The cancellation of ICSB Consortium’s investment in Bandar Malaysia project announced by TRX City Sdn. Bhd. has a great impact on the reputation of Johor State Government-linked company, KPRJSB and may cause potential losses.
Iskandar Waterfront Holdings (IWH) owns 60% equity of ICSB whereas China Railway Engineering Corporation (CREC) the remaining 40%. KPRJSB through its 40% equity in IWH would have 14.4% interest in Bandar Malaysia Project if the deal materialized.
It is expected that KPRJSB needs to shoulder RM 1.7billion fund in Bandar Malaysia’s investment of the total RM7.41 billion shouldered by ICSB. It is estimated that KRJSB has shouldered RM 178 million of the RM 741 million deposit paid by ICSB.
If it is ICSB’s failure to fulfil the contractual obligations as having been announced by TRX City Sdn. Bhd., KPRJSB’s share of the deposit RM 178 million could be forfeited, and its losses in future return from long term investment is estimated at RM 28.8 billion if the deal actually materializes.
This will have impact on KPRJSB’s financial status and reputation. According to the 2015 Auditor-General’s Report, KPRJSB needs to review its management of 18 subsidiaries’ performance. KPRJSB’s 18 subsidiaries have investment funds of RM 432 million and RM 144 million in 9 joint ventures.
Nonetheless, only 6 out of the 18 subsidiaries are active, and 12 are dormant. Only 1 out of the 18 subsidiaries is making profit, and the remaining 17 are in a total accumulated loss of RM 24.49 by 2014. The Johor state government should consider winding up the dormant KPRJSB subsidiaries to prevent further losses.
The announcement by TRX City Sdn. Bhd. would impact the reputation of the Johor Government-linked KPRJSB. Johor government should not be reluctant to negotiate with the Federal Government in defending the interest of the state.
I also urge all quarters to review the long term negative impacts of political alignment in businesses, resulting in government losses including BMF’s RM 10 to 30 billion losses, Perwaja’s RM 10 billion losses, 1MDB in the form of Royal Commission on Truth and Reconciliation as proposed by the Parliamentary opposition leader Dr. Wan Azizah, in order to formulate long term policies in preventing such abuses and wastage of public funds.