CHINA Communications Construction Co (CCCC), the main contractor for the East Coast Rail Link (ECRL), has drawn similarities between its project in Malaysia and the port it built in Sri Lanka in 2015.
The chairman of CCCC, Liu Qitao, had said recently at a conference in Hong Kong that the Sri Lankan people were initially apprehensive of the Hambantota Port project that the government was forced to hand over to the Chinese after being unable to service the debt of US$1.2bil tied to it.
But Liu said eventually, the people accepted the presence of Chinese ownership of the port after having discovered that it was beneficial for their livelihood.
The question with regards to the ECRL is not about the railway project being beneficial to the people in the Eastern corridor of peninsular Malaysia. Without a doubt, there are economic benefits.
However, the issues are about the cost of constructing the railway line from Gombak in Selangor to Kota Baru in Kelantan. And why the agreement was drawn out in a manner which is not favourable to Malaysia.
The ECRL project was mooted some 10 years ago at a cost of RM27bil. When the project was signed between Malaysia Rail Link Sdn Bhd (MRL) and CCCC, it was tagged at RM55bil with an additional RM10bil to be incorporated at a later stage.
That is RM65bil in total.
And 15% of the RM65bil was drawn down as upfront payment or `mobilisation fee’ without much work done.
Why such a big upfront payment? It is not the norm.
Even local contractors do not get such favourable terms. Why was CCCC granted such terms? Did they have to channel the money elsewhere?
MRL executives have told officials in the new government that they would not have signed such a contract. CCCC may not be aware of their apprehension.
But at least they should know that it is not about the project being beneficial. It is about the way the cost has ballooned and the agreement drawn out that is not favourable to Malaysia.
FGV’s forensic audit investigations
THE new management of FGV has been taken to task to revisit some of the group’s past investments and acquisitions with dubious transactions. An independent forensic audit investigation is currently being carried out and is slated to be concluded in two months’ time.
This forensic audit investigation follows after the FGV board conducted a preliminary internal investigation on the affected investments back in October last year.
Some of the past investments and acquisitions include those in FGV Cambridge Nanosystems Ltd, Asian Plantations Ltd and the purchase of the Troika apartments near the Kuala Lumpur City Centre.
As pointed out by the current FGV chairman, Datuk Wira Azhar Abdul Hamid, all the necessary action will be taken in a transparent manner once the investigations are concluded.
The forensic investigations will also be thorough from both the accounting and legal perspectives.
What draws the attention to the past investments is that all were purchased or acquired from the proceeds of FGV’s listing back in June 28, 2012.
Within a span of three years after its listing, FGV had spent over RM4bil under its M&A strategy, which mainly comprised brownfield plantations to supposedly “fast-track” the group’s growth expansion and improve its crop age profile.
This include the RM1.1bil purchase of London-listed Asian Plantations, among others.
In the case of Asian Plantations, FGV is taking it to the next level by using both domestic and international resources for the forensic investigation. It has also hired a London-based legal firm to handle the matter, particularly on the land valuation aspect.
Hence, the possible conclusion from FGV’s ongoing forensic investigation will be like opening a can of worms from the past business dealings of the world’s largest CPO producer.
NEWS that some 34,532 residential units worth RM22.26bil remain unsold is not surprising. The fact that the number of unsold units comprising houses and high-rise units rose 55.72% from a year ago is.
Property in Malaysia in recent year has been a sore point. The escalation in prices and the number of highly priced residential units have made owning a house out of reach of the average Malaysian for some time and that gap is not closing anytime soon.
Housing has always been part of the Malaysian dream and with houses still out of reach of the average Malaysian means that more needs to be done to correct the imbalances that exist in the housing market in Malaysia.
Sure, there will be proposals to alleviate the property overhang in the country, but that method should not be done by making it easier to own a house. Shortcuts to have people own a house will be compounded later on in the duration of home ownership in the country. What is needed is an upliftment in the incomes of households that will make them afford houses instead of schemes that make it easier to buy a house, but then down the road see households struggling to continue with the housing payments.
Taking a leaf from the problems of the past suggests that the best way to deal with housing overhangs is to grow the economy. Even in the late 1980s, there was chatter that the housing overhang was large and would last for a long time, but high economic growth dusted off that problem in no time.
What state governments can do also is to make sure that more affordable houses are built. Malaysians on average cannot afford to buy a house that costs RM500,000, as the monthly payments will take a large part of their monthly household incomes.
The higher-priced units can be grabbed by upgraders as their household incomes rise, but a comprehensive plan is needed to ensure that the housing needs of the average Malaysian is met in the immediate term.