Part 2: BN "sold" Jelutong Highway land in Penang for RM20psf? Here are the facts.

Continuing on from my previous posting where Penang Chief Minister's Lim Guan Eng's accusation that the previous BN Penang Govt sold land for a ridiculous RM1psf for the Tanjung Tokong/Pinang project, I go on to his second allegation.

Here's Guan Eng's much repeated (but lying) table again.

This time, it's the alleged sale of 325 acres of land at "Jelutong Expressway" for a total of RM325 million or RM20 per square feet (psf).

Again, this is an outright lie by YAB Lim Guan Eng.

The first thing that would tip you that this is not land is the fact that the land is named "Jelutong Expressway" by Lim Guan Eng.

I mean, which developer would go buy land which a highway is sitting on, correct?

This is because it is not actually land but was a privatization project signed 20 years ago in 1997.

This project is extensively researched in an article in the February 2014 issue of the International Journal of Construction Management.

Ignoring the fact that land prices would have cost much lower 20 years ago in the height of the Asian Economic crisis would be much lower than now and should not be even used for comparison like what Guan Eng did, let's go to the details of this project.

Firstly, this privatization project was awarded based on an open tender by the previous BN Penang Govt and involves asking a contractor to build a much-needed highway in return for land reclamation rights (not land). 

A company called Jelutong Development Sdn Bhd (JDSB). JDSB was initially owned by IJM Properties Sdn Bhd (40%), Hume Industries (Malaysia) Sdn Bhd (40%) and Kumpulan Pinang Holdings Sdn Bhd (20%).

IJM Properties Sdn Bhd later took up Hume Industries (Malaysia) Sdn Bhd’s share in October 2002 for RM3.02 million, making JDSB effectively a wholly owned subsidiary of the listed IJM Corporation Bhd

The Privatisation Agreement was signed on August 22 1997. In exchange for the 4.7 km Jelutong Expressway (JE) constructed on 81.04 acres of land which would be handed over to the Penang State Government at no cost, 324.9 acres of land (partly existing but mainly reclaimed from the sea) would be alienated to JDSB. 

All costs pertaining to reclamation would be borne by JDSB. 

JBSD was required to pay the Penang State government RM1.3 million upon signing of the privatisation agreement and a further RM24.1 million in instalments. 

JDSB was expected to develop new integrated precincts (for commercial, retail and light industrial use) on the reclaimed land. 

It was also expected to build 5,500 units of low cost and low middle cost dwellings, and over 4,000 units of other types of residential units. The entire real estate development associated with the JE was expected to take about 15 years to complete.

The JE project was awarded in 1997 and was expected to be completed at the end of 1999. It was originally valued at RM350 million, including squatter compensation, land acquisition and all direct costs pertaining to the project.

JDSB however was contractually bound to maintain the JE for two years after its completion. JDSB also guaranteed the expressway design for seven years and had to ensure that the design life of the interchanges was 20 years following construction, while that of intersections was 10 years following construction.

The JDSB was allowed to reclaim land totaling 324.9 acres, partly for the expressway, but mainly for residential (partly to resettle affected populace), recreational, commercial and industrial development from which JDSB could recover its investment. Half of the land to be reclaimed was given freehold status, while the remaining portion was on 99-year lease. In addition, JDSB was allowed to convert a 30 acre piece of land which had been previously been used for agriculture and refuse dumping, also for real estate development.

At that time in 1997, land in the middle of Georgetown was selling for RM150-RM200 psf while reclamation cost was estimated to be RM20 psf.

In a nut-shell under the so-called "sale", IJM:

- will get 350 acres of land, of which the majority is reclaimed by themselves at their own coast, 

- has to build the 5km dual three-lanes on grade Jelutong highway with 5 intersections at their own cost of RM350 million mostly on land that they reclaimed themselves,  (compare this to the 5km Lim Chong Eu to Air Itam by-pass dual two-lane roads that the DAP Penang Got wants to build that will cost RM1 billion)

- has to hand-over the highway back to the state govt including the 81.04 acres which the highway sits on.

- pay RM25.4 million to the state govt.

- has to pay for land acquisition, compensation and resettlement of the squatters including temporary housing

- has to maintain the JE for two years after its completion;

- guarantee the expressway design for seven years and had to ensure that the design life of the interchanges was 20 years following construction

- has to build 5,500 units of low and low-medium cost housing units (RM25,000 - RM50,000 type) on their reclaimed land, many of which were also given as compensation to the squatters.

The last part is even more telling when you compare to the so-called affordable housing of up to RM400,000 built by the DAP Penang Govt using their RM500 million state fund - the first 520 units of which is scheduled only to be completed next year, a staggering 10 years after DAP had taken over.

After 10 years, the first 520 units of affordable housing built by DAP Penang Govt costing up to RM220,000 on the mainland will be ready.

Imagine this. The IJM consortium that was claimed to have gotten land cheap by Lim Guan Eng actually built 5,500 affordable homes costing between RM25,000 to RM50,000 on the island - compared to 520 units costing between RM72,500 to RM220,000 on the mainland.

Conclusion

Again, just like the alleged RM1psf "land" sold at Tanjung Tokong, YAB Lim Guan Eng's allegation that RM20psf "land" sold to IJM in 1997 for the Jelutong Highway without tender (it was open tender) is yet another pack of lies that he uses to defend and divert attention away from his 500% increase in Penang operational expenses and his tens of billions of state land, land rights and assets that he has sold or traded away since taking power in 2008.