Media statement by Tony Pua Kiam Wee in Kuala Lumpur on Wednesday, 19^th January 2011:

BN once again failed to protect the interest of the rakyat by ensuring most "value for money" for government assets and contracts by awarding a RM600 million contract without open tender

In a mirror image of the RM682 million contract to construct Malaysia's largest exhibition and convention centre via direct negotiations by the Ministry of International Trade and Industry in November 2009, the Ministry of Health has awarded a RM600 to 700 million contract to Sentosa Jitra Sdn Bhd, a 50% associate of SP Setia Bhd to build 1National Institute of Health (1NIH).

In both cases, the Government is footing the bill via land swap deals. The Matrade International Convention & Exhibition Centre is paid with a 62.5 acres piece of prime land near Mont Kiara to Naza TTDI Sdn Bhd while the 1NIH project is paid with a 40.22 acres piece of prime land along Jalan Bangsar.

In both cases, the estimated value of the land far exceeds the value of the construction contract. Professional valuers have estimated the Naza TTDI land to be worth between RM350 and RM500 per square feet (psf) i.e., a total value between RM970 million to RM1.5 billion. The proposed project on the land is expected to achieve RM10 billion in gross development value (GDV).

Maybank Investment Bank has also estimated the value of land obtained by SP Setia to be worth RM646 to RM1,050 psf based on recently transacted prices in the area, giving a total land value of up to RM1.8 billion. ECM Libra also estimated a GDV of around RM8 billion.

The nature of these contracts only prove that the lack of transparency and good governance practices continue despite all the talk of reform through the hyped up transformation programmes such as the GTP, ETP and NEM.

Why did the Government choose not to tender the respective construction projects without any tenders, open or restricted to ensure that it gets to build the Matrade Centre or the 1NIH at the lowest possible cost?

Why was there no open auction on the Government land which was bestowed upon these private developers to ensure that the Government maximises the value of its assets?

Government losses from these two deals of up to RM1.28 billion combined would have more than offset the "savings" generated from the most recent round of subsidy cuts on essential goods.

In direct contrast to the award of the 1NIH project, the Pakatan Rakyat Penang state government has also recently awarded a contract via open tender to SP Setia to build the RM300 million subterranean Penang International Convention and Exhibition Centre (sPICE) where the developer will only be paid a total of RM50 million. SP Setia has to recoup its investments from managing and operating sPICE during the 30-year concession.

The Prime Minister, Datuk Seri Najib Razak has promised to stamp out "rent-seeking and patronage" under his "New Economic Model" to ensure value-for-money for government expenditure. He has even promised under the "Economic Transformation Programme" to carry out open tenders for big projects. However, the deals which have been awarded by the Government to date fails to live up to Najib's lofty promises. These deals continue to heavily benefit the big businesses at the expense of the Government, and ultimately the rakyat.

We call upon Datuk Seri Najib to cancel the above transaction and instead call for an open tender to build the proposed 1NIH and conduct an open auction for the 40.22 acres of prime land in Bangsar to not only ensure that the rakyat's interest is prioritised, but prevent the GTP, ETP and NEM from becoming for all intents and purposes, dead and buried.

* Tony Pua Kiam Wee, DAP National Publicity Secretary & MP for Petaling Jaya Utara