The pros and cons of mega projects
A Question of Business by P. GUNASEGARAM
Not all of them are bad – the challenge is to identify the good ones
MEGA projects – those two dreaded words that raise a lot of alarm in the minds of people and set off bells to ring around the place. And yet, there are times when there may be a justification for them.
If we can generate loads of electricity by using hydropower and we have to build a huge dam to do that, should we not go ahead if we can control the environmental damage? In fact there is a lot less fossil fuel that will be burned, reducing carbon emissions.
And if we can find a way to transport the power across the seas via a rather expensive cable, should we not do it so that the peninsula benefits from the substantial generating power available in Sarawak if the economics of it works out?
We are of course talking about the multi-billion-ringgit Bakun dam and the even more expensive plan to bring power to Peninsular Malaysia via undersea cables hundreds of miles long. But still there is a justification for these projects in terms of the benefits they bring.
But not all mega projects are created equal even if they are mega. For me, the ones to beware are those which are described as iconic. That means that they have a lot of form but not nearly as much substance, as in usefulness.
We have had our share of iconic projects – the Dayabumi building in town was once called a white elephant. When it was completed in 1984 – a year before the 1985 recession – there was a glut of office space in Kuala Lumpur. Petronas became its anchor tenant.
We all know that Petronas eventually became embroiled in a much more ambitious iconic project – the world’s tallest building, the Petronas Twin Towers at a cost of some RM4bil.
This was started by tycoon T. Ananda Krishnan and subsequently taken over by Petronas, which completed it in 1998 – right smack in the middle of the Asian financial crisis. Petronas completely occupied one of the two 88-storey towers on completion and it took a while for the other tower to be fully occupied, given the oversupply of office space then in Kuala Lumpur.
At around the same time the Petronas Twin Towers opened, so did two other iconic developments – the RM20bil Putrajaya, the new administrative town, and the RM10bil KL International Airport, both considerably under-utilised.
For six years, the twin towers ruled as the tallest buildings in the world until pipped in 2004 by a building in Taipei. But they continue to be the tallest twin towers in the world, which is not as iconic.
Now Dubai holds the distinction of having the tallest building – the Burj – in the world. Ahead of its opening next month, Dubai is facing serious problems caused by a property glut.
The evidence is that iconic developments are not very lucky and if I were the ones putting up iconic mega structures in and around Jalan Duta and the Merdeka Stadium area in Kuala Lumpur, I would be rather careful and do my numbers to ensure that there is demand for the supply that I am going to bring on.
If reports are to be believed, plans may be in the pipeline for two 100-story plus skyscrapers in Kuala Lumpur. That should put them both among the tallest buildings in the world. But the question is who is going to occupy them?
An empty icon is of no use to anyone. Why scrape the bottom of the barrel to build one and risk losing everything in the process? There are other things that can be done with that kind of money – improving the public transport system for one.
Often it’s the mega projects to build infrastructure for the most number of people which give most bang for the buck instead of a whimpering exit in the face of insurmountable debts that iconic projects could face.
·Managing editor P. Gunasegaram says that we badly need the right kind of stimulus spending.
From thestar online
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