Billion Dollar PKFZ Fiasco Fallout
The billion dollar Port Klang Free Zone (PKFZ) fiasco fallout has opened a frightening can of worms of power abuse and mismanagement.
Today(May 29,2009), Port Klang Authority(PKA) chairman Datuk Lee Hwa Beng handed a copy of the investigative "Position Review" probe into the failure of the PKFZ to the Malaysian Anti-Corruption Commission(MACC) for appropriate follow-up action.
Lee,acting upon directive from new Transport Minister Datuk Seri Ong Tee Keat,also submitted the report to the Public Accounts Committee(PAC).
PricewaterhouseCoopers(PwC),commissioned to do the probe, states: "The strategic intent of the PKFZ project was to transform Port Klang into a national load centre and regional trans-shipment hub.
"However,significant project costs, weak governance and weak project management have severely undermined the viability of the project.
"It is imperative that PKA take immediate action to restructure the MOF(Ministry of Finance)'s soft loan of RM4.632 billion to avoid a potential default in 2012.
"The government would therefore need to make a concerted effort to turn the PKFZ into a viable venture."
Indeed,based on the PWC report made public yesterday(May 28,2009),the PKFZ,instead of the original objective to replicate the Jebel Ali Free Zone success in Southeast Asia with Port Klang as the regional hub,has turned into a shameful story of political-business incest eating up Malaysian taxpayers' money.
The fantastic dream deal,wrapped up in a special huge economic pie cook-up,planned and executed over almost 10 years,involves very influential top political and business figures.
It is a true Malaysian power play of conflict of interests,weak project management and bad governance at the highest levels.
Among the personalities named in the report are two former transport ministers Tun Dr Ling Liong Sik(1986-2003) and Tan Sri Chan Kong Choy(2003-March 2008),former Minister of Housing and Local Government Tan Sri Dr Ting Chew Peh,who was also Port Klang Authority chairman(2000-2004),former Serdang Member of Parliament Datuk Yap Pian Hon who was Port Klang Aurhority chairman(2004-2007),Alor Setar Member of Parliament Datuk Wira Chor Chee Heung,who was Port Klang Authority chairman(2007-2008),former UMNO treasurer Datuk Seri Azim Mohd Zabidi,the first woman general manager of Port Klang Authority Datin Paduka O.C.Phang and the project "executor" Bintulu Member of Parliament Datuk Seri Tiong King Sing.
Among the vital issues highlighted by PwC are:-
*Contracts worth RM1.8 billion were awarded to one company KDSB without any competitive bids;
*Development proposals were not tabled for Malaysian Cabinet approval although the purchase of the land of 1,000 acres was approved by the Cabinet at high price of RM1.088 billion against proposed compulsory acquisition cost at market value of RM442 million;
*PKFZ project cost could balloon to RM7.5 billion and eventually 12.5 billion based on interest charges due to Kuala Dimensi Sdn. Bhd. and Finance Ministry's 20-year soft loan;
*PKFZ's actual occupancy of 14 percent is low and revenue generated inadequate to cover its operating expenses
*PKA's cash flow projections shows PKFZ will suffer cash deficit position from 2012.
The PwC report exposes disregard of proper government procedure,excessive costs,lack of masterplanning,poor governance and no open tenders.
The failed project,started since 1999 in the heydays of former Prime Minister Tun Dr Mahathir Mohamed with official Malaysian Cabinet approval, was done lump sum by turnkey developer Kuala Dimensi Sdn. Bhd.(KDSB) with "minimal supervision" because of the high-powered personalities involved.
Interestingly,current deputy finance minister Datuk Chor Chee Heung was former deputy home minister assisting Tun Dr Mahathir,who was also home minister and finance minister.
Chor, a trained lawyer, served as Wijaya Baru Global Berhad(WBGB) non-executive deputy chairman from April 2004 till July 2007.
WBGB is the parent company of Wijaya Baru Sdn. Bhd.(WBSB),the main contractor, for turnkey developer,Kuala Dimensi Sdn. Bhd.(KDSB).
Datuk Seri Tiong King Sing, who is also parlimentary Backbenchers Club president,owns 32 percent stake in Wijaya Baru Global Berhad(WBGB), a public company listed on the Kuala Lumpur Stock Exchange.
WBGB in turn holds 45 percent stake in Wijaya Baru Sdn.Bhd.(WBSB) the main contractor to the turnkey developer Kuala Dimensi Sdn.Bhd.(KDSB).
Tiong owns 70 percent of Wijaya Baru Holdings Sdn. Bhd.(WBHSB) that holds full controlling interest of 100 percent in Kuala Dimensi Sdn.Bhd.(KDSB).
Datuk Seri Azim Mohd Zabidi, the former UMNO treasurer,is chairman of Wijaya Baru Global Bhd(WBGB).
He joined the board of Kuala Dimensi Sdn. Bhd.(KDSB) on July 28,2003.He is also chairman of Bank Simpanan Nasional,the national savings bank.
He won RM1 million in damages over two articles published by Malaysia Today editor Raja Petra Raja Kamarudin(RPK) last year.RPK,prosecuted for sedition for his statutory declaration on the bomb blast murder of Mongolian beauty Altantuya Shaaribuu,has fled the country in self exile.
In last year's March general election,Azim was among the giants who fell, losing the Bukit Gantang parliamentary seat.
Datuk Abdul Rahman Palil,Sementa state assemblyman and president of Koperasi Pembangunan Pulau Lumut Bhd.,the original landowners of the PKFZ project site, was a board member of Port Klang Authority(PKA) from 1997 to 2003.
Abdul Rahman was also a Selangor state executive council member under the Barisan Nasional(National Front) government that was ousted by the Pakatan Rakyat(People Alliance) in last year's March general election.
Now,the Selangor state,Malaysia's richest state where Port Klang and Kuala Lumpur International Airport (KLIA) are located, is ruled by the opposition Pakatan Rakyat coalition government.
Abdul Rahman,as president of the cooperative, had queried the proposal for compulsory acquisition at a PKA board meeting.
So instead of compulsory acquisition,the Port Klang Authority bought the land from Kuala Dimensi Sdn. Bhd. for RM1.088 billion repayable by 2017 at 7.5 percent interest per year on November 12, 2002.
PKA also committed to engage Kuala Dimensi Sdn. Bhd. as the turnkey developer for the first 400 acres from RM350 to RM400 million.
In 2003,Kuala Dimensi Sdn. Bhd. began infrastructure works.
The Transport Ministry issued special letter of support for Land Agreement(LA).
Kuala Dimensi Sdn.Bhd. then used Special Purpose Vehicle Bhd to issue RM1.31 billion private debt securities against the payments from LA.
The Port Klang Authority,which has earlier signed Memorandum of Understanding(MOU) on June 27,2001 with Jebel Ali Free Zone International(Jafzi),appointed Jafzi to manage the Port Klang Free Zone(PKFZ).
In 2004,supplementary agreements expanded PKA's commitment to Kuala Dimensi Sdb.Bhd. to develop project from RM350 million to RM400 million for 400 acres to 1,000 acres for RM 1 billion repayable by 2012 at 7.5 per cent interest per year.
The Transport Ministry issued another special letter of support for the development agreement.
The Auditor-General noted the Port Klang Authority did not have sufficient funds to meet its obligations.
Kuala Dimensi Sdn. Bhd. used Transhipment Megahub Bhd. to issue new RM1.4 billion private debt securities.
In 2005,the Port Klang Authority awarded additional development works package for RM510 million repayable by 2011 at 5 percent interest per year.
The Transport Ministry again issued special letter of support for the additional development works.
In 2006, Kuala Dimensi Sdn. Bhd. used Valid Venture Bhd.to issue RM545 million private debt securities against the additional development works.
The Port Klang Authority then awarded new additional development works to Kuala Dimensi Sdn. Bhd. for RM336 million repayable by 2010 at 7.5 per cent interest per year.This was revised to 5 percent per year.
The Transport Ministry issued another special letter of support for the new additional development works.
Kuala Dimensi Sdn. Bhd. used Free Zone Capital Bhd. to issue RM410 million private debt securities against the new additional development works.
In November 2006, the government lanuched the Port Klang Free Zone(PKFZ).
In June 2007,the government ratified the development cost of RM1.8 billion.
In July 2007.the Port Klang Authority terminated the services of Jafzi and the Finance Ministry approved RM4.6 billion soft loan to the Port Klang Authority.
Apparently, Jafzi and The Services Group(TSG) Inc. had prepared a master plan to develop the Port Klang Free Zone in multiple phases over eight years for light industrial units.
However,the Port Klang Authority bulldozed ahead with the single phase RM 1 billion development agreement with KDSB in March 2004, nine months ahead before Jafzi-TSG finalised the master plan.
Hence, the PKFZ project was completed in 24 months resulting in a massive glut of light industrial units that till today are only 14 percent occupied.
This damning PwC report of massive power abuse and waste of public funds was made public by PKA chairman Datuk Lee Hwa Beng at his office in Port Klang yesterday.
It underscores the "new administration's commitment to transparency and accountability".
Lee told the press to visit new Transport Minister Datuk Seri Ong Tee Keat's blog,www.ongteekeat.net,for further details.
In his blog,Ong says the Malaysian Cabinet has given the green light to release the full PKFZ report after its third deliberation on it on Wednesday(May 27,2009).
"I am glad that the Prime Minister and my Cabinet colleagues share my aspirations that our government should be transparent and deal with the issues of the day,"stresses Ong.
"Sweeping problems under the carpet is not an option,"he adds.
As vast sums of Malaysian taxpayers' money are involved,Ong points out that the "new administration is prepared to reveal the truth and take appropriate action to correct the wrong".
Ong has directed the Port Klang Authority to seek professional advice on restructuring its financial obligations,improve and ensure proper governance and strengthen PKFZ management for better financial returns.
"We need to seriously act on the findings of the report to make sure that the interests of the people are fully protected and that this government walks the talk," he pledges.
"I have advocated since April last year that the public should know the truth.
"It has been a long journey for me personally.
"It is one that is fraught with challenges and hurdles from both within and without,"adds the Malaysian Chinese Association(MCA) president.
In a statement released yesterday, the Transport Ministry declared that the government would act on the findings in a firm manner to ease the public burden.
"The government has, through today's action,shown that it really means to change the old way of governing," it said.
"It demonstrates the openness and transparency espoused by Prime Minister Datuk Seri Najib Tun Razak's People First Performance Now administration."
Veteran opposition MP,DAP adviser Lim Kit Siang,who has persistently pressed the government to come clean on the Port Klang Free Zone fiasco commended the Prime Minster and Transport Minister for making the report public.
The parliamentary Public Accounts Committee(PAC) is expected to call meeting in June and seek more information from officials of the Transport Ministry and other related officials.
Its chairman Datuk Seri Azmi Khalid said the PAC is ready to call up the witnesses over the PKFZ fiasco,
On Sept. 6,2007, the PAC had discussed the scandal under its then chairman Datuk Shahrir Abdul Samad who visited the PKFZ site with committee members but nothing came out of it.
Shahrir,who lost his seat in the April UMNO elections,had tendered his resignation as a minister in the Malaysian Cabinet in disgust over his defeat.