Letter to Tan Sri William Cheng by Idris Jala

August 27, 2011 | The Malaysian Insider

AUG 27 — Pemandu is arguing that a report by The Malaysian Insider, “Pemandu admits land acquisition only way to recoup MRT cost”, is misleading.

In public interest, The Malaysian Insider is publishing the letter by Datuk Seri Idris Jala on which the report was based, and asking Malaysians to read it and let us know what you think.


YBhg Tan Sri,

I refer to your letter entitled “Unfair Rail plus Property Model for MRT Development” dated August 8m 2011. YBhg Tan Sri has raised some concerns regarding the rail and property model including the acquisition of the Jalan Sultan shoplots.

The “rail and property model” is a business model that has been successfully applied by the Hong Kong MTR Corporation in developing the HK MRT rail network. The rationale behind this concept is to ensure effective synergies between rail and property development to optimise catchment and passenger flows for the MRT and provide an effective means of recouping the vast sums spent on developing the MRT. For Hong Kong, this approach also serves as a planning tool for urban spatial development by establishing new communities along the routes of its railway lines.

HK MTR revenues are currently based on 35 per cent fare box revenues, with the remainder being derived from property development. By relying solely on fare box revenue itself, Hong Kong will not be able to successfully finance both the capex and opex costs for its rail network.

In the case of Singapore, the Land Transport Authority (LTA) develops the MRT lines but does not get involved in property development along MRT routes. Instead, this role rests with the Urban Redevelopment Authority and its Housing and Development Board.

The exception is the Dhoby Ghaut station (a five-storey high-rise) undertaken by LTA. Singapore’s MRT operators rely heavily on fare box revenues and contribution from commercial activities is minimal but this approach is considered an exception rather than the norm.

It is difficult to replicate fully HK’s property value management model in Malaysia as we have to put in play a model that is best suited to our specific needs. HK MTR Corporation has the benefit of access to several tracts of land (mainly from reclamation) that allows integrated station and property/residential development in a country where land is scarce. At the same time, the high density in Hong Kong allows maximum optimization of returns from such property development.

However, in the Greater Kuala Lumpur/Klang Valley area, most of the area is already built-up and the Sungai Buloh-Kajang alignment runs mainly along a corridor where there are existing developments and hence the need for some amount of land acquisition.

The developments referred to by YBhg Tan Sri in respect of Sungai Buloh-RRI and Kuala Lumpur International Financial District (KLIFD) sites are developed by GLCs and to be totally clear, the revenue from these developments do not go directly towards offsetting the MRT capex.

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. Increasing the fares is not an option as the government wants to act responsibly by providing the rakyat with affordable 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 through the MRT Co will develop properties above the underground station box and the park-and-ride facilities to ensure optimisation of MRT assets and the associated facilities (park and drop-off/bus/taxis areas).

In addition, where there is injurious land (part of the remaining lot not compulsorily acquired) and the property owner is willing to dispose to the government on a “willing buyer, willing seller” basis or where the property owner approaches the MRT Co for joint development, the government is willing to consider such options that would allow some returns to balance the heavy investment in rail infrastructure.

The government is thus not acquiring land banks for the MRT Co nor abusing the Land Acquisition Act for this purpose. In respect of the Jalan Sultan shoplots and several other buildings such as UDA Ocean and Plaza Warisan, I will let the Land Public Transport Commission (SPAD) respond to your concerns as I understand that YBhg Tan Sri has sent a similar letter to SPAD.

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

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

I hope my detailed explanation above on the rail and development model that we are adopting clarifies YBhg Tan Sri’s concerns and provides assurance that we are committed to delivering the MRT in the most efficient and effective way possible.

Thank you for taking the time and effort to reach out to me.

* Datuk Seri Idris Jala is Minister in Prime Minister’s Department and chief executive officer of Pemandu

  1. #1 by monsterball on Saturday, 27 August 2011 - 11:06 pm

    What is so important about one BN member to another?
    One is crooked government loud speaker.. The other.. is Najib’s puppet.

  2. #2 by waterfrontcoolie on Sunday, 28 August 2011 - 12:11 am

    Ha! ha! ha! when does this Tan Sri really care about the SMIs or is he in politics too? I thought all he wanted was Gomen protection for his steel production at the higest possible price without givng a damn to the small operators who source the basic steel as material for their production. I believe any company that includes Proton that asks for gomen protection MUST show their records to the general public; one can literally ‘cheat’ even on one’s own company, especially the listed one, and then claim for protection! In the end Malayisans are made suckers of! Dato iris, I agree that realty could be own by the MRT operators including land located near the track for apartments and businesses but in the case of property already owned for empteen years why can’t ypu allow thsoe owners to have a share on gthe proposed development? You talk of 5 or even 6 storey buildings especially at the stations, let the original land owners be repaid by the floor space created in such undertakings! Is this so difficult? Why? Outright forced purchases smacked of under-tactic behaviour!

  3. #3 by Jeffrey on Sunday, 28 August 2011 - 12:35 am

    So if “rail and property model” is successful in Hong Kong does it mean it will be successful here? Rakyat concerns stem from comparing oranges and apples! Public Transport Commission (SPAD) or Syarikat Prasarana Negara Bhd (Prasarana) is comparable to Hong Kong MTR Corporation??? Since when has anything copied from overseas as justification work here? Wasn’t our MACC modeled after top anti-corruption agencies, such as HK’s & Australia’s ICAC? They don’t have two ‘suicides’ within a short while of inauguration! Mahathir admin copied “Privatisation” of Thatcher’s admin: should we compare UK’s Privatisation that cut social spending with what some would call Piratisation here which increased it? TDM also urged us to “Look East” to Japan/Korea to emulate the East Asian Miracle: they became dragons: what did we become?

  4. #4 by Jeffrey on Sunday, 28 August 2011 - 12:36 am

    Why our Constitution was framed along lines of the British unwritten constitution and parliamentary practices. They change govt every few years and don’t evoke archaic section 377 against Gays much less an Opposition leader and in fact gave the honour to a known Gay (a “Sir”) to sing ‘Candle in the Wind’ in Parliament in Princess Diana’s funeral – Do we? We have one ruling coalition for 50 years + now Bersih versus EC! Other places have got good practices like no NEP: why don’t we copy that here? Successful overseas practices do not mean that they will be successful here. What are “synergies elsewhere” are viewed by detractors as excuses for abuse here. That’s where confidence is lacking. It’s an issue of credibility and trust that underpins differences of position in any debate whether what works for people elsewhere will necessarily apply here when adopted as weighed against a price or cost.

  5. #5 by Jeffrey on Sunday, 28 August 2011 - 1:02 am

    Any enterprise and idea depends on people working it – the top decision makers, middle section and rank and file….People’s objectives and performance are determined by their values, cultural norms, work ethic, level of training etc. You take different societies with different people, different political and cultural norms and you say copy something because it is good elsewhere and therefore will be good here – isn’t this simplistic and naive?

  6. #6 by Cinapek on Sunday, 28 August 2011 - 1:19 am

    I am trying to make sense of this convulated reply. Is it trying to say that the Govt has no choice but to make compulsory acquisition of the shophouses in Chinatown to build the MRT and then also develop those properties they have forcefully acquired in order to pay for the CAPEX for the construction of the MRT?

    IF this is correct then I think it is an unfair ripoff of the owners of those properties forcefully acquired. They will not only lose their properties and livelihood but also suffer the pain of seeing their property developed to make money for someone else and they have no say or benefit in this compulsory land grab.

    I read in the mainstream media the comment by SPAD’s Chairman that there is no guarantee that the owners will be allowed to return to their property. So this means that the owners is as good as having lost their properties and Idris is saying that the properties forcefully taken in this manner will be developed to fund the MRT. And being prime property there is also every likelihood that these prime properties will supposedly be handed over to crony companies on the pretext of being developed? And with billions of ringgit worth of contracts handed on a platter to vested interest, my reading of Idris explanation will be we need to take the land to develop it to pay for the construction of the MRT, a large portion of which is paid to bloated vested interest.

    A case of robbing Peter to pay Paul?

  7. #7 by dagen on Sunday, 28 August 2011 - 10:05 am

    Models huh. HK government is transparent and the people is HK is highly educated and very demanding and extremely contentious. More importantly, HK government does not suppress or oppress them. Try land acquisition there and you will know what it is like. You jolly well study the public interest need to do so very very throughly before starting the process. So let us not just make on-the-face comparison. Here the need to generate funds from properties is not in issue. The issue is the acquisition. It does not seem necessary. Thousands and thousands of developments hv taken place in the city centre nearby or even just next door to some centuary old structures. I oversaw the construction of a 6storey new building with basement right next door to one such building. A lot of monitering is needed and the old building needed strengthening. That was it.

    Let us not confuse this issue with the funding issue. And let us not allow umno to use the funding reason as excuse to acquire land.

  8. #8 by Bigjoe on Sunday, 28 August 2011 - 11:24 am

    What I read is that the govt has valuable land such as KLFD, RRI land, Merdeka stadium is NOT using them to pay for MRT but instead expect those of Chinatown, BB, Sey Hoy Chan family, to foot the bill instead??

    WTF? How the hell anyone at Pemandu and Spad could even think this was even a business model? Its daylight robbery, communism..

  9. #9 by cemerlang on Monday, 29 August 2011 - 6:48 am

    The Tan clan for Presidential election in Singapore. In Singapore, they already have this masterplan regarding their transportation service. You do not find the MRT to be such an ugly addition to the scenario unlike in Kuala Lumpur where everything looks so crowded and confusing like the government’s system.

  10. #10 by Jeffrey on Monday, 29 August 2011 - 7:06 am

    “More than RM8 billion worth of projects will be awarded to bumiputra companies as part of the (RM20 billion worth) of MY Rapid Transit (MRT) Project”, according to Najib – news report on page 2 of The Star Sat 27th Aug.

  11. #11 by dagen on Monday, 29 August 2011 - 1:52 pm

    And the more than 8b to be awarded to umnoputra companies will eventually balloon to 80b with no guarantee of completion.

  12. #12 by Loh on Tuesday, 30 August 2011 - 3:09 pm

    ///The “rail and property model” is a business model that has been successfully applied by the Hong Kong MTR Corporation in developing the HK MRT rail network.///

    Copy the model by all means, but with clear understanding of how it works. Hong Kong did not make individual landowners such as those in Jalan Sultan give up their property so that the MRT company could profit. They develop land on some specific location. Sungai Buloh RRI land should be part of the KVMRT scheme to finance the project. If that development is not sufficient, it means that the HK model is not appropriate for the country.

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