Source : The Business Times, August 27, 2007
Mid-East investors, Khazanah in special purpose vehicle
A SPECIAL purpose vehicle comprising majority Middle Eastern interests and Malaysian state investment agency Khazanah Nasional is poised to jump-start the Iskandar Development Region (IDR) with an initial US$1.4 billion development of a nucleus 'Rim City' in events that could be announced as early as Wednesday.
While government officials have been tight-lipped about the project, they concurred that Prime Minister Abdullah Ahmad Badawi will be making a visit to Johor on Wednesday to make a 'major announcement'.
The project - done through a masterplan on a greenfield basis - is apparently very ambitious in scale, with one official telling BT that 'this will make the KLCC (Kuala Lumpur City Centre) look like peanuts'.
According to some estimates, the project could be anything between US$4.5 billion and US$6 billion over a period of 10 to 15 years.
The identities of the investors have been kept under wraps although they are said to include Dubai-based Jumeirah Capital and three other parties from Saudi Arabia, Abu Dhabi and Kuwait.
According to the officials, Khazanah will bring land as its portion of its equity in the special purpose vehicle. The rest of the equity will be held by the Middle Eastern investors who will end up with majority control of the company.
The land will be on a 99-year lease, which means it will ultimately revert to government hands, a feature presumably aimed at avoiding any political backlash.
'Giving them control will commit them to the project and give them a certain comfort level after all the pledges made on the IDR,' one of the officials said. 'But they are very tough negotiators and up until now, the talks are still going on in Singapore. Things are still fluid.'
The IDR project signals a sea change in the attitudes of Middle Eastern investors who have traditionally opted to place their excess funds in the US and Europe. But after the Sept 11 terrorist attacks in the US, more and more have cast their eyes towards South-east Asia.
Recently, the Middle Eastern investment spree in Malaysia swelled with Saudi Telecom paying US$3 billion for a stake in Maxis Telecommunications. But the latest round of Middle East investments in the IDR will dwarf even that.
The IDR project is also expected to radically change the way of doing business in Malaysia, especially for big projects. Given that the Middle Eastern investors will have control of the project, all contracts are likely to be based on open and international tenders to ensure best prices and quality. In that sense, politically-connected companies hoping to ride on the boom through negotiated awards are likely to be disappointed.
Moreover, the presence of the Middle Eastern investors is a shrewd political move as it is likely to quell criticisms about Malaysia selling 'its sovereignty' to foreigners, especially Singaporean interests. The officials said that there would be less to carp about when the foreign investors are Islamic interests.
Finally, the announcement of the project is likely to renew foreign interest in the IDR, which has been criticised as 'all talk and no action'. Indeed, the officials said that a series of announcements was likely in the coming months with many investors already lined up. 'But this will provide the spark,' they said.
No comments:
Post a Comment