A case of the jitters

A woman walking past a 1MDB billboard in Kuala Lumpur. A source says the lack of transparency and slow progress have made major investors reconsider their positions in two of IMDB’s mega projects. Photo by Reuters

KUALA LUMPUR: Major global investors from Qatar and Abu Dhabi are said to be considering pulling billions of ringgit out of two of 1Malaysia Development Bhd’s (1MDB) mega projects, namely the Tun Razak Exchange (TRX) and Bandar Malaysia here, due to the lack of transparency and slow progress.

“The lack of transparency in sharing their (1MDB) plans with investors and the public, coupled with slow progress, lack of experience and delays can cause a substantial amount of interest costs to accumulate,” a source close to the matter told The Edge Financial Daily.

“[Thus,] investors from both Qatar and Abu Dhabi are reconsidering their positions in the TRX and Bandar Malaysia projects,” the source said.

In April last year, 1MDB and its Abu Dhabi partner — Aabar Investments PJS — had reportedly raised US$3 billion capital from a private placement to fund their RM18 billion worth of projects. TRX in Jalan Tun Razak was said to be potentially the first investment by their 50:50 joint venture, Abu Dhabi Malaysia Investment Co (ADMIC).

Meanwhile, Qatar Investment Authority (QIA), one of the partners for the Bandar Malaysia project, had pledged to invest US$5 billion (RM16.25 billion) in it. In exchange, 1MDB had promised to give QIA first choice of land, before opening the rest to local developers.

Apart from Aabar Investments and QIA, financial services firm Prudential is reconsidering pumping US$500 million into the TRX project, the source added.

The source also noted that another investor from Kuwait that was initially interested in setting up a mega Islamic bank within TRX had recently pulled out.

At press time, 1MDB did not respond to an email query by The Edge Financial Daily.

1MDB is the master developer for TRX, an international financial district, and the 495-acre (200.3ha) Bandar Malaysia urban redevelopment township, located 3km from TRX.

When contacted, Akitek Jururancang (M) Sdn Bhd, one of TRX’s master planners, said the project has yet to start major earthworks. “There have been several changes to the master plan and this has caused delays to the project,” the spokesman added.

Akitek Jururancang had partnered with international firm Boston-based Machado and Silvetti Associates Inc for the TRX project.

Kuala Lumpur mayor Datuk Seri Ahmad Phesal Talib told The Edge Financial Daily that there should not be any issues preventing the project from moving forward as all the necessary approvals have been issued for the TRX project.

“Earthworks for the basement were approved by the Kuala Lumpur City Hall (DBKL) last year,” he added.  

Ahmad Phesal also confirmed that DBKL has yet to receive any application to start with Bandar Malaysia.

It is understood that Bandar Malaysia is one year behind schedule.

In August 2011, IMDB Real Estate Sdn Bhd (1MDB RE) chief operating officer Datuk Azmar Talib was reported to have said that the detailed master plan for TRX was scheduled to be completed in the first quarter of 2012, while construction was on track to start in June the same year.

On Monday, 1MDB RE invited prospective contractors to take part in its pre-qualification exercise for TRX. The scope of works for the project involves the proposed construction and completion of the infrastructure and roadway works.

This article first appeared in The Edge Financial Daily, on September 24, 2014.



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