The total gross development value (GDV) of all the projects on that piece of land comes up to RM15bil. The announcement set tongues wagging among politicians, developers, analysts and property consultants. How did the Naza group land the deal? Did they get the 65 acres for a song? Shouldn’t there be an open tender for the project? Is the timing right, even amid the soft property market?
There are many questions and Naza TTDI group managing director SM Faliq SM Nasimuddin will attempt to answer them when he calls for a press conference, likely to be next week.
The Naza group is headed by Faliq and his brother, SM Nasarudin SM Nasimuddin. They have some very prominent projects, the KLCC Platinum Park being one of them.
They have other developments, residential and commercial, in Ampang, Shah Alam, Kajang and Taman Tun Dr Ismail. The group, however, is best known for its automotive business.
The Government has said that the Naza project is a public-private partnership (PPP). But what exactly constitutes a PPP?
A check on the Internet brings up this example – a PPP is a contract between a public sector authority and a private party where both parties enter into an agreement in which the private party provides public service and assumes substantial financial, technical and operational risks.
A PPP can be between the government and one or more private sector companies, which come together to form a consortium, according to Wikipedia. The consortium may have different functions, but they have one single objective.
In the case of the Naza project, that single objective should be to develop this 65 acres into the form, shape and function that will meet the criteria of the government, with the benefits to be accrued to the community at large.
A PPP takes into consideration the larger community and how a project can benefit them. It is not to the profit of a single entity or company.
Kumar Tharmalingam, chairman of Hall Chadwick Asia Sdn Bhd, says Naza’s building-for-land deal is a PPP, but with a slightly different model.
“The Government is not providing any financial undertaking other than that piece of land. All the expertise and financing is from the private sector,” he says.
“Instead, the Government acts as a facilitator or enabler by giving a list of approvals – from the master plan, to the building approvals to re-zoning.
“Naza will have to find people to develop and build the different components. They will have to sell the place, or find people to occupy all those projects around the convention centre. So in that context, all the Government does is give them planning approvals.”
As Matrade will get the expo centre, the Government will have to maintain it. Kumar says in some ways, the Government is turning away from the old style of doing things.
“It is not giving any guarantees,” he says. He cites the North-South Expressway concession, in which the Government had to provide a guarantee to Projek Lebuhraya Utara-Selatan (PLUS) on traffic volume in return for PLUS taking on the job.
“The Government does not need to guarantee that the buildings on that 65 acres will be filled, or how these buildings will come into existence. That is Naza’s responsibility. So in this sense, we are moving one big step forward,” says Kumar.
On the Government being handed a convention centre, Kumar says that should not be an issue as Matrade can give it to someone else to run and operate.
He does not share the view that such a development may be unnecessary. “There is something about convention centres. People will use it after it is built. The Kuala Lumpur Convention Centre is very popular because it is well located, managed and marketed,” he argues.
He says an important point that most observers have missed thus far is that the components that make up the master plan has to feed the expo centre. “All the components on that 65 acres have to complement the expo centre. So the onus is on Naza,” he adds.
A source, who declined to be named, says it will be a challenge for Naza to make a success of the huge project. “It will have to get the master plan right. If it pulls this one off, it will elevate the group to another level as a developer,” he says.
PPPs exist throughout the world in different forms. In some types of PPPs, the cost of using the service is borne exclusively by the users of the service and not by the taxpayer. A mass transport system is one example. In this case, the user may be a taxpayer also.
In other types of PPPs, the capital investment is borne by the private sector on the strength of a contract with the government to provide agreed services, and the cost of providing the service is borne wholly or in part by the government.
The government contributes to the contract by transferring certain existing assets into the partnership. In this particular case, that government asset would be the 65 acres of state land located behind Matrade.
Because the RM628mil expo centre will be turned over to Matrade on completion, this effectively means Matrade will be going into a new business.
By The Star
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