IT is common, in fact, simply human nature that when you get something for free, the value is less appreciated. Still, who doesn’t love a freebie? But could that still be the case when it involves choice public land?
It is widely speculated that the Government will transfer its ownership of some 195 ha of prized land in Sungai Besi, currently the base for the Royal Malaysian Air Force (RMAF), to 1Malaysia Development Bhd (1MDB) to be developed into a mammoth scale urban renewal project.
1MDB is a Government-owned strategic development fund that was set up about a year ago. In that sense, it’s not a peculiar move. Ultimately, the Government is still the land owner. But that also means that it is not a risk-free proposition; the Government has merely transferred the land but not the risks involved in developing the land.
The first question that comes to mind – why 1MDB? With RM5bil in its coffers which was raised through an issue of debt papers and with no cash flow to thump its chest about for the moment and merely pledges from several international corporations that they will invest their monies in the country, 1MDB really has no track record to speak of.
While that in itself may not be enough to dismiss its ability to pull this project off, it does raise some concerns. Is 1MDB biting off more than it can chew? The deal’s proponents say 1MDB managed to woo Qatar Investment Authority (QIA) to part with some US$5bil, part of which will be ploughed into this development project.
The Doha-based sovereign wealth fund with an eye-popping US$65bil in its kitty was ranked one of the world’s biggest shoppers in the second half of 2009, having spent US$32bil gobbling up assets.
It recently closed a £1.5bil deal to pick-up Harrods, a retail empire with an outlet in Knightsbridge. Its massive financial muscle is backed by gas reserves in the tiny gulf state. The thing is that while QIA may be a strategic investor with really deep pockets, it is a real estate investor, not a property developer.
This makes it imperative for 1MDB to tie-up with an entity that does have the necessary expertise for this mammoth project, which it plans to do.
Speaking of mammoth, there seems to be a steady flow of news on developments of large acreage of Government land in the pipeline.
The Employees Provident Fund (EPF) has tied-up with the Government to develop the 1,214 ha of land in Sungai Buloh into a “new hub” for the Klang Valley.
The rationale for the EPF’s involvement is that the returns from the project, it is hoped, will trickle down to millions of its contributors whose retirement savings of over RM380bil is under its care.
But even this is not free from concern. Should the EPF, the people’s retirement fund, involve itself in property development? Again, investing in real estate and getting involved in property development are not the same thing.
Late last year, in a land for building swap, Naza Group or more specifically Naza TTDI got some 25 ha of public land in Jalan Duta to build a new Matrade centre valued at RM628mil, which is part of a massive RM15bil project.
Then, there’s the colonial era Pudu Prison in the city centre that is being demolished to make way for another new RM5bil city development project.
But in this instance, its developer UDA Holdings Bhd forked out RM100mil for the 7.65 ha land to the Government. UDA is wholly-owned by state investment arm Khazanah Nasional Bhd.
What is not clear to the public is the rationale for the Government’s decision to share, charge or transfer for free its vast landbank. How does it decide which one best serves to maximise value?
It is only logical that as landowner, the Government provides the land, while the other parties involved either have the expertise or the capital to develop the land.
But what happens when there is more than one party that fits the bill? Perhaps it’s time that the management of public land should conduct itself in a manner that is more transparent?
>Business editor Anita Gabriel can already hear the accusations that she’s a cynic. But she thinks there’s a fine line between prudence and cynicism.
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