GEORGE TOWN: The Penang government has decided to commence legal action against Tropical Island Resort (TIR), which operates a resort on Pulau Jerejak, to recover RM10.6 million in land premium owed for 80 acres (32ha) of land on the island.

Chief Minister Lim Guan Eng said the state government was also asking the state legal advisor to look into the legalities of recovering the land from TIR.

State-owned Penang Development Corporation (PDC) and the Urban Development Authority (UDA) are partners of the Tropical Island Resort in which PDC holds a 49% stake and UDA 51%.

"While the state Land and Mines department is entitled to recover the land premium, we would also want to regain the land which has been allocated to TIR," Lim added.

The 80 acres are the only land developable on the 850-acre former penal island.

Lim said the land matter was unique as it could be disputed, as the previous state government had issued the land title after only RM2.4 million out of the RM12.9 million land premium had been paid.

At a press conference, Lim said said todate RM18 million losses had been incurred with revenue dropping from RM3.2 million in 2007 to RM2.7 million in 2009 while losses have been rising with RM1.8 million in 2008 to RM2.3 million in 2009.

Lim said the accumulated losses suffered now amounted to RM18 million.

"This is a unique case as the land title was given away without the land premium being paid in full on Oct 10, 2002 as legally, there were provisions which allowed for the land title to be given upon payment of a portion of the land premium.

"Why wasn't there any action taken when they stopped paying the land premium?," Lim asked.

The application for the Pulau Jerejak land was made by TIR on Nov 19, 1997 and approved on Jan 15, 2001 with a 60-year lease which expires on Oct 10, 2062.

The premium fixed by the then state government was RM12.95 million (RM3.72 per sq ft) for the 80 acres while interest was fixed at 4% annually. The repayment period was fixed from 2004 to 2013.

TIR's paidup capital is RM31.5 million and with PDC holding a 49% stake, its investment amounts to RM15.4 million.

Lim said on Dec 28, 2007, PDC also granted a RM3.41 million loan to TIR for its operation expenses which has yet to be repaid.

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