Questions on ‘mega-bridges’ financing in Brunei Darussalam

Questions on ‘mega-bridges’ financing in Brunei Darussalam

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Brunei_2013_ConstructionAs plans for three new ‘mega-bridges’ take shape, the government intends to impose stringent environmental assessments for the vast structures. However, critics say equal emphasis should also be placed on identifying financing options to avoid construction delays.

On June 20, the Ministry of Development signed a $138.9m deal with domestic firm Swee Sdn and South Korea’s Daelim Industrial to build the Sungai Brunei Bridge, a cable-stayed bridge, which, at 607 metres in length, will connect Kampung Sungai Kebun to Jalan Residency. Daelim will assume responsibility from design to construction and have a 67% stake in the venture.

Set to be complete in 2016, the bridge will cut the journey time for local residents, who currently have to travel around 30 km via Jalan Bengkurong-Masin and Jalan Tutong to reach the capital. The new bridge will have a two-lane carriageway and pedestrian walkways.

Three weeks earlier, while discussing the proposed Temburong Bridge that will stretch 30 km to link Brunei-Mura District and Temburong District, Permanent Secretary (Administration and Finance) Awang Haji Mohammad Lutfi bin Abdullah said efforts must be made to ensure bridge projects do not harm the environment.

“The protection of the environment is of paramount importance to Brunei Darussalam and it is imperative that there are minimal adverse effects arising from the construction of the [Temburong] Bridge,” said Awang, advising an environment impact survey to leave “no stone unturned”.

On June 27, the government announced tenders for the Temburong project, saying it involved the construction of a 13.4-km marine viaduct across the Brunei Bay, an 8.1-km viaduct across the Brunei channel and a viaduct across the Eastern channel stretching 5.3 km.

Officials say that the bridge, set to be complete by 2018, will boost development in Temburong, which is currently separated from the other three districts by Malaysian territory. Completion will also mean that the country has realised a key section of the Pan Borneo Highway.

Contracts were awarded for the bridge’s initial assessments in May, with the director of the London-based Arup Group – which was appointed the civil and structural consultant – saying that the project would be “fast-tracked” for completion. Six local firms were also contracted to conduct environmental impact assessments, soil investigation, and marine and land surveying. Construction contracts are set to be divided into a number of packages, with the first tender scheduled for the fourth quarter of 2013.

A third bridge is planned to connect the mainland to the island of Pulau Muara Besar, located at the mouth of the Brunei River, which would form part of a $4bn project to develop an integrated refinery and aromatic complex there. Last August, it was revealed that South Korean engineering firm Pyunghwa Engineering Consultants was undertaking consultancy work for the planned structure.

The three mega-projects will create financing challenges, and senior officials are calling for an innovative approach to raising capital.

On July 1, the chairman of the board of directors for Bank Islam Brunei Darussalam, Yang Berhormat Pehin Orang Kaya Seri Utama Dato Seri Setia Hj Yahya bin Begawan Mudim Dato Paduka Hj Bakar, said Islamic bonds could be used to raise funds.

“If [the government is] to offer papers that are in compliance with Islamic principles, in the big numbers, we will buy. They should issue Islamic papers because, after all, the projects are in Brunei … [It is] exciting times for banks and people who invest,” he said.

Funding decisions are seen as a key factor in why the bridges, planned since 2011, have taken so long to see meaningful progress, with critics saying that the private sector wasn’t needed to raise funds given the Sultanate’s oil and gas wealth.

Last September, the chairman of Malaysia’s UEM Group, an engineering and construction firm, said that, due to Brunei Darussalam’s small economy, he does not think that the Temburong Bridge project would follow other ASEAN economies’ model of build-operate-transfer.

“[The bridge project] will be more government funded, so how the government does that – through deferred payment or through direct contract – will be looked at,” he said, adding that in other South-east Asian countries these types of projects are often privatised and the investment is recovered through tolls.

While the contract tendering and environmental impact assessments underline that mega-bridge projects have stepped up a gear in their development, only through greater transparency over their long-term funding will the government reassure investors and Bruneians that they will be completed on schedule.

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