PKFZ: FORMER TWO TRANSPORT MINISTERS CALLED BY PAC

*Elements of incompetency found in PKFZ project (theStar)


*KFZ: PAC unable to conclude on nature of four letters (sun2surf)



Elements of incompetency found in PKFZ project

KUALA LUMPUR: There are elements of incompetency in the handling of the Pork Klang Free Zone (PKFZ) project, the Public Accounts Committee (PAC) said.

PAC chairman Datuk Seri Azmi Khalid said there were still more that needed to be investigated before the committee gave a final report to the Government and the Parliament before the Dewan Rakyat sits again in October.

“Generally, based on the PAC findings on the issue, the running of the PKFZ project had been carried out by incompetent people.

“This is not our conclusion as yet, because we calling more people for their statements before we can finish the enquiry in the next few months,” he told reporters after questioning former transport minister Tan Sri Chan Kong Choy during a hearing on the project at the Parliament House on Wednesday.

Azmi said the PAC will call Attorney-General Tan Sri Abdul Gani Patail on August 12.

He added officials and former officials from the Transport Ministry, including a former secretary-general, and the directors of the Port Klang Authority board would also be called.

Azmi said Chan was questioned mostly on the three letters of support he gave to the PKFZ during his tenure as minister. A fourth letter was given to PKFZ by former transport minister Tun Dr Ling Liong Sik earlier.

Dr Ling had told the PAC earlier that the letter he had issued to facilitate the financing of the PKFZ was not tantamount to a government guarantee.

Azmi said Chan was asked how decisions were made particularly in the approval for the issue of bonds to raise funds for the project,

He was also questioned on the significance of the supporting letters which were interpreted as guarantee letters and the rationale for giving them to PKA.

“Chan said they were called supporting letters as agreed by the local and Commonwealth legal experts.

“The PAC cannot make a conclusion on what the letters should be termed as because we are not the body that decides on that matter, “ he added.

It was reported that Chan had signed three letters of support during his tenure as minister which allowed the developer Kuala Dimensi Sdn Bhd to issue RM2.375bil worth of debt papers to raise funds for the PKFZ project.

Azmi said Chan was responsive and cooperative during the enquiry although he told the PAC that he decided to come although he was unwell. Chan left the meeting at 1.30pm.

“I’ve nothing to comment. I’m a retired man,” he said.

Earlier, Chan arrived at Parliament House at 10.55am. He smiled and greeted the media before entering the enquiry room.

He came with several people believed to be a lawyer and assistants carrying a bag of documents.

PAC deputy chairman Dr Tan Seng Giaw said there was lack of transparency and accountability in the project.

“At the moment, we see that the project didn’t adhere to financial procedures.

“Chan tried his best to reply to our question. Some questions he didn’t answer,” he added.by

ZULKIFLI ABD. RAHMAN/the Star

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KFZ: PAC unable to conclude on nature of four letters

KUALA LUMPUR (July 29, 2009) : The Public Accounts Committee (PAC) is unable to conclude that the four letters of support for the Port Klang Free Zone (PKFZ) project issued by two former cabinet ministers are not government guarantees, its chairman Datuk Seri Azmi Khalid said today.

After hearing the testimony of former transport minister Tan Sri Chan Kong Choy for about two hours over the controversial RM4.9 billion project, Azmi said the question of whether the letters are government guarantees or not is subject to legal opinion.

"Although Chan and his predecessor Tun Dr Ling Liong Sik have denied the letters were guarantees, these are only their opinion, Azmi told reporters.

"We have different opinions in the legal aspect and we are not the body to determine. It is up to other bodies to decide."

Chan issued three letters of support, in 2004, 2005 and 2006, which confirmed that the ministry "shall at all times in the future ensure that Port Klang Authority (PKA) is in the position to meet their liabilities in respect of the repayment amount".

The first letter of support was issued on May 28, 2003 by Ling, and he had also told the PAC two weeks ago the letter was not a guarantee and that it had no financial implication on the government.

The four letters of support have been uploaded, together with other 19 appendices to the PricewaterhouseCoopers report on July 15, on the PKFZ information portal (pkfznews.com.my).

Azmi said Chan, who was accompanied by his legal adviser, was responsive and cooperative to the committee and most of the questions posted to the ex-minister were on the letters of support.

"His stand, which had also been explained in Parliament as well as by the Finance Ministry, was that these letters were not a form of guarantee but merely support," he said
"He had obtained legal views from well-known lawyers not only in Malaysia but also at the Commonwealth level that the letters cannot be construed as guarantee.

"(However) the differences in opinions should be looked into by the parties concerned. "

Azmi said the PAC will get more input for its report from Attorney-General Tan Sri Abdul Gani Patail on Aug 12, as well as from high-ranking officers, former board members of PKA, and former Transport Ministry secretary-general Datuk Zaharah Shaari on Aug 13.

He said the committee had also asked Chan to explain the rationale for some decisions made. He declined to disclose details, saying all will be made available in the PAC report.

Giam Say Khoon/sun2surf

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RINGKASAN EKSEKUTIF PKFZ OLEH PwC

PKFZ audit report: Damning disclosure

The Sun
by R. Nadeswaran and Terence Fernandez

The independent audit report on the Port Klang Free Zone (PKFZ) which is expected to be released this week is a damning disclosure of mismanagement, clandestine deals, conflicts of interest and a total disregard for transparency and accountability for a project which was supposed to cost RM1.845 billion but ended up at RM4.6 billion.

Sources told theSun that among the findings of PricewaterhouseCoopers (PWC) are that:
» No proper studies were undertaken before embarking on the project;

» Major decisions on the project were made without prior approval of the Port Klang Authority (PKA) board;

» The PKA chairman and general manager entered into agreements without seeking the advice of the relevant government authorities;

» There was a failure to exercise adequate governance and implement checks and balances in the implementation of the project.

PWC was commissioned by PKA to probe the troubled project a year ago following an expose by theSun in 2007.

The audit report also detailed a series of conflict of interest situations:
» Sementa assemblyman Datuk Abdul Rahman Palil was both the Pulau Lumut Development Co-operative (KPPL) chairman and a PKA director in 2002 when the land for PKFZ was sold by KPPL to PKA;

» Rashid Asari & Co, the legal firm retained by PKA, was also the same firm overseeing the inking of the sales and purchase agreement between KPPL and turnkey contractor Kuala Dimensi Sdn Bhd (KDSB). A point to note is that its senior partner, Datuk Abdul Rashid Asari, was the deputy chief of Umno’s Kapar division, where Tan Sri Onn Ismail is an exco member. Onn was the KPPL chairman and his son-in-law Faizal Abdullah, the then Kapar Umno division youth chief, is also the deputy CEO of Wijaya Baru Global Bhd (WBGB), the firm appointed by KDSB as the main subcontractor;

» Perunding BE Sdn Bhd, appointed by PKA as the independent quantity surveyor for PKFZ, was also a quantity surveyor for KDSB;

» PKA’s board of directors were not advised that the chairman of the PKA at one time was also the deputy chairman of WBGB;

» KDSB directors Omar Latip and Idris Mat Jani are also directors and shareholders of WBGB.

One contributory aspect to the PKFZ mess, the sources added, was that several Finance Ministry regulations on transparent accounting practices were not complied with and that the advice of the attorney-general (A-G) was not sought.

“The agreement between PKA and KDSB was not even vetted by the A-G,” said one source.

The A-G had suggested the government acquire the 404ha for the development of the free zone instead of purchasing it from KDSB at an inflated rate of RM25 per sq foot, although KDSB had purchased the land from KPPL for only RM3 per sq foot.

The source goes on to reveal KDSB’s questionable conduct by overcharging PKA in interests of up to RM300 million, while hidden costs amounting to RM100 million were not revealed to PKA, hence the purchase price of over RM1 billion.

“There was an absence of competitive open tenders with KDSB being awarded the contract to develop the free zone even before the master plan for PKFZ was completed,” said the source, adding that the audit report showed that contracts were entered into merely on estimation of the projected costs.

The report, it is said, also specifies that while the intention of setting up the free zone was to transform Port Klang into a regional trans-shipment hub, cost escalations, poor governance by PKA coupled with weak project management had undermined the viability of PKFZ as well as PKA’s financial obligations where its reserves of RM500 million have been all but wiped out.

“If all these bases were covered, then PKFZ would have been a goldmine,” said another source.

The audit report also paints a troubling picture of officials in the Transport Ministry, noting that so-called letters of support signed by a former minister for the issuance of the bonds could be construed as a guarantee and that PKA would have to meet its financial obligations under such an arrangement.

Instead of complying with the Treasury’s recommendations of issuing government bonds and developing the project in phases, thereby benefitting from lower coupon rates, PKA decided to develop the free zone in one go, having to pay double the rate, estimated at about 8%. Hence, there are concerns the project cost could balloon further.

It is learnt that the report also noted that PKFZ only enjoys an occupancy rate of 16% to 19%.

“However, one is confident that with the new team at the helm the project is salvageable,” said another source, attributing the disclosure of the PKFZ fiasco to efforts by Transport Minster Datuk Seri Ong Tee Keat and the “clean-up crew” of PKA chairman Datuk Lee Hwa Beng and PKFZ general manager Lim Thean Shiang, who took over from Datin Paduka O.C. Phang last year.

It is learnt that Lim briefed government backbenchers on the audit report yesterday.

An MP, when contacted, said the closed-door briefing was meant to keep them abreast of the issues before the audit becomes public.

Ironically, current Backbenchers’ Club chairman, Bintulu MP Datuk Seri Tiong King Sing holds a controlling stake in KDSB. Former Umno treasurer Datuk Abdul Azim Zabidi is also a director of KDSB. Idris Jani was/? still is the Kapar UMNO division treasurer.

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