KUALA LUMPUR: The government has ordered a freeze on all transactions of government-owned land near the Klang River in the city centre pending efforts to clean up the river, according to Kuala Lumpur mayor Tan Sri Ahmad Fuad Ismail.

In a recent interview, Ahmad Fuad said the move is to enable the government to extract better value from its land by doing deals only after it can factor in proximity to a beautiful riverfront as a value enhancer.

“We plan to beautify the riverside to enhance the value of the land. At the moment, a decision has been made to freeze the acquisition of government land until this project is completed and the land values are enhanced,” Ahmad Fuad said.

As to when the freeze would end, he said the government could start calling for bids to develop tracts of land in the capital after Phase 1 of the River of Life project is completed.

Clean-up works under the River of Life project, which is part of the Economic Transformation Programme, are expected to commence early next year.

The River of Life project involves cleaning a 110km stretch of river in the Klang River basin, and beautification along a 10.7km stretch within the city centre.

The spin-off economic activity from the river enhancement would be the redevelopment of select locations along a 10km stretch, which includes retail and residential properties.

It is uncertain precisely how much land the federal government holds in Kuala Lumpur and near the murky Klang River, and not all government-owned land can be developed. This would depend on the zoning, whether a plot of land has been committed for a particular use and  some plots of land will be designated as river reserve land, Ahmad Fuad said.

He noted that vacant land in Kuala Lumpur is becoming increasingly scarce, leading many companies and developers to eye brownfield projects within the city centre for redevelopment.

He said the River of Life’s project delivery partner (PDP) will be given incentives to manage and find buyers for government-owned land after the project is completed.

The government has issued a letter of intent to a joint-venture between Ekovest Bhd and Malaysian Resources Corp Bhd (MRCB) to act as the PDP for the river enhancement project over a three-year period.

“As for the incentives, after we beautify the whole area and state land has boosted value, the PDP will get 2% of the land transaction’s total value if it can find a buyer, much like real estate agents. But it depends on the government when and if it wants to sell,” he said.

This incentive is in addition to the basic fees for the PDP to coordinate the river beautification works. The fees will be a certain percentage of the project cost, Ahmad Fuad said.

Although the government has allocated RM1 billion in funds for the river beautification project, he said, the final cost has yet to be determined.

Apart from the RM1 billion set aside for river beautification, Ahmad Fuad said the government will allocate about RM3 billion for river cleaning jobs.

But, he said, the PDP will not be allowed to bid for government land near the Klang river as long as the joint venture company still remains the government’s partner in the upgrading of the river.

“This is because it will have a competitive edge over others given that it has access to information in its role as PDP. So it is not fair to the others.

“If it wants to bid for the land, it has to withdraw from being the PDP. If it bids, then of course it won’t get the 2% incentive if the land is sold. The choice is theirs. You cannot get both,” said Ahmad Fuad.

This article appeared in The Edge Financial Daily, August 25, 2011.