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Bandar Malaysia: Is Najib making up plans as he goes along?

May 18, 2017

Ad-hoc policy-making pronouncements are completely detrimental to the finance ministry's objective of snaring a new investor for the project.

COMMENT

tony-pua-bandar-malaysia-1By Tony Pua

Why is Prime Minister Najib Razak making up the plans for Bandar Malaysia as he goes along?

Over the past two weeks, the prime minister and the finance ministry have been making a series of announcements, varying them along the way.

First, the finance ministry surprised the markets with the sudden temination of the sale of 60% interest in Bandar Malaysia to the consortium led by Iskandar Waterfront Holdings (IWH) for RM7.41 billion.

According to the finance ministry, IWH and it’s partner, China Rail Engineering Corporation (CREC) failed to fulfil their financial obligations under the agreement despite more than 10 extensions granted.

However, despite the purported breach of contract by the consortium, which should have led to an event of default requiring the forfeit of the 10% deposit paid, the government decided to refund the RM741 million deposit paid in full.

Then the markets were fed “rumours” from official sources that the agreement was terminated as Najib was expected to sign an agreement with China’s Dalian Wanda, owned by one of China’s richest men Wang Jianlin, for Bandar Malaysia. The expected agreement was purportedly worth more than US$8 billion (RM35 billion).

However, during the Beijing meet between Najib and Wang on May 13, the latter offered nothing more than polite, diplomatic and measured praise for Malaysia. The prime minister had to return home empty-handed, not even with a perfunctory, non-committal Memorandum of Understanding (MoU) as is typically signed during such high-profile events.

Suddenly with the embarrassing failure by the prime minister to secure any deal with Wanda, The Star reported on May 15 that according to a government source in Beijing, “Chinese Prime Minister Li Keqiang told Najib that China hopes the deal on Bandar Malaysia stays unchanged. Najib may have to take the Chinese wishes into consideration.”

It was further reported that Najib said then that the formula for equity stakes in Bandar Malaysia would be changed and that foreign participants would not be just Dalian Wanda Group alone.

“We will take into account the position of CREC and other groups that are interested, including Wanda,” Najib had reportedly said.

However, yesterday, back in Malaysia, the prime minister appeared to have changed his tune again. He said, contrary to some erroneous reports, the termination of the previous agreement with IWH-CREC is final, and will not be reinstated.

“The selection process for the master developer will involve very strict criteria, including a proven track record, speed of delivery, content creation, and the financial capability to deliver a project of this scale. The highest possible value will be sought to ensure the best deal for the taxpayer is obtained,” he added.

It appears very clear that the Bandar Malaysia development lacked any direction, and Najib is making up plans as he goes along.

Such ad-hoc policy-making pronouncements are completely detrimental to the finance ministry’s objective of snaring a new investor for the project.

Instead, potential buyers will only be frightened off by the policy flip-flops which can take place in Malaysia, providing them with little confidence and certainty over their investment in the country.

We call upon the finance ministry to deliberate in-depth the developments over the past two weeks carefully before making any more vacuous decision announcements.

Najib must not forget the fact that the original sale to the IWH-led consortium was finalised only after a six-month global hunt for investors by C H Williams, Talhar & Wong, the 1MDB-appointed real estate brokers, in 2015.

The offer by IWH consortium, despite their apparent inability to fulfil their financial obligations was then the highest offer on the table.

Instead of making empty promises of selling Bandar Malaysia at substantially higher prices which may in turn cripple the viability of the proposed economically beneficial projects, the government must study in-depth the types of development in Bandar Malaysia which will generate the most economic multiplier effects for the country, with an emphasis on supporting competent local developers and businesses.

Tony Pua is Petaling Jaya Utara MP and DAP National Publicity Secretary.

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