Lim said the state will also need the federal government to issue an approval letter to enable the state to obtain loans directly from China. — Picture by KE OoiGEORGE TOWN, May 29 — Penang will use a portion of the reclaimed land from the proposed South Reclamation Scheme (SRS) as collateral for taking a loan from China, said Penang Chief Minister Lim Guan Eng.

The Penang lawmaker said the state will also need the federal government to issue an approval letter to enable the state to obtain loans directly from China.

“The loan period from China is only five years so we would not be borrowing a large sum, it will not be more than RM1 billion,” he told a press conference at his office today.

Lim clarified that the state is borrowing money direct from China and not a bank in China.

He was responding to criticisms by Penang Umno Liaison Committee chairman Datuk Seri Zainal Abidin Osman over the state passing a Penang Loan (Banks and Other Financial Sources) Bill 2017.

Zainal had demanded to know why the state government needed to borrow funds from overseas when the state has a budget surplus of RM1.6 billion.

“We don’t deny that we have budget surplus but we want to take a loan from China because when we take loans from a country, the interest rate is low,” Lim said.

He said the fact that China is willing to lend money to Penang is a recognition of Penang’s ability.

“We are talking about China, a country, not a bank. It will enhance and put Penang on the global map as a state with outstanding and brilliant financial performance,” he said.

He said the state government is not “selling the state” by borrowing a sum that is less than RM1 billion.

Lim said the loan is to partially finance the RM27 billion Penang Transport Master Plan (PTMP).

He added that project delivery partner (PDP) SRS Consortium may have to take the balance of RM26 billion loan from other banks.

The proposed SRS is off Permatang Damar Laut and was meant to fund the PTMP.

The SRS includes the creation of two man-made islands off the coast, of about 2,000 acres and 1,300 acres respectively, and later another island covering 800 acres.