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Penang CM defends sale of PDC-owned land in Byram to private company

Publish date: Tue, 03 Oct 2023, 07:30 PM

GEORGE TOWN: The Penang government has defended the sale of a Penang Development Corporation (PDC)-owned land in Byram, in the Seberang Prai Selatan district, to UMECH Construction Sdn Bhd (UMECH).

Chief Minister Chow Kon Yeow said UMECH had been chosen as PDC's collaborative partner to develop the new industrial area, and that the private company's participation was a result of broadcasting done during the Dubai Expo 2020.

Chow said PDC presented the proposal for an industrial park project in Byram to the Dubai Exco in order to attract investors, as the area's development was anticipated to face numerous obstacles due to its close proximity to the Pulau Burung landfill, a route for garbage trucks, and the high cost of infrastructure development, among others.

He said these challenges had resulted in efforts to attract investors to be highly challenging.

"Therefore, to attract high impact projects with a target of RM1 billion investments, the state government, through the then state Trade, Industry and Entrepreneur Development Committee chairman Datuk Abdul Halim Hussain, as the head of the delegation then, had broadcasted through the media and the Malaysian Investment Development Authority (MIDA) to attract local and international investors to invest in the project.

"During the business matching session at the Dubai Expo, UMECH had voiced its interest to invest in the project and they had arranged for further discussion with the funder. The outcome of their discussions convinced PDC that UMECH was capable of implementing the project with financial support from Dubai-based investors.

"The selection of UMECH was done according to 'due diligence' procedure. A small committee, with the participation from the then Deputy Chief Minister I, Deputy Chief Minister II, Abdul Halim and Datuk Seri Lee Kah Choon was set up to study UMECH's proposal. The proposal for the collaboration with UMECH was brought for the approval of the PDC board on Feb 9, this year.

"The direct negotiation project is one of the methods to get the best offer. Based on the record, the developments of the Aspen project on a 245-acre site and university development by Paramount Property Sdn Bhd in Bandar Cassia were also through direct negotiation. All the projects have succeeded in changing the landscape of the development of Bandar Cassia and are categorised under the high-impact, catalyst projects," he said today.

He was responding to queries from the Penang Chinese Chambers of Commerce (PCCC) on the awarding of the project through direct negotiations and why local companies were not given the opportunity in the project.

There were also questions raised that the land could have been transferred to a developer.

Elaborating, Chow said the determination of cash contribution payments by UMECH to PDC in related collaboration was based on the current land price in the area, based on existing conditions (as is the basis).

He said since the land involved had not yet been developed (raw land), the price could not be compared with the price of industrial land that had been stockpiled and completed with infrastructure such as in the Batu Kawan Industrial Park and Bandar Cassia Technology Park, which is RM80 per sqft.

"PDC estimates that UMECH will have to bear a cost of approximately RM500 million for the provision of major infrastructure, including works such as earthworks, road construction, electricity substations, sewerage treatment plants, bridges, upgrading roads and intersections and others.

"To assure maximum profit for PDC, the company also established a payment schedule in instalments that accounted for the annual increase in price value. Through this method, PDC can monitor the efficacy of UMECH's project implementation and ensure it does not incur 'opportunity costs'.

"If UMECH fails to implement the project and clear the cash contribution according to the set schedule, PDC still has the opportunity not to continue handing over the land for the next phases," he added.

Chow also said that PDC had carried out a CTOS search of UMECH, whereby the company's paid-up capital was as much as RM10 million and with 0 per cent gearing ratio considering that all financial financing was channelled directly through the UMECH Construction company (a holding entity of the same company).

Based on the review, he said, UMECH did not have any record of bad debts and had the strength to make loans for the financing of the project.

Chow also stressed that the sale process by UMECH could not happen because the land had not yet been transferred to UMECH.

"PDC believes that what happened was a feasibility study conducted by UMECH to get market reaction. Based on the feedback received, UMECH is confident that the project is viable and should be continued in collaboration with PDC.

"The implementation of the project is in accordance with PDC procedures. However, Sunway's involvement as the majority shareholder of UMECH is beyond PDC's knowledge. Related matters are only known after the signing ceremony of the letter of agreement through an announcement made by Sunway in the media.

"Based on the joint venture agreement, UMECH is bound to inform and obtain PDC's approval if there is a change in the company's shareholding structure. However, such changes occur before the agreement is signed and are beyond PDC's control.

"PDC has sent a letter to UMECH for an explanation. PDC will determine further action after examining UMECH explanation and will present it to the PDC board meeting.

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