Barrage of questions over Spice at press conference

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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?

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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?

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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”.)

Final notes

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.

Reply:

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.

Reply:

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.

Reply:

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.

Conclusion

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.

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glenn
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glenn

are you against the concessionaire asking for concessions? or are you just interested in making sure that mppp knows what it’s doing?

thanks, anil.

glenn
Guest
glenn

anil, though i respect your vigor for the truth and justice, you are obviously not doing justice to penangites. a convention centre will bring in foreign investments which will benefit everyone, especially to those entrepreuners in the electrical industry. our factory industry will very likely flourish even more if penang is marketed and exposed even more internationally. let’s gauge what we’ll benefit first before running down the project. no businessman is going to survive if there is no returns. setia is no exception. which businessman in their right mind would want to invest rm250m into something and hope to recover… Read more »

wira
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wira

I know for sure the publicity will be bad for SP Setia.
Unless and until their 1500 units quota is used up, every buyer of a SP Setia unit on the island will be on the alert about the building density of their projects as the 1500 units can be placed anywhere.

Hope buyers don’t forget easily.

Ong Eu Soon
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Ong Eu Soon

If you ask me who is the best candidate for Penang Chief Minister, it definitely not this Heng Ong Huat, it should be the Great Anil. Why the Great Anil should be the best candidate for Penang Chief Minister. 1) He is open minded. You can argue with him. If your reasoning is right he will accept it even sometime he does not like it. 2) He is keen to learn. Unlike the empty shouting of Heng Ong Huat, if you followed his blog you will realise that there is a lot of stuff he doesn’t know but at the… Read more »

Hangman
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Hangman

If you want to bodek Anil, then pls contribute money to his coffee fund. Otherwise pls shut up.

Sze Tho
Guest
Sze Tho

No substance…therefore he feels the need to fill up space with this drivel.

ManiamJK
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ManiamJK

Spice or no spice I am lloking forward to move to Batu Kawan as Boon Siew Honda is building a RM200 million motorcycle plant (annual production of 350K units) to replace the old one at Mak Mandin. A job opportunity for me and my family.

Ong Eu Soon
Guest
Ong Eu Soon

The Bo Hood Party is most disappointing. The Kai Sue administration is afraid of being sue yet the Bo Hood party really has no gut to bring this Kai Sue administration to court. How can the Bo Hood party expect Penangites to vote for it when it don’t know what to do with this Kai Sue administration over this scandalous concessions? Zero KPI is what the Bo Hood Party has achieved. All the best it can do is echo what the Great Anil wrote in his blog.

Ong Eu Soon
Guest
Ong Eu Soon

Once again the Kai Sue administration try to mislead Penangites on open tender. The RFP is not an open tender. The tender for the original PICC plan tak laku because even the developers know that it is a crazy ideas which no one bother to care about. The RFP can not be used as open tender as it did not set out the selection criterion. There is no way to compare the proposals. The Kai Sue administration can accept the RFP but should tender out the construction projects which it fail to do so especially after giving the developers such… Read more »

Ong Eu Soon
Guest
Ong Eu Soon

For LGe’s pet project, the Kai Sue administration has opted to betray the poor by denying them affordable housing. The argument that the cost of building a LMC unit is more than the selling price of RM72,500 is virtually set the pricing of LMC beyond the affordability of poor Penangites. This scandalous issue finally exposed the true color of LGe administration which choose to abuse the power vested in it. The permissible maximum development densities are outlined in the Penang Structure Plan, yet the Kai Sue administration choose to ignore it by wantonly change the development densities without provide any… Read more »

SH Tan
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SH Tan

Anil: I would like to help clarify some of the points raised by some commentors here: – regarding the 1500 additonal units; these are NOT for LMC. Clause 4.3(b) states “there shall be no development charges, built up area control or selling price control imposed by MPPP on any such additional density utilized.” So they can build these at any price they want. What price range of houses would you build if you are a businessman given this open cheque?? – our analysis showed that the whole project will cost MPPP and the State a total of RM110million, NOT RM50… Read more »

Ong Eu Soon
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Ong Eu Soon

This is also first time in Malaysia the PR state government is giving unusual concessions to developers and totally ignore the state Legislative Assembly. Why there is no debate in the state Legislative Assembly on this scandalous concessions? Not only the municipal councilors are being by passed, the state assembly also being ignored. This is what the Heng Ong Huat suppose to do?

kingkong
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kingkong

It is BEST time to be a developer. Everything the developer build will sold like HOT cakes and all sapu by Penang Kia even if they are can double the min price will also sell off. The SPICe must like carnival everyday when Penang kia going there everyday from morning breakfast to boogie nights whereas other centres have to get house flies swapper as there are no business or even close down. If Pico and Tm Kasturi are RM2 companies, then form a RM10 company and submit proposal. Pico and Tm Kasturi should persist as the profit is there and… Read more »

langtingtang
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langtingtang

The above does not bode well for PR and will definitely give plenty of ammunitions to BN this coming GE13. Penangites should understand that only PR with its CAT commitment allows the general public this press conference. With BN, it’s “we do what we want, none of your biz”. PR has been doing well governing the state so far and I personally feel that we should give them a chance to continue doing what is best for us and not go overboard by questioning their every decision. If this project is really bad (which I don’t think so) then let… Read more »

Ong Eu Soon
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Ong Eu Soon

What CAT commitment? You must be dreaming! Do you know who is the Chief Minister of Penang? Do you ever heard about this Heng Ong Huat? Heng Ong Huat IS NOW RUNNING THE STATE ADMINISTRATION !

Andrew I
Guest
Andrew I

Off topic: made my day, this one: http://thestar.com.my/news/story.asp?file=/2011/9/29/nation/20110929171531&sec=nation

Which segments of society, I wonder?

SamG
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SamG

Anil, Why so anti-development? If SP Setia is taking the financial risk to put up such a huge infrastructure, what is wrong in they making some money? They are not set-up to as an NGO or Non-Profit Organization! Why don’t question the state of Penang Bridge or PLUS which will be handed over to the Govt after 35 years? That too will be run down? Every building has to go thru’ re-furbishment. Dewan Sri Penang is over 35 years old? That too went thru’ regular upkeep. Its is good condition now. Simple logic – if SP Setia does not maintain… Read more »

Ong Eu Soon
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Ong Eu Soon

Hi SamG want to bodek LGe go to his office lah not in Anil blog!

Sunny
Guest
Sunny

How interesting… no one interested to submit in open tender? How convenient — precisely three proposals — mind you, not two not four not five.

hahaha… LGE, welcome to the XXX club!

nkkhoo.com
Guest

MPPP has to advertise open tender notice in the Star, no excuse for no tender.

I hope MACC digs into the scandal, and find out who are the Pico and Taman Kasturi. My gut feeling tells me they are RM2 companies.

Are these two companies ask for RM50 million and extra 1500 units?

MPPP (may) say the their RFQ documents are missing when more probes into this scandal.

kingkong
Guest
kingkong

Always hope and never do. Good opportunity to do it with happy heart content to MCCA to send the CM to Sg Buloh or balek kampong in Melaka and to be closer to you

Andrew Chan
Guest
Andrew Chan

FYI .. PICO is a Singapore based MNC with long experience in the exhibition industry and in no way a RM 2 company. I am one of the consortium partner at Taman Kasturi and we are in no way proxies of SP Setia .. we would have love to win this tender but unfortunately the council did not select our proposal for the new exhibition and convention center.

nkkhoo
Guest

The whole tender process is scandalous with no business feasibility study by a qualified party.

Pico and Taman Kasturi (may be) RM2 companies …

PR is slightly better BN on its “openness” to be grilled unlike BN who is running snack oil black box tender for its cronies.

If LGE wants to be different than BN, it’s better for him to re-visit LKY for a lecture on how to run a transparent and clean government.

In short, sPICE is another BN project under PR.

rilakkuma
Guest
rilakkuma

fyi LGE (allegedly) has had private talk indirectly with LKY via Ho Chin (LKY’s daughter-in-law) during her last visit to Penang.
May be sPICE ideas came from LKY whereby sPICE is modelled after Suntec Spore ? (not to be confused with Suntec of Bayan Baru) with feng sui elements taken into consideration ?

GK
Guest
GK

If that is the case, then LGE is total useless.

nkkhoo
Guest

LGE talked to Ho Chin? No wonder sPICE is so screwed up.

Ho Chin’s (tenure saw) Temasik (making) more than USD 10 billion (should be more..maybe USD30 billion) losses …

Ong Eu Soon
Guest
Ong Eu Soon

Aiya that is the national service need to be done for the US big brother!

kingkong
Guest
kingkong

Loser only making noises but when big win no beating the heart. In this case PAP Government is even worst than the penang state government what was claimed to be very good and doing wonders like building bicycle/bullock cart lanes and losing billions Uncle Sam dollars.

nkkhoo
Guest

Kiasu still have USD250 billion reserves.

Temasek Holding asset is still at S$ 298 billion now. It has revocered from S$ 181 billion in 2004 after Ho Chin resigned from the Temasek.

LKY made mistake in his own cronyism and learned the mistake by firing Ho Chin. (Anil, are you friend of Ho Chin? You seem like to delete and censure comments at your pleasure, that is freedom of speech.)

Malaysia did burn its finger in 90s after betting in foreign currency and the country almost bankrupt if no loans from Saudi Arabia.

nkkhoo
Guest

That is a relevant example of cronyism.

GK
Guest
GK

Anil:

If there is nothing to hide, why not put the agreement on the MPPP website?

GK: PR = BN, LOL

Andrew I
Guest
Andrew I

As pointed out by nkkhoo, slightly better than BN. This one can be grilled. Like the new initials, but you’ll always be Gherkin Khan to me.

GK
Guest
GK

Rebranding exercise ??? No, i’m a brand new user…

Andrew I
Guest
Andrew I

X files.

just
Guest
just

Thanks Anil for this report. However it raises more questions. for example since this is a RFP, what were the criteria used for evaluation of the proposals. I think MPPP should not be so happy about getting “convention centre, ‘people’s park’ etc worth RM250m which will serve the needs of Penang” after 30 years as by that time MPPP would be handed over a ‘liability”, the buildings would be obsolete and cost even more to upkeep whereas the developer has collected all the cash from their ‘investments’,, and none of those responsible will be around to answer for the folly.

rilakkuma
Guest
rilakkuma

Anil
You did good questionings and hopefully MPPP/Penang Gomen do not hide under carpet any matter pertainting to sPICE.
Once the matter sorted out clear n transparent, this would set new precedence not to take rakyat for granted.
I still feel sPICE (with allegedly scandalous handling sorted out) is needed to bring job opportunities and high spending tourists to spend money at shops/malls in Penang, so that uncles, aunties, grandpas and grandmas here are happy with money to earn lawfully and morally.

Mutiara Insider
Guest
Mutiara Insider

PNB consider buying SP Setia.
Khazanah wants a stake of E&O.
nkkhoo.com to be absorbed by anil.com judging by the collaboration in the making; with nkkhoo’s exit strategy after GE13 ?

rilakkuma
Guest
rilakkuma

Mutiara Insider
I am not so sure as Anil & nkkhoo have very contrasting characters that they can work together in the long run. May be they temporarily have common interests in grilling for more info about sPICE.

As for sPICE, I think Pakatan (especially DAP) is sincere in rejuvenating PISA for the benefits of Penangites. They could be over-zealous in getting things done fast that they overlook certain aspects in their negotiations for terms/agreements with SP Setia/Meridian. It’s learning process and they should be able to overcome any mistakes and continue to gain the faiths of the people.

Syiok Syiok
Guest
Syiok Syiok

mu humble opinion : PR/DAP folks are not of businessmen background hence could be “new” to handle commercialism – unlike Gerakan/UMNO/MCA trilogy that can smells $ even in their sleeping mode. So sPICE likely a steep learning curve which believe PR/DAP folks can learn & move on with greater vigor & phase to continue to win the hearts of long suffering Penang folks.
Anil (self-claimed for MPPP RM50 million protection) has done good investigative reporting which can even uncover the BN’s assault strategies knowing GE is round the corner.