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Saturday, October 15, 2011

Unlocking land value

When the Kuala Lumpur International Financial District (KLIFD) was announced, I was quite pleased at its location at the other end of Bukit Bintang as that part of the city was long the purview of dilapidated civil service residences which degenerated to car wash premises and some unsavoury practices on premises built nearly 100 years ago. All that is a memory now as the land is finally cleared and a new master plan began to emerge.

Kuala Lumpur is sorely in need of a financial district such as Connaught Place in Hong Kong or Raffles Place in Singapore or even Canary Wharf in London, a location that every international financial institution would have to be in to be counted as a world leader.

The KLCC location could have been ideal but Petronas is not property centric and preferred to surround itself with the oil and gas services industry. There are still a number of vacant sites after 15 years.

Malaysia has now a worldwide reputation as a sukuk platform and a halal platform both valuable commodities if you want to do business in the Middle East and be in the running for a syariah compliant financial service. Or if you want to sell your food products to the Middle East.

With the tsunami of change in North Africa and the continued instability in that region for some time, more and more banks and funds will want to relocate to safer locations and it's Malaysia and not Singapore or Hong Kong that will be the first port of call if we have the right product and the right location.

But after that announcement and the setting up of a great office and hiring people in 2009, there was a long period of silence. In the current gossip-laden environment there was not a peep from the company in explaining anything.

Then suddenly after a long lull the KLIFD project is in the news again, with a slew of appointments being made recently for the RM26 billion development.

To be fair, from the beginning its master developer 1MDB has made it clear it would let action speak louder than words. But in doing so it had had to resolve issues raised by several parties, transparency being one of the major ones.

Now though, more pieces are being put together and the picture is beginning to get a little clearer.

For a project of that scale, it is understandable that many will want to have a piece of the action and concerns of fairness when it comes to awarding contracts are bound to arise. From the outside looking in, some may say that not much effort has been done to allay these concerns and curiosity.

But it could also be said that 1MDB maintained its own pace in conducting the selection process. The company certainly remains either unaware or impervious, which is necessary for a project like this.

Given the 20-year timeline of the project, wouldn't any developer want to ensure all its vendors have the necessary resources and ability to deliver?

Early August, it had announced Akitek Jururancang Malaysia Sdn Bhd and US-based Machado Silvetti & Associates as its master planners, chosen for a "highly functioning, interesting, innovative, and aesthetically pleasing urban district that will establish KLIFD as a financial centre of choice".

A few weeks ago, it followed with 11 more appointments consisting international and local outfits in various fields of expertise, from infrastructure engineer to traffic experts to sustainability consultant.

This is quite a pleasant change, and redeemed 1MDB from some of its detractors' criticism of being unable to make decisions.

1MDB reiterated that its selection process adopted best global practices, including at pre-qualification and request for proposals (RFP) stages.

1MDB also said it had engaged all potential vendors in numerous discussions to ensure all parties are able to work together to realise its vision for KLIFD.

The need for keeping information close to the heart of the matter is, of course, understandable for fearing it will jeopardise negotiations and project's progress. However, 1MDB should still be aware of the public's curiosity and allow certain details to be available on a regular basis.

For one, this action will keep speculations to a minimum and at the same time it enables the public to make up their mind better on whether KLIFD is indeed a beneficial project or otherwise.

KLIFD is currently in its master planning phase, with a detailed plan set to be delivered early next year. Construction is scheduled to start in June next year.

According to news reports, the first phase of the development is expected to be operational by 2016, when the first line of Malaysia's mass rapid transit system is set to be up and running.

When fully complete, KLIFD aims to bring together leading financial institutions and top companies from all over the world into one place. With Malaysia's edge in Islamic finance as well as the country's location in Asia, it should well attract major players, complementing other financial centres in the region.

If the project is indeed going to be one of the main drivers of the economy, the public would want to know what kind of animal it would be, or how the project could boost the surrounding areas with incentives to complement KLIFD.

1MDB perhaps is ready to shift gears. It should continue with its initiative to be more forthcoming, and assume the spotlight it has always been put under. Besides KLIFD, 1MDB is also the master developer for Bandar Malaysia, the urban redevelopment project where the old Sungai Besi airport is located.

It has said that the selection of consultants for Bandar Malaysia, as the project is named, will undergo the same rigorous selection process with a mix of international and local companies. That should be a good thing.

The writer is the chief executive officer of Malaysia Property Incorporated

By Business Times

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