The closure and the proposed redevelopment of Pudu Jail highlights the Government's intention to rebrand Kuala Lumpur as a vibrant city with a new look.
So far, we have seen announcements of government companies and government-linked companies being called upon to develop the Merdeka Stadium, the land at Imbi Road, Sg. Besi airport, the Matrade-Naza joint venture and EPF with the Rubber Institute of Malaysia (RRIM) redevelopment. While the RRIM development is at the fringes of Kuala Lumpur, the other sites are in the city, and the infrastructure to develop them will see a total change in the traffic flow, logistics of land use, and as a result, will provide for the first time alternative iconic centres to the 15-year old Petronas Twin Towers.
The idea of using government companies looks like the early Singaporean model started by their first prime minister where they identified a piece of land at the end of Orchard Road, master-planned it and invited leading Hong Kong tycoons such as Lee Kah Shing and Tan Sri Frank Tsao to develop what eventually became the 5 million sq ft Suntec City which served as a catalyst for the redevelopment of the entire Marina Bay area.
Singapore hopes to replicate that by opening up the new Marina Bay development where the very expensive Sail Condo is located right across from the Sands Casino. This is expected to be the new financial centre in Singapore, thereby creating an extraordinary new chapter as a regional financial centre.
Malaysia should not play second fiddle, and we certainly have more opportunities to develop more iconic platforms as we have a better foot print and better design features. Furthermore, we have more land, and are able to spread our designs over a larger base.
The task for the GLCs or government companies to design and master-plan certainly is a much better proposition than passing it to well-connected individuals as was previously the case. These wholly-owned government companies, run by highly trained professionals, are very conscious of the responsibilities they have been entrusted and fully understand that they are constantly and continuously being watched, analysed and monitored by very critical analysts. The government expects these companies to practice full transparency and accountability for the future success of these projects, and more importantly, expects them perform as intended, in accordance with world standards. Additionally, the benefits derived from these development projects will return to the people via the Government which is the sole owner of these government companies.
Obviously the scale of the projects requires not only massive funding, but also deft master-planning and an understanding of market forces so that all these projects do not flood the market at the same time. Not many private companies are capable of handling these mammoth tasks.
The fact that they have a single sovereign owner should also ensure that the release of these projects into the market place will be orderly, unlike previously where there was no adequate property information. Every private developer placed his project in a vacuum, assuming that he had no competition which resulted in over-supply and a drastic drop of capital values in the late 90's.
We already have such a successful model in KLCC. The Sentral development project, after a rocky start at the tail end of the 1997 crisis, is now going from strength to strength, and MRCB has a good model there.
While it is vital to inject private sector participation in these projects, it is more important to have wholly government-owned companies or GLCs to take the lead role in the master planning process.
Selling these properties to the highest bidder, local or foreign, may result in the risk of the land being lost if the project failed or the purchaser, in his urgency to get the returns of his investment, fast-track the project without due consideration to market needs. Under this scenario, the project is bound to suffer.
The most famous landmark failure of that is of Canary Wharf, the iconic Eastern Docklands of London, which was bought by the Reichmann Brothers of Canada. Their company, Olympia & York, became the most successful property developer in Canada and US before they ventured into bidding a high price for the Canary Wharf site in 1986.
The 33.58ha site in 1987 became the largest development project in the world which incorporated One Canada Square, Britain's tallest skyscraper.
With the UK running into recession in early 1990, the building remained empty and the Reichmann Brothers were declared bankrupt in 1992, owing debts in the amount of US$20 billion (RM64 billion). The banks then took over Canary wharf and sold it by auction years later.
The London property market survived that disaster due to its strength as a world financial centre. If we follow that privatisation path again we may not be so lucky.
The writer is the chief executive officer of Malaysia Property Incorporated
By Business Times
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