Frankly Speaking

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EPF should vary options   Land is valuable, especially in a strategic location such as Kuala Lumpur or its fringes. How the land is carved out and developed will determine how much value the owners can extract from it.

When the government announced its intention to develop land that it owns in and around the city, one of the criteria established was that the tracts of land be auctioned. This is a common practice in Singapore and Hong Kong, where land is scarce and valuable.

The governments there determine how the land is to be developed right from the start, before the auction takes place. For instance, the plot ratio and space for recreation and green lungs are all determined in the documents before the tenders are called.

In some large-scale projects that the governments feel are vital to be carried out according to schedule, deadlines to achieve milestones are set out in the tender documents. Failure to meet deadlines result in penalties or forfeiture of the land.

Some of these measures have already been implemented by Khazanah Nasional Bhd in developing Iskandar Malaysia in Johor.

In Malaysia, the tender process has taken a back seat. In its place, it has been reported that the government has agreed in principle for the Employees Provident Fund (EPF) to take the lead in developing the land.

Being an entity that belongs to tax-paying Malaysians, there would be little to quibble about the EPF taking a lead role, although an auction with strict terms and conditions may yield higher returns.

The manner in which the EPF will develop the federal government land is not clear. Its chosen partner for now is Malaysian Resources Corp Bhd (MRCB), which the construction-cum-engineering company has not denied.

But is the present arrangement the appropriate strategy to extract maximum value from the assets? Were other developers considered by the EPF?

Has the EPF thought about creating a special unit comprising eminent industry practitioners to come out with the best plan to maximise the value of the land?

If it has not, that is something it ought to consider. The EPF should adopt a long-term strategy that clearly looks beyond its current approach and come out with a clear plan.Political will neededExperience has shown that quitting the low-wage habit is not going to be easy for Malaysia. Every time the government announced its intention to reduce its dependence on foreign workers, it has had to make an embarrassing about-turn when employers in the affected sectors complained that their businesses had been badly hit as a result.

Yet the country’s ascension from a middle to a high-income economy is becoming increasingly urgent as competing low-wage economies continue to draw away foreign direct investment. The call by former prime minister Tun  Mahathir Mohamad last week for employers to pay higher salaries to encourage productivity certainly strikes a chord.

Although Mahathir is now convinced that workers here need to be paid more, the idea of a minimum wage held little appeal to him when he was the premier. Nevertheless, Prime Minister Datuk Seri Najib Razak has put a high-income status on the national agenda.

To turn towards a high-income economy, policy changes are needed on several fronts. Firstly, there is a political cost to the economic shift away from low-wage jobs, which must be effectively neutralised. Secondly, workers must be incentivised to accept reskilling for their future economic welfare. Thirdly, employers must buy into the plan so that they are willing to pay more to get higher productivity. Fourthly, skilled foreign workers should be encouraged to make Malaysia their home to enhance the country’s attractiveness as an investment destination.

These are some of the obvious ingredients of a new economic vision that can ensure prosperity for the coming generations.

The government now needs to summon the courage to take the plunge. It is important that the policymakers act at the opportune time, or be left behind in the dawning of the Asian century.Benchmark for directorsIt is not often that non-interested directors of a public-listed company offer advice that is advantageous to minority shareholders in the way that two directors of Kumpulan Jetson Bhd (KJB) did last Thursday.

In an independent advice circular, KJB said its non-interested directors advised its shareholders to reject a conditional takeover offer by Superior Pavillion Sdn Bhd (SPSB) and Odyssey Wealth Sdn Bhd (OWSB) because the prevailing market prices of the shares, ICULs and warrants were significantly higher than the offer prices.

The directors agreed with KJB’s independent adviser Kenanga Investment Bank Bhd that  it was more beneficial for the stakeholders to realise their investment on the open market.

Thus, the directors turned down SPSB and OWSB’s joint offer for the remaining KJB shares for RM1 cash per share, outstanding 10-year 2002/2012 KJB ICULS for 93 sen cash per unit and outstanding 2002/2012 KJB warrants for 0.01 sen cash per unit.

As of the last practicable date on Sept 10, the closing market prices for the shares, ICULS and warrants were 41 sen, 36 sen and close to 69 sen higher than the offer prices.

Too often, so-called non-interested directors fail to raise the red flag when minority shareholders’ interests may be sidelined. The officials in this instance have made the appointment of non-interested directors to the boards of public-listed companies meaningful. This should serve as a benchmark for the protection of minority shareholders’ rights.This article appeared in The Edge Malaysia, Issue 774, Sep 28-Oct 4, 2009.