Serving the neo-economic master

Land is one and the most traditional factor of production. Wars have been fought for land. Civilisations have been subjected to slavery, when their land is captured and overrun by invading forces.

A major corporate play is said to be brewing in and around Iskandar Malaysia, involving a certain public listed company on an land-bank acquisition roll. Parcels of land have or in the process to be lined up for acquisition or injected into this Plc.

Iskandar Malaysia: East to West, encompassing the JB CBD has been targeted for a massive corporate exercise going towards flipping of land parcels

A property development corporation core business is too look for parcels of land for immediate or short term development projects. If it is long term, then the acquisitions or collaborations, in the form of joint ventures shall be ‘stored’ as land-banks.

Otherwise, they would opt for doing a series of ‘property flipping’. The common definition for this exercise is:

Flipping is a term used primarily in the United States to describe purchasing a revenue-generating asset and quickly reselling (or “flipping”) it for profit. Though flipping can apply to any asset, the term is most often applied to real estate and initial public offerings.

The term “flipping” is frequently used both as a descriptive term for schemes involving market manipulation and other illegal conduct and as a derogatory term for legal real estate investing strategies that are perceived by some to be unethical or socially destructive. The latter usage is typically contested by those who believe the strategies in question are ethical and socially beneficial or neutral.

Superficially, this general definition of any bonafide property development group doing the property flipping exercise looks rather normal for any other plc. However if specific parcels of land which are state owned and deemed to be strategic are being targeted for acquisition either by outright sale or injected for some corporate deals, then there should be alarm raised on what the strategic intent is. This is because these parcels of land could be ‘flipped’ for targeted ‘external benefactors’, who have had their eyes set within the 6,000 sq kilometres from east to west of Johor Bahru.

This is actually a realisation of a dream of the land-strapped ‘jews of the east’, for the longest time. Recently, there was this talk about a parcel of land deemed highly valuable, which was acquired from a GLC and ‘conveniently flipped’ to a Singaporean property developer. Of course, that rumour did not come without ‘an interference’.

It is expected there are more such deals to come with this Plc, as it has been said the process of the land acquisitions and injections for some corporate play, are already in motion. It is also said that the prowl is also on some of the highly valuable parcels belong to the state government or any of its agencies.

When they promoters of this scheme is done, they would have consolidated RM billions of assets acquired and injected into the Plc, without much cash transacted out. Even if there were ‘acquisitions’. it is strongly believed that the financial backers across the straits would have covered the necessary minimal ‘seed capital’ required.

Many, even those outside Johor firmly believed that the Iskandar Development Region incepted by the notorious ‘Level Four Boys’ during the bleak years under PM ‘Flip-Flop’ Tun Abdullah Ahmad Badawi’s weak and scandalous administration, was designed to provide secondary and supporting role to the high value Singapore economy. These series of corporate exercises which involve these parcels of land with strategic value and importance are almost definite about the fulfillment to the needs and demands of the Singapore economy, which include speculative market for property development projects.

The arguments are also almost straight forward. Malaysian corporations would neither put everything into one basket and gamble on a speculative property market nor have the necessary capital to do this exercise, in the narrow window of opportunity. Especially when one do not have the luxury of financial support from financial backers. No other international investors or property market speculators understand more about how Iskandar Malaysia would bring the much appreciated supporting effect to the Singaporean growing and financially-muscled property market and economy.

This is not withstanding the fact that recently, one of the significant players within the ‘Level Four Boys’ and strongest advocate of the South Johor Economic Region proposal and principal policy adviser to PM ‘Flip-Flop’ Abdullah was brought into JCorp Group and now the executive director of Kulim Bhd. One of the planned activity of JCorp Group to reduce and ‘manage’ its RM 3.6 billion debts is to hive off assets, which probably include some of their strategic properties all over Johor Bahru city limits.

Then, there is this bit about energy and oil and gas industry, being planned in the eastern corridor of the state of Johor.

Wednesday May 11, 2011

Petronas to announce RM50bil complex in Johor

By RISEN JAYASEELAN and JEEVA ARULAMPALAM
starbiz@thestar.com.my

PETALING JAYA: Petroliam Nasional Bhd (Petronas) will announce on Friday plans to invest around RM50bil in an integrated downstream oil and gas complex in Pengerang, Johor, reliable sources said.

Dubbed Rapid or Refinery And Petrochemical Integrated Development, the project is aimed at building something “larger than Kertih” and will eventually include multinational oil and gas companies as joint-venture partners.

The integrated development will not only include oil refining and petrochemical activities, but include a gas power plant and other “supportive industries” said sources.

Rapid is a project identified in the Economic Transformation Programme(ETP), which is led by the Performance Management & Delivery Unit (Pemandu).

One of the reasons why Pengerang was chosen is because its waters can reach depths of more than 20m, which is what is needed for very large crude carriers (VLCC) and ultra large crude carriers.

The Johor government will be a joint-venture partner of the project and will provide the land.

Sources indicate that Petronas’ Rapid project complements plans for the RM5bil independent deepwater petroleum terminal in Pengerang, which is to be the first deepwater terminal in South-East Asia.

The terminal is a tankage facility for handling, storing, blending and distribution of crude oils and petroleum products with marine facilities capable of handling VLCCs.

Part of the thinking behind Rapid was to replicate what Singapore has already done successfully, sources said. Singapore’s oil refining businesses only started around 10 years ago.

Singapore has an export refining capacity of 1.3 million barrels per day, compared with Malaysia’s 560,000 barrels per day, according to theETP roadmap.

Singapore Refining Company Pte Ltd, which operates a refinery on Jurong Island, is capable of processing 290,000 barrels of crude oil per day.

Other major refineries in Singapore include ExxonMobil’s refinery in Jurong that process about 605,000 barrels of crude per day and Shell’s Pulau Bukom Refinery with some 500,000 barrels of crude oil per day.

Plans for Petronas to develop Johor’s Pengerang into a sizeable force in the oil and gas (O&G) space are not new.

Last November, the Government said Petronas would play a major role in the development of Johor’s south-east areas of Teluk Ramunia and Pengerang into a O&G hub in the region.

It was then said that the investments in the hub would come from Petronas and its international partners and the investments would bring major development into Johor’s south-east areas and could turn Teluk Ramunia and Pengerang into a new Kertih.

Petronas chief executive officer Datuk Shamsul Azhar Abbas confirmed then that Petronas was talking with several international investors to invest in Teluk Ramunia and Pengerang.

Once a sleepy fishing village in Terengganu, Kertih is now a thriving township due to O&G related activities with Petronas as the main driver in the O&G sector there.

The Petronas Kertih Refinery is the national oil company’s first oil refinery in Malaysia, and processes 49,000 barrels of Malaysian light, sweet crude oil per day.

In total, Petronas owns and operates four refineries (three in Malaysia and one in South Africa) with a total refining capacity of more than 448,000 barrels per day.

The Government had also said then that while the investments would come from Petronas and its partners, the Government was looking into allocating money for infrastructure developments in the areas.

Another aspect of the oil and gas thrust in the ETP (and which is linked to the Rapid project) is for Malaysia to venture into the lucrative area of oil trading. Singapore accounts for hundreds of billions of oil trading every year, an area of business that is virtually absent in Malaysia.

According to the ETP roadmap, Singapore, by 2007, had built a significant trading business worth more than RM1 trillion in physical oil trade and RM2 trillion in derivative trade.

Sources said the Government may consider providing additional incentives to attract oil trading firms to be located in Johor.

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Another story literally in the pipeline to this ETP project is a tri-partite power generation plant using gas is being planned to be built in the east coast of Johor, within the area of the recently launched Refinery and Petrochemical Integrated Development (RAPID) in Pengerang. The whole eastern Johor corridor has been earmarked for this project and all the activities peripheral to the oil and gas industry. State energy producer Petronas, major Malaysian power generation player Malakoff and Singaporean engineering corporation Keppel power plant is set to serve the Singaporean energy needs.

It is obvious that instead of supplying gas to the republic, it would bring about better returns if power is sold instead. Why a Singaporean partner is admitted in the project is not too clear, especially when the ball is definitely in Malaysia’s court in the requirement-for-power-and-energy-of-five-million-people game.

This came as partly emancipation of Johor’s role in supporting lives of Singaporeans with the handover of Gunung Pulai and four other rivers water treatment plants last August.

Addition to the story on the land acquisition game mentioned earlier, a separate party with vested interest is in the play of lining up all the potential oil and gas players to have their facilities along the corridor from Pengerang all the way to Ulu Tiram and Tanjung Langsat. This exercise is believed to be with ‘interference’ too.

Johor is definitely being transformed as the staging ground to serve the Singaporean economy. When the most important, traditional and quantifiable factor of production in the properties and parcels of strategic land are in the process being taken away and gone forever, then the new age of slavery had just begun. Especially when the populous is being geared into serving the more important economy and commanding society. It will come in the literal form of serving the neo-economic masters. The relationship between the two people would eventually be ‘master-servant’.

Philosophically, that is ‘economic slavery’.