The company had to purchase the land from the owner, Kuala Dimensi Sdn Bhd, at the prevailing market prices because it could not obtain it through the Acquisition of Land Act 1960.

The land was issued with a development order and it therefore had economic value. Land acquisition under the Act can only be made for public purposes whereas the company had earmarked it for economic purposes. The land, therefore, could not be acquired under the Act, said PKFZ Sdn Bhd executive chairman Lim Thean Shiang yesterday, clarifying media reports published on Monday.

On Sunday, Transport Minister Datuk Seri Ong Tee Keat released the PKFZ chronology to the media.

Lim said PKFZ Sdn Bhd agreed in 1999 to a price of RM25 per sq ft, a total of RM1.088bil, for the land with its development order and with infrastructure that is now completed.

The total cost of the PKFZ project, including this land cost, office complexes and other construction costs, is RM4.6bil.

The payment terms, somewhat similar to that of private finance initiative or PFI, are to be paid over a 15-year period. The payments are made to bondholders, mainly financial institutions.

Lim said that so far, PKFZ Sdn Bhd had paid RM1.38bil to bondholders under the scheduled payment terms.

That leaves a balance of about RM3.22bil to be paid under the schedule.

PKFZ Sdn Bhd funds this projectthrough a long term soft loan at an interest rate of 4% from the Ministry of Finance.

On the termination of Dubai-based Jebel Ali Free Zone International (Jafza) as the manager of PKFZ last year, Lim said it was over differences of its corporate policies and Malaysia’s tax regulations and national interest.

Jafza proposed tax incentives for 50 years but Malaysia’s tax regulations allow for such incentives if approved by the Ministry of International Trade and Industry, for 10 years only, Lim said.

Jafza’s role at that time was to promote and market PKFZ which was then modelled after the Jebel Ali Free Trade Zone in Dubai. Following the parting of ways, PKFZ Sdn Bhd took over that role for the zone in Port Klang.

Investments had until March totalled RM748 million.

The bulk of the investments are in the project’s open land category, rising from RM720 million to RM916 million.

There was a 27 per cent increase, from RM28 million up to March, to RM58 million during the same period, in investments in light industrial areas.

The number of clients leasing office blocks also increased from six in March to 10. Also showing a marked increase was the number of employees, including foreigners, from 972 to 1,659 people.

Despite the overall increase in proposed investment, occupancy growth and number of employees, the percentage is still low compared with PKFZ’s capacity.

Until last month, only 18 per cent of the open land facility was occupied, the light industrial unit facility only had a 17 per cent occupancy rate while the leased office blocks had an occupancy rate of 19 per cent.

Questioned on this, Transport Minister Datuk Seri Ong Tee Keat said the figures should be viewed in comparison with similar zones such as the Jebel Ali Free Zone (Jafza).

Jafza, Ong said, took six years to fill 40 per cent of its capacity and 10 years to reach full capacity.

PORT KLANG: After nearly 20 months of silence, Port Klang Free Zone yesterday defended the “high” purchase price of land and the termination of the previous managers, Jebel Ali Free Zone (Jafza).

PKFZ executive chairman Lim Thean Shiang said at a press conference here that the price of RM25 per square foot paid to Kuala Dimensi Sdn Bhd for the project’s 404.7 hectares was “justified”.

Kuala Dimensi had reportedly bought the land for RM3 from a fisherman’s cooperative.

“The initial offer was RM28 per square foot but we brought it down to RM25.

“We feel that it is a reasonable price as it includes infrastructure and given the holding period.

“If you look at the land price in the surrounding area, it is about RM21 per square foot,” Lim said.

Transport Minister Datuk Seri Ong Tee Keat, who was at the press conference, said whether the government paid too much for the land would only be known once PriceWaterhouseCooper’s (PWC) cost analysis was done.

PWC was appointed independent auditor for the PKFZ project, including the land purchase, whose pricing became an issue when it became public.

On the termination of Jafza as project managers, Lim said it was due to “different expectations” between the Dubai company and Port Klang Authority.

Jafza, he said, was hired to help promote and market the PKFZ, and to capitalise on its expertise and contacts to bring in investors.

“Sadly, the investors did not come in even after two years and we decided to take over promotion and marketing.”

He said Jafza was also not aware of the government’s policies.

“For example, they wanted to give a tax holiday of 50 years to investors but Malaysia’s policy is only to give 10 years.

“They also wanted full autonomy to run PKFZ but this clashed with the government’s intentions as we are subject to certain procedures, such as going through the Customs Department and other agencies.

“Jafza thought that they could duplicate Jebel Ali (in Dubai) here at PKFZ but that cannot happen so we decided to terminate our contract with them.”

He denied accusations that the project was hamstrung by political interference, excessive red tape and vested interests as alleged by Jafza.

Lim insisted that they parted ways amicably.

Ong said claims of tax evasion attempts, and abuse of power by politicians and officials overseeing the project would also only be answered after PWC submitted its report.

He, however, defended the conduct of his predecessors, Tun Dr Ling Liong Sik and Datuk Seri Chan Kong Choy.

To counter accusations that PKFZ was a white elephant which tax payers had had to bail out, he released figures to show that it had been steadily getting investors since March.

Ong said his ministry was confident that the project would re-coup its RM2.94 billion cost (for land and construction) and that PKFZ could service its RM4.632 billion loan.

After a change of management in May and up to last month, he said, PKFZ had signed on 58 clients who had brought in RM974 million in investments.

Menteri Pengangkutan, Datuk Seri Ong Tee Keat, berkata, pencapaian itu lebih baik berbanding Jebel Ali Free Trade Zon (Jafza) di Dubai yang mampu menarik pelaburan 40 peratus dalam tempoh enam tahun.

“Ini permulaan yang baik kepada PKFZ walaupun baru dibuka dua setengah tahun. Prestasi ini diharap menangkis tohmahan yang menuduh PKFZ sebagai projek gajah putih,” katanya pada sidang media mengumumkan kronologi pembangunan PKFZ di sini, semalam.

Hadir sama, Pengerusi Lembaga Pelabuhan Klang (LKP), Datuk Lee Hwa Beng dan Pengerusi Eksekutif PKFZ, Lim Thean Shian.

Ong berkata, setakat bulan lalu, PKFZ mencatatkan pelaburan RM974 juta dengan 58 pelabur tempatan serta asing dan menyediakan 1,659 peluang pekerjaan.

Katanya, 46 hektar daripada 77 hektar tanah kosong disediakan PKFZ disewa 14 pelanggan, manakala 34 daripada 60 Unit Industri Ringan (LIU) disewa dan 95,033 daripada 25,000 kaki persegi ruang pejabat juga disewa.

Beliau berkata, jumlah pergerakan kargo kontena di PKFZ meningkat 495 peratus dengan 8,015 TEU bulan lalu berbanding hanya 809 TEU pada Mac, manakala bukan kontena meningkat 307 peratus dalam tempoh sama.

Ong berkata, penamatan kontrak Jafza yang bertanggungjawab mengurus dan mempromosikan PKFZ pada Julai tahun lalu tidak menjejaskan usaha menarik pelabur dari Timur Tengah.

Sementara itu, Lim berkata, kontrak Jafza ditamatkan kerana polisi syarikat berpangkalan di Dubai berbeza dengan PKFZ yang tertakluk di bawah Kementerian Pengangkutan selain perlu mematuhi syarat pelaburan yang ditetapkan Kementerian Perdagangan Antarabangsa dan Industri (Miti).

He will serve a two-year term beginning June 23 2008. Lim replaces Datin Paduka O.C. Phang who had tendered her resignation on the same day.

PKA chairman Lee Hwa Beng said unlike Phang, Lim will have executive powers and will be the focal point for matters relating to PKFZ.

Lim said with his appointment, PKFZ will no longer be searching for a suitable person to fill the managing director post left by Noel Gulliver William, who returned to Jafza International in April last year.

Gulliver was seconded by Jafza International to PKFZ in 2006 to establish its mega distribution park. However, Jafza pulled out of a 15-year contract to manage the free zone in July 2007.

“I am reviewing all the activities at PKFZ to make it attractive (for investors) as well as to get all facilities ready,” Lim said, adding that the main access road into PKFZ will be completed by the end of next month.

LIM Thean Shiang is tipped to become the new general manager of Port Klang Authority (PKA), replacing Datin Paduka O.C. Phang who has not been offered an extension to her contract, which runs out in June.

Lim is slated to take over the helm of PKA, the regulator of Northport and Westports, from June 6 2008.

Little is known of the man, except that he is currently a board member of PKA.

“It is understood that the Transport Minister is positioning Lim as general manager designate for a year or so to assist in realigning the management and directions of PKA,” Century Logistics Holdings Bhd deputy managing director Dr Mohamed Amin Kassim told Business Times.

Another industry source said PKA assistant general manager (regulatory) Captain David Rajan Padman is emerging as a favourite to succeed Lim, given his experience at PKA.

“Captain David is considered most promising to succeed Lim, as the former is most qualified and capable,” said the source, who declined to be named.

Lim’s appointment comes on the heels of former Subang Jaya assemblyman Datuk Lee Hwa Beng’s appointment as chairman of PKA from April 1 2008 by the Yang Di-Pertuan Agong.

Phang has been general manager of PKA since September 1997.

She was also the first vice-president of the International Association of Ports and Harbors (IAPH) between 2005 and 2007, the first Malaysian and first woman to attain such a position in the association.

Her election as first vice-president paved the way for the first Malaysian to be elected as IAPH president in mid-2007.

She was also a past chairman of the Asean Ports Association at the regional level and the Asean Ports Association, Malaysian chapter.

Phang was appointed chairman of Port Klang Free Zone (PKFZ) by the Minister of Transport last year, shortly after Jebel Ali Free Zone, a Dubai-based free zone operator, withdrew from the management concession for the 405ha facility in Pulau Indah, Selangor.

The project is the biggest investment undertaken by PKA since it completed the privatization of all its port services in the 1990s.

However, it has drawn criticism from the public over its ballooning development cost overruns, which amounted to RM4.6 billion from an initial cost of RM1.3 billion.

PORT Klang Free Zone Sdn Bhd (PKFZSB), the manager and marketer of the Port Klang Free Zone (PKFZ) in Pulau Indah, Selangor, said it is still continuing its search for a managing director vacated by Noel Gulliver William.

The post has been vacant for 10 months, ever since Gulliver’s return to Dubai in April last year.

Gulliver was seconded by Jafza International to PKFZ in 2006 to establish its mega distribution park. However, Jafza pulled out of a 15-year contract to manage the free zone in July 2007.

PKFZSB director Tengku Datuk Zainal Rashid, who participates in the selection process, said the company had recently posted an advertisement for the post after it failed to identify any suitable candidates the first time.

“I have not seen any of the applicants yet, but we are looking for a new managing director,” he told Business Times in an interview.

Tengku Zainal said the post does not necessarily have to be filled by a Malaysian, as long as the candidate “has got the right experience and qualification”.

“We have not established a timeframe, although we would like to fill the post as soon as possible. That’s because in any organisational structure, you need a managing director,” he added.

In the meantime, PKFZSB chairman Datin Paduka O. C. Phang will continue to head the company until the post is filled.

On the very first day of the current 45-day budget parliamentary session from August 27 to December 19, 2007, I had highlighted the scandal of the RM4.6 billion Port Klang Free Zone bailout in an emergency motion to adjourn the House under Standing Order 18(1) for a debate on an issue of urgent, definite public importance as there had been no proper accountability to Parliament whether by the Transport Minister or Finance Minister despite the various exposes in the public domain, such as

• Hanky-panky in the purchase of the 1,000 acres for the PKFZ, despite objections by the Finance Ministry and the Attorney-General’s Chambers.

• Mismanagement resulting in the pull-out of Jebel Ali Free Trade Zone (Jafza) from the project, which could become a “white elephant”.
• Questionable cost-overruns of the PKFZ, ballooning to RM4.63 billion from the original estimate of RM1.1 billion.
• The unlawful and unauthorized Transport Ministry issue of four “letters of support” which were used by the turnkey contractor – Kuala Dimensi Sdn Bhd (KDSB) – to raise RM4.6 billion bonds and get an AAA rating from the Malaysia Rating Corporation Bhd. for the PKFZ project.
• Why the government and the 26 million Malaysians must now bear responsibility for a RM4.6 billion PKFZ bailout despite earlier assurances that the PKFZ project would be feasible, self-financing and would not involve a single ringgit of public funds.
• Why the Prime Minister is breaching his undertaking of no bailout of mega-billion-ringgit “white elephant” projects — with the PKFZ bailout set to be the biggest financial scandal at the beginning of any Prime Minister.

However, my emergency motion on the first day of the current meeting of Parliament was rejected by the Speaker, Tan Sri Ramli Ngah as not urgent.

Since then, for the past three months, I had repeatedly sought to demand government accountability for the RM4.6 billion PKFZ bailout scandal but to no avail, as I came up against the wall of prevarication and evasion, with the ball kicked from one Ministry to another, namely the Transport Ministry, the Finance Ministry and the Prime Minister’s Department. Nobody wanted wanting to give a proper answer or accept accountability, with everyone either falsely claiming that it had already been answered or would be answered by another Ministry.

I had raised the RM4.6 billion PKFZ bailout scandal during the policy and committee stages of the debate on the 2007 Supplementary Estimates and the 2008 Budget but Parliament and the nation have still to get satisfactory answers.

When I raised the issue during the 2008 Budget committee stage debate on the Prime Minister’s Department, the Minister concerned, Datuk Seri Nazri Aziz said questions on the PKFZ scandal should rightly be answered by the Transport Minister.

When I again raised the issue three Mondays ago during the committee stage of the debate on the Finance Ministry, the Parliamentary Secretary to the Finance Ministry, Datuk Seri Dr. Hilmi Yahya said he would answer by way of written reply. I asked for the written answer to be given within a week. Hilmi was non-committal. More than two weeks have passed and I am still waiting. What has Hilmi got to hide about the RM4.6 billion PKFZ scandal?

It was precisely because of this record and background of prevarication and evasion of accountability that I strongly protested last week at a “government-on-the-run” when the Transport Minister, Datuk Seri Chan Kong Choy left for London to attend the 25th International Maritime Organisation (IMO) Assembly, which would mean another escape-act by the Minister from parliamentary responsibility and accountability over the RM4.6 billion PKFZ bailout scandal as the Transport Ministry was scheduled to be debated last Thursday.

At least the protest achieved the effect of ensuring that the Transport Ministry committee stage debate is put off from last week till today to enable the Minister to be back from London to come to Parliament to assume responsibility and accountability for his Ministerial portfolios.

I hope this will be the end of prevarications and evasions and a government on-the-run on the RM4.6 billion PKFZ bailout scandal.

I had in fact simplified the many questions on the RM4.6 billion PKFZ scandal which cry out for answer to five major ones, viz:

1. Was it true that when the Port Klang Authority and the Transport Ministry insisted on buying the 1,000 acres of Pulau Indah land for PKFZ at RM25 psf on a “willing buyer, willing seller” basis, in the face of strong objection by the Attorney-General’s Chambers and the Treasury which had recommended that the land be acquired at RM10 psf, the Cabinet had given its approval subject to two conditions: (i) categorical assurance by the Transport Minister that the PKFZ proposal was feasible and self-financing and would not require any public funding; and (ii) that every RM100 million variation in the development costs of PKFZ would require prior Cabinet approval.

2. In the event, the first condition was breached when the PKFZ project ballooned from RM1.1 billion to RM4.6 billion requiring government intervention and bailout while the second condition was breached with the original PKFZ development costs of RM400 million ballooning to RM2.8 billion without any prior Cabinet approval ever been sought for every RM100 million increase in development costs.

3. The Transport Minister had unlawfully issued four Letters of Support to Kuala Dimensi Sdn. Bhd (KDSB), the PKFZ turnkey contractor — to raise RM4 billion bonds, which were regarded as government guarantees by the market. The Transport Minister had no such powers to issue financial guarantees committing the government, as it could only be issued by the Finance Minister and only after Cabinet approval. The first Letter of Support was issued by the former Transport Minister, Tun Dr. Ling Liong Sik on May 28, 2003, which was Liong Sik’s last day as Transport Minister while the other three were issued by Kong Choy.

4. Whether it wasn’t true that in recognition that the four unlawful “Letters of Support” of the Transport Minister had nonetheless given implicit government guarantee to the market that the Cabinet had in mid-year to give retrospective approval for the unlawful and unauthorized four Letters of Support by the Transport Ministers in the past four years creating RM4.6 billion liability for the government in the bailout of PKFZ.

5. Why no action had been taken against the Transport Minister, both Liong Sik and Kong Choy, as well as the government officials responsible for the unlawful issue of the four “Letters of Support”. Kong Choy had said that he did not know that he had no power as Transport Minister to issue such Letters of Support. Was this acceptable explanation for getting the government embroiled in the RM4.6 billion PKFZ scandal?

I have raised these questions of accountability, integrity and good governance many times in the current meeting of Parliament, but I have not been able to get any clear-cut answers.

Why is it impossible for the Transport Minister to give a simple “yes or no” answer to these questions if he has nothing to hide in the RM4.6 billion PKFZ scandal?

The time has come not only for the Transport Minister but also for the Prime Minister to end the conspiracy of denial-cum-silence about the RM4.6 billion PKFZ bailout as the largest financial scandal at the start of any Prime Minister in Malaysia — even bigger than the RM2.5 billion Bumiputra Malaysia Finance (BMF) scandal which led off the Mahathir premiership more than two decades ago.

If the Mahathir premiership could appoint a three-man Ahmad Nordin public inquiry into the RM2.5 billion BMF scandal, why is Datuk Seri Abdullah Ahmad Badawi not prepared to “walk the talk” of his pledge to lead a clean, incorruptible, accountable, transparent, trustworthy and responsible administration by establishing a public inquiry into the RM4.6 billion PKFZ scandal?

There should be a public inquiry to find out who had been the beneficiaries of the RM4.6 billion PKFZ scandal – whether personalities from MCA, Umno as well as the BN MP for Bintulu, Datuk Seri Tiong King Sing.

The issue of four “letters of support” by the Transport Minister for the RM3.8 billion bonds issued by KDSB, which were regarded as government guarantees, resulting in 3A ratings by Malaysia Rating Corporation Berhad (MARC) remains unanswered.

This is unlawful and gross abuse of power as only the Cabinet can authorize such government guarantee for bonds and which can only be issued by the Finance Ministry. The four letters of support had never been authorized by the Cabinet.

The first letter of support was issued by the former Transport Minister, Datuk Seri Ling Liong Sik and the three others by Chan Kong Choy.

I had challenge any Cabinet Minister to deny that it was precisely because the government accepts that the Transport Minister’s “letters of support” were tantamount to government guarantees for KDSB’s RM4.6 billion bonds that the the Cabinet has recently given retrospective approval to the unauthorized government guarantees to the KDSB bonds based on the four letters of support of the Transport Minister.

As a result, the Cabinet also approved the RM4.6 billion bailout of the PKFZ scandal.

The even more question is why no punitive action had been taken against the Transport Minister concerned who had unlawfully issued letters of support for KDSB’s RM4.6 billion bonds, which have forced the Cabinet to give them retrospective approval and the RM4.6 billion PKFZ bailout.

The first letter of support for the first issue of RM1.31 billion bonds by KDSB was issued by the former Transport Minister, Datuk Seri Ling Liong Sik on May 28, 2003 which was his last day as Transport Minister before going on a month’s leave and resignation.

Was the signing of the unlawful letter of support fror KDSB’s first issue of RM1.31 billion bonds Ling’s last act as Transport Minister? This raises grave questions about propriety and integrity of Ling in his last day in office as Transport Minister which must be thoroughly investigated.

Why has Liong Sik not been investigated and charged in court for gross abuse of power in his last day as Transport Minister, starting the process resulting in the RM4.6 billion PKFZ bailout scandal?

The same question applies to Kong Choy. Is it acceptable that he did not know as Transport Minister that he did not have the power to issue such Letters of Support, which could only be made by the Finance Minister and after approval by Cabinet?

There is no better answer than the one given by one poster on my blog, Jeffrey, as follows:

“No, it is not acceptable. A Minister cannot plead ignorance regarding what he is authorised or not authorised to do as an excuse — and yet claim he is not half past six.

“It is ironical that if a bank officer exceeds his authority in a loan approval by a few hundred thousand Ringgit he can be prosecuted under Banking and Financial Institutional Act for jeopardizing public funds but where a minister exceeded his authority committing public funds measured in terms of billions of Ringgit he is not only not held accountable but the government ratified his unauthorized acts.”

There is another reason why it is completely unacceptable for Kong Choy to plead ignorance, for he was the Deputy Finance Minister for close to four years from Dec. 1999 to June 2003, before he was elevated as Transport Minister.

I am moving a RM10 cut motion not only because of the RM4.6 billion PKFZ scandal, Chan’s role as Transport Minister but also for the long record of prevarication and evasion of accountability and responsibility.

[Speech on the RM10 salary-cut motion for the Transport Minister, Chan Kong Choy, over the RM4.6 billion Port Klang Free Zone (PKFZ) bailout scandal in the Dewan Rakyat on Tuesday, 27th November 2007]

A MEETING between the Public Accounts Committee and Port Klang Authority (PKA) officials has raised more questions than answers.

PAC chairman Datuk Shahrir Abdul Samad said the committee was “unsatisfied” with how the meeting went.

“The problem with the Port Klang Free Zone is far bigger than what the papers have reported,” he said yesterday.

“Far too many questions were left unanswered.”

When asked whether he was satisfied with the discussion, Shahrir said: “Look at us (the committee members). You can see from our body language that we are not.”

The two-hour meeting was meant to allow the PAC to question PKA officials on the RM4.6 billion Port Klang Free Zone (PKFZ) project.

The project first raised eyebrows when PKA bought 405ha in Pulau Indah in 2002 for RM1.088 billion, or RM25 per sq ft, from Kuala Dimensi Sdn Bhd. The land purchase was followed by RM1.845 billion in costs for the development of the free trade zone.

In July, port operator Jebel Ali Free Zone Authority (Jafza) withdrew from a contract to manage PKFZ.

Last month, the Transport Ministry said the government had agreed to extend a loan of an unspecified amount to the heavily-indebted PKA to help cover the total cost which had ballooned to RM4.6 billion, including interest and other charges.

Shahrir referred to the auditor-general’s report on PKA for the 2005 financial year, showing PKA’s liquid assets to be inadequate in financing its capital obligations.

“According to the report, PKA’s liquidity as of December 2005 was RM231.75 million, while the tax surplus was RM26.63 million, so PKA would need additional financing to meet its capital obligations of RM4.11 billion.”

Those present at the meeting included PKA general manager Datin Paduka O.C. Phang and Transport Ministry secretary-general Datuk Zakaria Bahari.

Timbalan Menteri Kewangan, Datuk Dr Awang Adek Hussin, berkata kerajaan bagaimanapun masih belum memutuskan butiran syarat dan terma skim pinjaman itu.

Katanya, secara asasnya kadar faedah pinjaman itu adalah empat peratus dengan tempoh pembayaran balik tujuh tahun tetapi beberapa butiran untuk memuktamadkan skim pinjaman itu sedang diperhalusi.

“Ini bukannya bail-out (menyelamat), ini pinjaman yang diberikan dengan faedah,” katanya menggulung Rang Undang-Undang Perbekalan Tambahan (2007), semalam.

Awang Adek berkata, pinjaman itu diputuskan kerana PKFZ adalah projek nasional yang dibangunkan di atas kawasan 1,000 ekar (400 hektar) membabitkan penyediaan infrastruktur untuk membantu pertumbuhan kargo di Pelabuhan Klang, Selangor, membabitkan kos keseluruhan RM4.6 bilion.

Beliau berkata, pada peringkat awal perancangan, PKFZ dijangka mampu menjana kewangan sendiri apabila dibangunkan dalam dua fasa iaitu 500 ekar (200 hektar) dalam fasa pertama dan 500 ekar lagi dalam fasa kedua.

Bagaimanapun, atas nasihat pakar iaitu Jebel Ali Free Zone Authority (JAFZA), syarikat yang mempunyai reputasi cemerlang dalam bidang pengendalian zon bebas, Kabinet menerima cadangan supaya PKFZ dibangunkan sekali gus membabitkan kawasan 1,000 ekar bagi mengelakkan masalah keselamatan dan memudahkan pergerakan barang.

“Berikutan tindakan itu, dana yang dijangka diperoleh daripada fasa pertama dan digunakan dalam pembangunan fasa kedua tidak terjadi, sekali gus menjadikan projek itu tidak lagi berkeupayaan menjana wang sendiri,” katanya.