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Of Queensbay and foreshore
21/10/08 NST Salleh Buang

A news item regarding the National Land Code (NLC), specifically section 76, recently caught my attention.

Under the law, a State Authority is the absolute owner of all "state land" within the territory of the state.

In section 5 of the NLC "state land" is defined as "all land in the State" other than alienated land, reserved land, mining land and reserved forests.

The term includes the bed of any river and the foreshore and bed of the sea situated within the territory of the state.

Section 42 empowers the state to dispose off state land in one of two ways: By alienation and otherwise than by alienation.

If disposal is by the first method, state land becomes privately owned alienated land.

If the disposal is by the second means, such as where the State Authority merely grants a temporary occupation licence, permit to remove rock material (for example sand) or permit the use of its air space, the land still remains as state land Ė its status does not change.

Disposal by the first method (by alienation) is described in detail in Part Five of the NLC, which includes section 76, a clause that empowers the State Authority to alienate state land either for a term of not exceeding 99 years (leasehold) or in perpetuity (freehold). In the old days, a private citizen (either by luck or with the right connections) could get freehold land from the State Authority.

Not any more. Nowadays, a private citizen can get freehold land from the State Authority only in rare cases where the "State Authority is satisfied that there are special circumstances which render it appropriate to do so".

Under section 76, freehold land can be alienated only to the federal government or to a public authority or when the State Authority is satisfied that the land is to be used for public purpose.

It has a proviso stating that the State Authority shall not alienate "any part of the foreshore or sea-bed" for a period exceeding 99 years. In other words, even if any State Authority is generous (or unwise) enough to alienate its foreshore, it can grant at best a term of no more than 99 years.

In the past, a foreshore was made by nature. Nowadays, through modern technology, a "new foreshore" can always be "created" by a State Authority from the sea, via coastal reclamation.

Sentosa Cove, at the southern tip of Sentosa Island in Singapore (which has a Foreshore Act), is an excellent example of such coastal reclamation, where public access to the waterfront has been maintained and not lost to the private developer carrying out the reclamation work and ensuing development project.

According to the news report that triggered me to think of the NLC, it was stated that the land where Queensbay Mall in Penang is presently sited is reclaimed land. Several concerned people in the island asked how and why did this reclaimed piece of waterfront property attain freehold status?

Curious to find the answer, I did some research and have come up with the following explanation. The Queensbay land was indeed, at the beginning, leasehold in tenure. However, in October 2005, the former Barisan Nasional-led state government allowed this prime 73-acre property to be converted to freehold. How much conversion premium was paid is not known.

This project (then known as Bayan Bay, of which the precursor of Queensbay Mall, Bayan World Megamall was one of the earlier components) was undertaken by Bayan Bay Development Sdn Bhd a 70:30 joint-venture with the now defunct Anson Perdana Bhd holding the majority share and Penang Development Corp the balance.

In 1998, as a result of the Asian financial crisis, the Bayan Bay project stalled with the first phase 85 per cent completed and the second 25 per cent.

The then state chief minister Tan Sri Dr Koh Tsu Koon was quoted as saying, "We are concerned over the fact that out of 409 retail lots in the mall at the time, 270 units had already been sold and a substantial number of buyers (are now) in a lurch."

He added, "It is obvious to us that we need to find a rescue plan for this project."

Following that major setback, several attempts were made to revive the project, but all were unsuccessful.

Several interested parties then approached the state government expressing interest to revive the abandoned project.

One "rescue condition" the Penang government insisted of any white knight is that it must first "complete the megamall", regarded as the projectís largest component.

In 2003, a white knight came in the form of Kuala Lumpur-based CP Group. In 2005, the leasehold land was converted to freehold.

Some quarters justify the conversion to freehold as a "compensation in kind" for the buyers (who have suffered heavy financial loss with nothing to show for their investment) as well as the developer (of which the state is also a partner) who was unable to pay liquidated damages to the buyers.

Development work has since continued unabated. Due for completion by 2013, this massive waterfront development is said to have a gross development value of RM1.5 billion.

The heart of the Queensbay development, Queensbay Mall, opened for business on Dec 1, 2006.

Described by Penangites as the "biggest retail development" on the island, the mall has a gross built-up area of 2.6 million square feet.

To sum up, this man-made foreshore was not alienated by the Penang State Authority as freehold. When first alienated to Penang Development Corp, it was for a term of years, in compliance with section 76 of the NLC.

However, due to unforeseen economic factors, coupled with the reasons put forward by the state government, this leasehold property was later given freehold status.

Could this be regarded as an indirect and roundabout way of alienating the foreshore as freehold in contravention of section 76?

I donít think so but I would let Penangites be the final judges of the affair.

 

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