Press statement on Port Klang Free Trade Zone Project

via Englishsection

The Malaysian Government has yet to offer any explanation on the status of the Port Klang Free Zone project and to account for the huge cost overrun amounting to RM 3.5 billion. To cover the losses on this botched project, the Government announced it will extend a soft loan amounting to RM 4.681 billion to the Port Klang Authority "retroactively."

This affair is one of the many examples from the present administration that reveals conflict of interest, corruption and mismanagement involving politicians, business interests and public officials.

Despite directives from the Prime Minister and the Cabinet, no explanation is yet forthcoming from the Chief Secretary to the Government. Not a single person has been held accountable for this fiasco.

While the project's finances are beyond salvaging, an independent and transparent audit would be necessary to hold those guilty of malfeasance to account and rebuild some credibility in the Ministry of Transport.

Land acquisition

PKA purchased 1000 acres of Pulau Indah land from Kuala Dimensi Sdn Berhad at RM 25 per square foot for a total consideration of RM 1.8 billion (inclusive of interest). Kuala Dimensi made a capital gain of RM 993 million because it had purchased the land from Pulau Lumut Development Cooperative Berhad for only RM 95 million (at RM 3 per square foot).

This lucrative deal involved UMNO and MCA politicians including the current UMNO Permanent Chairman, Tan Sri Dato Seri Haji Onn Ismail; UMNO Treasurer, Dato Seri Azim bin Mohamed Zabidi; MCA's Dato Chor Chee Heung who is the Chairman of KPA and former Deputy Minister of Home Affairs; Dato Seri Tiong King Sing, Barisan Nasional MP for Bintulu and their associates.

It is abundantly clear that the main losers from this land sale are the members of Pulau Lumut Development Cooperative Bhd. We can see the political promise to protect the poor and help the Malays remain unfulfilled and in its place the chosen few continue to amass untold wealth.

It is strange that the then Minister of Transport saw fit to reject the Attorney-General's view that the land could be acquired for "public purpose" under the Land Acquisition Act at RM 10 per square foot.

Instead, the Ministry of Transport and the PKA preferred to transact the land purchase on a "willing buyer and willing seller" basis and a price of RM 25 per square foot.. It is now known that this basis had been agreed to in 2002 between the Ministry of Transport and KPA and Kuala Dimensi without approval of the Treasury or the Cabinet.

Award of contract

I find it very strange that PKA appointed Kuala Dimensi Sdn Bhd, the company that sold the land, the sole "turnkey contractor" for the Port Klang Free Zone project via the Land Development Agreement dated 27 February 2003. Kuala Dimensi Sdn Bhd in turn appointed Wijaya Baru Sdn Bhd as the main subcontractor. These companies are either owned or controlled by Dato' Seri Tiong King Sing and Dato' Abdul Azim bin Mohd Zabidi is a Director of Kuala Dimensi Sdn Bhd.

There is a total lack of transparency in the procedure in the award of contracts by Port Klang Authority and the Ministry of Transport.

Serious violations of financial procedures and abuse of power

It is a matter of public record that the former Minister of Transport, Tun Ling Liong Sik, assured the Government that the Port Klang Free Trade Zone project was feasible, self financing and would not require government funding.

Why is there then a need to extend a "soft loan" amounting to RM 4.6 billion to Port Klang Authority? Is this not further evidence of the rot within the present administration?

The Minister of Transport saw fit to issue four (4) "Letters of Support" to the lead arranger for the bond issues. Tun Dr Ling Liong Sik issued one dated 28 May 2003 and the other three by the present Minister, Datuk Seri Chan Kong Choy dated 23 April 2004, 8 December 2005 and 23 May 2006.

These Letters committed the Government as Guarantor for any financial liabilities incurred by the Port Klang Authority for the Port Klang Free Zone project.

It has been established that these Letters tantamount to guarantees as they contained words to the effect that "we shall at all times in the future ensure that PKA is in the position to meet (and do meet in full and on a timely basis) their liabilities in respect of the Repayment Amount for so long as an amount in respect of the Repayment amount remains outstanding….."

It is standard Government policy that The Ministry of Finance is the only government agency which has the authority to issue any form of guarantee on behalf of the Government and that this must be endorsed by the Cabinet.

The issuance of the "Letter of Support" is in violation of the Government's rules and procedures. Under my watch when I was Minister of Finance, such infractions were not allowed to happen. What was worse is that the Treasury was not aware of these letters until they were alerted by the lead arranger in December 2006.

Based on the above, there is a strong basis to believe that Tun Dr Ling Liong Sik and Datuk Seri Chan Kong Choy are complicit to the improprieties in issuing the "Letter of Support" which resulted in the Government having to bail out Port Klang Authority but exerting undue advantage to certain parties. These parties are also supported by the presence of UMNO stewards within their ranks.

Call for full and independent investigation

I must state that I am shocked at the Abdullah administration's continued disregard of mismanagement of public funded projects and basic tenets of good governance as well as the incompetence of public officials in their management of national projects.

I, therefore, call for a full and independent investigative audit by a firm of professional auditors into the state of affairs of the Port Klang Free Trade Zone project.

The audit should determine the extent of the Government's liability, pinpoint existing weaknesses in the system of financial and accounting controls, and ascertain whether there is evidence of financial improprieties, misconduct, and corruption.

I further suggest that the Government declassify all records pertaining to this matter and make it public together with the audit report after it has been tabled in parliament.

I would like to repeat my earlier call for a Royal Commission to be established as well as getting the ACA and other relevant authorities to act and investigate without fear or favour on this matter.

Anwar Ibrahim
19th December 2007