Pemandu admits land acquisition only way to recoup MRT cost

By Yow Hong Chieh
The Malaysian Insider
Aug 26, 2011

KUALA LUMPUR, Aug 26 — Putrajaya’s powerful efficiency unit has admitted that the Najib administration needs to acquire and develop land along the Klang Valley Mass Rapid Transit (MRT) route as it cannot afford the multi-billion ringgit project otherwise.

In a letter sighted by The Malaysian Insider, Performance Management and Delivery Unit (Pemandu) chief executive Datuk Seri Idris Jala told Associated Chinese Chambers of Commerce and Industry Malaysia (ACCCIM) president Tan Sri William Cheng that the government was pursuing a “rail-and-property” model as it would not be able to recover the cost of the first line between Sungai Buloh and Kajang through fares alone.

“For the government to manage the project efficiently and sustainably, fare box revenue will not be sufficient to finance the high capex and opex for the MRT network,” Idris said in the letter dated August 23, written in response to Cheng’s queries about the acquisition of Jalan Sultan land.

“Increasing the fares is not an option as the government wants to act responsibly by providing the rakyat with an affordable means of transport. Instead, the government is adopting a prudent approach towards a sustainable financial model for the MRT through a modified rail-plus-property model.”

The government has said a Ministry of Finance unit called Dana Infra will raise funds for the MRT, which is the country’s most expensive infrastructure project to date, but has yet to give any details of the funding apart from saying it will develop the land along the route.

The Minister in the Prime Minister’s Department pointed out that Hong Kong’s MTR Corporation, which has successfully applied the model to its Mass Transit Railway (MTR) network, would not have an “effective means of recouping the vast sums spent on developing the MRT” without revenue from property development as earnings from fares only made up 35 per cent of total revenue.

He stressed that Singapore’s MRT operators, who rely heavily on fare box revenues with minimal contribution from commercial activities, were considered an exception rather than the norm.

But Malaysia would be using a modified version of the rail-and-property model with “some amount of land acquisition” as the Sungai Buloh-Kajang (SBK) line would traverse built-up areas unlike Hong Kong, which had access to several tracts of mainly reclaimed land that allowed for integrated station and property development, Idris said.

“The government is thus not acquiring land banks for the MRT Co. nor abusing the Land Acquisition Act for this purpose,” he assured, referring to the new project owner effective September 1.

However, Idris also revealed that land along the SBK corridor that will be developed by government-linked companies (GLCs), including the Rubber Research Institute (RRI) and Kuala Lumpur International Financial District (KLIFD) sites, would not go directly towards offsetting the capital expenditure for the MRT.

The minister added that he would let the Land Public Transport Commission (SPAD) respond to Cheng’s concerns over the land acquisition on Jalan Sultan in Chinatown, which traders there see as a threat to the historic enclave.

“These involve technical details such as the design of the alignment, constructibility, the need for station integration and so forth and why land above ground is acquired (in respect to the National Land Code) even if the MRT tunnels are below for safety and security concerns,” he said.

“On this score, perhaps we may also see a more positive development from the proximity of the MRT line to Chinatown where opportunities for revitalisation and restoration of the area would benefit the Chinese community in this part of Kuala Lumpur.”

Outgoing project owner Syarikat Prasarana Negara Bhd (Prasarana) has said it needs to acquire the land above the MRT tunnel that will run along Jalan Sultan and demolish existing buildings in the interest of public safety.

Both Prasarana and SPAD have also said the government has to acquire the land before any subsurface work can begin as Section 44 of the National Land Code 1965 states that property owners not only have the right to the plot itself but also the air above and the ground below.

But DAP publicity chief Tony Pua has accused the Najib administration of using the project as an excuse to hijack prime land in the capital for profit, pointing out that the National Land Code had been specifically amended in 1990 to allow for the acquisition of underground land without affecting surface property.

SPAD CEO Mohd Nur Ismal Kamal said this week that the regulator was currently working on a solution to allow traders to return to Chinatown lots being acquired for the construction of the MRT but said there was “no guarantee” that they would eventually be surrendered to the owners.

  1. #1 by cskok8 on Friday, 26 August 2011 - 12:41 pm

    Lets see, Perkasa wants 30% quota for bumis, MIC wants 10% for Indians, later MCA will want xx% for Chinese, then how many % for orang asli, Ibans, Melanaus, etc. In the end we just sit and watch the MRT build itself.

  2. #2 by k1980 on Friday, 26 August 2011 - 12:54 pm

    Cannot afford the multi-billion ringgit project?

    Easy… just evict the landowners and acquire the land cheaply, then sell it to developers for a thousand times its purchase price and become billionaires overnight. Satu lagi projek bn.
    Rakyat diutamakan (untuk eviction).
    Halau mereka sekarang!

  3. #3 by Bigjoe on Friday, 26 August 2011 - 1:20 pm

    So, what he is saying the govt has large tracts of land that can contribute to property revenue of KVMRT BUT instead is giving it away to cronies and instead taking over private property owners one to make money? And its NOT Abuse? WTF is he talking about?

  4. #4 by limkamput on Friday, 26 August 2011 - 1:40 pm

    I think this argument does not sound right – acquiring land along the MRT line at a profit. Why would the land owners allow you to do that? Are you asking the land owners to sacrifice more than others? Are you asking them to subsidise your project? What did the constitution say about acquisition of properties with adequate compensation? If the compensation is adequate, how do you profit from it? The second point I want to raise is this: how do you know the land, once acquired by SPAD, would be developed at a profit? Based on past records, most government property projects are moronic – poor designs, special bumi allocations that take ages to dispose, poor project management and maintenance etc. Please look around properties in KL developed, owned or managed by the government; you will know what I mean.

  5. #5 by yhsiew on Friday, 26 August 2011 - 1:41 pm

    ///But DAP publicity chief Tony Pua has accused the Najib administration of using the project as an excuse to hijack prime land in the capital for profit…///

    Tony Pua has very sharp mind and good analytical skills. One may wonder how many of BN’s cronies have been enriched in the name of national development. The rakyat must really open their eyes to scrutinize for anomalies, each time when BN proposes a mammoth project.

  6. #6 by Godfather on Friday, 26 August 2011 - 2:00 pm

    Stop jumping the gun. The govt has the right of compulsory acquisition, but it has to be based on current market value. If you don’t like what is being offered, you can take them to court. There is no suggestion that they are robbing Peter to pay Paul.

  7. #7 by dagen on Friday, 26 August 2011 - 2:04 pm

    So here is the secret. Umno gobermen has no money to develop the country. And umno needs to go on the acquisition path in order to raise funds for the mrt project.

    But how? Bangsar telawi shophouses are worth 5+ million each (intermediate) and 10+ million for corner lots. And downtown KL? Assuming the same (or slightly less), then the umno gobermen would have to pay a great deal in order to acquire those kl shoplots. And having paid so much, the question is how much upside in terms of future price increase are there left? Urban renewal – the solution? That option would require further capital expenditure in addition to the already costly acquisition. So how is it possible for umno to raise capital that way? Build a 50-storey structure over the underground tunnels?Practical? Logical?

    Rats. I smell rats. And rotting fish and rambutans. I say umnoputras are envious of property ownership by the chinese in the city (obviously prompted by the stupid dr mamak’s remarks something ago) and are now attempting to use the mrt as a cloak to cover their ulterior aim to ‘recover’ kl. This is not a lawful purpose under the land acquisition act. This is umno’s politics. And as with all things umno, at the end of the day it is about money, money and more money.

  8. #8 by dcasey on Friday, 26 August 2011 - 4:06 pm

    “The govt has the right of compulsory acquisition, but it has to be based on current market value. If you don’t like what is being offered, you can take them to court.” – Godfather

    An interesting issue here. But there is a general misconception though, and that is you fight the land acquisition in court for a better price if you don’t agree on the compensation offerred but in reality, the scenario is that the govt already acquired your land but leaving you to challenge the amount of compensation in court, which may take years to reach a settlement if the case is heatedly contested by both sides. If you don’t have the financial and mental stamina to go the full length of the course of action, you may end up dropping off half way and just accept whatever that comes along. So if this happens, then the case of “they robbing Peter to pay Paul” is indeed a consequential event and no longer plays as merely a hypothetical suggestion.

  9. #9 by Loh on Friday, 26 August 2011 - 8:31 pm

    Jalan Sultan is not selected as a station along the KVMRT. There is no need tear down the building to build the underground track for the MRTwith modern tunnel machinery. Why then should the land in Jalan Sultan be acquired now and resold later. Yes the land owners would gain from an increase in the land value after the MRT is completed. That too is true about other land parcels and buildings in the vicinity. Would all the building around Sultan street be acquired so that some persons can be identified by UMNO later to reap benefits for the resale?

  10. #10 by ktteokt on Saturday, 27 August 2011 - 12:45 am

    This is exactly what they are planning! Acquire using the COMPULSORY ACQUISITION ACT at forced-sale prices and once the MRT is complete, demarcate these lands as MALAY RESERVE and sell to the Malays. Goodbye Chinatown and selamat datang ke BANDAR MELAYU!

  11. #11 by drngsc on Saturday, 27 August 2011 - 8:14 am

    ACCIM is correct. Looks like the greedy goumen is using the Land Acquisition Act to beneift cronies again. They are getting desperate and even more greedy.
    Lets all support Tan Sri William Cheng and ACCIM. This goumen is just too much.

    We must change the tenant at Putrajaya. Ge 13 is our best chance. failure is not an option. This is for 1Malaysia.

  12. #12 by limkamput on Saturday, 27 August 2011 - 8:39 am

    Change the government, and those that were unfairly taken shall be taken back and this time without compensation, how about it?

  13. #13 by Godfather on Saturday, 27 August 2011 - 10:57 am

    I think some of you guys are downright emotional. Yes, you could be tied up in the courts should you take legal action to adjudicate what is “fair market value”, but there is some objective measure to this. If they pay RM 800 psf when the last recorded transaction was RM 1,000 psf, then you should not agree and you can call that “unfair”. Conversely, if you go to the courts and ask for RM1,500 psf, then you are being unfair and deserve to be tied up in the courts.

    Of course the Bandar Utama story is a different one altogether. SPAD is trying to extract concessions from the private developer, and threaten to acquire the land outright if the developer doesn’t agree to those concessions. It’s a matter of economics – and you can’t say that SPAD is robbing Peter to pay Paul if you are given the option to build on the land with enhanced values, or sell the land outright to SPAD.

  14. #14 by on cheng on Saturday, 27 August 2011 - 11:11 am

    Another first for Malaysia, The most expensive MRT in the world, per metre basis, very very expensive indeed !!

  15. #15 by on cheng on Saturday, 27 August 2011 - 11:18 am

    Klang Valley folks can expect another ‘leap’ in he cost of living when the MRT is completed. with much higher expenses, but may be marginal increased in income. Govt (or Malaysian) will be paying huge interest on the MRT project cost.

  16. #16 by Loh on Saturday, 27 August 2011 - 3:30 pm

    SPAD claims that they have not right to tunnel the land they do not own. If the 31 owners of land in Sultan Street authorize SPAD to do it, there is no need for SPAD to forcibly acquire the land for building the MRT. The reason for acquiring the land was to tunnel it underground. If that is agreed to, there is no justification for the SPAD to acquire the land.

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