Govt will seek to renegotiate the terms and amount of debt, including the terms of payment and interest rate for major national projects
By RAHIMI YUNUS / Pic By MUHD AMIN NAHARUL
The new government is looking to review major national projects which will have significant impact to the country’s debt.
Prime Minister Tun Dr Mahathir Mohamad has indicated the new administration will relook at the government’s debt level and aims to reduce it.
“That is our priority,” Dr Mahathir said in his first press conference right after swearing in as the seventh prime minister of Malaysia last Thursday.
He added the government will seek to renegotiate the terms and amount of debt, including the terms of payment and interest rate.
Bank Negara Malaysia had stated the amount of national debt owed by the government to financial institutions is RM800 billion.
“I know there’s a hidden figure that could raise the debt to about RM1 trillion,” Dr Mahathir said.
One of the key projects which the government will certainly reconsider is the East Coast Rail Link (ECRL).
The RM55 billion ECRL project aims to connect Kelantan to the Klang Valley over a 688km rail line.
The alignment starts from Port Klang in Selangor, cutting through the Titiwangsa mountain range to Kuantan in Pahang, and then heads northwards to Terengganu and ends at Pengkalan Kubor in Kelantan.
The Ministry of Finance Inc-owned Malaysia Rail Link Sdn Bhd has completed the pre-qualification exercise in October 2017, which drew 1,118 submissions from engineering and construction firms in the country.
China’s state-owned China Communications Construction Co Ltd (CCCC) was appointed as the engineering, procurement, construction and commissioning contractor.
CCCC has appointed AECOM as the site supervision services provider for the project’s stations, viaducts, tunnels and depots. Works to prepare for construction of tunnels in Bentong, Pahang, have started since February.
The previous government had secured an 85% financing for the RM55 billion project with the Export-Import Bank of China as the financier.
Another big ticket project is Bandar Malaysia, a 196.7ha development which sits at the old airport in Sungai Besi, to support Greater Kuala Lumpur as a new engine of growth.
A mixed development, Bandar Malaysia aims to promote liveability by housing green infrastructure, sustainable housing and a range of commercial and lifestyle facilities.
Total investment is estimated at US$7 billion (RM27.7 billion) to US$10.5 billion with target completion over 20-25 years.
On Dec 31, 2015, 1Malaysia Development Bhd as the land owner had agreed to sell 60% of its equity in Bandar Malaysia Sdn Bhd for RM7.41 billion to a consortium comprising Iskandar Waterfront Holdings Sdn Bhd and China Railway Engineering Corp (M) Sdn Bhd as part of its rationalisation plan to reduce its RM45 billion debt.
The consortium was later dropped as the major developer due to its inability to secure financing.
The previous Barisan Nasional (BN)-led government had stressed Bandar Malaysia’s master developer must be “a Fortune 500 company” with experience and a cumulative revenue of more than RM50 billion in the past years.
The government has been carrying the land on its balance sheet since 2015 with an estimated RM2.4 billion worth of Sukuk Murabahah, which needs to be repaid from 2021. A search for the new developer is currently ongoing.
China’s participation in Malaysia’s economy has been overwhelming for the last 10 years. But, it is uncertain if other major projects in various states will be reviewed.
The Melaka Gateway project is a premier mixed development project initiated by KAJ Development Sdn Bhd comprising three reclaimed islands and one natural island totalling 1,366 acres (552.8ha) in the Straits of Melaka.
The project is part of the One Belt One Road initiative and it includes the Melaka International Cruise Terminal, a free trade economic zone, a new deep sea port, a maritime industrial park and many others.
The total investment in the project is estimated at RM43 billion with target completion by 2025.
Master developer KAJ Development is partnering PowerChina International Group Ltd to develop the three reclaimed islands.
KAJ Development CEO Datuk Michelle Ong said the company will hold a 51% stake in the partnership, while the remaining 49% will be held by PowerChina International.
As of October 2017, the progress was reported behind schedule as the land reclamation work was only at 40% of completion.
The Forest City project is one of the mosts ambitious property developments in the south of Johor. The master developer is Country Garden Pacificview Sdn Bhd, a venture company between China’s Country Garden Holdings Co Ltd and Esplanade Danga 88 Sdn Bhd, an associate company of Kumpulan Prasarana Rakyat Johor.
The project will cover an area of 3,425 acres consisting of four manmade islands between southwest of Johor and northwest of Singapore.
Its a mixed development project consisting of commercial, residential, educational and healthcare centres, recreational facilities and others to attract buyers from across the world who want to invest, work, play and live in Johor.
The project is estimated to require a US$100 billion investment and is targeted for completion in the next two to three decades.
Land reclaiming works for the manmade island started in 2015 and about 11% of the proposed development was ready as of November last year. At present, the Phoenix Hotel, apartments, a business and retail area, a lakeside park, and the Forest City sales gallery and show units have been completed.
The metropolis will have accommodations for an estimated population of 700,000. Some 70% of the property buyers so far are from China and the rest from the Middle East, Indonesia, Singapore and India.
The Kuantan Port’s expansion entails the construction of a new deepwater terminal to cater for the berthing of vessels of up to 200,000 deadweight tonnage.
Kuantan Port Consortium Sdn Bhd, which has a 30-year concession to manage, operate and develop Kuantan
Port, is 60%-owned by IJM Corp Bhd and 40%-owned by China’s Guangxi Beibu Gulf International Port Group Co Ltd.
The new terminal will increase the port’s capacity to 52 million freightweight tonnes (FWT) from current 26 million FWT.
According to a Bernama report, former Transport Minister Datuk Seri Liow Tiong Lai had said the government will set aside RM1 billion for the project, while the private investors inject RM3 billion more. Works are targeted for completion by middle of 2018.
The Malaysia-China Kuantan Industrial Park (MCKIP) will be redeveloped along with the port expansion.
The MCKIP is the first industrial park jointly developed by Malaysia and China in Kuantan and has a sister park in China called China-Malaysia Qinzhou Industrial Park.
The industrial park began in 2013 with a land area of only 1,200 acres.
The total land area has been expanded to 3,000 acres. Investors can get a 15-year tax exemption after earning their first profit.
Officially launched on Feb 5, 2013, the industrial park in Gebeng is 51%- owned by Kuantan Pahang Holding Sdn Bhd and 49%-owned by Guangxi Beibu Gulf International Port Group Co Ltd. Kuantan Pahang comprises IJM Land Bhd (40%), Sime Darby Property Bhd (30%) and the Pahang state government (30%).
The Kuantan Port expansion aims to attract investors to use the MCKIP as their base to expand to other regions.
To be developed in phases, a target investment of RM19 billion to RM20 billion is projected for its first phase of development, RM15 billion in the second phase and up to RM7 billion investment for the third phase.
MCKIP has attracted Chinese companies to implement large-scale investments in the manufacturing and services sectors in the country.
Among them are Alliance Steel (M) Sdn Bhd (basic metal industry), Ye Chiu Non-Ferrous Metal (M) Sdn Bhd (basic metal), Longi Solar (Kuching) Sdn Bhd (solar), Jinko Solar Technology Sdn Bhd (solar), Ji Kang Dimensi (M) Sdn Bhd (base metal), Xinyi Solar (M) Sdn Bhd (solar), Xiamen University (education services), as well as Huawei Technologies (M) Sdn Bhd (information and communications technology).
IJM Corp’s CEO and MD Datuk Soam Heng Choon, in an interview with a local daily last November, said 89% of the land in MCKIP 1 has been sold to investors, while 20% of the land in MCKIP 2 has already been earmarked for an investor.
MCKIP 3 will be developed for light industries and logistics, commercial and residential buildings.
On Nov 13, Hong Kong’s listed NewOcean Energy Holdings Ltd entered into an agreement with Kuantan Port Consortium to invest RM5.1 billion for the development of an oil refinery complex. To date, MCKIP 1 has secured about RM19 billion in investments.
Another major development in the south is the Robotic Future City, which is set to make Johor a hub for robotic development covering manufacturing, talent development, financial provisions, and research and development.
The project within the northern region of Iskandar Malaysia, is a partnership between the state government’s investment arm Johor Corp and China’s Siasun Robotic Investment Co Ltd.
Siasun is the largest robotics development firm in China and the third-largest in the world. About RM15 billion is expected to be invested in the project.
The Samalaju Industrial Park in Sarawak has attracted China’s stateowned Hebei Xinwuan Steel Group Import & Export Co Ltd and MCC Overseas Ltd to propose a steel complex there.
The companies signed an agreement with the state government of Sarawak in November 2016 in Beijing, China, to invest in a steel complex comprising a five million-tonne capacity steel mill, a cement plant, a coke oven plant, a cold rolling factory and a welded pipe facility, which will be developed in three phases.
The total investment is estimated at US$3 billion and targeted for completion by mid-2020.