Mersing Laguna: Is Land Reclamation the Solution?

Mersing Laguna: Is Land Reclamation the Solution?

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Mersing Laguna land reclamation

The Star, 9th March 2012

RM22bil plan to turn Mersing into the likes of Bali and Hawaii

JOHOR BARU: Radiant Starfish Development Bhd plans to position Mersing town (see location map below) into an international tourist destination on par with Gold Coast, Bali, Caribbean and Hawaii.

Chief executive officer Ungku Safian Abdullah said the town had all the ingredients to become a tourist hotspot and its potential had yet to be exploited.

“I can guarantee you that Mersing town will no longer look like what it is seven years from now,” he said at a press conference yesterday.

Ungku Safian said Mersing, which was located on the north-east of Johor, was sandwiched between 40 unspoiled islands and the 200-million-year old Endau-Rompin National Park.

He was speaking after the signing of memorandum of agreements with YPJ Holdings Sdn Bhd, Sinohydro Corp (M) Sdn Bhd, Shengrong International Group Co Ltd and CIMB Insurance Brokers Sdn Bhd witnessed by Johor Mentri Besar Datuk Abdul Ghani Othman.

The agreements entail the development of the RM22bil Mersing Laguna, which involves the building of hotels and villas, land reclamation, a water theme park and provide insurance coverage for the project.

Ungku Safian said the reclamation works and related infrastructure would cost RM4.2bil and RM1bil respectively, adding that some RM17bil was required for develop the rest of project which would take seven years to complete.

The components of the project will consists 22 blocks of five-storey boutique hotels with 3,000 rooms, 4,000 villas and service apartments, marina facilities and commercial development

“Mersing Laguna is aimed at attracting tourists with high spending power and travellers who would love nature and eco-tourism,” he said.

Mersing Laguna is one of the nine projects announced by Prime Minister Datuk Seri Najib Tun Razak in Putrajaya on Feb 28 under the East Coast Economic Region.

Let’s do some quick calculations

  • Land reclamation area : 2,000 acres (approximately 800 hectares. Reported in other media but not here)
  • Estimated land reclamation cost : RM4.2 billion
  • Estimated Infrastructure cost : RM1.0 billion
  • Estimated land cost (without infrastructure) : RM525 per square meter
  • Estimated land cost (with infrastructure) : RM650 per square meter (prepared land cost)
  • 7,000 units over 800 hectares is about 9 units per hectare gross (let’s say 12 to 15 units per hectare net after accounting for public space and non-accommodation use)

 

Some basic questions

  • The low density boutique and villa developments coupled with the targeted ‘high-spenders’ implies relatively high unit prices. This limits the market to wealthy Malaysians and foreigners. The question is :  is this or will this be a high value location? Are high residual land values needed to provide a wide margin of safety over the land reclamation and infrastructure costs?
  • What are comparable values for prepared waterfront development land in Malaysia and the region? Do values exceed the prepared land cost in Mersing Laguna by a healthy margin?
  • Does the raw land value of coastal Malaysia exceed the reclamation cost? If so, by how much? Does the excess value cover the risk of cost increases associated with land reclamation works?

 

Is land reclamation the best solution?

There’s undoubtedly significant potential for a major coastal tourism destination on the east coast of peninsula Malaysia. It’s written about here in the opportunities available at Teluk Mahkota.  However, even though Mersing Laguna may be part of the national development agenda, the question remains whether a land reclamation approach is the best project development solution. It will be interesting to work out the financials of this project.

 

Update:

The Star: Johor Sultan says Mersing Laguna project cancelled

Downloads:

You may also be interested to download the Mersing Laguna EIA Executive Summary.

See also:

Malaysia: Marina Island Pangkor (Land reclamation project)

 

Location Map

 

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