TASK 1: THE GOVERNMENT AS A PROPERTY DEVELOPER

In my opinion, the government do trying to squeeze out private sector from

developing a high-end housing development. This may due to the fact that the recent
scandal involving one of the government-linked company (GLC) which is known ad
One Malaysia Development Berhad (1MDB) had put the Minister of Finance Inc.
(MoF Inc.) be in a lot of financial debt. MoF Inc. was initially introduced as an assets
holder from the colonial government. However in 1957, the MoF Inc. was given
permission to own companies with a piece of legislation and from there, they have a
strong influence on government-linked investment companies (GLICs) and also GLC
in making major commercial decisions. Some of the renowned companies that
participated as a GLCs are Khazanah Nasional, Permodalan Nasional, Employees’
Provident Funds, Lembaga Tabung Angkatan Tentera, and Lembaga Tabung Haji. All
of these companies that classified as GLCs participates actively in corperate
manoeuvre.
Since the MoF Inc. also acts as financial lender to companies in Malaysia, the
government is in control of the economy indirectly. With the debt arised from the
1MDB scandal, the financial liability of the MoF Inc. had increased greatly. The
corruption had cost more that $4.5 billion and the amount is still growing had put our
financial situation into a lot of damages and degrade our market value as it is
impossible to restore our previous values. Hence, for one of the way that they can
decrease their financial liability is by squeezing out private sector company from
developing high end housing development as they might see a strong potential for
higher cash inflow by involve in property development. Previously, most of the
property developer who joined GLCs, are involved in developing low cost houses that
are affordable for the locals to purchase. However, the low cost housing project does
not repay as much for the government to recover the lost that they gained from the
scandal. By involving in high end housing development, they could see a possible
chance for them to obtained more income that low cost houses development.
Some of the act that the government did to squeeze out private sector from
developing high-end housing is by increasing the development charges that private
sector has to pay when developing a land in Malaysia. Development charge can be
define as levied to be paid by property developers to the local planning authority. The
value to be paid for the development charges depend on the value of the land, size of
the residential value, size of land to be developed, and construction of parking space if
needed. Property developer are instructed to pay 20% of the total development
charges in order to issue a development order. Hence, in order to lessen the
involvement of private sector in high-end housing development, the government had
increase the rate charges upon property developer to burden them to pay the charges
as the bigger the project, the larger the total development will be making the
development charge very high. This method had be proven successfully as most of the
private sector developer had made a call to the government to look back on the
development charges set for property developers as the rates are too high for them.
Other than that, the government had also increased the requirements imposed on
developers before initiating the development project. Since the beginning of this
sector, the government had set some guidelines to be followed by local property
developer in order for them and their project to be qualified and to be approved.
However in order to add the burden for the private sector property developer, the
government had set the qualification higher and a lot of developers are unhappy about
it since they have to faced the new amenity requirement making it harder for property
developers to stay in the private sector and join the GLCs.
https://www.slideshare.net/nonakikin/development-charge

https://www.theguardian.com/world/2018/oct/25/1mdb-scandal-explained-a-tale-of-
malaysias-missing-billions

https://www.theedgemarkets.com/article/penang-developers-feeling-squeeze-fees-
slow-market