The New Istana - analysis of the increased costs

Source:  29 Jun article - reproduced in full here
http://asiasentinel.com/index.php?option=com_content&task=view&id=2563&Itemid=164
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A Malaysian Palace fit for a King

Or at least for the current wearer of the king’s hat, who gets to stay there for five years

On June 23, speaking to the Regional Cambridge International Symposium on Economic Crime in Kuala Lumpur, the Domestic Trade, Cooperatives and Consumerism Minister, Ismail Sabri Yaakob, outlined broad efforts to improve transparency and confront corruption, saying all reported cases will be fully investigated regardless of the position or status of those involved and that punishment will be swift and harsh.

But before the policy can be fully implemented, there is the matter of the cost of building a new national palace for the country’s sultans, which has doubled from RM400 million (US$124.2 million) to RM811 million since the contract was let – without bid — in 2006 under the premiership of Abdullah Ahmad Badawi, and may well triple, according to government insiders.

Under Malaysia’s system of rotating kingships between the country’s nine sultans, each assumes the title of Yang Di-Pertuan Agong and lives in the Istana Negara, or national palace, for five years before moving on – or uses it as a ceremonial residence during his reign. Each has his own palace in his respective sultanate. The grounds of the new one, to be built on a hill, will cover a massive 96.52 hectares, according to the government.

Well-placed sources in Kuala Lumpur told Asia Sentinel that the RM811 figure is only preliminary. The total cost is actually nearing RM1.2 billion and is expected to go higher, the sources said, with both the Sultan of Perlis, who retired as Agong in 2006, and the Sultan of Terengganu, who took his place, becoming hidden partners with Malaysia’s seventh richest individual, Syed Mokhtar Al-Bukhairy.

“Syed Mokhtar got the original contract at RM400 million. Then the Raja of Perlis was given a gratuity and his brother, Syed Anwar Jamallulail, became Syed Mokhtar’s 30 percent partner and costs escalated,” said a source. “When the current king came in – the Sultan of Terengganu — he asked for a piece of the action and costs went up again. It was brought up in cabinet in December by an MCA minister. [Mohamed Nazri Abdul Aziz, minister in the prime minister's department for parliamentary affairs] replied: “So what? It’s the house of a Malay King, not a Chinese contractor.” Needless to say, no one has brought it up since.”

The favoritism allegedly shown on the Istana contract presents a challenge for Najib, who has publicly vowed to clean out rent-seeking and preferential treatment in government-linked contracts in his campaign to clean up Umno’s tattered reputation.

Opposition Leader Anwar Ibrahim alleged on the floor of parliament last week, for instance, that the land under the 115-year-old Pudu Jail, which is being torn down, is being handed over to Vincent Tan, another longtime Mahathir crony and head of Berjaya Corp. Anwar accused the government of handing out contracts worth billions of ringgit to favored individuals.

The next big test will probably be the construction of a new building to house the Dewan Rakyat, or Parliament, whose current building is an exemplar of the tacky architecture that the third world thought was modern when it was built in 1962 and when Malaysia was a third-world country. The project has been shelved for the time being because of lack of money but it will probably resurface as the economy improves.

Although the construction consortium building the Istana Negara includes the Bumiputra firm Ahmad Zaki Resources Sdn Bhd with partners Kejuruteraan Kenari Sdn Bhd. and Maya Maju (Malaysia) Sdn Bhd, there are widespread reports in Kuala Lumpur that although his name appears nowhere, the construction operation is actually headed by Syed Mokhtar.

A onetime roti canai seller who was born into a poor Kedah family of Arab descent, Syed Mokhtar amassed more than US$2 billion in assets and made the Forbes Magazine list of richest individuals partly due to government contracts, primarily as a result of his close relationship with former Premier Mahathir. Today, his business empire encompasses plantations, property development, construction, engineering, power generation, infrastructure and ports.

Deputy Minister Yong Khoon Seng told reporters the construction of the main complex was awarded to Maya Maju Malaysia Sdn Bhd at a sum of RM650 million, while a contract for the flyover from Jalan Duta to the palace was given to Ahmad Zaki Bhd. The palace is far behind schedule and is scheduled to be completed by 2011. The contract for the upgrading of a flyover to the new palace will cost an additional RM150 million. Malaysia has been abuzz for days since the cost overruns were announced over the identity of Kejuruteraan Kenari and Maya Maju. Both are listed in Malaysia’s corporate registry with a flock of officers that nobody seems to know. The Malaysian blogosphere has been preoccupied with speculation on their connections. Maya Maju lists two shareholders and five directors. The directors are Man Bin Mat, Md Nizam B. Md Sharif, Rasidah Bt. Salleh, and secretaries Lim Hooi Mooi and Tan Enk Purn. The shareholders are
Maryna Keh Abdullah @ Miss Keh Kim Lan and Man Bin Mat.

Then there is the question of why, with Malaysian politicians making public pronouncements that the country will go bankrupt unless subsidies for the poor are withdrawn, a new Istana is needed at all. The current one, built in 1928 as the onetime home of a Chinese tycoon, stands on 11 hectares of grounds in the middle of Kuala Lumpur. It has undergone a long series of renovations going back to World War II when it was used as a Japanese Army mess hall. It was refurbished in 1986 at a cost of RM70 million.

It is difficult to say just what the RM811 million actually includes. Some critics say the costs for equipping the new building do not include furniture, lighting, air conditioning and a wide variety of other charges that can be expected to drive the total price tag far higher.

“For Umno,” wrote one critic to the Malaysian Insider online news portal, “all projects MUST undergo an increase of minimum 40 percent of total budget in order for it to be completed in triple the estimated time. If not, then that person isn’t a loyal Umno member.”

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My previous posting about the increase costs of RM 400 million for the new istana ------>  here