AFTER three years of vacillating on mega projects from the very top in Putrajaya, the construction industry can now breathe a sigh of relief.
Industry players can finally catch a break, and the largest one at that, with the first phase of Bandar Malaysia slated to kick off early next year.
Those in the business have gone through quite a turbulent period in recent years due to the changes in administrations that led to differing stances on mega projects and infrastructures and this is made worse when the coronavirus disease (Covid-19) hit early this year.
The pandemic grinded them to a halt for close to two months when the government implemented the movement control order (MCO) in March and even as construction activities were allowed to resume in May, they have yet to reach pre-pandemic levels. In fact, Master Builders Association Malaysia says the construction industry has lost RM11.6bil each month since the MCO began in March.
On the whole, Malaysia’s economy, like many other countries, has taken a beating due to Covid-19 and it takes tremendous effort to get the economy going again.
In Malaysia’s case, there is no bigger project right now than Bandar Malaysia and that is one of the government’s many answers to kick starting the economy.
It will be a mixed-use, transit-oriented development (TOD) with a gross development value of RM140bil and the government is optimistic about the multiplier economic effects that the mega project will bring.
Bandar Malaysia will sit on a land area of 194.5ha, located at the site of the former Royal Malaysian Air Force base in Sungai Besi, making it the single largest city development project in South-East Asia.
IWH-CREC Sdn Bhd, the master developer of the project, will begin the development for 20.23ha of the first phase early next year, which it intends to complete within a four-year time frame.
It is an aggressive target for that land size. Kuala Lumpur Sentral, which houses Malaysia’s largest transit hub Stesen Sentral, is spread over 29.14ha of land and that took some 20 years to complete.
This presents a lot of contracting opportunities and as far as IWH-CREC is concerned, it already has a list of multinational companies (MNCs) and developers, both local and foreign, who have expressed their interest.
The entire Bandar Malaysia is expected to be developed over 20 years, phase by phase.
IWH-CREC is a joint venture (JV) between Iskandar Waterfront Holdings Sdn Bhd (IWH) and China’s state-owned enterprise China Railway Engineering Corp (CREC).
IWH holds a 60% stake while the remaining 40% is owned by CREC but they both equally share 50:50 in economic benefits.
Construction tycoon Tan Sri Lim Kang Hoo holds 63% in IWH through his private vehicle Credence Resources Sdn Bhd.
The Johor government also has an interest through Kumpulan Prasarana Rakyat Johor Sdn Bhd, which owns 37% of IWH.
IWH-CREC holds 60% in Bandar Malaysia Sdn Bhd while the government holds the other 40% through Ministry of Finance Incorporated’s (MOF Inc) wholly-owned subsidiary TRX City Sdn Bhd.
The JV outfit had just settled its initial contractual obligations on Tuesday totalling RM1.24bil comprising a 10% deposit and an RM500mil advancement to TRX City, paving way for the mega project to start.
IWH-CREC tendered for the project at RM12.35bil, of which its 60% stake amounts to RM7.41bil.
Subsequent to the initial payments, it has two more staged payments of RM960mil each to the government and the balance will be settled via two bank guarantees over three years, which will be charged on IWH’s land.
Following the fulfillment of the initial commitment, IWH-CREC will soon begin inviting qualified local and foreign investors, developers, consultants and contractors to submit their proposals to participate in Bandar Malaysia.
The project will see strong opportunities for bumiputra and Malaysian companies while the use of Malaysian construction materials, technologies and local talents will be prioritised.
Shaping the future of Kuala Lumpur
The Kuala Lumpur City Centre is viewed from an oil and gas hub perspective while the Tun Razak Exchange (TRX) is set to be an international financial centre.
What Bandar Malaysia aspires to be is one of the most advanced urban cities housing the best of everything, from business and transportation to urban lifestyle, cultural heritage, education and medical. There will also be a data processing centre.
“This will be an MNC centre where we attract the Fortune 500 companies and the top 100 financial institutions.
“Everything will be intelligent in this purpose-built city. That will be important for us to compete among the regional countries. Everything must be high tech and we will also incorporate artificial intelligence to make the city different, ” Lim tells StarBizWeek in an interview.
Lim’s vision is that this will further increase high-income employment opportunities and alleviate the brain-drain in Malaysia.
Post-Covid, Malaysia will not be the only country scrambling to attract foreign investors in their economic recovery plans.
While Bandar Malaysia may offer the best modern city for businesses and corporations, an important element is the tailor-made incentives to attract the foreign direct investments.
Lim says that with the public-private partnership model with CREC and the Finance Ministry and its experience through Iskandar, it is something achievable, but it needs time.
He adds that they have also requested for a one-stop centre to include the Malaysian Investment Development Authority and the International Trade and Industry Ministry for the negotiations with the global corporations when it comes to the tailor-made incentives, which will differ among industries.
Meanwhile, the underground city element of Bandar Malaysia will still go ahead as planned, expected to be the world’s largest.
This leads to the next interesting question. Sungai Besi is historically a mining town and the site that Bandar Malaysia will be built on sits on tin reserves that is said to be the largest in the world.
Will Lim do anything to extract that pot of gold he is sitting on?
Ekovest’s involvement in Bandar Malaysia
Being the executive chairman of Ekovest Malaysia, Lim is mustering all he has to bring Ekovest into the Bandar Malaysia picture but of course, the final say ends with the shareholders.
He is attempting a corporate exercise which will allow Ekovest to acquire 40% of IWH’s equity interest in IWH-CREC.
This is said to be valued at around RM1.5bil.
“Ekovest will own about 20% in the JV company. Basically it’s like a strategic partner.
“For Ekovest to participate in this, Ekovest will not have to worry about Bandar Malaysia moving forward.
“We will have the opportunity to participate in the infrastructure and building, which is Ekovest’s forte and business.
“I will pull in Ekovest to be fair to the shareholders. With such a big project (and Ekovest) doesn’t participate?” Lim quips.
Industry observers have been anticipating either Iskandar Waterfront City Bhd (IWC), of which IWH holds 38%, or Ekovest will have to go in because such a mega development has a long gestation period.
And as far as cash flow is concerned, it is not the forte of IWH although it is well endowed with assets.
The market has been seeing Ekovest as dwindling in terms of order book. Therefore, by having a direct investment in Bandar Malaysia, this would be replenishing around 20 to 30 years of order book for the group.
Ekovest is much better in terms of cash flow.
“IWH is a master developer. It will be like Singapore’s Urban Redevelopment Authority.
“When the market is good, we sell more pieces of land through tender. When the market is not good, you basically just leave the land there.
“You can’t push out more land when you know there is a property glut. That’s why the master developer role of IWH is totally separated. Ekovest can come in as the developer, to do the contractor work and infrastructure work, ” Lim says.
IPO plans for IWH
Now that the green light has been obtained for the Bandar Malaysia go ahead, Lim’s next step would be to take IWH public, of which he intends to raise around RM5bil.
The company has a very strong asset base, currently valued at around RM20bil, with outstanding bank borrowings of only RM400mil.
Lim, who is the executive vice-chairman of IWH, aims at having long-term investors parking their funds with the company.
“We will definitely submit for an initial public offering (IPO). As to when, we don’t know.
“When it comes to funding for Bandar Malaysia, I think any bank will fund us. We actually charge our land. We have plenty of land, ” he says, adding that the timeline for the IPO would depend on how fast Covid-19 can subside.
A lot of value will come from Bandar Malaysia which will anchor IWH’s listing, more than it’s Iskandar Waterfront development in Johor.
Given IWH’s track record, it is also talking to other states and countries in the region for similar city developments.
Lim says they have gone to the Philippines and Cambodia to conduct planning and studies to propose to the respective governments.
Rail and highway connectivity
Bandar Malaysia will be home to the Express Rail Link, KTM, Mass Rapid Transit Line 2 and 3 and the existing ERL railway, which connects KL International Airport and KL Sentral transportation hub.
The MRT2 has already designated two stations in Bandar Malaysia which is set to be completed by 2021.
The Setiawangsa-Pantai Expressway, formerly known as DUKE 3, is slated to be completed by 2021. It is linked to 12 other highways in the KL city and will be aligned to Bandar Malaysia.
Lim also stresses on the importance of the KL-Singapore High Speed Rail (HSR) as it will open up Malaysia and Singapore’s economic corridor to the world.
Even without that, the existing network of road and rail already makes it quite a tantalising proposition for people to look at Bandar Malaysia.
There is the North-South Expressway that links Bukit Kayu Hitam in Kedah all the way to Johor Bahru which eventually links to Singapore through the Johor Causeway.
There is also the electrified double-tracking project between Johor Baru and Padang Besar that Bandar Malaysia can benefit from.
The KL-Singapore HSR is projected to be in operation sometime 2030 or 2031 and this will definitely lift the prospects of Bandar Malaysia.