RM11.3 bil project with Temasek called off due to ‘soft market’, says PDC

The BPO Prime project was supposed to feature two towers, 29 and 25 stories high, in Bayan Baru, Penang.

GEORGE TOWN: A Penang state agency today said it agreed to call off a RM11.3 billion outsourcing centre and technology park project mutually with Temasek Holdings Pte Ltd and another company due to the soft market.

In a statement today, the Penang Development Corporation (PDC) said the cancellation was mutual.

“PDC had entered into a partnership with Temasek and EDIS to develop the BPO Prime (Business Process Outsourcing Prime) project in 2014.

“However, due to soft market conditions, the project has been cancelled by all parties,” the statement read.

On July 31, 2015, PDC, along with Temasek and Economic Development Innovations Singapore Pte Ltd (EDIS), signed a memorandum of understanding to build an outsourcing hub called BPO Prime on a 2.8ha of land in Bayan Baru.

Temasek and EDIS are to also develop the Penang International Technology Park (PITP) on a 83.4ha piece of land in Batu Kawan. This features two tech parks, residential and commercial zones.

Temasek is Singapore’s sovereign wealth fund with a reported net portfolio value of S$313 billion (RM952 billion) as of March 31 this year.

Temasek told NST Business that it would “remain open” for other investment opportunities in Malaysia.

In January 2017, The Edge reported that Temasek had put “on hold” the BPO Prime and PITP projects, citing “property market conditions”.

Former Penang CM Lim Guan Eng witnessing the MoU ceremony between PDC, Temasek and EDIS in 2014. (Facebook pic)

PDC had then denied this, saying the project was being “reviewed” and its construction cost relooked.

The late state Umno chief Zainal Abidin Osman questioned the Singaporean companies’ abrupt withdrawal.

He had said it was a sign that investors were losing confidence in Penang. Former chief minister Lim Guan Eng had told a press conference on Jan 25, 2017, that the project was merely “postponed”.

Meanwhile, investPenang director Lee Kah Choon gave more details on the cancelled project. In a text message, he said one of the reasons was due to a weak investment environment in the residential property sector.

“Banks are cutting down on granting housing loans and property prices are falling.

“According to a survey conducted by a consultant appointed by PDC and Temasek, the property market has softened and the demand for housing property has weakened substantially.

“As a result, the joint venture parties decided to terminate the project,” he said.

Lee said to meet the demand for office space, PDC had begun building “[email protected]” within the compound of the PDC headquarters in Bayan Baru, with a floor space of 80,000 sq ft. This project is expected to be completed in March next year.

Trade group Outsourcing Malaysia projected that Malaysia’s Global Business Services (GBS), or outsourcing sector, would see a compounded annual growth rate of 10%-15% from 2017 to 2020.

According to the Malaysia Digital Economy Corporation, GBS companies with MSC Malaysia status recorded total revenue of RM18.4 billion in 2016.

The Malaysian Investment Development Authority, in its 2016 report on investment performance, listed Penang in second place after Kuala Lumpur in investments for Global Establishments for Services, with an investment value of RM4.1 billion.