MPHB throws down the gauntlet to Johor

MPHB throws down the gauntlet to Johor

By Kamarul Azhar

Is it right for the Johor government to forcibly acquire private land and then resell it for a hefty profit?

That is the crux of the suit MPHB Capital Bhd has brought against the state government as the first defendent and national oil company Petronas as the second defendent.

MPHB's subsidiary Kelana Megah Development Sdn Bhd (KMD) filed the suit as the landowner on May 9.

In essence, the Johor government and Petronas are being accused of conspiring to unfairly and forcibly acquire seven parcels totalling 1,150 ha (2,841 acres), which is an abuse of the Land Acquisition Act.

Here are the salient points of the suit according to affidavits filed in court by Kelana Megah:

- The Johor government used the Land Acquisition Act to buy the land at 93 sen psf without granting KMD sufficient time to appoint an independent valuer to value the land. KMD was notified on Aug 9, 2012, and at a land enquiry conducted by the state land administrator on Sept 3, 2012, that the administrator had fixed the acquisition price at 93 sen after refusing a KMD request to delay a decision pending submission of an independent valuation.

- The state government proceeded with the acquisition at 93 sen on Oct 8, 2012, while it already had an agreement to sell the same land to Petronas at RM8 psf, which the national oil company needed for its Refinery and Petrochemical Integrated Development (RAPID) project.

- KMD alleges that the RM8 psf price was agreed upon by the state government and Petronas in May 2012 - four months before the Sept 3 enquiry that decided that KMD was only to get 93 sen psf from the state.

- KMD further alleges that three of the seven parcels acquired were not on the original list of land that Petronas had asked for and needed for RAPID and so should not have been acquired by the state.

The  land administrator set the price at 93 sen psf despite KMD producing a receipt for the payment of stamp duty on one of the parcels, which had been valued at RM5.75 psf just a year before.

At RM5.75 psf, all seven parcels would have been valued at RM711.55 million, based on a back-of-the-envelope calculation by The Edge.

The price differential between the RM8 psf paid by Petronas to the state government and the 93 sen psf awarded by the land administrator to KMD means that the state government made a whopping profit of RM800 million.

"Why should the state get the difference between the RM8 and 93 sen?" sks a corporate executive. "If the acquisition was made in the name of national interest, surely, the state should not have made money at the expense of the private landowner?"

Landowners are watching the outcome of the court case with great interest, although this is not the first time one of them has taken both the federal and state governments to court (see accompanying story).

The RAPID project, announced by Prime Minister Datuk Seri Najib Razak in May 2011, is positioned to turn southern Johor into Southeast Asia's oil and gas and petrochemical hub.

Petronas plans to have the RAPID project commissioned by 2016. However, opposition to the project from the local residents and the complexity of acquiring individual parcels and relocating the affected people raised concerns that the project may not see the light of day.

Petronas then turned to the state government for assistance in acquiring 8,200 acres in Pengerang, including the seven parcels belonging to KMD.

According to KMD, it should have been given sufficient time to determine the valuation of its land since Petronas had said it would only make a decision on RAPID in 2013. In fact, it was only in April this year that a final investment decision was made by the national oil company on the project.

In its suit, KMD is seeking a declaration by the court that the acquisition of the land was illegal and of no effect and to order the state authority to take all necessary steps to revoke the acquisition.

It is also seeking an order that Petronas deliver vacant possession of the land within seven days, pay damages for trespassing on the land, general damages for cutting down trees and destroying its oil palm estate as well as interest at the rate of 5% per annum from the date of the acquisition.

(Re-produced without permission from the Edge Malaysia magazine, the week of May 26 to June 1, 2014. All rights belong to the author of this article and the Edge Malaysia magazine, i own no proprietary rights and am only re-producing it for the sole purpose of academic discussion)