Finance minister says cancellation of TRX would cost the govt RM3.5b in compensation claims
By P PREM KUMAR
The government has decided to continue the Tun Razak Exchange (TRX) project, injecting a further RM2.8 billion to prevent the multi-billion ringgit proposed financial hub from being a financial disaster.
The capital injection into the 70-acre (28.3ha) development would shore up investor confidence and ensure the project will continue despite allegation of RM3 billion misappropriation during the early stages of construction.
Finance Minister Lim Guan Eng said the cancellation of the project would cost the government RM3.51 billion in compensation claims.
“On Wednesday, the Cabinet has met and decided that the TRX project shall be completed, with government funding of up to RM2.8 billion.
“This decision will help allay concerns among the local and foreign investors, who have put in billions of ringgit on the fate of the TRX project,” he said in Putrajaya yesterday.
The project’s developer, TRX City Sdn Bhd, had highlighted that it does not have sufficient funds to complete the mammoth financial hub, just a few kilometres away from the world’s tallest twin towers.
The project’s future, which was part of scandal-ridden state fund 1Malaysia Development Bhd (1MDB), was thrown into doubts over allegations that debt papers issued to finance the project had been misappropriated. Lim confirmed that the Treasury had detected over RM3 billion of government funds supposed to be channelled to TRX City was instead misappropriated by the previous government to pay 1MDB’s debts.
“I have asked the TRX City management to lodge an official police report and to (engage) the investigative panel on 1MDB on the funds misappropriated by 1MDB,” he said.
The RM2.8 billion government funding will be channelled in tranches up to 2024 when the project is expected to be fully completed.
For this year, the government has approved a RM344 million allocation to ensure works on the development, which will house the country’s tallest structure, will continue uninterrupted.
Lim said TRX City will be required to complete all infrastructure works in TRX costing up to RM2.8 billion.
The government, he said, can’t afford to be saddled with a RM3.51 billion compensation claim if the project goes under.
“I am very concerned that works on TRX project should not be stopped because we cannot afford to have such an abandoned mega project in the city centre…even after all the public funds that have gone into it.
“In the event of cancellation, apart from having to pay compensation of RM3.51 billion, the government will also lose the RM3.7 billion transferred earlier to TRX City,” he said.
Lim said since 2012, the federal government has guaranteed borrowings, extended advances and provided transfers and purchased land plots from TRX City totalling RM3.69 billion.
“Of this RM3.69 billion of transfers, a total of RM3.07 billion was misappropriated by 1MDB, mainly for its loan repayments. As a result of the misappropriation of funds, TRX City does not have enough money to fulfil its obligations as the master developer for TRX.”
TRX has managed to sign global property and infrastructure group Lendlease to develop the Lifestyle Quarter, Indonesia’s property developer Mulia Group to develop the Signature Tower plot, Affin Bank Bhd for an office tower, Lembaga Tabung Haji for a residential plot and a global water management firm Veolia Water Technologies South-East Asia as the water treatment and recycling concessionaire.
Located next to Jalan Tun Razak, one of the busiest street in Kuala Lumpur from which the development gets it name, it is set to become a leading centre for international finance and business.
With an estimated gross development value of RM40 billion, the development will encompass investment grade A office space, underpinned by residential, hospitality, retail, leisure and cultural offerings.
The Exchange 106 (formerly TRX Signature Tower), which will surpass the Petronas Twin Towers in height, is about 90% ready and will be completed this year. Prudential Financial Inc’s Malaysian headquarters is being constructed by IJM Corp Bhd and will be completed early next year.