21November2019

Agenda Daily

MEGA PLANS, MEGA DUTIES

The recently announced mega property projects by the government, while on one hand bringing cheer to certain sectors of the economy, raises some pertinent questions on the other. Among them, would not such massive projects worsen the over-supply situation in the local property sector, and will local expertise be sidelined in favour of foreign consultants and cheaper imported labour?

 

DO WE NEED MORE RESIDENTIAL AND commercial space in and around Kuala Lumpur?

That’s the billion-ringgit question that begs an answer, following a series of announcements about major construction projects in recent months.

It’s not about spoiling anybody’s party, but about seeking the truth. We have touched on this subject before and should continue to do so for the sake of the country’s future.

We are not being doubting Thomases, but merely echoing the very facts and figures made available to us by the government. They clearly suggest that there’s a large property overhang.

The Treasury reported that in the second quarter of this year, there were 22,586 unsold housing units as opposed to 23,164 units in the first quarter. In the first half of the year, 106,738 new residential units were launched.

A worrisome trend is the high rate of unsold units in the lower price ranges — the RM50,000 to RM250,000 bracket. Either these categories of residential units are not strategically located, or the lower income people can no longer afford to buy houses.

The overhang was lower for shops. Against new launches of 32,508 units, the unsold totalled 9,621 units for the first half of 2010. But many of the sold units remained unutilised or are being offered for sale, suggesting a high level of speculation in this type of property.

While the ordinary people may not be aware of this situation and the implications it has on the economy, those who are knowledgeable are not keen to talk about it.

As such, the overhang and its bubble effects continue to worsen and may, sooner or later, impact on the banking system that provides funding for these properties.

Best not to sideline local labour

GIVEN the unwillingness of the government to face this problem head-on, it is good that the public is becoming more vocal in questioning the recently announced mega property projects.

They may not necessarily be basing their opposition on financial and economic considerations, but their activism may force the government to be more transparent and truthful in its defence of such projects.

The negative response to Prime Minister Datuk Seri Mohd Najib Abdul Razak’s announcement during his 2011 Budget presentation of the 100-storey Warisan Merdeka project is a case in point.

Mohd Najib, who is also Finance Minister, stirred the hornet’s nest by incorporating the project, which, as it later turned out, was a private sector undertaking, in his Budget speech.

Stung by the negative public reaction, the Prime Minister hastily passed the buck to the project’s proponent, Permodalan Nasional Bhd. Some argued that private projects should not have been included in the national Budget in the first place.

Taking the heat off the big boss, the Bumiputera trust agency held a special Press conference to explain and defend the project.

Its President and Group Chief Executive Tan Sri Hamad Kama Piah Che Othman said the 10-year project would be developed in three phases at a cost of RM15 billion, starting with a 100-storey tower next year. The 100-storey tower, the country’s tallest when completed, is estimated to cost between RM2.5 billion and RM3 billion. It boasts a gross floor space of three million sq ft and 2.2 million sq ft net.

Apart from the office tower, the development will also incorporate a shopping mall and condominiums.

Hamad was quoted as saying that the mega project would be a five-star green development.

We can agree with Hamad that the development would create excitement and spillover benefits for the country.

Already the project, together witb the earlier ones announced by the Prime Minister like the second Kuala Lumpur City Centre in Sungai Buloh and the Kuala Lumpur Financial District, has caused euphoria among building material suppliers.

But beyond that, how sure are we that these massive private initiative projects will not worsen the over- supply situation in the commercial and residential property sector, and produce the desired long-term benefits for the country?

As with other major projects, there will no doubt be considerable benefit to the material suppliers — the cement manufacturers, the steel makers and the rock quarries.

There will also be demand for professional services and construction crew.

But with a project of this magnitude, the engagement of foreign consultants, as the construction of the Petronas Twin Towers had shown, would be unavoidable.

Not only do we not have sufficient expertise in the construction of super-high skyscrapers, but we also have to engage foreign consultants in order to boost the confidence of prospective customers.

Unless special efforts are made and conditions imposed, the local professionals and workers would again be sidelined in favour of foreign consultants and cheaper imported labourers.

Ensuring benefits for the people

THESE mega private initiative projects — much of which will be implemented by government-linked companies and trust agencies — offer the government the best opportunity to put its human capital mantra and the reduction of dependence on foreign workers to work.

But for this to succeed, the government must impose strict conditions on these mega developers that they not only employ local professionals and workers, but also participate in upgrading their skills.

An RM5-billion 10-year project by PNB, for instance, is large enough to warrant an onsite skills training and development centre, which the Bumiputera trust agency can develop in conjunction with its contractors and accredited skills licensing institutes.

The same should be made compulsory on the developers of other privately funded initiatives like the second Kuala Lumpur City Centre in Sungai Buloh, the Kuala Lumpur Financial District and the redevelopment of the Sungai Besi Royal Malaysian Air Force base.

Thus far, the development of local skills and contracting activities, especially among the Bumiputeras and the minority Indians, by the government-inked companies and the developers of major projects on government land like the KLCC, the KL International Airport, KL Sentral, the privatized railway land in Sentul and the City Hall land in Pantai Dalam, has, at best, been mediocre.

Instead, these developers and contractors form their own consultancies and sub-contracting businesses that effectively shut out local professionals and sub- contractors.

Additionally, for PNB, the challenge is not just to undertake the mega project, but more importantly, to ensure that it brings benefits to the people, especially the Bumiputeras whom it represents.

It can be argued that privately owned commercial complexes can be colour-blind in the choice of buyers and tenants. The only colour they recognise is the colour of money.

But it would be a dereliction of duty and a betrayal of the Bumiputeras should PNB practise the same policy in the sale and rental of its properties at the proposed Merdeka Heritage Project.

Above all, PNB must ensure that this project, like its other investments, will generate a steady income for its unit-trust investors. It has promised an expected yield of between 8% and 10% annually for the project.

MAIL:

BESIDES MALAYSIAN BUSINESS, KADIN ALSO CONTRIBUTE TO LOCAL BAHASA MALAYSIA AND ENGLISH PUBLICATIONS

HE ALSO BLOGS AT www.akadirjasin.com

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