KUALA LUMPUR (June 1): Selangor’s newly incorporated sovereign wealth fund, Darul Ehsan Investment Group Sdn Bhd (DEIG), will be developing five townships in Selangor with a total gross development value (GDV) of RM10 billion, according to a report in The Edge Financial Daily today.

They will be jointly developed with partners from the private sector, including public-listed developers, that will be identified by year-end.

The projects, which are currently being planned, will be in Shah Alam (GDV: RM5 billion), Gombak (GDV: RM1 billion), Section 14, Petaling Jaya (GDV: RM1 billion) and two other projects in Bukit Beruntung that are still in the preliminary planning stages.

Menteri Besar Inc of Selangor group chief operating officer Soffan Affendi Aminudin said DEIG is in the process of making a request for information (RFI) from several property developers, the identities of which will be disclosed at a later stage.

“Based on the RFI, we will proceed with a request for proposal from the players. Soon after, they can begin to develop the townships,” said Soffan Affendi.

He adds that the joint-venture (JV) structure will be based on share of GDV and not by equity.

The township developments are part of the Selangor government’s overall plan to improve the state’s revenue by monetising its assets such as land, minerals waste management, education and healthcare.

Selangor Menteri Besar Mohamed Azmin Ali had earlier told The Edge weekly that the state government wanted to develop some 5,000 acres (2,023.4ha) land over the next three to five years and hoped to make property development the main contributor to state revenue.

“We foresee that the cash cow for Selangor is going to be on the property side, while waste management will provide a recurring income of about RM500 million a year to the state because it’s a concession and cash business,” said Soffan Affendi.

However, state assemblywoman for Damansara Utama Yeo Bee Yin has raised concerns about the Selangor government’s involvement in business.

At the state assembly in April this year, Yeo questioned if it was a given that JVs with private companies will necessarily increase the return for government-linked companies.

In a written reply to a question posed by Yeo during the state assembly session in November last year, the state government said a total of 38 joint-venture projects were completed by Pemodalan Negeri Selangor Bhd (PNSB).

However, PNSB suffered a return on investment that is “much lower than industry average”, Yeo says.

Soffan Affendi acknowledged that most of the state government’s property development partnerships were based on profit sharing which includes the elements of revenue, cost and profit.

“The state was previously always the victim because it couldn’t control cost and ... there would be leakages and profit contribution to the state would be smaller.

“With the consolidation under DEIG, we will get into the top line arrangement and the state will act as an investor and not get into business,” he said.

  1. DONE DEAL: 1½-storey terraced factory at Hicom-Glenmarie Industrial Park, Shah Alam, Selangor
  2. DONE DEAL: Shop unit at Damansara Utama, Selangor
  3. DONE DEAL: Warehouse at Seksyen 22, Shah Alam, Selangor