Citing lack of tenants Singaporean company APG to pull out of its 70% share in the Nu 500 mn Thimphu Tech Park

The Assetz Property Group (APG), which holds 70 percent of the Thimphu Tech Park Limited (TTPL), through a letter dated 10th March 2014 has announced its intention to withdraw from the project.

The APG in its letter says, “While APG appreciates the goodwill and support received from the RGoB changes in the global economic situation, changes in our company and the difficulty that the Park has faced in attracting tenants have put tremendous pressure on APG and its shareholders. APG would like to exit from the Joint Venture Partnership fully as desired by our shareholders and investors”

APG in the letter says that it would be in the best interest of TTPL if Druk Holdings and Investment (DHI), which currently owns 30 percent, were to fully takeover TTPL.

The letter addressed to the Ministry of Information and Communication (MoIC) requests the ministry to release APG from clause 8 and 10 of the FDI Rules 2012, which are to do with a three year lock in period and permit APG an early exit.

The letter also mentions that both APG and DHI have had extensive discussions in the last few months over TTPL.

A DHI letter in turn sent to the MoIC supports the idea of buying out APG from the project and has mentioned that the DHI board had granted approval to explore this course. DHI is currently in negotiation with APG on the price of the 70 percent shares.

The Department of Information Technology and Telecom (DITT) promoted and supported the TTPL from the MoIC and furthermore the land had been leased for 30 years through the Ministry for the IT Park.

The DITT Director Phuntsho Tobgay said, “We have received the letter and we have written to the Ministry of Finance as government investment was involved and to the Ministry of Economic Affairs as they look after the FDI rules.”

According to official figures a total of around Nu 500 mn has been spent on TTPL. Of this USD 4.16 mn or Nu 250 mn was provided as grant by the World Bank for developing the project site with facilities sewage, telecom etc and leasing 10,000 square feet for the government. The government in turn had to pump in 907,123 USD or Nu 54 mn for the access road.

The DHI and TTPL who are the developers and owners of the project have in turn spent Nu 214 mn so far through a combination of equity and loan financing.

The DHI CEO Karma Yonten said, “APG was not willing to even put in the full equity. APG was supposed to put in Nu 56.4 mn as their share but they put in only Nu 45.7 mn and DHI put in Nu 19.8 mn.”

With the rest being loan the initial Nu 225 mn estimate of the APG and DHI’s investment came down to Nu 214 mn.

The CEO said that the DHI board had given the go ahead into looking buying out APG’s 70 percent shares. He said that negotiations were still under way to discuss the cost of a buyout.

The TTPL which is Bhutan’s first mega project outside the Hydro project soon got the tag of a ‘White Elephant’ after this paper in an article in January 2013 pointed out the park was having difficulty getting tenants with most of its commercial space empty. The only two companies there Shaun Communications and Scan Café were also facing difficulty. The Park itself was facing a cash flow problem unable to generate adequate revenue.

In a rebuttal of sorts in an article on April 2013 in the national newspaper the DITT claimed that by 2014 up to 1000 jobs could potentially be created. (This was later clarified in an August 2013 article in the same paper by the DITT to mean that the place had a potential to generate 1,000 jobs). The TTPL CEO Mike Holland (who is now pushing for APG to leave the project) at the time dismissed any claims that the project was a ‘White Elephant.’

There hasn’t been much progress in the Tech Park since The Bhutanese last reported on the issue in January 2013.

According to the DITT Director Scan Café which has only leased out a part of the second floor has around 180 jobs while Shaun Communication is still yet to commercially lease space with it still stuck with around 50 staff in the incubation center which is a free space meant for entrepreneurs.

This is in spite of the former government providing a host of additional incentives and subsidies that involved training stipends, slashing internet rates, lowering the rent etc.

The IT Park is officially supposed to produce 700 jobs by 2015 of which 400 were supposed to be in place by June 2014 now looks difficult if not impossible. Officials also admitted that the TTPL is still not profitable and there was a cash flow problem.

However, both the DITT Director and DHI CEO put a silver lining on the entire issue saying that the project would become viable in the long run. The DITT Director claimed that they would no longer target huge companies but target mid-sized companies and by April 2014 an Australian and a South Korean company would come to look at the project. The Director said that with the management fully under DHI the project would have one source of authority and so more attention could be given.

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