State government and senior MPPP officials faced a barrage of questions over the Spice convention centre during a press conference on Tuesday.
I was among the journalists who raised these questions, and I jotted down some notes. I hope I got it down accurately, as the answers sounded vague and unclear in some places. Bear in mind, these are not actually quotes but just my paraphrased notes.
The replies were provided by state exco member Chow Kon Yeow, MPPP president Patahiyah Ismail and other senior MPPP officers.
Was this RM250m project approved in a full council meeting of the MPPP before the agreement was signed? If not, why not?
It was approved by the Lembaga Perolehan, chaired by YDP, along with the State Financial Officer and a few others.
It was tabled before a full council meeting. (This sounded vague. According to some MPPP councillors, there was no submission or discussion at a full council meeting for the details of the agreement of the project.)
If that’s the case, why were councillors not aware of the details of the agreement or not even given a copy of the agreement? Why did they have to request for a special meeting for more information?
Even the State Exco were not given a copy. The agreement itself need not go to full council; otherwise with so many agreements around, only a handful of agreement can be completed.
But we are talking about major outlay of Council money. Was the RM50m to be incurred by the MPPP and the other terms for Spice deliberated and approved by a full council meeting before the agreement was signed?
(No real answer given.)
At present, the agreement is only available for viewing at the MPPP office by appointment for two hours at a time. Will it be made public?
We have already created a first in the country by making the agreement open for public viewing. The public can also come back again for another viewing if two hours is not enough.
The agreement was only exhibited after it was a done deal. Why was the agreement not exhibited before it was signed?
(No real answer given.)
If there is nothing to hide, why not just put the agreement on the MPPP website?
(No real answer given.)
Who were the other bidders for this project? How can it be an open tender if it is restricted to only those with existing projects in Penang? Were all the bidders offered the 1500 units in extra density?
There was a call for open tender but there no were takers. So the open tender process was then ended.
We then commenced a ‘request for proposals’. We received three.
Could you give us the names of the other two, apart from S P Setia?
A company called Pico and the other was Taman Kasturi.
Who was involved in the negotiations on the state government/MPPP side?
(Answer wasn’t very clear.)
The assessment payment to MPPP is being waived for the sPICE convention centre, the indoor stadium, the Aquatic Centre and the car park? How much per year is the MPPP losing?
The property belongs to the MPPP; so that’s why assessment is being waived. (But if MPPP owns the land, why is it not entitled to any rentals? It is a Build-Operate-Transfer project for an initial 30 years and the MPPP won’t get any income for their outlay.)
Why is this project exempted from a Social Impact Assessment (SIA) study?
The SIA is a new thing and most of our projects don’t have this. We will have a traffic impact assessment (TIA).
Is the TIA report binding or merely for “academic purposes”?
(They didn’t seem too sure about this. I don’t think it will be binding as it will probably be done by their own consultants.)
You have a 6000-capacity convention centre with only 2000 parking lots and a limited number of parking bays for tourist buses. How are you going to cope with the extra traffic?
Road widening around the area will be required. The project will also be integrated into the Penang Transport Masterplan (They also mentioned something about transport interchange nodes. But I don’t think there has been any serious thought about all this.)
We will look again into the parking lots situation when the actual plans come up for approval.
Who is the traffic consultant and will the consultant be independent of the developer?
As this is an MPPP property/project, the MPPP will also be looking into the traffic aspect.
Why the need to give 1500 units in extra density to the developer?
We are getting a RM250m convention centre paying only RM50m (less repairs and renovation saved etc). The extra density is to allow the developer to raise funds for the project.
There is a perception that the terms are generous. How did you agree to the figure of 1500? Can we see your calculations?
You can assume any figure for the selling price of the extra apartments. We could also assume that it may cost RM300000, in which case they might raise RM200m (which covers the cost of the convention centre).
They can easily raise that amount, no problem, probably more. Surely you would have done your own calculations. Can we see your calculations?
There are also intangible and subjective benefits to the state while the project carries certain risks. The concessionaire is responsible for the risks.
If the project is financial viable, why give ‘compensation’ of 1500 units in extra density? Is there a business plan to show that this project is viable?
(No real answer.)
The MPPP development charge is being waived for the 1500 extra units. There is a reason why development charges are imposed. Why are they being waived in this case? And how much are the amounts waived? Please provide us with figures.
It depends on the actual projects and where the 1500 units will be built. They can only use these extra units for larger projects where there are 8000-10000 units. (Not very clear.)
On what basis are the higher plot densities being allowed? 120 units per acre? Aren’t these well above existing density guidelines? What is the maximum permissible under the Local Plan and are these densities in line with that?
The State Planning Committee has the power to decide the higher densities.
But the Local Plan was approved by the MPPP in 2008?
The Local Plan is not yet gazetted/in force so it remains a guideline. Under existing guidelines, low-and-medium cost housing is allowed 120 units/acre and the Local Plan also allows it. (But is this restricted only to LMC?)
Why is MPPP providing land free-of-charge for the low-medium cost housing? What is the estimate cost of the land?
The land needed is not as big as what has been speculated. Based on current density guidelines, only about 3.75 acres are needed and not 16ha as speculated. We want to ensure that affordable housing is built.
The hotel – this is the jewel in the crown of the project. How was the price of RM100psf arrived at for the sale of the land? Who did the valuation?
It is based on transactions in neighbouring sites. The valuation was decided by MPPP’s valuation department.
Why is the hotel and land not being returned to MPPP after 30 years? Why is it 99 years?
The land is being leased for that period.
Can you give us a total estimated cost for all the additional related costs (development charge and assessments waived, free land provided) on top of the RM50m to be incurred by the MPPP? What are the total costs (direct and indirect) to the MPPP?
(Vague answer. They are sticking to the line that “we pay RM50m and we get a convention centre, ‘people’s park’ etc worth RM250m which will serve the needs of Penang”.)
Questions we didn’t get the time to ask:
Is this a flood-prone area? Have any studies been undertaken about the water-table in the area?
The developer will benefit from income derived from rentals of the retail outlets, convention centre, indoor stadium and car park. Will the MPPP be entitled to profit-sharing during the 30-year concession period? (I hear the MPPP is not entitled to any profit-sharing. What is the return on investment for the MPPP after spending or forgoing so much money?)
Are you setting a precedent by providing land for LMC for free?
The press conference, which began at 1.00pm, ran until 2.35pm, forcing the cancellation of a scheduled OSC committee meeting. Credit to the MPPP and state exco for facing the press.
But while appreciative of the opportunity to raise questions, I didn’t really get much new information except for the identities of the other parties who were supposed to have made proposals.
While it is arguable whether Penang needs another convention centre (I hear IJM will be building one?), what is of greater concern is how this deal is being pushed through the MPPP, the financial implications for the MPPP, the swap mechanism and the worrying precedent this will set for other possibly bigger swap deals in the future.
For the record, this is Chow Kon Yeow’s statement made at the press conference, before journalists raised the above questions:
Statement By Penang State Executive Councillor For Local Government And Traffic Management Chow Kon Yeow On Tuesday 27 September 2011 Made At The Media Briefing On The sPICE Project
The Penang Island Municipal Council (MPPP) has on 12 September 2011 make available the Concession Agreement for the sPICE project for public viewing and feedbacks.
The MPPP has not received any written feedbacks from any quarters. However the media has reported various comments and views made by several State Gerakan leaders.
We take this opportunity to address the issues raised on the sPICE project.
(1) sPICE Project Benefits Only The Developer
The State Gerakan Local Government Bureau Chairman Teh Leong Meng has said: “The deal benefits only the developer because the State Government must provide land for the developer to build the required 450 units of low medium cost residential units. Profits from the sale will be given to the developer despite the land being provided by the State Government. The State Government will have to allocate 16 ha. of land.
The developer do not stand to benefit from the State Government’s directive to build the 450 units of LMC housing even though the land is provided.
The cost of building a LMC unit is more than the selling price of RM72,500/=.
The State Government has insisted on this directive so that more LMC housing units can be built and distributed to housing applicants.
Teh Leong Meng had tried to mislead the public that 16 ha. of land would be needed. Based on current density guideline, the State Government needs to provide about 3.75 acres for the purpose.
Anyway if the State Government is unable to provide the land, the developer will not be required to build the LMC units.
This clause is included because of the State Government’s commitment to fulfill the people’s need for LMC housing and not to benefit the developer.
(2) sPICE Project Violates the Local Government Act And Town And Country Planning Act
The State Gerakan has alleged that the LGA and TCPA have been violated.
The State Government, pursuant to Section 9 (1) of the Local Government Act to attain a conference and convention services and exhibitions centre for the rate payers of Penang, has directed the MPPP to achieve this vision.
The MPPP has invited competitive proposals utilizing a standard Request For Proposal (RFP) from eligible persons and companies for implementing the Project and the MPPP received proposals from several companies, including the Concessionaire for implementing the Project.
Under the TCPA, the State Planning Committee has the power to amend planning guidelines and to allow additional density.
The SPC under the previous Government has granted additional density for LMC housing projects and other development proposals.
(3) MPPP Lambasted For Selling People’s Assets
State Gerakan Chairman Dr. Teng Hock Nan has claimed that the sPICE project will result in the people lossing RM487 million.
He claimed that as a result of the additional density of 1,500 residential units, the total saving on land cost will amount to RM450 million. Other loss include the RM27 million loss because the land for the hotel is underpriced and RM20 million land cost for the LMC housing units.
The Concessionaire anticipates that the costs of the Project is at least RM250 million for the construction of the new sPICE building, the refurbishment and rectification works to the existing PISA indoor stadium and PISA Aquatic Centre and other external and ancillary works.
The Concessionaire shall be responsible for the financial arrangement as would be necessary to finance the anticipated costs for the Project.
In the agreement, in the event the actual construction and development costs expended by the Concessionaire for the entire project shall be less than RM250 million, then the Concessionaire shall adhere to any reasonable proposal for additional works as may be proposed by MPPP up to the value of such shortfall amount.
It is expected that the Concessionaire would have to raise sufficient fund to complete the Project and recover the investment over a period of 30 years.
It is also expected that the Concessionaire would exercise the right to utilize the additional density of 1,500 residential units to generate revenue to finance the sPICE project.
Whether the Concessionaire is to raise revenue of RM100 million or RM450 million (as claimed by Dr. Teng Hock Nan), it is part of the commercial aspects of this agreement and the Concessionaire is solely responsible for any business risks involved.
A investor who choose to put the investment sum of RM200 million into a low risk fixed deposit account for 30 years (the concession period) at 4% interest would receive a revenue of RM240 million.
This concessionaire is willing to take the risk of putting up the sPICE and recover their investment from their property development.
There have been allegations that the State Government and MPPP have granted the Concessionaire so much favours. There have also been allegations of corruption and malpractices. Those making the allegations should report to the MACC or Police for full-scale investigation.
For the State Government and MPPP, we have responding to the needs of Penang for an international convention and exhibition centre which would drive economic growth in the State.