Thursday, June 11, 2009

PKFZ Fiasco & Being Accountable

Since 2003 to 2007, the Auditor General had repeated warned the Port Klang Authority that it may find it difficult to meet the financial commitments on PKFZ. I am wondering why the board of PKA did not sit down to review the financial position and viability of the project.

As reported in its website, the project development cost had ballooned from RM0.87 billion in 2001 to nearly RM2.43 billion by 2008. The development cost variation of nearly 180 percent was remarkably too high to slip away from the detection of the board of PKA. Surprisingly, most of PKA board members did not come forward to explain how this oversight was possible.

I was told that nearly 15 contracts worth billions were signed by the PKFZ general manager even when it was obvious that the authority was facing a difficulty to meet all its financial obligations. As a result, the ex-ministers of transport (Ling Liong Sik and Chan Kong Choy) had between them endorsed and signed four letters of support to allow the authority to raise corporate bonds.

Another procedural problem had surfaced regarding the validity of these letters. It was obvious that the ministers cannot issue any letter of guarantee on the behalf of the Malaysian government. The only ministry allowed to issue a letter of guarantee was the ministry of finance after procuring an approval from the cabinet.

A remedy for the project must seek to address this procedural flaw to ensure that a strong check-and-balance mechanism is in place to prevent any such flaw from happening again. Members of the administration must be held accountable to the promise of protecting public's interest.

Interesting, by claiming that this project was a national interest, the cabinet approved a soft loan worth RM4.3 billion (at 4% interest) to the PKA to fund the project. It appears that the authority may have some difficulty making the interest payment worth RM2.51 billion by 2036. On top of this, the authority needs to pay the contractor, Kuala Dimensi Sdn Bhd, a total interest of RM1.45 billion by 2017.

Even with the most aggressive projection, the company's cash flow may not be enough to keep this project afloat and viable. The company still need to factor in the maintenance cost which is easily 10% of the total development cost annually.

Another mind boggling inconsistency was its land acquisition cost. It was stated by the cabinet decision that this project was a national interest. The land was purchased by PKA at price of RM1,088 million (that is RM25 psf including Infrastructure Works with land fully reclaimed) instead of through compulsory acquisition which would have cost RM442 million (that is RM10.16 psf for land partly reclaimed and no infrastructure works).

The cabinet made the decision based on the recommendation of Selangor State Government that compulsory acquisition was not possible because PKFZ is not a public interest project; and the Land had been issued with development order in 1995.

This inconsistency was glaring when the cabinet later contradicted itself by offering a soft loan of RM4.3 billion to the company and claimed that it was a national interest. A probe must be done and someone must be made accountable for the irresponsible recommendation.

What's next? The probe must identify all parties and individuals involved in the project. People who were involved in making unscrupulous decisions or acted beyond their official boundaries must be taken to task and reprimanded. Like Minister Ong Tee Keat had promised us, the investigation will not leave any stone unturned.

It was announced yesterday that the government has established three committees to deal with the scandal-plagued Port Klang Free Zone (PKFZ), including one headed by the country head of global anti-graft body Transparency International (TI).

Datuk Paul Low, president of TI Malaysia, will head an ad-hoc committee of corporate governance which will look into ensuring that weak practices of the past are not repeated.

Ong also announced that a special task force of legal, accounting and project development experts has been appointed to provide Port Klang Authority (PKA) with recommendations on how to recoup some of the RM7.5 billion already sunk into the industrial zone. Heading this team is Vinayak Pradhan, from prominent law firm Skrine, who is a former commissioner with the United Nations Compensation Commission and member of the Permanent Court of Arbitration, and assisted by two directors of PwC.

A third team, called the executive committee, will take charge of PKFZ’s business development.
It is to be co-chaired by PKA chairman Datuk Lee Hwa Beng and Tan Sri James Alfred, a PKFZ director who is also chairman of the Federation of Malaysian Manufacturers.

Ong has given the committees and special task force a period of two months to come out with an action plan.

Ong must remember that ultimately the responsibility of fixing this gigantic scandal falls on his shoulder. He must deliver the following:
  • Identify the main problems, causes and culprits which had contributed to the financial fiasco of PKFZ and find ways to recover all ill gotten monies
  • Identify all procedural flaws and propose a check-and-balance mechanism which can be replicated for all public projects involving public money
  • Stop the financial bleed, work on the viability of the project or restructure/reorganise/reinvent the project to ensure it is a viable project which can support the development of Port Klang in the next 50 years
  • Review the financial projection to ensure that the project displays all hidden costs
  • Review all contracts to ensure that there is no one-sided contract signed by the company on behalf of PKA
  • Identify the right people through a merit based system to run and revive the project. Stop all political appointees and replace all board members who did not contribute to the running of the company
  • Stop any draw down for the project until it is clear that the fund is going into something purposeful and all legal reviews have been conducted

The tasks above are not exhaustive. A fiasco this size may have more things up its sleeve which are hidden to us.

The public should support Ong to do his best. He should be noted that the outcome of the investigation may possibly implicate a number of people from his party but he must ensure there is no cover up and action must taken against those who are found guilty.

Imagine, more than 5 ministers in the Gordon Brown cabinet had resigned due to some expense claims controversy. The size of PKFZ financial fiasco would have brought down the Labour Party.


Anonymous said...

Hang Chan Kong Choy. That B^&*(*(d

linda said...


You seem to have missed the mother of all intentions of the setting of these committees.

It has to be to identify the culprits behind the fiasco!!!

I think you would not disagree with me and all Malaysians who are apolitical & who are concerned about Malaysia and Malaysian public funds.

It affects you and me and and others who are Malaysian

Anonymous said...

As the saying goes MALAYSIA BOLEH!
Tak apa, RASUAH tu biasa la asalkan ada pembangunan.
Negara ada duit, Umnoputra dapat, MCA dapat, MIC dapat, BNputra Sabah dan Sarawak pun dapat. FAIR bukan.
The practice has been continue since 1980s when Malaysia went through rapid economic transformation.

Now, under Najis leadership what do we expect? Tangkap PKFZ culprits? No way, because Umno pun dapat dan lain-lain BNputra pun ada dapat lain project.
The fact is MINDEF rasuah money mountain high! First, tangkap perasuah submarine and scorpean. Fair, LEADERSHIP BY EXAMPLE!

Anonymous said...

Let study the first transport minister profile who start the project, TOON Ling. During 1990s economics boom, LLS son acquired few public listed company worth billions at the age of 30. Soh Chee Wen has the story to tell the truth. These company went burst after 1997 Asian financial crisis. Hundreds of million public money in share market burnt. Insider trading culprits like Toon Ling left off.
TOON Mamak cant charge MCA president because anakku pun dapat Petronas money to bail anakku out.

After 1997 financial crisis, Toon Ling did not learn, remain evil. Emerge Transmile debacle. Again public listed company with billion market capital. Until this moment, Transmile remain no issue to SC.

Anonymous said...

Tiong KS Kuala Dimensi very scared with the independent auditor report to the extend with threat to sue them. A lot details in the report surely help to prove certain thing.

Shanker said...

Dear Khoo

I have my doubts about the results that can be achieved by yet another committee, formed by the "able" men of Bolehland.

Is there a need for another committee? Isn't the past littered with enough committees that make the White House look understaffed?

What happened to the VK Lingam case? Nothing.

What happened to the Auditor General's report on overspending by the Youth & Sports Ministry? Nothing.

What happened to the IPCMC? Nothing.

What happened to the investigations on the Kugan murder?


What happened to the disclosure of Khir Toyo's extravagant spending in Disney land? Nothing

So, pls pardon me, but I am not holding my breath.

Anonymous said...

LHBeng also got scandal in Subang Jaya.
Lets see!

Anonymous said...

Mr Khoo,

If I remember correctly, Mr Tan Seng Giaw said it was not Letter of Guarantee - it was Letter of Comfort. Seems like somebody at RAM or banks cannot distinguish the difference between Guarantee and Comfort.

On another matter, could you advise if a PKR Chairman has executive powers? If not, meaning the General Managers must be hauled up.


kopitelp16 said...

Sorry to say but I don't really see anything improving or anyone will have to face the music. We can set up all the commissions in the world but if we still have politicians that are corrupt and irresponsible, no one can help us.

Too many scandals and sharks really got punished. Remember 'Lingamgate'? What's next after all the fan fare? It's all sandiwara and things will never change. Until I see big shots like CKC or even Tun LLS face the court for apparent abuse of power, I'm not convinced.

MAybe it's a good thing for us all to have short memory and deep pockets!

Anonymous said...

I wonder.........

Are these people managing PKFZ so "stupid" or what...????

When "a company" starts to show "cracks" don't you think you should look into it......?????

Why wait for it to get sooo... bad than only move their "arse" & start blaming a "scapegoat"........??????????

Are they again "stupid" or what...???????????

We are talking about "billions" of ringgit, you know...?
And why is it so difficult for these so called "experts" & powers-that-be to answer us......?????

It's just like "running" a company. I own & run about 7-8 companies. (True...!)
All doing well & properly managed.

To managed a company is the "top" most important factor....!!!

So what's with the "management" of PKFZ.....????????????
I smell & see something "fishy" there...!

And the rakyat is "NOT"......
I repeat "NOT" stupid...!!!

The pieces of "pie" have been scattered..........!!!!!!!!!!!!!!!

tan, tanjong bungah said...

Hi everyone,

The PKFZ issue provides a "golden opportunity" for BN to show a strong political will to right past wrongs, make amends for past mismanagements, cronyism, corruptions, etc. The PKFZ project(s) have caused the people dearly - just imagine how much more could have been done for the people and country without such grave financial 'leaks'!

Stern action, no cover-ups of all those, especially the VVIPs, who have procured ill-gotten gains in the PKFZ projects and prosecution pursued by MACC and recovery of ill-gotten gains to the people would demonstrate in no uncertain term the seriousness of the present Federal Govt. of its claim of wanting to be transparent and accountable for all the past and present misdeeds.

This is the only way to go for BN to stay relevant! No mere talk/rhetorics only, but action must be taken to go after the guilty. Failure to do so would turn the PKFZ scandal into an albatross round the BN's neck!

egteh88 said...


clearwater said...

Khoo Khay Peng,

Gordon Brown's cabinet is made up of pathetic egg shelled individuals ; fancy resigning over some petty expense claims. The Mahathir, Badawi and Najib cabinets, however, comprise men of much sterner stuff ; they will not even be abashed, much less resign, even if they have bilked the public of billions over the years in one cabinet approved scheme or another. Why is this so? Because they will not be made to account for it. Mutual self preservation rules.

Anonymous said...

Accountability doesn't exist in the BN vocabulary.

Just take a look at the many Penang land scams. Koh Tsu Koon acts as if they never occured and PM Najib even saw fit to promote him to the cabinet.

Sickening is the word.

icon2008 said...

Why whenever people are on the top, they have the tendency to pocket Rakyat's money? They practise 'under table' also.

I don't know when Pakatan really rules this country, will things like this happen also?

anti corruption said...

This government would have collapsed if it were a morally upright and responsible one. We are dealing with 'uncivilized' leaders.
In the end the fiasco will end up like the Police Commission or the Lingam inquiry.

giam2020 said...

Malaysia is only good in forming these committee and that committee
but in the finale nothing is acted
upon on their findings.In no time
our country will be in financial
problem one of these day at the
rate of project failure and cost
over run.

Anonymous said...

Yes Ong Tee Keat, put the best committees in place staffed by the most professional in the world but what the public wants to see is heads rolling for this. Not ikan bilis, mind you but big heads.

If this is just another "crime with no criminals" then expect some severe election backlash. dear Minister!

Vanessa said...

The government should freeze the bank accounts of everyone implicated in the Port Klang Free Zone (PKFZ) controversy, while those who are also holding government positions should be suspended pending the Malaysian Anti-Corruption Commission (MACC) investigations into the scandal.

Project Management said...

The report cited that significant government participation in the private sector and considerable business participation in politics means that the movement of gatekeepers as players and players as gatekeepers has a negative influence on the concept of checks and balances.