Greater KL and the Myth of Development
To pave the path to success is not easy, to walk it even harder. The government has a lot of strategizing to do, a whole lot more of explanation to give to the people and ultimately, a short period of 5 years (or less given the next election is less than 3 years away) to prove its worth. Luck is not even a factor here. Facts and figures speak for themselves, and currently, it doesn’t point to an easy ride.
By Delimma
The commentary by OSK Research on their concerns that the development of a financial district and redevelopment of Kg Baru, Sg Besi Airforce base and Sungai Buloh would result in a commercial glut to KL has brought about some critical issues that ought to be viewed seriously by the government. The reputable local economic research house’s comments and glaring views on the government’s plan to create a greater KL comes at a crucial time where the 10MP will be debated, elaborated and decided upon by Parliament this coming two weeks.
The 10th MP unveiled on Thursday by the Prime Minister sets a very audacious tone in reengineering Malaysia’s growth from a middle income economy to a high income and high performing country. That the services and industrial sectors are seen as key drivers towards achieving this goal is not surprising, given that both sectors contributed a massive 90% towards the national economic figures and growth – from banking, tourism and hospitality, healthcare, manufacturing, trade and oil and gas. Many have come to expect that the Najib administration would lend its focus towards enhancing and advancing development in these areas. The potential for growth is enormous, and with it the promise to create a better Malaysia for all citizens.
Key to the government’s drive in transforming the nation into a high income country lies in the 12 key elements of the New Key Economic Areas or NKEA as announced by the PM in his speech. Apart from the expected industries that will be boosted, Najib has touched some very sensitive issues when proclaiming a greater Kuala Lumpur as the 12th element of the NKEA. The news came at a time when KL is facing some serious challenges to cope with the enormity of growth and fast paced culture that has turned this once slow moving city in the 50s and 60s into a robust metropolitan of the 21st century.
One of the concerns raised by OSK Research is the government’s announcement to redevelop 4 key landbase of KL within the next 5 years – a financial district, the 400 acres Sg Besi airport, Kg Baru and the massive 3,300 acres planned for urban development in Sg Buloh. According to media reports, OSK Research expressed concern that redevelopment of these massive landbanks would result in further dire for the property market in KL, which if their figure is correct, is already facing a 17% glut in occupation and tenancy.
It takes no rocket scientist to figure out that OSK’s figures might be too conservative, given the fact that most buildings in KL are at least 30-40% empty due to the recent economic downturn and high supply as opposed to demand. With new buildings being built and refurbished, I wonder why such figures were not announced earlier. Is the property development sector trying to “hide” their true state of affairs? Even if the figure is correct, why in the world would property developers such as Tong Kooi Ong, Krishnan Tan and even the Naza family still build and develope office space and property in KL? Could there have been an oversight on their part before embarking on huge projects totalling billions of ringgit? I believe oversight is not an issue here given their expertise and years of experience. Yet they are still building and building – for reasons only known to them, but with the figures out now, I believe it will further dampen the property market. But don’t expect property prices to fall as yet.
Property prices in KL will drop if these mega projects are embarked upon, that’s what OSK fears. Whilst it is a good thing for buyers and prospective tenants alike, there are several points that we need to look into first before we can celebrate an early Hari Raya or Christmas this year.
Firstly, there is this notion of the “tight-lipped” property developers in KL. Most of them remain quiet and deny any glut (what has OSK done?), and always paint a positive outlook on the market. That the PM’s announcement has caused severe repercussions for them is one main reason for their sudden revelation. But aren’t these developments in a way unconnected to the city centre? Except for Kg Baru and the financial district, the other two developments seem to be developed further away from the Golden Triangle. What have other research houses and property developers have to say to this? Only OSK has concerns and not the rest, perhaps, but time will tell.
There is more to this argument than just property value and traffic jams. Najib has announced that these mega projects would be developed within 5 years to boost the economy, create jobs, lessen the pressure on KL and provide alternatives for businesses. But anybody who has done property development knows that to develop some of the landbank will take a few years, let alone building an entire area bigger than the Golden Triangle. In my opinion it is impossible.
Najib made the announcement in the belief that it will spur investors from within and abroad to favour KL as compared to other growing cities in the region – Jakarta, Hanoi, even Banda Acheh. He is hoping money, especially from Middle East allies will flow into Malaysia to spur the development projects. That some money will come is not a doubt, we are confident Najib is savvy enough to have already secured some foreign funds before making the announcement.
But these money do not come in free, there is always a price tag to it. No honest and clever investor would invest in something that does not give returns to them. Investors would expect return within 5 years from their investment. But could the projects be 100% completed within 5 years?
Let’s take an example; say if the government wishes to develop the old Sg Besi airport. The land is situated at a very strategic point that would ease traffic congestion in KL as well as create a new business centre akin to Petaling Jaya, there’s no doubt about it. Let’s say the government has secured a few billion ringgit in foreign funding to spur the project. Do you think the investors would want to build the entire 400 acres at one go? Good business mindset would be to build the area in stages, with let’s say 10-20% maximum at a time. Why? Simple demand and supply issues – build some of it, test the market, get sales in and then develop some more.
Property development cannot happen in one go unless it is a government project like Putrajaya (which also took 10 years to be where we are now and it’s still what, 60% completed?). Sane property developers would develop projects of such magnitude and size in stages to ensure maximum returns or in commercial words amplifying their return of investment (ROI). Thus it would be impossible for the government to achieve this enormous task within the 10MP. Now, where is the wealth creation factor here for Malaysians in general and KLrians in particular? This has to be revealed and properly explained.
Secondly, God knows DBKL, the Land Office, even the government is trying to work as fast as possible in approving development projects, but it would take at least 1-2 years to get the necessary approvals and commissioning even before the project could kick-start; and another 2-3 years for development and completion, safety tests, certificates etc etc. That’s 5 years for you, and at the end of the 10th MP, we have developed only a maximum of 20% of the land area concerned. Let’s say the same applies to all the other land, including Kg Baru. We have to keep in mind the next general election would come before the end of the 5 years of the 10MP. So, what will the government have to show to voters during the polls in terms of development and wealth creation? How is it possible for the government to create a high income society within 5 years from these projects alone? A greater KL? It would take at least 5 years for people to start purchasing, renting or even moving to these areas. How can it ease traffic congestion in the meantime, or even provide an alternative to businesses in the next 5 years?
Thirdly, for Kg Baru folks, I am inclined to advise that their aspirations are more fantasy than reality, and I shudder to think if any development can actually happen within the 10MP when prevailing critical issues as to land titles and status, the local plan as well as the yet to be formed development authority has yet to be resolved. If it takes 1-2 years for these issues to be amicably settled, then development will only start after the 10MP (maybe during the 11MP). And that would only comprise 20% of the area. So how can Kg Baru become a catalyst for higher income growth in KL at present? Even Malay GLCs such as PNB and Tabung Haji would be careful in its investment for Kg Baru, lest they want to show poor returns to the public yearly who have invested their life in these institutions.
Fourthly, the government is yet to explain the real definition of greater KL to the public. Since KL is a prison of sorts in terms of land, to a layman like me greater KL would mean to expand its borders … is this the case here? Will the land in Sg Buloh be declared part of the Federal Territories? It would create a bigger issue taken the fact that at present the governing body for the land is under Opposition administration, and the state government has already expressed its disappointment at being “left out” of the 10MP. Will this throw a spanner in Najib’s plans to develop the Sg Buloh landbank? Again some explanation would curtail my foolish fears.
For the people of KL, a greater KL would have to mean better standards of living, better housing for the poor, more economic opportunities for small businesses and better urban management especially in public transportation. The government has yet to announce its plans to resolve the sale of low cost government housing to the poor in KL. It comes to mind that the government had decided to sell about 42,000 units (if I’m not mistaken) and the offer to purchase has been overwhelming. But I am saddened by the fact that at present only about 20% of the units could be sold as most of the prospective purchasers could not obtain loans – how can they when they are mostly low income self-earners without payslips and even worst, some have prevailing problems in even meeting the meagre RM128 a month rental charged by the government on their units. Isn’t there a better solution, perhaps the government offering the units on a hire-purchase scheme at the same monthly rate of RM128 instead of asking them to go out and get loans which is almost impossible in their state?
In terms of economic opportunities the government should come out with plans and strategies to aid small businesses and hawkers residing in KL. Most of them aren’t able to obtain loans from banks due to the small nature of their business and as such agencies such as MARA and TEKUN have to step on the plate to be counted upon. The recent mishap on the handling of an East-Malaysian Bumi girl’s small loan application by MARA as reported smacks of the current predicament facing would be small business holders – if even institutions supposed to aid them like MARA can come out with preposterous reasoning and conditions not to give out loans instead of sound financial advice and aid to ensure that the business can actually grow and the application approved; how can the government actually realise its aims to help them? The government need to clarify this matter – loan approvals aside, all applicants should be assisted to ensure that their business can grow and how their rejected applications can be turned into approved ones! MARA is not a bank governed by stringent fiscal rules, instead it is a bastion for Bumi small businesses to prosper and climb the equity ladder. The sooner this pristine institution realises this and cleans up its house to come out with better service, the sooner with small businesses prosper in KL, and MARA no longer a laughing stock of the Bumi community for seemingly failing when it matters most.
More highways do not necessarily translate to less traffic, on the contrary, more highways bring more traffic into the city. This was the mistake done by previous administrations and Najib plans to develop an underground transport system akin to that in New York, London and Tokyo as a means to eradicate this myopia. Good intentions, but will it work? Can KL be dug up without some building falling due to the soft grounds in which this city was built upon? Here’s a lesson in history to the administrators and planners. What these foreign governments did was to develop a transport network from one that already existed to cater for their population’s safety during the world wars. The tunnels were already dug so that people can travel around town in safety from bombs and guns; and rather than being abandoned they are put to good use as part of the urban development process.
For a city like KL, the government plans to dig underneath existing buildings to build the new underground transport system (whatever it might be called later). Is this move a wise or even safe one to make, given the existing conditions of the soil in KL? What have the environmentalists got to say to this, will this be a good move to curb the ever increasing screams of frustrated road users due to the hiking number of road vehicles? This is a no-win situation in my view. Whilst the government intends to mitigate jams and transport problems by building the underground rail or whatever, its policies of encouraging vehicle purchase negates every single bit of advantage the alternative system provides. Will this change in the 10MP? It would adversely affect Proton, Perodua (which is partly owned by PNB now after it haphazardly bought into the dimming and volatile automotive industry business through its acquisition of some UMW Toyota shares) and other car makers. Are we prepared for this?
All of the above points to a rocky road ahead for Malaysia in the 10MP. To pave the path to success is not easy, to walk it even harder. The government has a lot of strategizing to do, a whole lot more of explanation to give to the people and ultimately, a short period of 5 years (or less given the next election is less than 3 years away) to prove its worth. Luck is not even a factor here. Facts and figures speak for themselves, and currently, it doesn’t point to an easy ride, does it?
