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Saturday, 12 April 2014

Khalid Ibrahim : Eco World made a gross profit of RM170 million or RM120 million net – based on price per sq foot as per in the agreement signed between SISB and PNSB – by selling Selangor state land it had not yet paid for in full.

With Thanks to FMT




Selangor land deal blights PKR

 | April 12, 2014
The sale of more than 400ha to a private concern looks like it involves a sweetheart deal to benefit MB Khalid.
COMMENT
Khalid-Ibrahim-SELANGOR
For the past three decades, with Umno consolidating its hold on government, there has been a revolving door in the wall that would have kept politics separate from business. It’s a door that’s well greased to allow for easy passage by politicians, of course, but also judges, bureaucrats, officials in uniform and other well connected people.
We’ve often heard of projects and business opportunities valued at hundreds of million and even billions of ringgit for which the government—that is, the public—takes the risks and from which businessmen make obscene profits.
Greed is good, some say. They may be right, as long we don’t take the expression too literally, charmed though we are by the alliteration. The trouble with Umno politicians and their business cohorts is that they have taken it as God’s honest truth.
But wait a minute. Did we say “Umno politicians”?
Disappointing as it may be to opposition supporters, some of the tentacles of business may have managed to slither into the corridors of Pakatan Rakyat power, as illustrated by the following case, which looks like a sweetheart deal involving Selangor Menteri Besar Khalid Ibrahim himself.
What does Selangor have plenty of? Land. And land is a state matter. Nothing can be done on a piece of state land without the Menteri Besar’s say.
Khalid once declared in the State Assembly that state land would be developed by GLCs (government linked companies) to ensure that the projects would be driven not by the thirst for profits but by what would benefit the people of Selangor.
Power of attorney
He said his administration, to prevent abuses, would not surrender power of attorney to any party when it came to land matters.
Keeping in mind these statements and the sentiments they express, let us examine last year’s sale of the strategically located piece of vacant land formerly known as Canal City.
This prime piece of land, covering 474.29 hectares, lies close to Kota Kemuning, Putra Heights and Bandar Rimbayu with accessibility to four major highways: Lebuhraya Shah Alam, Lebuhraya Kemuning Shah Alam, South Klang Valley Expressway and Expressway Lingkaran Tengah.
The land is composed of 11 parcels, all in the Mukim of Tanjong Duabelas, Kuala Langat District.
The land title gives these other details:
Restriction-in-interest: This land can have its ownership transferred and can be leased or mortgaged with the permission of the state authority.
Category of land use: Buildings for business, buildings for residence.
Existing use: Vacant land.
Tenure: Leasehold interest for 99 years expiring on 9 November 2110.
Encumbrances: None
The land was alienated to Menteri Besar Incorporated (MBI), with Permodalan Negeri Selangor Bhd (PNSB) appointed as project manager to handle its development. In April last year, it was acquired by Tropicana Corp Bhd (then known as Dijaya Corp Bhd) when its subsidiary, Saphire Index Sdn Bhd (SISB), signed a sale and purchase agreement (S&P) with PNSB.
During the tender process, the offer made by another company, SP Setia, was better than SISB’s. However, PNSB persuaded SISB to match its rival’s offer.
The S&P guarantees PNSB a minimum return of RM1.297 billion, payable over a period of 20 years, but a clause in the agreement effectively compels PNSB to surrender its power of attorney over the land to SISB.
Last January, Tropicana sold a portion of the land to Eco World Development for RM470.67 million cash. Up to that point, the only payment it had made to PNSB was a deposit of RM50 million.
Therefore, with the Eco World deal, it made a a gross profit of RM170 million or RM120 million net – based on price per sq foot as per in the agreement signed between SISB and PNSB – by selling land it had not yet paid for in full.
On March 29, Khalid requested accelerated payment from Tropicana for the sum of RM844.2 million.
He said: “We made this decision following the announcement by Tropicana, who through its subsidiary Sapphire Index Sdn Bhd, sold 308.72 acres of land to Eco World via Prominent Stream Sdn Bhd for RM470.67 million.
“Since Tropicana has realised the land’s full potential from the sale, the state will do the same.”
Under the S&P, PNSB agrees that SISB “is entitled at any time at its absolute discretion to accelerate payment of the purchase price by the payment of any or all of the installments prior to the expiry of the completion period.”
Good graces
What can Khalid do to ensure that Tropicana comply with his “request” for RM844.2 million?
Tropicana requires state permits and approval to develop the land, which means it has to depend on the “cooperation” and “good graces” of the Selangor state government. Since the land is leasehold, any delay will affect profits.
Eventually it will be a compromise between what Khalid wants and what Tropicana will be prepared to do to ensure that its work as master developer is not compromised.
In considering this issue of the state’s deal with a private concern, any patriotic Selangor citizen should be asking at least the following questions:
                  Bearing in mind Khalid’s declaration that state land would be developed only by GLCs, why did his government sell this spread to SISB?
                  Why has the state given power of attorney to SISB?
                  Why are the land price (RM11.50 per sq ft) and the interest rate charged (5% per annum) much lower than the industry norm?
                  Why is PNSB’s entitlement over the deal payable over the long stretch of 20 years? What happens if Tropicana goes belly up before the 20 years are up?
                  Who is behind Eco World?
We have the answer to the last question. Abdul Rashid Abdul Manaf, chairman of SP Setia between March 1997 and October 2012, is the main shareholder of Eco World.
He is also the lawyer brokering an out-of-court settlement over Khalid’s RM60 million debt to Bank Islam. We have yet to know what kind of settlement is being brokered and the style of haircut Bank Islam prefers.
If PNSB had adhered to ethical principles, it would have placed conditions that would prevent Tropicana from dealing with any party that might have links with the Menteri Besar and thereby expose him to charges of having a vested interest in the transaction.
Good governance
It was unwise not to do so because it now brings into question Khalid’s integrity and that of the government he heads. It also compromises the integrity of PKR and Pakatan Rakyat in their practice of good governance in the states they rule.
Khalid’s holds his Menteri Besar post at the pleasure of the PKR leadership and members. He is duty bound to keep his party informed of his intentions, at least with regard to crucial issues such as those affecting the state’s water and land assets.
If he prefers to work independently of PKR, then he should resign from the party, quit his state seat and stand again for election under a different ticket. If he wins, he can persuade his party to appoint him as Menteri Besar.
CT Ali is a reformist who believes in Pakatan Rakyat’s ideologies. He is a FMT columnist.

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