UDA: Malay Agenda and its Future

Malaysia set up Urban Development Authority (UDA) Holdings 40 years ago, giving it large land banks and huge government grants to fulfil its mission: to help Malays buy property in cities.

Today (2011), the state-owned company is not only struggling for survival, saddled as it is with debts of RM900 million (S$370 million), but also faces a firestorm of complaints over its redevelopment of the famous Pudu Jail site in Kuala Lumpur.

To its chairman Nur Jazlan Mohamed, the decline of the UDA's fortunes is a cautionary tale. It tells of the direction that Malaysia will be heading in if it continues to promote the Malay agenda through the old ways of rampant government spending and political cronyism.

'But no one dares to talk about this,' said Datuk Nur Jazlan, an UMNO MP appointed to the UDA a year ago, in an interview with The Straits Times.

The company was in dire need of reform to become profit-oriented and focus on building Malay capacity, rather than doling out contracts, he said.But Mr Nur Jazlan himself has come under attack over his handling of its biggest project - the RM6 billion redevelopment of the site once occupied by the Pudu Jail, at one time a landmark in Kuala Lumpur's tourist zone.

As news leaked out that several Chinese state-owned companies were front-runners to win the bid, he has been accused of abandoning the UDA's Malay agenda. Eleven companies - about half of them Chinese or joint ventures with Chinese companies - have put in bids. The matter is now pending approval by the Finance Ministry.

Several politicians, including independent MP Zahrain Hashim and Penang UMNO Deputy chairman Musa Sheikh Fadzir, have alleged that Malay contractors were sidelined.Wrote Datuk Seri Zahrain in his blog: 'I'm not accusing anyone, but I only want to protect the original intent of the UDA.'

Mr Nur Jazlan said the UDA had stringent requirements on this project. The winning company will have to fully finance the development, and will not be allowed to use the land as collateral to raise financing.

In return, it will be given part of the development - a hotel, offices and condominium units. But before it builds those, it will have to deliver the UDA's portion - a 2 million sq ft mall and carpark, as well as a transport hub.

Mr Nur Jazlan said the winning bid will have to meet these requirements, as the Pudu Jail site has to be developed with a profit motive in mind. The government can no longer keep pumping money into the UDA, he said.

National oil and gas company Petronas, which provides 40 per cent of the federal budget, now wants to cap its dividends to the government at 30 per cent of its profits as it needs money for reinvestment, he said. Last year, it paid the government 69 per cent of its gross profits.

'Who is going to keep paying for the bumiputera agenda?' he asked. Mr Nur Jazlan said the UDA's debts began piling up since the government cut off grants in 1996. It now has just RM90 million in the bank, depleting land banks, and still owes RM130 million in premiums for the Pudu Jail site.

He said the company will give priority to Malays to run the businesses in the new development, although it will not subsidise their leases permanently. 'They have to be successful businesses,' he added.

This is a better way to create real Malay businesses, than benefiting a handful of powerfully connected people through contracts, he explained. Mr Nur Jazlan added: 'Nobody wants to say this - it is political suicide - but it's time for political leaders to speak up on reforming the Malay agenda.'