Letter to Tan Sri William Cheng

By Datuk Seri Idris Jala via The Malaysian Insider

Pemandu is arguing that a report by The Malaysian Insider, “Pemandu admits land acquisition only way to recoup MRT cost”, is misleading. 

YBhg Tan Sri,

I refer to your letter entitled “Unfair Rail plus Property Model for MRT Development” dated August 8m 2011. YBhg Tan Sri has raised some concerns regarding the rail and property model including the acquisition of the Jalan Sultan shoplots.

The “rail and property model” is a business model that has been successfully applied by the Hong Kong MTR Corporation in developing the HK MRT rail network. The rationale behind this concept is to ensure effective synergies between rail and property development to optimise catchment and passenger flows for the MRT and provide an effective means of recouping the vast sums spent on developing the MRT. For Hong Kong, this approach also serves as a planning tool for urban spatial development by establishing new communities along the routes of its railway lines.

HK MTR revenues are currently based on 35 per cent fare box revenues, with the remainder being derived from property development. By relying solely on fare box revenue itself, Hong Kong will not be able to successfully finance both the capex and opex costs for its rail network.

In the case of Singapore, the Land Transport Authority (LTA) develops the MRT lines but does not get involved in property development along MRT routes. Instead, this role rests with the Urban Redevelopment Authority and its Housing and Development Board.

The exception is the Dhoby Ghaut station (a five-storey high-rise) undertaken by LTA. Singapore’s MRT operators rely heavily on fare box revenues and contribution from commercial activities is minimal but this approach is considered an exception rather than the norm.

It is difficult to replicate fully HK’s property value management model in Malaysia as we have to put in play a model that is best suited to our specific needs. HK MTR Corporation has the benefit of access to several tracts of land (mainly from reclamation) that allows integrated station and property/residential development in a country where land is scarce. At the same time, the high density in Hong Kong allows maximum optimization of returns from such property development.

However, in the Greater Kuala Lumpur/Klang Valley area, most of the area is already built-up and the Sungai Buloh-Kajang alignment runs mainly along a corridor where there are existing developments and hence the need for some amount of land acquisition.

The developments referred to by YBhg Tan Sri in respect of Sungai Buloh-RRI and Kuala Lumpur International Financial District (KLIFD) sites are developed by GLCs and to be totally clear, the revenue from these developments do not go directly towards offsetting the MRT capex.

For the government to manage the project efficiently and sustainably, fare-box revenue will not be sufficient to finance the high CAPEX and OPEX for the MRT network. Increasing the fares is not an option as the government wants to act responsibly by providing the rakyat with affordable transport. Instead, the government is adopting a prudent approach towards a sustainable financial model for the MRT through a modified rail-plus-property model.

The government through the MRT Co will develop properties above the underground station box and the park-and-ride facilities to ensure optimisation of MRT assets and the associated facilities (park and drop-off/bus/taxis areas).

In addition, where there is injurious land (part of the remaining lot not compulsorily acquired) and the property owner is willing to dispose to the government on a “willing buyer, willing seller” basis or where the property owner approaches the MRT Co for joint development, the government is willing to consider such options that would allow some returns to balance the heavy investment in rail infrastructure.

The government is thus not acquiring land banks for the MRT Co nor abusing the Land Acquisition Act for this purpose. In respect of the Jalan Sultan shoplots and several other buildings such as UDA Ocean and Plaza Warisan, I will let the Land Public Transport Commission (SPAD) respond to your concerns as I understand that YBhg Tan Sri has sent a similar letter to SPAD.