PDC management instructed to conduct study on land sale, development

• Chief Minister Chow Kon Yeow: PDC has several methods of selling land, whether via an open tender, request for proposal, or direct negotiations. Therefore, the review would help the management scrutinise the process to assign the rightful method for the respective projects.

PENANG (Oct 18): Following the Umech land sale controversy, the Penang Development Corporation (PDC) board, chaired by Chief Minister Chow Kon Yeow, has instructed the management to prepare a paper to review the sale of land for projects that would be implemented on PDC land in the Batu Kawan Industrial Park 2 (BKIP2).

The review is aimed at improving the process of land sale to avoid future disputes or weaknesses in the system, as well as come up with a specific guideline to develop the land using appropriate methods and existing processes.

“PDC has several methods of selling land, whether via an open tender, request for proposal, or direct negotiations. Therefore, the review would help the management scrutinise the process to assign the rightful method for the respective projects,” he said.

The management has been asked to present the paper to the board in the next few weeks before a decision is made. The paper is expected to issue recommendations, such as criteria for consideration and assessment of company backgrounds, which can enhance the land sale process.

On Tuesday, PDC announced the cancellation of the Umech deal, noting that the change in majority shareholders of Umech Land’s equity structure was done without informing PDC and without PDC’s approval. PDC found this to be a “serious issue and cannot be accepted by the board”.

The PDC board, however, maintained that the selection process of Umech Land was transparent and in line with its policy. The termination of the agreement comes with a three months’ notice, PDC said on Tuesday.

Upon the contract’s termination, PDC was instructed to advertise for a request for proposal to collaborate with PDC to develop the BKIP2, the statement added.

Recall that the deal for the development of the mega industrial project, with an estimated gross development value of at least RM3.5 billion over eight years, came under scrutiny after Sunway Bhd on Sept 27 announced that its 70%-owned unit Umech Land had inked a joint development agreement with PDC to co-develop a 558.96-acre (226.20-hectare) parcel in Byram, Seberang Perai Selatan, near Batu Kawan.

Chow, who has previously mentioned that he was not aware of Sunway's shareholding, has been at the brunt of criticism laid upon by the Penang Chinese Chamber of Commerce (PCCC) as well as former deputy chief minister II Prof Dr P Ramasamy, and outgoing chief minister's special investment adviser Datuk Seri Lee Kah Choon.

The latter two claimed that they were not aware of any PDC board approval for the Umech Land joint development agreement.

Among the questions raised by the parties, the agreement with Umech Land instead of Umech Construction Sdn Bhd (the company involved in initial meetings), land price and lack of transparency of the deal were prominently discussed.

According to Chow, the reason behind the PDC management's choice of Umech Land was because both companies had the same shareholders and directors.

“I think the [PDC] management continued negotiating with Umech Land instead of Umech Construction because both had the same directors and shareholders — [there's] no change.

“Sometimes, a company would set up a special purpose vehicle to undertake a certain project. Every developer will set up a company for one project, although it belongs to a group,” Chow explained.

Separately, PDC has been criticised by PCCC and Ramasamy for its alleged bureaucracy, and for possibly misleading Chow in the deal, suggesting that it be reorganised.

Regarding this, Chow said that the top management is evaluated based on the balance score card, where the chief executive officer would have to fulfil the key performance indices (KPIs) in terms of financial achievement, operation excellence and so on.

“They (the top management of PDC) will be evaluated on these KPIs. If they don’t meet the KPIs, that would affect their bonuses and other benefits,” responded Chow.

Regarding the absence of a proper signing ceremony given the size of the land deal, Chow replied that the PDC management should answer that question, adding that it might be an operational matter.

But he quipped that he “cannot be involved in how many toilet rolls are being used in the toilet”.

“Of course it is a big matter. Sometimes, we have other events like a ground-breaking [ceremony],” he said.

In the meantime, Umech Land has been given time to reply to the board following the termination, and would decide the next course of action.

Asked if PDC would return the deposit of RM64.6 million, Chow said: “We will deal with it after this, after we get their reply. If [the termination] is accepted, we should return any payment which has been made, because the deal has been cancelled. It is our duty to return any payment made.”

Looking to buy a home? Sign up for EdgeProp START and get exclusive rewards and vouchers for ANY home purchase in Malaysia (primary or subsale)!