GEORGE TOWN, May 25 — The Penang state assembly today approved the Penang Loan (Banks and Other Financial Sources) Bill 2017 which will allow the DAP-led government to borrow from a bank in China.

Chief Minister Lim Guan Eng when presenting the bill said the enactment was introduced to create a new law regarding the state government’s borrowings.

"I believe the bill which was prepared under the initiative and leadership of the state government is geared to provide an abundance of investment and spur socio-economic, and physical development for the welfare and prosperity of the people of Penang,” he said during the state assembly sitting here.

He said the state government signed a memorandum of understanding (MoU) with China Exim Bank on Dec 16, 2014, which would allow the state to take loans from the bank at any time, for agreed purposes.

He said the bill was required under legal requirements as recommended by Prime Minister Datuk Seri Najib Razak in his letter dated May 31, 2016.

"The prime minister said if the state government wishes to get a loan from China Exim Bank, a number of conditions set out in Article 111 (2) of the Federal Constitution must be looked into,” he said.

Lim said the amount of money borrowed under the bill was to finance the investment and implementation of the physical, economic and social development of the state as well as other related matters, including the Penang Transport Master Plan 2013-2030 (PTMP).

Earlier, during the debate on the bill, Dr Norlela Ariffin (PKR-Penanti) said she was concerned that the loan would put the state in a huge debt risk.

She said the loan was understood to also finance the implementation of several development projects including the PTMP, which involved high costs.

Meanwhile, Cheah Kah Peng (PKR-Kebun Bunga) also questioned the amount of the loan and state government’s purpose of obtaining it.

"I, as a trustee want to know why this bill should be passed. How much money is needed (in the loan) and what are the reasons for it. Is it RM1 million or RM100 million or RM10 billion. The total, if it’s a large amount will burden us,” he said.

He said the state government should look at the examples of countries like Greece, Indonesia and the Philippines, which had faced the burden of debt, forcing them to mortgage land.

Lim said the prescribed loan period would be as enshrined in the Federal Constitution, namely, not exceeding five years.

He said however, that the loan amount was not important, but rather the acknowledgement by an institution owned by the Chinese government of the state government’s good financial performance.

"The amount we can borrow is limited. They (China Exim Bank) also have conditions which are not easy (to meet). I would like to emphasise here that Penang’s debt is the lowest compared to other states.

"I hope what we are doing here is not only a recognition from China, but also a practice of transparency. We’re ready to provide explanation regarding the financial instruments to any assemblymen who wish to know,” he said. — Bernama