Prime Minister visit to China, a contract
has been ratified. BEWG promised to turn old, smelly and ugly aerated lagoon to state of
art, latest technology sewerage treatment plant to cater majority of Klang Valley resident
sewerage and build recreation park above it with 4 football fields, playground, jogging
track and much more. This project has attracted many heated arguments, debates among
political, environmental NGOs and public. Here are few issues being raised,
1. The normal procedure for such huge project will be through open tender or close
tender, but for this Big Project, direct tender awarded to BEWG.
2. The initial planning, cost was less than Ringgit Malaysia Five Hundred Million,
why suddenly increase of cost during the agreement signed.
3. System for sewerage fall under jurisdiction of Suruhanjaya Prasarana Air Negara
(SPAN), according to policy, only approved system will be allowed to be use for
sewerage treatment plant in Malaysia, any new system will have to go through a
very strict procedure before been approve such as pilot plant, JKRnD meeting and
many others, but BEWG system was exempted from such exercise.
SCHOOL OF GRADUATE STUDIES
MANAGEMENT AND SCIENCE UNIVERSITY, SHAH ALAM

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Issues and problems with "mega projects" (millions and billions of $)
Usamah Bin Zaid
4. This Pantai 2 project investment initial cost will be invested using FDI investment
based on 20-80%, but a year afterward, most of financial cost was borne by the
Government.
5. BEWG has asked to use local consultant and contractor, which they cannot live up
to.
6. What if the technology proposed by BEWG did not work, who will bear the
outcome and take full responsibility as they were not local Technology Provider.
7. Warranty on maintenance and operation period last for two years only, will the
agency appointed by Malaysian Government will be able to run it, if the is no
technology transfer from BEWG to Malaysian.
Too many question has been asked were yet to be answer, do we really take into
consideration over cost overrun risk, lower than expected return on investment
(ROI).


4.0Conclusion
Adding a new chapter to the long and colorful history of megaproject development and
grassroots activism, the ongoing struggle surrounding Stuttgart 21, River of Life and
Pantai 2 holds several lessons for megaproject research and for investigations of current
urban development dynamics more generally. The project itself illustrates the renewed
relevance attached to large-scale development projects in urban policy as well as the
preoccupation with economic growth. A lot of lesson learn should be taken into
consideration that might scupper any mega projects plan. Such enormous sums of money
ride on the success of megaprojects that company balance sheets and even government
balance-of-payments accounts can be affected for years by the outcomes. The success of
these projects is so important to their sponsors that firms and even governments can
collapse when they fail. While we can also pin point many mega projects successfully
been delivered in Malaysia or elsewhere in the world ie Putrajaya and Cyberjaya, LRT
and Penang Second Link Bridge. Anything that well managed, objectives are understood
and deliverables are correctly and precisely managed, the outcome always beautiful.For
environmental and social effects of projects, one similarly finds that such effects often
have not been taken into account during project development, or they have been severely
miscalculated. In Scandinavia, promoters of the resund and Great Belt links at first tried
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Issues and problems with "mega projects" (millions and billions of $)
Usamah Bin Zaid
to ignore or downplay environmental issues, but were eventually forced by environmental
groups and public protest to accept such issues on the decision-making. In Germany,
high-speed rail projects have been criticised for not considering environmental disruption.
Dams are routinely criticised for the same thing. However, environmental problems that
are not taken into account during project preparation tend to surface during construction
and operations; and such problems often destabilise habitats, communities and
megaprojects themselves, if not dealt with carefully. Putrajaya development did not
sacrifice the environmental, eco-systems are well managed, Enviromental NGO will have
no points to argue, megaprojects become great projects. Moreover, positive regional
development effects, typically much touted by project promoters to gain political
acceptance for their projects, repeatedly turn out to be non-measurable, insignificant or
even negative. At the end huge impact will befallen on the stakeholder, most notably, the
public, and while some group of people will spend public funding as their own treasury.
Megaprojects will become monster project or white elephant project.

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