PART Two of excerpts from the interview with IJM Corp Bhd chief executive officer and managing director Datuk Soam Heng Choon.

Q: When will the Kuantan Port expansion be completed?

A: It is being developed in two phases. Phase 1 will be completed in the next two years, by 2018. The second phase will be two years after Phase 1 is completed.

Q: Do you expect Kuantan Port to become a mega port with the expansion?

A: Yes, that's why we are expanding our capacity in Kuantan Port from about 25 million freight weight tonnes (FWT) a year to more than 50 million FWT. It would also improve the shipment that is coming in. Currently, we have ships with 50,000 deadweight tonnage (DWT). When we finish the expansion, we expect ships of between 150,000 and 200,000 DWT.

Q: Who are you targeting, and should Singapore be worried?

A: We are targeting shipments from China because of the short four- to five-day travel time. If the commodity business comes back, we can expect a lot of shipments from Australia, and Kuantan Port will be the transit point as we are located on the right side with China. Singapore might become worried. We have Port Klang which caters to India, which is a big market. From Kuantan Port, we have China which is also another big market for trading.

Kuantan Port's comparative advantage lies in its strategic location facing the South China Sea. It is also right in the middle of the busiest shipping lanes in the world. So there are cost savings. The new terminal will position Malaysia as a key investment and trading destination for Asean, Asia Pacific and Far East markets and benefit all our divisions.

Q: Is IJM very focused on government projects?

A: No, we do quite a few private projects, especially building works like the Equatorial Hotel in downtown. We are doing the Radia project in Bukit Jelutong for UEM Sunrise Bhd and Sime Darby Bhd. We are doing The Potpourri in Ara Damansara for See Hoy Chan group and also in Damansara Uptown. In Johor, we are doing Puteri Cove for the Pacific Star of Singapore and the Almas project for UEM Sunrise. We do a lot of private projects, especially building jobs. Because we realise that a lot of the government jobs are meant for smaller players, there's a more level playing field. For the most sophisticated projects, sometimes the smaller contractors will find it difficult to execute, so it's better that we focus on the bigger projects.

Q: Can you share with us your role in Real Estate and Housing Developers' Association Malaysia (Rehda) and what are the issues facing your members?

A: My role in Rehda started when I got involved in the property business. Even though I've taken over the helm of IJM where there are many other businesses, I've been requested by my colleagues to continue. So I feel that if I can contribute to both the property and the construction side, for the sake of the industry, I try to help wherever I can.

To me, property is always a challenge. Currently, people are talking about affordability of housing and not being able to get loans. The younger generation cannot buy houses. So, we always do a lot of engagement with the ministry.

Q: How do you define affordability?

A: To me, affordability depends on the location and the disposable incomes of the people in that area. You cannot say RM500,000 or RM300,000 is affordable across the board.

Q: You cannot put a figure?

A: Yes, you cannot put a figure. Affordability is relative. It's subjective. A place like Perlis, the affordability is different than Kuala Lumpur, correct? Just like the cost of roti canai there and here is different. There, the people's earning power is less, affordability is less, land price is cheaper, so it's different. Kuala Lumpur is different. People earn more but land price is higher, the cost is more than what people can afford.

Q: There is a debate now on what are affordable homes. If you look at the latest Bank Negara Malaysia annual report, the conclusion is that properties in Malaysia are unaffordable.

A: That's why the medium income in Kuala Lumpur and the medium income from other parts of Malaysia is different. For example, maybe in Kuala Lumpur it's RM7,000, but in other areas it could be RM4,000 or RM5,000.

Q: So should the government compel private developers to focus on the so-called affordable category rather than the high-end category?

A: All the while, developers have been building affordable housing because in all states, developers are made to build at least 30 to 40 per cent of low-cost houses, low medium-cost houses and medium-cost houses. Those are already in the affordability level.

You must also look at why property prices went up. A lot of input costs have gone up, including payment premium and cross-subsidy. Because the low-cost and medium-cost houses are losing money and cross-subsidised, and because of the Bumiputera discounts, these have to be offset by the other side, causing the prices to rise.

To say private developers do not build affordable houses is not true. All private developers do. And if we are too focused or dive into affordable housing as Malaysian developers do now, the danger is there will come a time when there are too many houses in this category, and no buyers.

We must make sure that we do a proper study and balance between supply and demand. In all categories, we always believe there's always a demand but the supply must be right. If supply is too little, prices go up. If supply is too much, prices come down and nobody wants to go into this category.

Now people say affordable housing can sell, so (they) go into affordable housing. If all developers dive in, very soon you will see all affordable housing cannot sell. Say if you open a stall and sell nasi lemak for RM3 a packet, people can afford to pay. If everybody opens a nasi lemak stall, how then? They will also close shop. It's the same analogy for housing.

Q: Is there an oversupply of affordable housing?

A: Not currently. That's why I said a study needs to be done on the supply and demand. And supply must always be location-centric. Certain areas need more medium-cost while other areas need high-end houses. For Damansara Heights, you should put high-end houses there. It's already high end. You cannot be putting low-cost houses there, to be fair, and land prices have gone so high.

For more affordable houses, you should go a bit further to build. Or if the government wants them to stay nearer, it should encourage the developer by increasing the population ratio or density nearer to the city. But then this brings up the question of infrastructure and traffic jams. So, the government needs to look at bringing in public transport, like the mass rapid transit. When public transport is improved, there will be less dependence on cars. Then people can afford to buy a house. And a house is an appreciating asset.