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.

It had been reported on Oct 31 that a senior Customs Department officer was under investigation for falsifying papers enabling him to smuggle in 15 Toyota Harriers without approved permits.

Sources were quoted as saying the officer had also allegedly forged the signature of former Customs director-general Datuk Seri Abdul Rahman Abdul Hamid to bring in these vehicles.

PKFZ marketing and corporate communications department issued a statement yesterday stating that no such incident had taken place in the zone.

It was understood that the case was referred to the Anti-Corruption Agency for further investigations and that the agency had recovered all 15 vehicles.

PORT Klang Authority, regulator of Northport and Westports, plans to build a multi-purpose berth to help increase the port’s occupancy rate to 65 per cent, said its general manager and chief executive officer (CEO) Lim Thean Shiang.

“The multi-purpose berth, which should be built in the next 1 1/2 to two years, is crucial and is in our national interest.

“Whether Westports will do it or we get someone else – shipping lines or international operators – to do it as a concession, will be looked at soon,” he told Business Times in an interview in Tokyo last week.

Lim, who is in his second month as CEO, said the lack of the berth is one of the main reasons why companies like Technip, Dialog and a lot of Middle East oil and gas companies are not entering the port.

A multi-purpose berth could cost up to RM60 million.

Orient Overseas Container Line Ltd, a Hong Kong shipping line, has enquired if PKA was willing to provide a dedicated berth for which it would consider bringing one million TEUs (twenty-foot equivalent units) first.

“It is important to make Port Klang a gateway to Malaysia – being nearest to Europe-bound shipments. If we don’t make it now, we stand to lose to Vietnam and in the next 20 to 30 years, India as well as Africa,” he said.

Another potential area of growth is in the warehousing of dangerous goods, he said.

PKA is the manager and marketer of the Port Klang Free Zone (PKFZ), which enjoyed 6,000 TEUs last year compared with 4,000 TEUs in 2006.

Lim said the entrance of the port, which is the last area to be developed, is targeted for completion by the end of July.

Dubai-based Oilfields Supply Centre Ltd, which is developing part of PKFZ as an oil and gas hub in the Asean region, is already opening up office and is expected to construct its own centre in December.

Under the Mid-Term Review of the Ninth Malaysia Plan, PKA was to dredge the north channel but Lim said the move would have to be relooked as it will not improve throughput.

“It would be better to expand the width of the south channel by 500m from the current 365m to enable two big vessels to use instead of having to anchor outside the channel,” he added.

Lim, who is on a two-year contract, is also determined that the port authority improve the overall efficiency of Port Klang in terms of services, infrastructure and haulage companies to woo shipping lines which have shied away before.

To achieve this, PKA has submitted several initiatives to the Transport Ministry for approval.

PKA has only two operators, but foreign ports like Yokohama has over 100 and Osaka has 268 operators.

“They have dedicated port operators, which is one of the areas I will explore in opening up Port Klang.”

He has suggested to the Economic Planning Unit that Northport and Westports contribute a portion of their revenue or net profits to enable it to undertake the promotion of the port, as is being done in Yokohama and Osaka in Japan and Hong Kong.

“PKA should be promoting the port (and the country) to the world as we have facilities, rail, road system and expansion plans for the next 15 years.”

Lim, who visited Osaka and Yokohama port cities while accompanying International Trade and Industry Minister Tan Sri Muhyiddin Mohd Yassin on a trade and investment mission last week, said PKFZ can do the same with a free trade zone.

It is still talking to the highway authority on a two-year plan to build another road to Pulau Indah to enable the port to be a supportive feeder for air cargo.

THE Ministry of Finance (MOF) is expected to release the findings later this week of a special audit to determine the actual cost incurred in developing the Port Klang Free Zone (PKFZ) at Pulau Indah, Selangor.

Pricewaterhouse Coopers (PwC) conducted the audit.

“We have written to the MOF. It is supposed to give us the report this week. We are still waiting for it,” said newly-appointed Port Klang Authority (PKA) general manager and chief executive officer Lim Thean Shiang at his first press conference in Port Klang yesterday.

He said he is unsure if PKA will hold a public meeting and release the findings of the audit as it has yet to determine what the terms of reference of the report entails.

But until PwC validates the PKFZ project’s cost against the deliverables, PKA will not make any payment to the turnkey contractor Kuala Dimensi Sdn Bhd, a subsidiary of Wijaya Baru Global Bhd.

Payment to Kuala Dimensi is divided into four tranches, with the second tranche payable at the end of this month.

Lim said so far payment of some RM260 million has been made to Kuala Dimensi, being the first tranche and the initial down-payment of 10 per cent for the project.

It was reported that until March 31 this year, PKA has paid RM238 million for land purchase and RM480 million for development work.

The PKFZ project has drawn criticisms from the public over its ballooning cost overruns, which grew to RM4.6 billion from an initial RM1.3 billion.

“The RM4.6 billion amount is just a ceiling (spending limit). We don’t think the project’s actual cost will surpass that,” said Lim.

Meanwhile, PwC has been appointed by MOF to conduct another audit of the 405ha facility, this time on its “feasibility and how to make it successful”, said Lim.

On the soft loans provided by the government for the PKFZ project, Lim said the government has agreed to give the loans but details of the repayment scheme are still being worked out.

“We are seeking to extend the term of the loan to 20 years and to lower the interest rate to two per cent from the government-approved four per cent,” he added.

The land, located adjacent to the Port Klang Free Zone (PKFZ), was purchased from Pulau Indah Marina Resort Sdn Bhd for RM130 million.

Wijaya Baru Global entered into the deal to acquire the land in March 2005, and full payment was settled in November 2007.

“We acquired a piece of land next to the PKFZ for mixed development involving some housing, commercial and leisure (components),” its deputy chief executive Faizal Abdullah said.

“There are people who are interested to buy large lots (within the area we bought). There are two parties – one in industrial and the other in trading,” Faizal told Business Times in an interview.

“We are still negotiating (to sell) between 10 per cent and 30 per cent of the land,” he said.

Faizal said Wijaya Baru Global has not yet decided whether or not to sell the land, or to which party, but if it does go through the price will be at a premium to what the company paid earlier.

Meanwhile, work on this mixed development job is expected to commence early next year.

“We have put things on the drawing board. We will be finalising these plans in the next three to four months and commence operations early next year,” he added.

Wijaya Baru’s associate Wijaya Baru Sdn Bhd is involved in the construction of the infrastructure and superstructure of PKFZ.

His first task will be to appoint an independent auditor to check PKFZ’s financial standing to determine whether claims of waste and cost overruns are true.

Transport Minister Datuk Ong Tee Keat, who announced Lee’s appointment yesterday, said the independent audit is not meant to be a witch hunt or a probe into the individuals previously handling PKFZ’s accounts.

“There have been a lot of media reports saying the project is scandalous and a white elephant but at the moment these have not been conclusively proven.

“In order to give PKFZ a fresh start we need to carry out this audit,” Ong told reporters in Putrajaya after his ministry’s post-Cabinet meeting.

He said if the Parliamentary Public Accounts Committee wishes to conduct their own probe into PKFZ’s management and finances, the ministry and the Port Klang Authority, which owns the free zone, will cooperate.

He said he expects Lee to announce the auditor by next week.

Lee, an accountant, replaces Datuk Chor Chee Heung, who resigned on March 31. Chor, the Alor Star MP, is now deputy home minister.

Lee told newsmen that heading the RM4.6 billion free zone will be a challenging task. It has come under public scrutiny because the initial cost of the development was to be RM1.3 billion.

Lee said he resigned as chairman of Integrated Logistics Bhd on April 24 as it would present a conflict of interest with his new appointment.

SELANGOR Menteri Besar Tan Sri Abdul Khalid Ibrahim yesterday defended the state’s desire to play a part in making the Port Klang Free Zone (PKFZ) a success.

Khalid (PKR-Bandar Tun Razak) told the Dewan Rakyat that he had visited the free trade zone recently to check on the investments which had gone into it as well as the money spent on land purchase and construction work.

The PKFZ in Pulau Indah, located on a 400ha site and managed by Port Klang Free Zone Sdn Bhd (PKFZSB), has become an issue following the start-up cost of the facility which has ballooned to more than RM4 billion.

The area comes under the Port Klang Authority, which is under the auspices of the Transport Ministry and Minister of Finance Incorporated.

“I feel that the use of such a large amount of money will have a considerable impact on the state’s economy,” said Khalid.

He said the money spent on the construction and development of PKFZ could not be determined on a commercial basis alone.

He added that it was essential to take such a position as the returns on the investment in terms of construction and development could not be recouped for at least another 20 or 30 years.

“We do not want it to continue to be a burden,” he said adding that the Selangor government was willing to play its part in ensuring the PKFZ remained viable and turn it into a successful project.

Khalid explained the state’s position following a heated exchange between Datuk Seri Tiong King Sing (BN-Bintulu) and Lim Kit Siang (DAP-Ipoh Timur) over the PKFZ.

“If it was no good, why was Selangor willing to buy it,” shouted Tiong at Lim.

He called on the former opposition leader to get his facts and understanding on the project right instead of continuously criticising it.

“It is self-financing … if you continuously condemn it … who will want to invest in it,” he said.

Earlier, Lim had demanded full government accountability and responsibility for the RM4.6 billion PKFZ project.

He questioned the project’s viability, history of alleged impropriety in land transactions, illegal issue of Letters of Support, Cabinet bailouts and retrospective ratification of illegal decisions by previous transport ministers.

PORT KLANG: An independent auditor will be appointed to go through the accounts of the Port Klang Free Zone.

Transport Minister Datuk Ong Tee Keat said the fact that the Port Klang Authority was doing so was proof that the government was transparent.

He also gave an assurance that a witch hunt was not being carried out.

Newly appointed PKA chairman Datuk Lee Hwa Beng said Price Waterhouse Coopers was the recommended auditor.

Ong said there was a misconception that the PKFZ was a white elephant.

“Some have even labelled it as an abandoned project while others are questioning its feasibility,” he told reporters after his first visit to the PKFZ here.

He said that the RM4.6 billion soft loan to the project was not a government bailout.

He said a bailout would have to be in the form of a grant which the recipient would not be required to pay back.

As of March 31 this year, he said PKA had bought the site from Kuala Dimensi Sdn Bhd for RM238 million besides paying RM480 million to develop the free zone.

He said the free zone started commercial operations in November 2006 and had so far earned RM11.8 million from operations.

When asked whether the project was viable he said he would leave it for the people to decide.

He said the project comprised 256 hectares of open land development, 512 light industry units and a 500,000 sq ft office block.

Of these, only 13 per cent of the open land had been taken up, 30 of the industry units were occupied while the occupancy rate for the office block was 1.2 per cent.

Ong said there were 47 investors in the PKFZ with investments totalling RM748 million providing 972 jobs.

He said another 46 investors were expected to sign agreements this year, bringing in a further RM614 million in investments and 830 jobs.

The next signing ceremony will be between PKFZ and Halal Development Corporation on Monday.

He said there were projections of the PKFZ creating up to 30,000 jobs and investments of up to RM6 billion by 2015.

On the Parliamentary Public Accounts Committee’s investigations into the free zone, he said PKA and PKFZ were cooperating in the matter.

On the state government’s proposal to take over the project, he said the ministry was open to all suggestions.

“We are still waiting but nothing has been put forward to us,” Ong said.

According to a statement, among the issues discussed were the Port Klang Free Zone (PKFZ), the utilisation of Subang airport and foreign workers in Selangor.

Abdullah had advised the Selangor government to discuss the PKFZ and Subang airport issues with the Transport Ministry, the statement said.

It said the prime minister had also given a positive response on the proposal for a halal hub at the airport.

The state government was reported to be keen to develop the hub.

According to the statement, Abdullah told Khalid that the state government should resolve issues related to water supply with the Economic Planning Unit as well as with the Energy, Water and Communications Ministry.

Minister Datuk Ong Tee Kiat said the investigation is currently ongoing.

“I will announce it very soon. It is not because I’m being pressured but because we should address the issue to uphold transparency,” he told reporters after launching the 14th World Route Development Forum in Kuala Lumpur yesterday.

The probe would reveal how the development cost has risen to RM4.6 billion, how to revive the free zone and also to identify those responsible for cost overruns.