KUALA LUMPUR, Nov 22 — The Langkawi Development Authority’s (Lada) property development performance for the period of 2018 to 2022 has yet to achieve a satisfactory performance to boost tourism on the island, the Auditor-General said in its latest report for the year 2022 released today.
According to the A-G’s report, there are Lada development projects and private investments that could not be completed within the specified period.
“Overall, Lada’s real estate development management has not yet achieve a satisfactory performance as a number of private development and investment projects could not be completed within the set period, revenue returns did not reach the target of success and weaknesses in land lease management which caused revenue collection failure and exposed the risk of land loss,” the A-G said in the report.
From Lada’s vacant land development planning, the report found that only one out of 19 MasPlan Lada and Investment Guide development concepts has been signed and is in the implementation phase by the private sector.
The MasPlan Lada 2030 was created to provide comprehensive guidance to investors.
Additionally, the Investment Guide published by Lada aimed to enhance the promotion and provide direction of development planning on Lada lands.
“This has delayed benefits meant for tourists and locals. Real estate development is also unable to provide maximum returns as Lada needs to fulfil its functions under the Lada Act 1990 as an agency that promotes and facilitates the development of tourism, socioeconomics and infrastructure in the Langkawi district,” the A-G said in the report.
The A-G also found that there are weaknesses on activity management which covers the implementation of Lada development projects that are not completed according to the specified period, the absence of land lease agreements have an impact on revenue returns as well as land mortgages to companies carry the risk of losing land.
“In addition, high rent arrears, weak property management in terms of management and operations (M&O) and property ownership outside Lada area require attention from the management for improvement actions,” the A-G report said.
Among other irregularities found in the A-G report is the leased land to the company that built the St. Regis Langkawi hotel.
The construction of the hotel was handled by an associate company of Lada identified as Company 989392-K in the audit report.
Lada had leased land to the company for the purpose of hotel development based on the Shareholders Agreement (SHA) that was signed on April 11, 2014.
The construction of the St Regis Langkawi hotel involved two land lease plots namely Plot 1 (Subplot A and B) and Plot 2 (Subplot Ci and Cii) worth RM69.67 million with a total area of 47.25 acres located in Mukim Kuah, Langkawi.
The SRL has been operating since May 29, 2016.
“The audit report found that no land lease agreement was signed for Plot 1 up until the date of the audit was conducted; land lease revenue amounting to RM660,000 per year has not yet been received since Plot 1 land grant was issued on February 8, 2018; and the land lease rate for Plot 2 has not been finalised as of December 31, 2022 although the hotel has been operating since 2016,” the A-G said in the report.
The A-G said that it found out on December 9, 2019 that the Lada board of directors decided in a meeting that same year that there was no need for it to sign a land lease agreement due to the weakness of the company's financial performance.
This resulted in enforcement actions not being implemented because the lease agreement contract was not signed while the collection of land lease revenue could not be made even though there were conditions that had been agreed in the SHA.
“The Audit Department estimated a total of RM3.19 million for the four years and 10 months land lease payment for Plot 1 which has not yet been collected as of December 31, 2022.
“The lease revenue for Plot 2 has yet to be determined as it is still being assessed by JPPH,” the A-G report said, using the Malay initials for the Valuation and Property Services Department.
As for delayed completion of projects, among others the demolition and reconstruction project of Kota Mahsuri Auditorium Building experienced a delay with a total extension of time totalling 742 days.
Payments that had been made to the original contractor amounted to RM5.57 million as of October 2018 before the work termination notice was issued. Termination notice was issued as the contractor was not able to complete the project in the time specified.
The remaining project work was later completed by a bailout contractor (listed as company 711614-D) on May 31, 2022 with an adjusted contract value of RM6.96 million involving the preliminaries work component, auditorium block, TNB block, mechanical block, air-conditioning room and external works.
“The Audit Department found that the actual cost of the project to continue the remaining works that failed to be completed was almost equal to the cost of the original contract that had been awarded to Company 607097-X.
“The works department has issued a letter of demand for a Certificate of Termination Cost amounting to RM2.84 million to Company 607097-X on November 9, 2021.
“This claim was made due to the failure of the original contractor to complete the project according to the terms of the contract. As of the date of the audit, Company 607097-X has not settled the RM2.84 million claim submitted by the works department,” the A-G report said.
Another project found with irregularities is the Tok Senik Resort Village investment project involving a Lada land. The project was implemented to allow tourists to explore and experience the uniqueness of the Malay culture.
For the purpose of the project, Lada signed a Shareholder Agreement , a Subscription Agreement and a land lease agreement for the years 2000 until 2003 for the purpose of Company 414252-H’s (identified as an investor) shares and the development of the Tok Senik Resort Village project.
“Based on the meeting minutes between Lada and the investor on June 20, 2010, the 30 per cent shareholding worth RM8.3 million promised to Lada has not been registered.
“Lada had requested that the land compensation in the form of shareholding compensation be replaced in the form of lease payments in cash.
“However, the Audit review findings state that the company was unable to make lease payments in cash and suggested that Lada to reconsider its share ownership of 30 per cent in the investor company. However, there was no resolve from the meeting (in 2010),” the A-G report said.
As for abandoned properties, the 1Malaysia Restaurant or Restoran 1Malaysia (R1M) that was completed in 2014 as Lada’s asset, has ceased operations since 2018.
From the audit checks, the R1M experienced losses for three years in a row, which forced its shutdown in 2018.
Based on the R1M meeting minutes from October 2021, acts of vandalism and trespassing were noticeable, while the Audit Department during its checks in February found that the premise of the restaurant has been vandalised.
Following the A-G’s findings, the Parliamentary Public Accounts Committee (PAC) today said it has summoned the Ministry of Finance to record its explanation on Lada’s real estate management, on November 30.
This will be the PAC’s first hearing of many more lined-up for the rest of the year, PAC chairman Datuk Mas Ermieyati Samsudin said today.
“The PAC has decided to call up the Ministry of Finance to explain issues regarding Lada’s real estate management.
“PAC will inform from time to time on other proceedings,” she said in a news conference at Parliament this afternoon.
Lada, established in 1990 is an agency parked under the Ministry of Finance, and incorporated under the Acts of Parliament to develop and nurture Langkawi Island into an international tourism destination.
