Dubai World factor in IDR
MMC Corp Bhd group chief executive Feizal Ali tells StarBiz about the business proposition behind the RM16bil memorandum of understanding with Dubai World and how the project will create a new petrochemical and maritime industry in Johor
How did this partnership come about and please brief us about the project?
In the course of doing business in the Middle East, we developed relationships with various infrastructure groups, including Dubai World. Being an infrastructure and utilities group, we recognised potential synergies that can be drawn between MMC and Dubai World.
Dubai World’s subsidiary, DP World, is one of the largest global port operators and another subsidiary, Nakheel, has practically transformed Dubai into one of the most vibrant cities in the region, through the creation of unique projects, such as The Palm Islands and The World.
Dubai World also has a very strong track record in the development of logistics parks.
When executives from Dubai World visited South Johor during the last three months, they became aware of the tremendous potential of the Iskandar Development Region (IDR) and South Johor generally. They were very interested in our landbank of 2,255 acres at Tanjung Bin as well as the 500 acres next to the Port of Tanjung Pelepas (PTP), which had been earmarked for industrial development, and we had discussions on the possibility of working together to jointly develop these lands.
Our discussions led to the recent signing of an MoU with Dubai World, and we are now working on developing a maritime centre masterplan for our land, that will comprise oil terminal activities, drydocks, shipyards, conventional cargo handling facilities, logistic parks and real estate development.
We view this project as being in line with the call of Prime Minister Datuk Seri Abdullah Ahmad Badawi and Johor Menteri Besar Datuk Abdul Ghani Othman to develop the South Johor corridor.
This development will create a new petrochemical and maritime industry with an estimated gross development value of RM16bil, which we hope will become the next engine of growth for South Johor and at the same time complement IDR.
What is Dubai World’s role in this project?
We had developed our own masterplan for the development of this land. We recognised, however, that this is a greenfield project and working with a strong strategic partner would enable us to take this project to the next level.
In Dubai World, we found a company with proven project management experience, marketing strength and a global footprint that enable us to reach out to the international market.
Dubai World brings to the table a brand that has been very successful not only in Dubai but also in other parts of the world. We believe our partner brings strength and credibility to this project as well as the requisite expertise and experience to jointly develop this area to a level that is on par with other international endeavours.
From our perspective, the participation of a premier brand such as Dubai World reflects its trust in MMC’s ability to deliver world class projects and also underscores MMC’s position as an emerging global utilities and infrastructure group.
What equity stake will Dubai World take in this project?
We are in the midst of discussing our masterplan in detail with Dubai World. We will come to an agreement on the equity structure of this partnership once this masterplan has been agreed upon by both parties.
What do you think persuaded Dubai World to join MMC in this project?
Dubai World chairman Sultan Ahmed Bin Sulayem has said they see a bright future for this exciting multi-faceted development. He expressed the view that an integrated maritime centre will improve efficiency and Dubai World appeared very keen to capitalise on the opportunities within the region as well as in Malaysia’s vibrant and rapidly growing economy.
What is the timeline for the development?
Work on Tanjung Bin land will begin right after acceptance of the masterplan by both parties next year. We expect the project to be fully developed by 2012.
What is the value of the Tanjung Bin land?
The average offer that we have received, on an “as is where is” basis, is RM20 per sq ft on a 30-year lease. However, we do not wish to completely sell or lease all of the land in one go just to record one-off gains.
Instead, we want to plan this project well and maximise the use of the land by building supporting infrastructure and services to support the entire project, which will also allow us to generate recurring income.
In our initial study, the cost of developing the infrastructure and services required would be about RM2.5bil. This would include an industrial port, three oil jetties and supporting infrastructure. This proposal is, of course, subject to regulatory approvals from the Federal and state governments. Naturally, the value of the land will increase with these supporting facilities in place.
Are there any environmental concerns?
The area earmarked for development is outside the area identified as a wetland sanctuary under RAMSAR.
Expert opinion confirms that the proposed development is balanced and will not damage the RAMSAR site. As part of our corporate social responsibility, we will ensure that the development will not, in any way, compromise the environment.
In developing the masterplan, particular attention will continue to be given to preserve the RAMSAR site. We will have very stringent requirements to ensure that all emissions will be in full compliance with all environmental requirements.
In fact, we are already in dialogue with the Malaysian Nature Society and other NGOs on how we can work together. Our plans will also take into consideration the overall environment including the views of experts, professionals and NGOs to ensure that the goal of a balanced development is achieved. We will also pay serious attention to the wishes of the state government.
A good example of a balanced development is PTP. We built this world-class port while successfully preserving the surrounding environment. PTP works closely with the Fisheries Department on dugong programs to preserve the species.
Together with NGOs such as the SOS committee, PTP is also involved in monitoring the sea grass bed, which is the habitat for seahorses. Our experience shows it is entirely possible to preserve the environment while building a world-class facility and that continues to be our objective as a responsible corporate citizen.