So from RM50 million that the MPPP will have to pay for the proposed convention centre, it has now become just RM11.5 million, which we are told is a “minute sum” for RM300 million worth of facilities.
If this sounds too good to be true, it probably is. And very ‘creative’ too. We are now told the council will save RM25 million in upgrading Pisa and the Aquatics Centre and it will also receive RM13.5 million from the sale of the hotel land. Thus the MPPP would only have to stump up RM11.5 million instead of RM50 million.
In the first place, has the MPPP budgeted or planned RM25 million on upgrading work? If it hasn’t, then there is nothing to save. Secondly, whether or not we have sPICE, the MPPP can still sell the land.
I have some questions:
- From what I hear, there is a list of things that S P Setia expects from the Penang state government/the MPPP in relation to its proposal. What are these? They should be made known to us. What does S P Setia expect in return for undertaking this RM300 million project and operating it?
- Where is the financial projection for the next 10 years? What is the breakeven period and ROI for the project?
- Who will absorb any persistent operational losses?
- How many trees will be planted on the roof-top garden and the ‘people’s park’?
- How much is the maintenance cost of the garden and the complex?
- Will access to the roof-top garden be free? Will rates for the aquatic and sports centre be maintained?
- Are there adequate car parks? If sPICE is going to have a 600-table (or whatever) banquet hall plus a hotel, how many car park lots do you need bearing in mind our limited public transport system?
- Was this on the agenda of the last full council meeting of the MPPP? From what I hear, it wasn’t. Has the full council seen the financial projections and approved all this?
Someone who was involved in the public relations industry told me that when the KLCC concept was being promoted, it was initially touted as the ‘Hyde Park of KL’ – a place where people work, live, play etc . Thousands of trees were supposed to be planted. But if you look at the KLCC green space now, it’s hardly a Hyde Park, is it?
Another person who saw the sPICE slideshow says it brought back ‘fond’ memories of the PGCC project. That too was supposed to be a place where people work, live, play, etc. Zero-carbon and all that jargon.
The Penang state government should take care not to expose the MPPP to future losses or heavy expenditure from any proposed development.
Here’s an alternative idea that will not expose the MPPP to any losses. In fact, it will make the MPPP a tidy immediate profit. Why not sell the whole land outright to S P Setia at market value? The MPPP will make a lucrative profit, which it can use for its operations. S P Setia can then go ahead with its ‘iconic’ RM300 million sPICE design (of course after it succeeds in getting through independent environmental/traffic/social impact studies). As we are told it is a viable project, S P Setia can keep all the profit it makes from operating the place. The people will get their ‘roof-top garden’. Win-win-win, right? This way, everything will be at arm’s length.
So why do we need a ‘public-private partnership’ and 30-year BOT, in which the MPPP will have to stump out cash (whether RM50 million or RM11.5 million)?
In the first place, has the MPPP budgeted or planned RM25 million on upgrading work? If it hasn’t, then there is nothing to save. Secondly, whether or not we have sPICE, the MPPP can still sell the land. – Anil
Are you ok or not? Surely there was a plan on upgrading hence the sum of RM25 million, right? I agreed that MPPP still can sell the land but then again, how much? Say market rate, isn’t that too subjective? How to pleased everyone?
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What upgrading plan? Where?
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Please take a look at the FAILURE of JB’s PERSADA.
It is a Johor Corp’s convention cenre built in city centre next to its Puteri Pacific Hotel not too long ago.
It is a ‘white elephant’ (so lowly utilized) as it has failed in its original objective to be a good alternative at lower cost for trade shows or exhibitions that have been utilising Singapore facilities.
While it failed to cannibalize Singapore’s market, Singapore has continued to attract more trade shows and events with the two new integrated resorts besides the existing Suntec City convention centre.
It is one reason that has plunged Johor Corp. into Rm3.6 billion debt?
Penang should learn form this big mistake.
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Like you I also want transparency when spending public money, but please write something that make logic sense when read.
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dawsheng
It is not Anil is not making sense but the DAP fan club members have gone berserk in desperate attempt to protect their idol the Cheap Minister from being questioned and exposed.
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SP Setia is coughing up RM250m as well as putting their reputation on the line on this high profile project.
They obviously have more faith in the success of this project than some of the commentators here.
If SP Setia’s track record is anything to go by, I think this project will be a success.
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You want to talk about Malaysia construction business culture? Did you ever learn that Malaysia whole construction business are at the expenses of holding payment/material cost of sub-contractors.
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Hello Anil,
Please raise more concrete and salient points, your questions are just sound immature and for the sake of asking. It seems that the Penang government is doing the right and perfect project.
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This latest twist is a spin worthy of an Oscar. Surely this is a contender for the joke of the year !
This issue becoming even more stranger by day !
Why are such facts only being told after the project been awarded ?
I have some questions too.
1. Was there an open tender ? I heard the tender was closed. So what were the bids and bidders ?
2. Was this ever discussed in MPPP full-council and what was the rationale for going ahead with the project ? Any ROI analyses done ? What about EIA ?
3. Why was SP Setia’s bid was successful ? What are the terms ?
4. What actually the scope of work and the actual contractual terms ? Who will absorb any loss and what are the financial arrangements ? Why MPPP even putting up Rm 50 mil if SP Setia going to own the facility ?
5. Who will do all the promotion ? SP Setia or the state or MPPP ? Will SP Setia get “soft loans” or other financial assistance ?
6. Why Eco Meridean, a Rm 2 company was awarded the contract ? Why not SP Setia ? Does SP Setia offers any guarantee ?
7. Based on the strange, illogical financial calculations by the Cheap Minister, SP Setia has to fork out more than Rm 300 Mil since they also have to pay for other works apart from sPICE. So what are the exact cost breakdown ? Is the land is only woth Rm13.5 Mil ? Who made the assessment. Looks awfully too little to me. It is so confusing.
8. So what there is for SP Setia in this project ? How they are going to break even ? Does the state need to provide any business guarantees ?
To make, it certainly looks like something is being held from public knowledge. If LGE really serious about CAT, he should come clean.
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Finally I can agree to your comments. These are the right questions to ask.
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Anil,
Im surprised at your negative slant and poor alternative suggestion. Why are you failing to see the creative and positive merits of this proposal? Its very unlike of you. By all means, please do push for more tranparency and for more details but dont put a wet blanket over it.
Anyone who has land, can easily sell and get immediate cash for it. But how is this being creative to make the best use of the land? How come you dont see the leveraging that is being done to get the best deal using the limited resources that is available to Penang state government?
Your posturing made me read “About Me”. I quote “In “my previous life”, I trained and worked as a chartered accountant and external auditor in England before returning to Malaysia to be immersed in corporate life.” As chartered accountant and having immersed in corporate life…the best you can offer is to sell the land for a profit! Come-on Anil…you can do much better than this.
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Why not just sell the land to S P Setia at market value and let it build the convention centre if it is so viable? Why is that negative? From the MPPP’s perspective, it is a lot better than spending RM11 million or RM50 million (for what returns?). S P Setia can still build and operate the convention centre, if it gets through the socio-environmental impact assessment.
I am concerned about the MPPP’s exposure on this project especially since we have not seen the terms, guarantees if any, the financial projections, the breakeven period and return on investment. Have all the MPPP councillors, let alone the public, seen all these?
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Anil,
http://research.maybank-ib.com/download.php?did=461&mid=653
Hope, the above reseach information on SP Setia helps to give you and other readers an idea of the strength that SP Setia brings to this proposal.
I do know that there are proponents for deals to made on armslength and no cross subsidy basis. This is only one school of thought. There is another which believes in leveraging to get more and better results and at the time help to give a kick start. Penang goverment is not in the position at the momment to do major things on its own.
My appeal is to support the direction of the project but go ahead and ask for more information and feedback. If its not forthcoming, I too will join in to pressure for more transparency. But do bear in mind, some people prefer to get every information on the silver platter whilst others do some research to get it. Add some sPICE to our life….its better! Cheers.
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Kometenmelodie,
I agreed wholeheartedly with you and Anil on the issue of transparency but not the viability of the project, leave that to the expert, shall we?
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Spot on.
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Chinese has a famous proverb about businesses :
Businessman will never take money losing business; if there is profit, they will take the hitman job.
If sPICE are so viable, so profitable, isn’t it defy logic for SP Setia take the whole profit home? Just go watch the whole Mid-Valley project. If not, there is another thesis about Mutiara Damansara township. How many sPICE supporter here take consider of operation cost, bank interest rates and the infamous phenomena of government building construction overrunning cost? It is true that government should look long term, but feasibilities must come first. There is no such thing as long term for any business/government if you keep losing money until you broke. Alas, devil is hiding inside the details.
There is a huge different between do the right things vs do things right. All Anil question are plain common sense.
In fact, I am quite baffles of the idea of getting an expensive convention center. There is not many big business around to pay expensive floor rent,because Malaysia are middle of no where in the world industrial map. You cannot get a huge exhibitors and crowd compare to German CeBIT, Taiwan COMPUTEX. I wonder, did MPPP ever did a rental survey if the exhibition hall rent shoot up by ten folds?
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Perhaps everyone should have a idea how much current PISA charge for its various venue.
This form show everything.
http://www.penevents.com.my/booking%20form.pdf
For main arena level 2, If fully book for 365 days, from Mon-Friday, the annual revenue will be RM 4.6 millions, and 2.1 millions for Sat-Sunday. More accurate information should come from the company that operate PISA. Will the new transparency act allow public access those info?
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You just have made up your mind to oppose this project early on. This is the difference between dong things right and doing it wrong. The fact is if BN govt had not screwed up Penang so much, the Penang govt could have done this on their own and the whole thing would be financed by the banks – that is how Singapore, Taiwan, Korea and other places do it.
When will you get it that its night and day between how the right way to do things and the way BN govt has done it for 40 years.
All your demands and issues cannot be met because BN govt ruled 40 years. Heaping it on PR govt is just being a …
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If i bought a land, then its mine. Whether i build or not its up to me? No?
If it’s designated for commercial, as long as i comply with that and the building by-law, i can build anything that i want! No?
If the land is mine, why should i waste my money on some 7 acres of tree on my rooftop? and the need to cater strong foundation for it and maintain it?
So i think the issue here is transparency on the project and what is the gains for the all stakeholders and whether its worth the money.
Thats the issue. Not sales of land or whatnot.
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To sell or not to sell the land, there’s always politcal concern besides profit, which is common on this country nowadays. May be someone should mention to whom SPS is related to?
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How about organizing an on-line petition so we can demand LGE and Penang Govt provide clear cut info and answers to all these question we have on this SPICE deal with SP Setia?
What I find most disappointing is that this is exactly the sort of haze we usually expect and see when UMNO/BN is involved and for which we have been taking them to task ever since. Now we find (almost) the same modus operandi from a State Govt we fully support and one which we see as a beacon of light for change for the better.
It looks like LGE is prepared to bulldoze his way through for this deal to materialise and that’s what worries me most. When Chief Ministers take this ‘over my dead body’ approach, that’s when a massive financial disaster is bound to happen.
LGE should swallow his ego and pride, take a step back and look at the whole project objectively. And the way he is going about it by attempting to confuse critics with contra costs and APCO and Idris Jala/Najib-style PR spin sounds very much like a Bernie Madhoff approach. I smell a con, a big one.
It’s the norm in M’sia that when someone submits a bid for a 20-30 year concession deal to finance a huge construction cost (read SPICE – $300 million), their eventual returns will be way,way over the top. Look at all the Toll Highway (especially PLUS), Water and IPP deals not to mention the recent Matrade one for $650 million. SP Setia, being a Plc, WILL NOT be doing the Penang State Govt any favours. There won’t be any free lunch. That much you can bet your last penny on!
dpp
we are all of 1 Race, the Human Race
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SPICE rooftop park are indeed intriguing.
In fact, it sounds good ,feel good, but pretty damn difficult and expensive to maintain.
Apparently, LGE didn’t mentioned anything about WATER CATCHMENT abilities. So I assume there is NONE. So one question here : did MPPP ever think of watering expenses and issues? How much weight the “park” structure going to sustain without incur too much cost? What is the park water proofing cost? How much it cost to maintain to not jeopardy the whole building infrastructure?
As reminder, Malaysia Parliament half billions maintenance/refurbish flood and leakage problem is some lesson to learn.
BTW, SP setia liabilities are NOT directly tag into SPICE, the subsidies is a vehicle to shield them from possible construction delay/specification legal risk.
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Again Anil, We need a PICC, NO 2 ways about it. We need a proper convention Center of some international class.
Penang is not looking for the same MICE market as Singapore or BITEC or KL Convention Center. We are trying to develop a regional to national level presence.
In the 1970s Malaysian used to go to Singapore for shopping but today the roles are reversed.
We cannot depend on our FIZ manufacturing in high volume, high labour intensive industries.
What PR Govt is looking at is for the next 20-25 years.
It is mypoic to say everything is okay for now, and we should not focus on new areas of growth and visions for the state.
If SP Setia is going to pump in RM300m, that means that they want to re-coup that plus profits. So they are not going let it sink. OF COURSE they will be heavily investing in International, Regional and Local Marketing
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If we cannot depend on our FIZ manufacturing in high volume, high labour intensive industries, why build sPICE which solely depend on the MNCs for survival?
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This very important point is missed by many.
The whole real estate plus everything on top of it (some RM300 million in today’s ringgit) reverts back to the local authority after this “build and operate” lease expires in 30 years.
Over time, MPPP is the winner, unless cronies of government are able to extend it under dubious means like in the case of PLUS and other concessionaires.
With UMNO, this is sure to happen.
With DAP/Pakatan, there is hope.
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The crux of Anil’s reservations is about the much-vaunted transparency the State Govt advocates. It talks CAT but the project, from inception to award, has been mired in the dark of stealth. It might well be this will be good for Penang, but show us the studies, the rationale. What are the short- and long-term implications to the people? This is public money so a little accountability is required.
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Please gentlemen get your fact right! LGe is dealing with Eco Meridean, a Rm 2 company , not SP Setia. If Eco Meridean go broke, LGE can’t claim any damage from SP Setia. LGE should explain how the tender was awarded to Eco Meridea.
Remember how LGe laughed at Zahrain for asking him to give greenlight for a RM2 company to operate and manage the Bukit Jambul Golf and Country Club, of which Zahrain is a director.
Why now a RM2 company is no longer a problem for building his monument?
Why no open tender system for the proposed RM300mil sPICE project?
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Public tender, no cronies nor rent seekers and a right business sense should suffice for government projects.
The state should reveal sufficient details for its citizens on public websites, invite public opinion and discussion, so that tax payers are well informed.
If Penang were to lead, political courage and a sense of enterprise is needed.
It is unnecessary to refer back to the voters for every major decision.
After all, a 5 year mandate had been given to the ruling party in the last state election.
Would anyone expect that the appointed MPPP councillors would or should take leadership and responsibility to commit millions of ringgit of tax payers’ money to a project without the approval of an elected state government?
Moreover, no one elected them to be the custodians of our tax money.
I say let the state cabinet take the leadership and leave the necessary legislative details to the councillors who, under the present set up, are basically understudies to be future leaders.
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Actually, the MPPP is responsible and accountable to the people of Penang Island on how their assessment income and other revenue are spent. So councillors have a crucial role to play in safeguarding MPPP coffers.
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When most convention facilities in the world is losing money and appear to be heading toward a larger loss in the near future,what make LGe think that sPICE will not end up as a white elephant that need the bailout of the state government.
LGe should give detail projections on how the much money should go to paying off the debt for construction of the convention center. How much should be spent on sales and marketing to attract events organizers to use the facilities. How much should be paid for operations of the center.
LGe should also provide detail information on PISA center, how many events were held at the convention center in 2009 & 2010. How lucrative is the business of PISA?
LGe should come out clear whether the sPICE is built to make money. If the facility is not built to make money, how should the state government fund the yearly deficit? Is the state government intent to is ask the MPPP to make up whatever deficit that occurred or let Eco Meridean bear the consequences without the intervention of the state government .
What are the projecting event revenue for the 5 consecutive years after the facility is ready?
Did the state government has any detail or information on how typical convention centers of similar size and markets operate?
Who is in charge of marketing destinations for the convention center? Ng Yan Yan?
Tell us in 2009 and2010, how many groups had came to our hotels,PISA. What is the economic impact to the city ? We need to know all this, to be sure how LGe come to his decision to build sPICE. Is that too much to ask under Competency, Accountability and Transparency?
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One more please tell us how the flood mitigation in the surrounding areas can guarantee that the underground facilities of sPICE will not be submerged by rain water.
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Don’t you people understand how business is normally carried out?
Eco Meridean may be a RM2 company today for the purpose of business name registration.
Soon, it will no longer be.
Please lah ….
Don’t place the business acumen and trust of Liew Kee Sin and his team in the same league as Zahrain and his family.
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Register a sole proprietor company already costs RM30 plus other misc.
Are you ignorance or damn stupid to say register a sdn bhd company only need RM2.
If you cannot differentiate registration fee and paid-up capital, you should shut off your mouth till you learn the business 123 course.
Why people must trust Liew Kee Sin? He is just another UMNO crony with no business acumen unlike Robert Kuok.
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One thing I cant understand why Desmond always give in to Umno cronies. Is it a prelude for DAP to join BN? The design of sPICE with the underground facilities at a site that prone to flooding, smell like a camouflage sabotage attempt. How Desmond learn to trust Liew Kee Sin is really puzzling me!
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For those with limited brain power and memory storage problem,please refresh your memory on Bayan Baru flash flood a constant agony at
http://www.malaysiakini.tv/video/19042/downpour-floods-bayan-baru-again.html
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& the same RM2 Ah Soon Enterprise wants the contract to implement the bestest land Transport system in Penang. An enterprise with no credentials.
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I am not a card carrying member of any political party or NGO, just a registered voter and a Penang resident all my life. This sPICE project will create traffic chaos in the already congested Relau area as well as posing vast unknown financial risks to ratepayers. Remember LGE’s “track record” – the Kings of Tennis fiasco, the proposed Tiger Park, sending an Exco member who cannot speak English properly to represent Penang at a tourism function in Australia, etc, Anil, can you enlighten me whether he has publicly published the declaration of assets of his Exco members which he promised during the 2008 GE? This high handed way of running the state worries me, although his DAP cheerleaders and cyber troopers are asking us to join his fan club, no thanks.
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DAP is not offering good service to rakyat, they are betting on BN is more evil than DAP. This is only card they have.
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