Kota Baru (The Star/ANN) - A 2 billion ringgit (US$645 million) development project on the riverfront in Kota Baru, Kelantan that was to be ready in 2015 remains little more than a plan two years after the Auditor-General alerted the state government of its shortcomings.
The 10km-long project is supposed to be completed on Aug 31, 2015 just two years from now based on the exchange of letters between the developers Liziz Standaco Sdn Bhd (LSSB) and the State Economic Planning Unit.
The project was touted to involve 2,400 shop-offices, a hotel, a hypermarket, a golf course, luxury apartments and residential houses.
But only a hypermarket and some shoplots have been built since 2003 when the 404.6-hectare project was first announced and some 130 farmers ordered to move out.
Some 389 million ringgit worth of infrastructure and other supplementary projects and cash have yet to be delivered although the agreement with LSSB is about to expire.
The non-delivery of projects such as a mosque, roads, bridges and a low-cost housing scheme has led to the Auditor-General asking questions and the Malaysian Anti-Corruption Commission investigating.
The Auditor-General's Report for 2011 stated that the contractor LSSB owed the state government more than 12 million ringgit as contribution towards a low-cost housing scheme.
Sources said some of the transactions showed that LSSB had not met its obligations to the state.
"The company owes the state 389 million ringgit. While claiming that it did not make enough money to fulfil its obligations, it paid out more than 400 million ringgit in the past five years to its directors," said one source.
Last year, LSSB declared its biggest loss yet of 7.1 millionn ringgit. What puzzled MACC was that the directors were still paid 75.5 million ringgit.
The agreement also required LSSB to build the Sultan Yahya Petra Bridge. It didn't. The Federal Government took over the 90 million ringgit project and the company has not paid for it.
Four parcels of land were alienated to LSSB under a 99-year leasehold. The land runs some 10km along both sides of Sungai Kelantan covering areas such as Jambatan Sultan Yahya Petra to Pulau Jerami, Kota Baru, Kampung Palekbang and Tumpat.
Under the agreement signed on July 8, 2003, the company has until 2015 to build the shop-offices, hotel, hypermarket, golf course, luxury apartments and residential houses.
In return for the land, LSSB is supposed to pay the state in cash and build infrastructure.
After 10 years, the state has not received any money nor has any of the promised infrastructure been built, according to sources. The agreement was originally for 12 years although it allows for extensions.
Another point of interest for the MACC investigators is that the agreement also allows LSSB to substitute "some other form of benefits in kind" as long as the substituted benefit is "equal to the total sum set out".
This has led to a puzzling transaction where the developer has handed over a 4.8ha area, purportedly the site for a palace. The developer valued the land at 41 million ringgit.
"There is not even a single completed building on the site. All they did was level the land. There was never a proposal for a palace in the original agreement," said an official familiar with the contract.
MACC chief commissioner Abu Kassim Mohamed confirmed that a team was looking at the papers on the project.
He said the investigators had been in touch with the state government and LSSB officials but declined to elaborate.
Meanwhile, LSSB officials declined to comment on the queries while the Deputy Mentri Besar Datuk Ahmad Yaakob could not be reached for comment.
At the same time, small-time entrepreneurs and investors who banked heavily on the project have seen their investments go up in smoke.
Many of the traders have rented lots, hoping to cash in on the traffic that would come with the Lembah Sireh project but have seen only a handful of customers trickle in.
*US$1=3.0 ringgit