Whither the multi-billion ringgit projects?

By Anita Gabriel, The Star

“Rumours: EPF Answers.” You’ll spot that item on the bottom right of the Employees Provident Fund’s website. Uncommon? Yes. Necessary? Absolutely. For with RM450bil (and growing) in its fat coffers which involves the hard-earned retirement savings of over 12 million people, the fund’s every move is closely scrutinised and often, good fodder for rumours.

Sadly though, to date, the only postings under this title relates to procedural matters aimed at shedding the light on several chain e-mails on dividend and nomination. As for the fund’s investment-related developments, apart from its quarterly updates and major moves involving public listed companies, the rest is largely dominated by the business sheets. Of late, such news leaks have also been appearing in foreign business journals given the fund’s strategy to diversity its investments abroad.

That’s exactly how we learnt a day ago that the EPF would be forking out close to RM3bil to acquire some 3,000 acres of Rubber Research Institute Malaysia (RRIM) land in Sungai Buloh from the Government for a mega mixed development project (the story had appeared in StarBiz). The price tag we are told is based on market value. Once the master plan for the development is done, EPF will parcel out plots of land to property developers through a bidding process. Some of these parcels will also be jointly developed together with the EPF. All of these will take place close to year end.

Now compare this to another fund, the 1Malaysia Development Bhd, which is leading another massive development project at the opposite end – the redevelopment of the old airport in Sungei Besi.

Unlike the EPF, 1MDB is wholly goverment-owned. It was reported that the Government will transfer ownership of the Sungai Besi land to the strategic development fund for the multi-billion ringgit urban redevelopment project. IMDB’s task – to unlock the value and maximise returns from the land.

It is widely perceived that because it is a left hand, right hand transfer, 1MDB may not have to pay for the land (this has yet to be ascertained). Any returns from the land development will go straight to the Government’s kitty. In the case of EPF, the returns from the Sungai Buloh project will be channelled as dividends to its members. Remember, not all taxpayers are EPF members.

Here’s the problem with free land. What and how will 1MDB benchmark its returns against? Wouldn’t that also make the venture, from the land acquisition cost perspective, risk-free? And if that’s the case, how would the returns from the project on the whole be reflective of 1MDB’s true prowess as a “strategic enabler”?

And this – if the entire project is being done via a tie-up with a foreign party, wouldn’t that also mean the Government and by extension, the taxpayers may be subsidising the project for a foreign party whose deep pockets runneth over ours?

Of course, if none of these is actually the case, that only means one thing – the fund needs to do a great deal more to fulfill its original promise of ensuring transparency and adequate dissemination of pertinent information. And this needs to be done across the board.

In fact, there has been scant information on the progress of 1MDB thus far. A quick glimpse of its website further cements this notion. Between December 2010 and April 2011, the only news that has been forthcoming from this strategic development fund relates to its corporate responsibility projects.

The last significant development took place in October last year when 1MDB signed two collaboration agreements with Abu Dhabi’s Mubadala Development Company for a strategic partnership. One will involve an investment of up to US$7bil in the aluminium sector based on hydro power in Sarawak and the other to explore joint developments within the Kuala Lumpur International Financial District – a 34.4ha development in Kuala Lumpur which is expected to be finalised this year following completion of the master plan.

Little has been told of 1MDB’s other strategic tie-ups namely that with Petro Saudi International to set up a joint venture company to invest in oil and gas and real estate projects to the tune of US$2.5bil. In May 2010, 1MDB signed an MOU with Qatar Investment Auuthority to explore investment opportunities in the energy and real estate sector in the Klang Valley with a proposed investment of up to US$5bil. Much earlier, in January 2010, the fund signed an agreement with China’s state-owned State Grid Corp of China to undertake projects in Sarawak, which we were then told would create US$11bil worth of economic value.

Isn’t it curious that no one quite knows much about the progress of these projects with their much-vaunted, lofty aspirations and eye-popping investment promises?