This article first appeared in The Edge Financial Daily on March 21, 2019

KUALA LUMPUR: The government will not cancel an agreement entered with S P Setia Bhd’s 50%-owned unit in relation to the Federal Hill (Bukit Persekutuan) development at Bangsar, said Federal Territories Minister Khalid Abdul Samad.

Speaking to reporters at the Parliament lobby yesterday, Khalid said the government cannot afford to breach the agreement, as doing so might affect investors’ confidence.

“This agreement has been entered when I took over, so I inherited many things. If I was the minister in the past, I probably wouldn’t have entered into this agreement. But when I inherited [it], I have to handle it, I cannot just cancel it.

“I cannot just ignore all the agreements and contracts as I like. That will have very adverse consequences to the government and also affect our image, because investors who want to enter Malaysia may think we do not honour the agreements we sign and decide not to invest in our country,” he said.

S P Setia’s 50%-owned unit, Setia Federal Hill Sdn Bhd (formerly known as Sentosa Jitra Sdn Bhd), had on Nov 29, 2012 entered into a privatisation agreement to undertake the development and construction of a new integrated health and research complex for the government to be located within Setia Alam.

In exchange, the government will swap some 52 acres (21ha) of prime land located in Bangsar, on which the group plans to develop an integrated luxury residential and commercial development, to be known as Setia Federal Hill.

Khalid said yesterday that S P Setia has honoured its promise to build the health facility, now known as National Institute of Health (NIH) in Setia Alam, Shah Alam.

“As the Federal Territory Minister, I have to honour the contract, while for S P Setia, they have delivered what they have promised, so we cannot suddenly say we don’t care, (and) we want to cancel the agreement. They can sue us.

“If they sue us, we have to pay compensation and the sum will not be small — it can be over a billion ringgit,” he said.

Khalid, meanwhile, said he has told S P Setia to review the development plan at Bukit Persekutuan to ensure minimal negative impact on neighbouring residents.

“I hope the residents there take into account that this is an agreement that has been concluded, and we should not force the government to breach the terms because the legal implication is serious. The best I can do is to ensure the development plan to be approved in future has minimum negative impact on the residents,” he added.