KUALA LUMPUR – Failure to complete a land-ownership agreement between the Langkawi Development Authority (Lada) and INR Sdn Bhd for the St Regis hotel on the island resulted in a loss of RM3.19 million in uncollected land-lease payments.
Lada could not collect the payments of RM660,000 per year, for a period of four years and 10 months, said Parliament’s Public Accounts Committee (PAC) in its report on Lada’s management of its real estate.
The PAC found that the lease agreement to complete the land-ownership rights for the St Regis in Langkawi between Lada and INR could not be signed because of a discrepancy in the land status.
While the status of the acquired land is leasehold, conditions in the shareholders’ agreement stipulate that the land must be freehold.
The Finance Ministry had planned to sell the hotel to help settle INR’s debts with Bank Pembangunan, but faced difficulties in finding potential buyers due to complications involving the land status.
“INR Sdn Bhd’s inability to repay its loan instalments to the bank for 24 months has become a ‘non-performing loan’ which became more critical when the country was hit by the Covid-19 pandemic crisis.
“As of June 30, 2021, the arrears amount to RM27 million,” the PAC’s report said.
Lada’s problems with the uncollected RM3.19 million in land-lease payments were highlighted in the 2022 Auditor-General’s Report released in November last year, after which the PAC launched its investigation into the matter.
The PAC in its report released today recommended that Lada and the Finance Ministry take immediate steps to finalise the land status so that the lease payments could be collected.
The Finance Ministry should also have a comprehensive rescue plan for the St Regis in Langkawi that includes debt restructuring and hotel-management plans.
This rescue plan should be submitted to the PAC, the report said, in addition to having audit and advisory firm Deloitte act as the hotel project’s receiver and manager.
PAC also found that Lada failed to collect share proceeds for another project, the Tok Senik Village Resort, because the company involved, Maju Holdings Sdn Bhd (MHSB) did not register Lada’s 30% share ownership in the project.
This made the agency unable to collect proceeds amounting to RM8.30 million.
Lada had also acted negligently, PAC found, in allowing MHSB to mortgage the land where the village project is, to Perwaja Terengganu Sdn Bhd (PTSB).
“This has exposed (Lada) to the risk of losing the land if the mortgage debt is not paid,” the committee said.
These management problems involving the St Regis Langkawi Hotel and the Tok Senik Village Resort have resulted in Lada not being able to collect a total of RM11.49 million, PAC added.
The problems with the St Regis Hotel date back to 2018, and to 2003 for the Tok Senik Village Resort.
PAC said Lada needs to improve management competency, while the Finance Ministry must conduct better regulation of companies under the Minister of Finance Incorporated to prevent negligence that could affect the government’s interest.
In 2022, the Auditor-General’s Report on Lada found that its performance for the period 2018 to 2022 was unsatisfactory and it did not fulfil its goals as a catalyst for world-class tourism in Langkawi. – March 19, 2024