It’s been more than a month since Pakatan Harapan took over as Malaysia’s new government, and reforms have been happening at a rapid pace. However, many Malaysians have also wondered what the fate of the Tun Razak Exchange (and its prize building, the Exchange 106) will be in the near future. Well, a recent report by The Edge Markets shed some light on the matter, and here’s what happened over the past year;
1. TRX failed to sell Bandar Malaysia and became short on funds
According to The Edge Markets, TRX had allegedly become strapped for cash when they failed to sell 60% of its unit, Bandar Malaysia Sdn Bhd, in May 2017.
After a previous deal had fallen through, the Ministry of Finance invited requests for proposing a stake in Bandar Malaysia, but specified that interested parties had to be Fortune 500 companies that have earned a minimum revenue of RM50 billion over three financial years. Former secretary-general of Treasury,Tan Sri Irwan Serigar Abdullah had then announced in August 2017 that six parties were interested in sending their proposals, but no developments about this surfaced since then.
In light of this, it was reported that the Minister of Finance Inc had plans to buy Bandar Malaysia, but this was not carried through in light of the 14th general election, which ousted the former Barisan Nasional (BN) government.
2. The current Ministry of Finance just decided to continue funding the project
According to the report, the current government is reportedly not willing to fund the up-and-coming financial centre based in Kuala Lumpur.
A source revealed that the 70-acre centre will not receive any more funds from the government after a meeting between TRX City Sdn Bhd (formerly 1MDB Real Estate Sdn Bhd) and Minister of Finance, Lim Guan Eng took place on Monday (18th June). TRX City’s senior management also spoke with Lim Guan Eng’s special advisor, Tony Pua on Friday (15th June) in a separate meeting.
The source explained that TRX is currently short on money and needs to finance infrastructure development, which is reportedly estimated to cost between RM1.5 and RM2.5 billion. The source told the daily,
“In a nutshell, TRX is cash-strapped and the government will not be pumping any more money into it. How much more funds are required is uncertain as the figure is at present a moving target.”
“The Ministry of Finance wants the TRX management to source for funds.”
However, in latest developments, Lim Guan Eng revealed that the cabinet has decided to proceed with funding the project on 21st June, as the revenue from it can help repay debts and recover embezzled funds. In the end, the government decided to fund up to RM2.8 billion for the TRX project.
He was quoted by Free Malaysia Today as saying,
“The alternative of not coming up with a funding of RM2.8 billion and not completing the project, is to pay RM3.51 billion of ringgit in compensation claims, as well as an eyesore of an abandoned mega-project in the heart of Kuala Lumpur.”
“In that event, apart from having to pay compensation of RM3.51 billion, the government will also lose the RM3.7 billion transferred earlier to TRX.”
3. The Exchange 106 is being built according to plan
Meanwhile, as for the Exchange 106 that started construction under the BN administration, Finance Minister Lim Guan Eng told The Edge that the ministry had to fund the project, despite the building being largely owned by Indonesian developers, Mulia Group.
“They [Mulia Group] did put in some money, a substantial sum, but there was a need for capital injection from MoF to keep the project going,” said the minister.
On top of that, Lim Guan Eng added that Mulia Group did not contribute an amount that was proportional to their stake in the project and that they need to return the money to the Ministry of Finance by a specific amount of time. If they are unable to do so, then the Exchange 106 will belong entirely to the ministry. He continued,
“On one hand, if you cut your losses now, you lose everything. But if you go ahead – provided it can be completed, it looks like it can be completed – at least you have an asset there that can be completed at below construction cost.”
“While we want to see the project being completed, we also want to see a better deal. That is basically the government’s position.”
Soon after the historic general election, although uncertainty was in the air at the time, work still continued on the Exchange 106. A source told The Star,
“There is no slowdown because infrastructure developments have deadlines to meet.”
According to the daily, Australia infrastructure and property group Lendlease initially signed a joint venture with TRX City that has now been parked under the Ministry of Finance. Lendlease, which reportedly owns 17 acres, issued a statement addressing the election and expressed an interest in working and engaging with the Pakatan Harapan government.
The Exhange 106 is expected to be completed by September 2018, and will stand at an impressive 492.3 metres, surpassing the Petronas Twin Towers as Malaysia’s tallest building, and the second tallest building in Southeast Asia.
So, that’s what has been happening to the TRX financial centre and the Exchange 106 since our general election. Let’s see how things develop as the year progresses!
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