Poser over Bayan Mutiara deal

Property News/ 28 February 2012

There are still several questions left unanswered by the Penang government over the sale of the prime property.

Several Penang-based analysts and local community leaders have questioned the Penang government for selling a 41.5ha plot of prime state land to a private developer, Ivory Properties Group Berhad, for RM1.07bil.

Their concern is understandable due to scarce availability of state-owned land on the island which may hinder the ability of the state government to drive a balanced development and ensure it does not drive out the lower middle-income group from the area.

Most private property projects on the island are focused primarily on premium and luxury property which have driven up prices beyond the reach of most Penangites. There is worry that the sale of the state-owned Bayan Mutiara land to a private developer may end up in a similar fate.

Apart from escalating property prices, there is a concern that the land may have been sold below the prevailing market value. The state government had explained that the current selling price was above market value at the time of transaction.

However, it does not explain if it is usual to allow the purchaser a period of five years to settle the full payment. Did the transacted price factor in any interest payment accrued by the five-year payment period?

The opportunity cost derived from a potential increase in land premium over the next five years should be included to ensure that it is a fair deal.

Accusations and allegations of a lack of transparency in the tender process should be comprehensively addressed by the state government. Critics had alleged that the sale was done through direct negotiations between the state government and the purchaser.

Without justifying the five-year payment period, these allegations will create doubt over the much ac­­claimed transparency and ac­­count­ability of the state government.

Moreover, the allegations are peppered by talk that a bidder who is prepared to make a full payment for the purchase was not selected during the tender process.

Some analysts have questioned how can the sale benefit the people? They wonder why the development of Bayan Mutiara cannot be taken up by the Penang Development Corporation (PDC) which has the capacity and experience to handle people-centric development projects such as the Penang Free Trade Zones, housing estates, Komtar and others.

Regrettably, the issue of public accountability and good governance has been grossly politicised by certain parties. Politicians have gone to the extent of throwing down the gauntlet of challenging each other to resign over false allegations related to the land sale. We expect such showmanship from politicians but we deserve straight and accurate answers from them.

Politicising this issue is going to deprive many concerned stakeholders a chance to ask relevant and legitimate questions about the decision to sell the land to a private developer.

Chief Minister Lim Guan Eng had described allegations of wrongdoing over the tender award for the Bayan Mutiara mixed deve­lopment project by PDC as “a pack of lies”.

While some of these allegations may be malicious, it is pertinent for Lim’s administration to identify legitimate concerns over the sale. He should acknowledge that the state government controls less than 5% of total land size on the island and this calls for a prudent and strategic management of state-owned prime land.

Hence, it is best for his administration to address these issues immediately in order to convince the people of Penang that it has taken the best interests of the people into consideration before agreeing to the sale. Major issues include:

> What was the rationale to allow a five-year payment period to the purchaser? It gives an impression that the purchaser may not have secured financing for the purchase.

> Is it true there was another bidder who was prepared to pay an upfront full payment for the asking price?

> Did the transacted price factor in any interest charges or projected land price appreciation over the next five years?

> Is there any restriction or precondition between the state government and the purchaser to discourage any sub-sales? If the purchaser were to divide and resell some parcels of the land to other developers at a higher premium, it may further drive up property prices on the island. If such sales were allowed, is the state government entitled to a share of the higher premium?

> It is understood that the government would like to use the proceeds from Bayan Mutiara land to finance its low-cost housing scheme in Batu Kawan. While the low-cost housing scheme is welcomed and encouraged, the state government needs to justify if the sale of Bayan Mutiara land is the best option to help finance the project.

> Lim said part of the RM500mil financing for the housing scheme came from the state coffers. If this is the case, what is stopping the state from raising money through external sources to fund the entire project and carefully weigh all options to optimise the use of the Bayan Mutiara prime land bank?

Bayan Mutiara is no longer about selling above the current market value but the use of scarce prime land on the island for the purpose of socio-economic transformation. Ownership of prime land is very crucial for the state government to drive the state’s economy.

We do not want a repeat of high premium-reclaimed lands being sold to private developers who in turn inflate property prices in Penang and raked in billions in profit at the expense of the people.

Bayan Mutiara could be what the state government needs to help transform the landscape of Penang and create new attractions to boost its attractiveness as a tourism and cultural destination and a services hub.

Time will judge if the current state government has made the right decision on Bayan Mutiara and if the proposed plan is not going to turn out to be just another expensive commercial project by a private property developer.

Source: The Star