PDC mulling suit against The Edge over report on controversial BKIP2 project

KUALA LUMPUR (May 31): Penang Development Corporation’s (PDC) lawyers are currently reviewing The Edge’s report on the controversial land deal in Batu Kawan, as it considers legal action against the publication.

Appropriate steps will be taken soon, Penang Chief Minister Chow Kon Yeow said at the state assembly, according to Buletin Mutiara, a Penang state government news portal.

“Legal action against The Edge’s report is under review by PDC’s lawyers, and appropriate steps will be taken in due course,” Chow reportedly said in his winding-up speech during the State Legislative Assembly session on Thursday.

According to the report, Chow said PDC has initiated legal action against a former director over a matter concerning the development of Batu Kawan Industrial Park 2 (BKIP2) (Phase One).

The Penang state government takes seriously the allegations that the state and PDC had wrongly signed a land sale agreement with Umech Land Sdn Bhd, Chow reportedly stated.

“PDC has taken legal action after receiving a mandate from the PDC board and a notice of claim was issued on May 8 this year.

“Furthermore, PDC’s lawyers are currently filing a lawsuit in the Penang High Court against this individual,” the report read.

It did not name the former board member.

To recap, PDC last year signed a joint development agreement (JDA) with Umech Land Sdn Bhd to develop a RM3.5 billion mega industrial project, dubbed Batu Kawan Industrial Park 2 (BKIP2), by teaming up with the PDC.

Under that agreement, which has since been terminated, PDC, as proprietor of the land, would have been entitled to RM646.02 million — an amount that was “derived from negotiations” with Penang’s development arm based on the market price in the vicinity of the land.

Umech Construction Sdn Bhd, which claimed to have financial backing from Dubai, was the initial partner that the state government had identified.

But Umech Construction's financial capability to undertake the project, which had an estimated development cost of RM3.5 billion, was questionable, given that it only had a paid-up capital of RM10 million and a gearing ratio of 215% as at Dec 31, 2021.

It is unclear whether it was because of Umech Construction’s weak financial position that Umech Land ended up signing the JDA with PDC instead.

Sunway Bhd emerged as a Umech Land shareholder via the subscription of a 70% stake on Sept 25 — two days before the JDA signing on Sept 27, 2023.

Umech Land was originally a 70:30 joint venture between by Karen Cheng Pui Kwan and Nathaniel Rajakumar, respectively. Cheng and Nathaniel are also shareholders in Umech Construction.

The project put PDC and Sunway under intense public scrutiny, while the Penang Chinese Chamber of Commerce (PCCC) queried the state government for not undertaking an open tender for the project. The PCCC claimed that the price tag of RM646 million, or RM27 per square feet, significantly undervalued the land.

PDC subsequently called off the controversial deal on Oct 17 last year, and issued a request for proposal (RFP) for the project instead.