If you bought a piece of land 94 hectares in Penang for RM1.38 Billion today, what would you do with it? Especially is that piece of land is within the island itself and in an area favoured by many local Penangites? Air Itam. Well, 1MDB bought it and announced earlier that it would build 9,999 units of affordable and low-cost homes there. Then, it said that besides these affordable and low-cost homes, it will also be using one part of the land for other purposes which will be able to generate significant value for its investment. One tiny problem for this plan though. Penang Chief Minister Lim Guan Eng said that he will not be allowing 1MDB to build anything than just affordable homes.
Let’s use some assumption to do some calculation and projection. Since the total number of units announced was 9,999 units, assuming 1MBD were to build half of them as affordable units at RM400,000 and another half of low cost at RM72,500, this would give it a total GDV of RM2.36 Billion. A pretty exciting number where Penang is concerned. Anything above RM1 Billion GDV is considered big in Penang. After deducting the cost of land which is RM1.38 Billion, paying compensation for the squatters plus the construction costs, I really am not sure if 1MDB can pull this off without incurring a loss. Of course, if 1MDB only builds the affordable units instead of low cost units, then it should be ok. Any other percentage on the side of low cost would mean losses. We shall wait for 1MDB’s reply on the Chief Minister’s remarks.
The reason why we should see this issue from a broader perspective is because if the whole project is cancelled, it benefits no one. Not even the state government. If however the project goes ahead but the 9,999 units promised were not built, then again, it does not benefit Penangites or even non Penangites working and contributing to Penang’s economy. The dream of many who just have to stay in island instead of mainland would also have to be dashed. It’s clear that if all the units to be built are low cost units, even before starting 1MDB would have suffered a huge loss and there is no reason why they would proceed. For this case, I think it is important that politics are set aside and everything is discussed objectively based on a win-win situation for every party involved. There’s just too little to argue about who’s right and who’s wrong and too much at stake if nothing happens from here onwards.
written on 6 Nov 2014
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