WILLING GOVERNMENT AND WILLING AGENTS DEALING AT ARM LENGTH

PKFZ report: Former PM and transport ministers mentioned


Zakiah Koya/sun2surf

KUALA LUMPUR (Nov 9, 2009) : Former Port Klang

Authority (PKA) general manager Datin Paduka O.C.

Phang named former prime minister Tun Abdullah Ahmad Badawi and former transport minister Chan Kong Choy as the officials responsible for approving the purchase of land in a single phase and not two phases, incurring more costs than the initial Port Klang Free Zone (PKFZ) plan.

Phang said the purchase of the land was made during the tenure of the other transport minister Tun Ling Liong Sik. Phang further said the ministers acted so upon the advice and suggestions by the Jebel Ali Free Zone International (JAFZA).

According to Phang, in the initial plan, PKFZ was to be developed in two phases. The first phase was to involve 500 acres and PKA was supposed to develop the first 500 and later the rest in Phase Two. Nevertheless, the then PM and transport minister (Abdullah and Chan) gave orders to PKA on March 3 2004 to develop 1,000 acres.

Throughout the proceedings, Phang said all the ministries involved knew of this, and the cabinet had in fact agreed to approve the purchase of 1,000 acres on a "willing seller willing buyer" basis with Kuala Dimensi Sdn Bhd owned by Datuk Seri Tiong King Sing.

"Is it fair to say that I failed to alert the government? The government knew all the way about it. MOT (Ministry of Transport) s aware, MOF (Ministry of Finance) is aware, central agency … aware that there is financial implications," she said.

"The thing is as first said, just like aware of the financial buat sahajalah. I think I am so powerful, I buat sahajalah! I’m quite annoyed because I have been keeping quiet all this while because you know they say now I’m retired…but this land acquisition leveled at me, I think I have a right to be annoyed. So I’m trying to make it clear that this is not the real thing, okay." she said.

The Finance Ministry had instructed that the land be bought under the Land Acquisition Act which would be much cheaper, but PKA bought the land at RM25 per square feet, -- double the price KDSB paid for it.

"When (the) cabinet approved RM25 per square foot on a willing seller, willing buyer basis, the agreement that we have was based on RM25 with a financial cost of 7.5%.

"Initially they asked for 8.5% because that time the cost was I said no, this is 7.5%, we worked it out and then 15 years defered payment longer than the normal of 10 years under the Jabatan Valuation, the net present value comes down to RM20.58 per square foot."

Phang explained that the purchase by PKA was made on receiving a letter from then transport minister Tun Ling Liong Sik.

>>Explaining her position

From the very beginning of the proceedings, Phang had a tough time trying to explain her position and duties in PKA and what her role was supposed to be in PKFZ.

Asked what her duties exactly were, Phang could not say for sure, and ended by saying she was a "a port regulator".

A graduate from Universiti of Malaya, Phang revealed that she had also been sent to Cranfield School of Development, UK by the government, to prove to the Public Accounts Committee (PAC) panel that she had management expertise.

She stated that there were between five and nine members of the board at PKA.

Although she worked for 10 years at PKA, she said that it was "very tough to answer" whether any of her board members throughout her tenure, understood the aspects of planning, strategising, and trade facilitating.

According to her, "by and large" the board would just agree to whatever she said.

To a suggestion by the PAC panel that PKFZ should have been self-financing, Phang said she had presented to the board the need to jump start and it was agreed, explaining that normally the processes of the meetings were such that, no one asked questions and everybody just agreed (with her).

>>Relationship with Tiong of KDSB

Phang was grilled on her relationship with Tiong of KDSB.

And she was cornered by the PAC panel when they made her admit there was indeed no detailed proposal for the deal with KDSB, despite it being worth RM1 billion ringgit.

She also admitted that no one did any research on the background of KDSB.

KDSB which owns the land had offered to be the contractor of the land, even though under the law, the owner of the land is discouraged to be the contractor.

She could not state for sure how the figure for the RM1 billion contract awarded to KDSB came about, saying only that it was estimated earlier by JAFZA, and at that time there was no quantity surveyor (QS) despite that being the norm in mega projects.

Phang could also not answer when asked why a quantity surveyor was only appointed as an afterthought for a big project worth billions of ringgit.

She claimed that it was not an afterthought but something done when there was too much to handle. She also had a tough time explaining how the QS was chosen.

>>Letters

On the letter of support by Tun Ling and three letters of guarantee by Chan Kong Choy, Phang was adamant that she was not involved in the letters at all and apparently did not know about any letters from PKA or Tun Ling until the orders came from Chief Secretary to investigate the letters from PKA.

She stated that an investigation was done to only ensure that PKA was not involved.

>>Bonds

Questioned on the bond issued by PKA, she stated that the bond is not within the purview of the PKA. She also claim she did not know how many bonds were issued and to whom they were issued. This was despite a letter that she received from the Secretary General of Treasury that the development of the PKFZ project could be financed by long term PKA bonds.

Thoughout this period she maintained that she was only "aware" of the bonds and nothing more.

Phang also claimed she does not remember much about the bond which was the biggest financial undertaking by PKA because "it seems to be outside what I am doing and monitoring this entire project. That is all."

>>Management lessons

The PAC panel took the time to grill Phang on her management knowledge throughout the he entire four and a half hours of questioning as she claimed she was unaware of many things, and merely followed legal advice given to her, adding that the PKA board agreed with her all the time.

"Honestly I did not ask except to get the legal advisor to tell me it is okay and is it proper to sign. Certain legal things and certain technical things I don’t have capacity to do that, I will just ask my boys or girls to advise me."

Asked whether development agreement accounts were signed off by her, she said,"I did not sign any of these things.

"As I said when we receive all these notices, it is acknowledged by the technical officer and then the QS all will work on it and see whether there is anything for the technical commitee to evaluate. And then finally, the whole thing will come up and that is only one time I have seen that coming up and went to the board," said Phang.

She was also very evasive in her answers and at many times she asked the PAC panel to repeat the questions or reword the questions. She also claimed that she was not hands on in many of the matters of PKA and that she was just "a port regulator".

>>>>>Soft Loan

Phang said the RM4.6 billion worth of soft loan was to service the project cost. She said the rating agency OSK came to see her to request her to direct payment to special vehicles and to get assurance that PKA would not divert the money to other projects.

She claimed she wasnot aware of the letters purportedly signed by Ling and Chan Kong Choy, the two transport ministers. She claimed she was not aware of the RM3.6 billion worth of bond issued by PKA and many other things costing hundreds of millions of ringgit. Likewise about payments to KDSB worth RM254 million for works which they were apparently not entitled to and RM55 millions for works which have yet to commence.

Phang also claimed that payments to KDSB were all past her time and that the people from JAFZA were not to her expectations.

Footnote:

THE Port Klang Authority (PKA) had embarked on the Port Klang Free Zone (PKFZ) project in 2003, envisioning it as a trans-shipment hub complete with a convention centre and a four-star hotel.

The Public Accounts Commiittee (PAC) recommended that the Malaysian Anti-Corruption Commission (MACC) or the police investigate former transport minister Tan Sri Chan Kong Choy and former PKA general manager Datin Paduka O.C. Phang for criminal breach of trust in the PKFZ project.

The report also said issuance of bonds was also improper as it had resulted in the government suffering huge losses as the funds acquired under the government’s guarantee was not fully utilised to implement the project.

Last month, PKA filed a suit against Phang for breaches in her fiduciary, contractual and common law duties to the organisation.