HUGE BUDGET BLOWOUT AT THE AIRPORT MALL - RussTini Real Estate
 
The long-suffering investors in The Airport Mall may at last be seeing some light at the end of a very long, dark and difficult tunnel. However, it comes at a huge cost to someone.

The estimated cost of completing the original project, when it first started, was $12,000,000.

However, the development stalled at birth. Morsima Sdn Bhd., the original developer and still the owner of The Airport Mall, claimed that progress payments from the bank, TAIB, were frequently delayed, and that this caused huge problems for the company and the project.

Eventually, in 2005 Morsima Sdn Bhd reluctantly agreed to handover responsibility for finishing The Airport Mall project to TAIB. This was at TAIB's suggestion, and on the understanding that TAIB would complete the project without delay.

TAIB appointed HAHD Engineering and Associates, to oversee the project. HAHD stated in December 2005, “With reference to our prepared Work Programme, the target date of completion is by the end of April 2006.”

The estimated cost of completion at that time was $4,000,000.

But, this completion date never materialised. In fact, very little work seemed to be done at The Airport Mall, causing even more worry, frustration and anger among investors.

Nearly three more years passed before TAIB appointed a contractor, and signed a widely publicised agreement in September 2008 with United Engineering. UE are a highly respected company with considerable expertise in their field. TAIB never explained why it took them nearly three years to appoint a contractor to finish The Airport Mall.

Could all parties involved in The Airport Mall now heave a collective sigh of relief?

Not quite. In those three years, the cost of raw materials and other services had risen and the estimated cost of completion was now nearly $9,000,000. More than double the $4,000,000 that it would have cost three years earlier!

In fact, the contract awarded for completion of The Airport Mall was for the sum of $8,836,330.90.

However, even though this is more than double the four million dollars that was estimated in 2005, apparently it is still not enough!

The cost of finishing the project has now ballooned to a whopping $12,703,247.54. More than the cost of the whole project back in 2002 when it first began.

This represents a huge increase in costs. About 50% more than the awarded contract amount and this on a building that was nearly completed anyway!

The time that the project has taken to finish is another matter causing some speculation. The project should have taken ten months to complete; the planned completion date was 14th June 2009. However, it is now running five months late! For a 3 year contract to be five months late is bad enough; for a comparatively short, ten month contract, to over-run by five months indicates that there is a major problem somewhere in the system. Where could it be?

I asked the two parties involved TAIB bank and United Engineering, “Why has The Airport Mall cost so much to complete and why has it taken so long to complete it”?

Hjh Zazarina bte Hj Zainuddin of TAIB's Corporate Finance Division refused to comment about the reasons for the huge increases in the cost of completing The Airport Mall. When asked why the project had taken so much longer to complete than expected she again refused to comment.

The CEO of United Engineering, Mr. John Lee, when asked what caused this huge budget blowout and the long delay in completing the project said he could make no comment on these matters as he was bound by terms of confidentiality to his client, but that his company, as the main contractor, was not responsible these aspects of project.

The Managing Director of Morsima Sdn Bhd, Mr Wong Yep Meng, who is still the owner of The Airport Mall, was both stunned and alarmed when informed of the huge cost increase in his project.

He says that TAIB never informed him of these massive cost increases. In addition, TAIB have never informed him about any other problems that they were having completing The Airport Mall on time or on budget.

He cannot understand how TAIB can justify spending the nearly thirteen million dollars that they claim to have spent, on the project. He says that The Airport Mall was about 80% finished when TAIB took over responsibility for completion in 2005. He cannot understand why it was not completed for four million dollars back in 2006, as he expected it to be.

So far, almost everyone seems to be a loser on this project. However, there is no bigger loser than Brunei. The Airport Mall, with over 170 shops, a supermarket, and bowling centre, will create about 700 jobs.

To put this in perspective, the four hundred million dollar methanol plant in Sungai Liang will create, (according to the BEDB website), about 130 jobs. The Airport Mall represents a huge lost opportunity for Brunei.

With the best will in the world, the government can no longer be expected to find jobs in the civil service for everyone. It is up to the private sector, to do all it can to create jobs for the nation’s most important resource, which is no longer oil, but all those young Bruneians who need jobs upon which to build their lives and their future. But, the private sector cannot do it without the cooperation of the banks.

It is to be hoped that when The Airport Mall finally opens its doors for business that it will live up to the hopes and dreams of Mr Wong Yep Meng, the man who created it, as well as all those who have waited so long for their investment to bear fruit.

5/7/2010 03:20:07

I just stumbled upon this site.
I wonder what is the actual problem, could it be that taib doesn't have the finances to finance the project? or is it the financial management.
sounds a lot like if the construction was done by government, it takes very long to complete, but that's usually mostly to the red tape.

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john doe
10/24/2010 14:35:22

I think the transparency is an issue here. The government should be doing much more to ensure that TAIB or any other corporation open up their accounts to the public.

To spend 12 million on a 4 million dollar project and not explain to the investors why is simply just poor business practice. If I was an investor, I would be pretty devastated as is the case with Mr. Wong.

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