KUALA LUMPUR: The Ministry of Finance (MoF) and the Attorney-General had recommended that the 1,000 acres that Port Klang Authority (PKA) acquired from Kuala Dimensi Sdn Bhd (KDSB) for the PKFZ project be purchased through compulsory acquisition.

However, this proposal mooted by MoF in a letter signed by then secretary-general Tan Sri Samsuddin Hitam in 2001, was objected to by the Selangor state government.

In the letter dated June 12, 2001 to the Transport Ministry’s chief secretary Datuk Zahrah Shaari, Samsuddin had recommended that the ministry obtain the land through compulsory acquisition and fund it through the (transport) ministry’s allocation.

However, the directive was not followed as the then Selangor state administration had recommended that compulsory acquisition was not possible because PKFZ was not a public interest project and the land had been issued with development order in 1995.

According to the PricewaterhouseCoopers (PwC) report, compulsory acquisition as recommended by the Attorney-General and MoF, had it been possible, would have cost a total of RM442 million compared to the purchase price of RM1.088 billion (RM25 per sq ft or psf, including infrastructure work with land fully reclaimed) on the basis of 10-year deferred payment.

The cabinet accepted the recommendation of the state government. Subsequently, the land was purchased at RM25 psf on the basis that it was of “special value”. “Special value”, according to Standard 2 of the Malaysian Valuation Standard, relates to an extraordinary element of value over and above market value. It is an increment of value that could be applicable to a particular owner or user, or prospective owner or user of the property rather than to the market at large; that is, special value is applicable only to a purchaser with special interest.

According to the PwC report, in arriving at the special value, MoF’s Valuation and Property Services Department (Jabatan Penilaian dan Perkhidmatan Harta or JPPH) took into consideration three factors:  
i)    that KDSB was reluctant to sell the land;
ii)    the Transport Ministry/Port Klang Authority (PKA) had required the land for future development; and
iii)    there was no other suitable land adjacent to Westport.

JPPH valued the land at RM17 psf and RM18 psf respectively in November 1998 and May 2000. In September 2000, it assessed the land to be at RM21psf after taking into account infrastructure works to be undertaken by KDSB.In addition, JPPH was also of the view that a higher price could be considered if payment terms were deferred. It placed a special value of RM25 psf on the assumption of the following deferred payment terms:
•    5% deposit in first year;
•    Coupon rate of 6.5%;
•    Interest waiver for first and second year;
•    Interest repayment only in third and fourth year; and
•    Annual repayments inclusive of interest for six years and repayment period of 10 years
In August 2001, JPPH placed a value of RM10.16 psf on the basis of compulsory acquisition with land partially reclaimed and no infrastructure works.