Sultan of Johor's Business Empire every Johorean should know
Has Sultan Ibrahim of Johor’s succession of big money deals over the last six months caused the tide of public opinion to turn against Johor’s royal palace? KiniBiz examines the roots of the public backlash in a three-part series.
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A quiet storm has been growing over the Sultan Ibrahim Ismail’s increased commercial dealings and business interests.
It looks to have come to a head with strong public and political
opposition to Johor’s new Housing and Real Property Board Bill that was
initiated to give the Sultan of Johor sweeping executive powers in the
property industry. KiniBiz will examine that issue further tomorrow.
Many observers cite the Sultan’s sale
of 116-acres of prime land in Johor Bahru last December to China
developers Guangzhou R&F last year as a major turning point.
The deal pocketed the Sultan RM4.5 billion. Although scant details have
been released, unconfirmed sources told KiniBiz that much of it is prime
land in the Johor Bahru (JB) city centre and seafront designated as
development zones in the Iskandar region.
Sources also told KiniBiz that the land was alienated to the Sultan of
Johor by the state government for a lot less than the sale price.
KiniBiz has not been able to verify this independently.
It is not known whether the Sultan has any stake in the mixed developments to be undertaken on this land bank.
The China angle
The special economic zone of Iskandar has been buzzing with big Chinese
mainland developers such as Country Garden constructing projects on a
massive scale that has dwarfed other local developments.
The Sultan’s RM4.5 billion land sale to China developers clearly ruffled
some feathers, not least among local developers who are worried that the local market could be swamped with units made by China developers and cause a property glut.
Ironically, only last July Iskandar Investment Bhd or IIB announced that
it was limiting the sale of land in Iskandar through a “controlled
release” strategy.
The move was deemed necessary because Iskandar “is still a re latively
small and fragile region” and to “allow investors to make money”, said
IIB president and CEO Syed Mohamed Ibrahim then.
There were also concerns that selling prime state land to China was a
politically insensitive move. Nevertheless, there was little vocal
opposition at the time when the RM4.5 billion land sale was announced,
although there were grumblings on the ground.
Fear factor
The Sultan of Johor is often treated with a mixture of respect, awe and
even fear especially among Johorians. Open criticism of the Sultan is
seen as social taboo. Local professionals and businessmen keep their
lips pursed for fear of repercussions.
“Yes, there definitely is a fear factor,” said a local Johor businessman who did not want to be named.
Things could slowly be changing with the furore over the housing bill.
“With all due respect, he (the Sultan) shouldn’t be involved in
business. This is the first Sultan known to Malaysians to sell land to
China. And it is prime city land. It is unprecedented. Even the previous
late Sultan Iskandar (Sultan Ibrahim’s father whom the Iskandar region
was named after) did not engage in such public business dealings,” said
a practicing lawyer in Johor who spoke on condition of anonymity.
In theory, the RM4.5 billion land sale to Guangzhou R&F alone could place Sultan Ibrahim among the richest men in Malaysia.
Vincent Tan
Business dealings
Based on the latest Forbes Malaysia’s 50 richest list, the Sultan of
Johor would rank just behind Vincent Tan (a businessman that the Sultan
has been closely linked to) who is at number 10 on the list with an
estimated net worth of just over RM5 billion (US$ 1.6 billion).
The Sultan could have slipped quietly into the background after the
mammoth land sale, but subsequently he made several other eye-catching
moves in the corporate world. He has been acquiring shares in other
existing businesses in deals worth more than RM600 million.
After the RM4.5 billion land sale, the Sultan of Johor bought a 15% stake in MOL AccessPortal (MOL) for RM396 million and 20% stake in Berjaya Times Square Sdn Bhd (BTS) for RM250 million.
Interestingly, both companies that the Sultan of Johor bought stakes in
are linked to Batu Pahat-born Tan who is chairman of Berjaya Group and
owner of Cardiff City football club.
Most recently, the Sultan of Johor made waves again, this time in the energy sector.
A consortium of SIPP (SIPP) Energy Sdn Bhd, YTL Power International Bhd and Tenaga Nasional Bhd (TNB) was conditionally awarded the development of Project 4A, a new 1,000 megawatt (MW)–1,400MW combined cycle plant in Johor.
The project is reported worth approximately RM6 billion, according to a CIMB report.
The Sultan of Johor owns a 51% stake in SIPP with the balance
shareholding split between two company directors — Daing A Malek Daing A
Rahman (24.5%) and Anuar Ahmed (24.5%).
With such high-profile business acquisitions, many have questioned
whether it is appropriate for a sitting ruler to be so conspicuously
involved in the business world.
Legal implications
“The constitution says that they (the royals) should be ceremonial
bodies and above politics. They get a lot of remuneration and grants
from the state government. These are all from public funds. They don’t
need to be in business. It is also not right for a Sultan to be in
competition with the rakyat for businesses. How can they compete? It is
the Malay “adat” not to go against the Sultan, ” said the Johor lawyer
to KiniBiz.
The lawyer is also concerned that the Sultan’s various business dealings could expose himself to potential lawsuits.
“If the Sultan is involved in companies and business entities, he is
liable to be sued in court if anything goes wrong. That could tarnish
the royal family’s image and bring the country into disrepute,” said the
lawyer.
This is not the first time that the Sultan of Johor has been linked with
prominent local businessmen. Previously, he was heavily linked with Lim
Kang Hoo, majority stakeholder of Ekovest and Iskandar Waterfront
Holdings (IWH).
Lim Kang Hoo
Property tycoon Lim is ranked number 19 in the latest Forbes Malaysia’s
50 richest list with an estimated net worth of over RM3 billion (US$ 975
million).
During the 1997 financial crisis, Lim took over RM200 million debts of
state investment agency Kumpulan Prasarana Johor (KPRJ) in return for
land reclamation rights. With the value of land skyrocketing in Iskandar
in recent years, so has Lim’s fortunes.
IWH is a public-private partnership between the state of Johor and Lim,
with KPRJ having a 40% stake. Lim holds the balance 60% through his
vehicle Credence Resources Sdn Bhd (CRSB). Lim is also executive
chairman of public-listed property company Tebrau Teguh.
Lim owns vast tracts of land in JB’s waterfront especially in Danga Bay.
Last April, Shanghai-based developer Greenland Group paid RM600 million
to IWH for 13 acres of land in Danga Bay. IWH and Greenland will be in a
joint venture (JV) for a mixed development worth a gross development
value (GDV) of RM2.2 billion.
Previously, IWH sold 58 acres of land to Country Garden for RM900
million to develop its Danga Bay project that includes 9,000 units of
high-end condominiums units and commercial development with a RM18
billion GDV.
IWH is also planning an initial public offering (IPO) later this year that could be worth up to $300 million (RM960 million).
Sultan of Johor confirmed that billionaire Lim is his business partner
in a 2012 interview with a few local bloggers, including Ahirudin Attan
(or Rocky as he is more popularly known as).
During the interview, the Sultan also angrily dismissed allegations that
he is a “30% man” based on rumours that he was asking for a cut of
major business dealings in the state. The Sultan explained that the “30%
is for the state”, according to the 2012 interview.
Chinese companies have been investing huge sums of money and contributing to Iskandar’s growth substantially.
Feeding China’s love for property, land
Major Chinese developers in Iskandar include Country Garden, Guangzhou R&F, Agile Property Holdings and Greenland Group that have invested a combined US$6 billion (RM20 billion).
In 2013, Chinese institutional and retail investors poured US$1.9 billion (RM6 billion) into Malaysia properties.
However, there has also been growing unease with the increasing Chinese
ownership and presence in vast tracts of waterfront land in JB.
“Technically, it could compromise the security of the nation and is not
in the best national interest. The Chinese have bought land all along
Danga Bay up to Tanjong Pelepas. They are developing all sorts of
projects without any restrictions such as the bumiputera quota that are
imposed on local developers,” said the Johor lawyer.
The cocktail of big business, land, politics, royalty and foreign
ownership could be a political time bomb for Johor. Both sides of the
political divide are already up in arms over the Sultan of Johor’s
potential involvement in state administration via the Housing and Real
Property Board Bill.
Major developments and investments in the southern state such as
Iskandar and Pengerang could be placed in delicate positions in light of
these recent developments in Johor.
Tomorrow: Is the Sultan of Johor rewriting the rules?
