Proposal to acquire Malay reserve land

By Doreen Leong, The Edge Daily

If anybody had thought that oil and gas would be the main thrust of the Eastern Corridor Economic Region (ECER), they were wrong. The emphasis instead is on agriculture, tourism and spending to improve the infrastructure in the eastern region.
A crucial part of the development is a proposal to acquire Malay reserve land that will be held under a trust fund. This is because 40% of the total land area, measuring 66,736 sq km, in the ECER is Malay reserve. Under the proposal, landowners can opt to accept units in the trust or sell them outright to the trust.

In fact, the vast area categorised as Malay reserve land could hinder the development of the region. Hence, Petronas chairman Tan Sri Hassan Merican believes that the land could be optimised for property as well as agricultural purposes.

"One of the biggest problems in ECER is the vast Malay reserve land. But we can optimise the land, including developing its potential," he adds.

For instance, he says, up to 100,000ha can be used to cultivate rubber trees as a source of wood, which can then be exported or used in the furniture industry.
Other =agro-based sectors that can be tapped are poultry and herbal cultivation in Kelantan, goat rearing and citrus cultivation in Terengganu, and cattle rearing and pineapple growing in Pahang.

While agriculture and tourism will be the key thrusts under the ECER, its other focus are oil, gas and petrochemical, manufacturing and education. The ECER is expected to attract investments of up to RM112 billion over the next 13 years.

The amount does not include investments in oil and gas. This is because Petronas, which has been involved in exploration, development and production of crude oil in Terengganu and Kuantan since the 1970s, has its own oil and gas masterplan for the growth of the oil-producing states.

"Agriculture will be the main thrust of this plan simply because there are ample resources available. ECER (which covers Kelantan, Terengganu, Pahang and Mersing in Johor) makes up 51% of the total land area in Peninsular Malaysia," says Hassan.
Like the Iskandar Development Region and Northern Corridor Economic Region, ECER will involve an elaborate plan but the question is: will the investments achieve its objective of raising the per capita income of households, given that generally, the population there is contented?

Hassan believes the plan will work provided there is commitment to succeed.
"The key is the people. Although, generally, the people there are looking forward to this development, there is a fear of rising cost in the region," he says.
What is surprising is that Terengganu, being an oil-producing state, registers the highest incidence of poverty in the peninsula, with a rate of 15.4% while the lowest is Penang (0.3%).

This poses the question: why is Terengganu's household monthly income below the RM734 poverty line despite it getting billions from Petronas in the form of royalty payments?

"This is because the resources are not properly managed. Petronas has invested RM70 billion in the state," says Hassan.

Although Petronas will not be pumping any additional investments in the O&G sector, analysts are bullish about the sector, especially with the recent record-high crude oil price of US$82 (about RM282) per barrel last Wednesday.

But the bullishness is not translated into upward movements in the share prices of the oil and gas counters as investors are still wary of the volatile equity market and the time lag between oil prices and oil profits.

"We estimate a delay of between six months and a few years for our local boys to reap the benefits from the current rally in oil prices," OSK Investment Research analyst Chris Eng says in a recent note.

He adds that the immediate beneficiaries of high oil prices are the oil refineries followed by rig builders. Also, Scomi Group Bhd, which supplies services for the exploration and appraisal of oil fields and drilling mud equipment, stands a great chance to benefit from the crude oil upcycle.

The share price of Scomi Group closed at a six-month high of RM1.93 on July 25 and has since declined to RM1.51 last Wednesday. Based on a historical price earnings (PE) ratio of 6.18 times and estimated forward PE of 11.44 times, the counter appears a "cheap" investment compared to Tanjung Offshore Bhd, which has a PE of 28 times.
Companies such as Dialog Group Bhd, Petronas Gas Bhd, KNM Group Bhd, Alam Maritim Resources Bhd and Eastern Pacific Industrial Corp Bhd emerged as favourite stocks among analysts, but there is growth potential from players such as Pantech Group Bhd and Deleum Bhd.

Besides the oil and gas counters, companies involved in highway construction such as MTD ACPI Engineering Bhd and Ahmad Zaki Resources Bhd will also benefit from the planned transport network that will cost RM44.8 billion under the ECER.

The improved road infrastructure will include phase three of the East Coast Expressway linking Kuala Terengganu and Kota Baru, phase four of the expressway linking Kuantan to Johor Baru and a road linking Temerloh to Kuala Pilah.

Among all the corridors, the ECER will be the most challenging for the government. It covers a large geographical area and a politically savvy population. Considering all the intricacies, it will be the hardest corridor to develop.