Call for a public inquiry into the RM4.6 billion Port Klang Free Zone  scandal in the model of the Ahmad Nordin public inquiry into the RM2.5 billion Bumiputra Malaysia Finance scandal two decades ago

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2008 Budget Speech (2)  
by Lim Kit Siang  
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(Dewan Rakyat, Monday): The Prime Minister-cum-Finance Minister, Datuk Seri Abdullah Ahmad Badawi began his 2008 budget speech reminding Malaysians of its significance and historic circumstances � on the occasion of the nation�s 50^th Merdeka anniversary celebrations and the first Budget as the nation enters the second 50-year phase as an independent state.

To me, the 2008 budget was even more significant � as it was an acid  test as to whether the Prime Minister was finally going to �walk the talk� of his National Integrity Plan and keep his pledge to Malaysians that he would lead a clean, incorruptible, accountable, transparent, trustworthy  and responsible administration and that he would not countenance  the culture of impunity among his Ministers and public officials � or whether he would  break his final pledge that he would not approve mega-billion-ringgit bailout of �white-elephant� projects  (as all his other pledges of good governance have already been broken).

I was very disappointed by Abdullah�s 2008 Budget, for he had failed this acid test.

There was not a word about the RM4.6 billion Port Klang Free Zone (PKFZ) bailout scandal � 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.

Tun Dr. Mahathir had said at the time that the RM2.5 billion BMF scandal was a �heinous crime without criminals�. Are we having another bigger �heinous crime without criminals� in the form of the RM4.6 billion PKFZ scandal under the Abdullah administration?

Abdullah had failed as both Prime Minister and Finance Minister in not giving a full and satisfactory accounting of  the government bailout of the RM4.6 billion Port Klang Free Zone (PKFZ) scandal to set an example of government accountability and financial integrity to all Ministers, Deputy Ministers and Parliamentary Secretaries.

This is because in  the past two weeks, the Transport Minister, Datuk Chan Kong Choy (before he suddenly went on medical leave, sparking political speculation whether he is  resigning from the Cabinet), the Deputy Finance Minister, Datuk Dr. Awang Adek bin Husin and the Parliamentary Secretary to the Finance Ministry, Datuk Seri Dr. Helmi bin Yahaya had been misleading Parliament and the nation about the true nature and character of the RM4.6 billion PKFZ bailout scandal.

In the 2007 supplementary estimates totaling  RM11.9 billion approved by Parliament last week , the Finance Ministry asked for RM260 million for Port Klang Authority without giving any explanation as to its true purpose.

It was from my exchange with Helmi during the winding-up of the debate at the committee stage that it emerged that the RM260 million sum was the first amount of the RM4.6 billion government bailout for PKFZ, as beginning this year, the first annual payment of RM510 million for the RM4.6 billion bailout for the bonds raised by Kuala Dimensi Sdn Bhd � the vendor of the controversial sale of 1,000 acres of land to PKFZ and its turnkey contractor - has to be made.

It was also only after I had made persistent demand, declaring that this was information that Parliament and Malaysian taxpayers have right to access, that Helmi read out the schedule of repayments in the RM4.6 billion PKFZ bailout, viz:

2007 - RM510 million
2008 - RM660 million
2009 - RM660 million
2010 - RM772 million
2011 - RM487 million
2012 - RM733 million
2013 - RM170 million
2014 - RM170 million
2015 - RM170 million
2016 - RM170 million
2017 - RM179 million
Total - RM4,681 million

However, Chan, Awang and Helmi were all part of a conspiracy to mislead Parliament and nation in denying that there was a RM4.6 billion bailout scandal � Chan in his reply to my question on August 28, Awang in his reply in Parliament on 4^th September and Helmi in his reply on 5^th September 2007.

In failing to give a full accounting to justify the RM4.6 billion PKFZ bailout scandal in his budget speech on Friday, Abdullah as Prime Minister and Finance Minister must bear full responsibility for the Cabinet conspiracy to mislead Parliament and the nation on the biggest financial scandal to start off any premiership in the country.

Up to now, there have been no proper accountability on the various issues on the  basis of which I had sought, though unsuccessfully, to adjourn the House to  have an urgent debate on the first day of the current parliamentary meeting on  August 27 on the PKFZ scandal, viz:

� (i) 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;

(ii) mismanagement resulting in the pull-out of Jebel Ali Free Trade Zone (Jafza) from the project, which could become a �white elephant�; and

(iii) 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 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 if there is 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 � set to be the biggest financial scandal at the beginning of any Prime Minister.

I regret that Awang in his reply during the winding-up of the 2007 Supplementary Estimates policy debate last Tuesday was most guilty of half-truths and even falsehoods about the RM4.6 billion PKFZ bailout scandal.

I call for a public inquiry into the RM4.6 billion Port Klang Free Zone  scandal in the model of the Ahmad Nordin public inquiry into the RM2.5 billion Bumiputra Malaysia Finance scandal two decades ago, and among the issues which  the public inquiry should focus on are:

(1) Port Klang Authority (PKA) purchase of  RM1,000 acres of Pulau Indah land from Kuala Dimensi Sdn. Bhd.  for PKFZ at RM25 psf when Treasury and Attorney-General�s Chambers have proposed acquisition under Land Acquisition Act at RM10 psf

This raises the question whether PKA and the Transport Ministry were acting in the best interests of the country or in the interests of Kuala Dimensi Sdn. Bhd (KDSB) and  a select group of individuals instead.

There had been a long and intense battle over the price that should be paid to KDSB for the 1,000 acres of land, which the company had acquired for RM95 million in 1999, or about RM3 psf.

Ranged on one side were the Treasury and the Attorney-General�s Chambers who wanted the land to be acquired �for public purpose� under the Land Acquisition Act at RM10 psf while the Transport Ministry and PKA wanted to buy the land at RM25 psf on a �willing seller, willing buyer� basis.  I understand that the Transport Ministry and PKA had made this �willing seller, willing buyer�  commitment with  KDSB. as far back as 2,000, totally without authority of the Treasury or the Cabinet!

The Attorney-General�s Chambers in particular had objected to the �willing seller, willing buyer� pitch by the Transport Ministry and PKA, as apart from the much lower price valuation under the Land Acquisition Act,  the 1,000-acre land were not free from encumbrances with several charges and caveats, which would tantamount to a �misrepresentation� or even �fraudulent misrepresentation�.

However,  the PKA and the Transport Ministry finally had their way to conclude the �willing-seller, willing-buyer� land deal at RM25 psf after the then Transport Minister, Datuk Seri Dr. Ling Liong Sik gave  the Cabinet the categorical assurance that the PKFZ project was feasible, self-financing and would not require any government funding.

Why should the taxpayers be now responsible for the RM4.6 billion PKFZ bailout after the PKA and the then Transport Minister had rejected the proposal of the Treasury and the Attorney-General�s Chambers that the land be acquired under the Land Acquisition Act at RM10 psf.   If the Treasury and the Attorney-General�s Chambers advice had been accepted, and  some RM370 million public funds  used to acquire the 1,000 acres of Pulau Indah land for the PKFZ, the country would not be faced with the RM4.6 billion PKFZ bailout scandal today.

With the land price shooting up some 19 times to RM1.8 billion from what KDSB paid (RM95 million in 1999), who were the beneficiaries at such  inflated price?   This should be the special objective of the public inquiry into the PKFZ scandal � whether  personalities from MCA, Umno as well as the BN MP for Bintulu, Datuk Seri  Tiong King Sing, who is kingpin  of KDSB and who had even  threatened to institute legal proceedings over government failure to allow PKA to honour its agreement to pay RM25 psf for the 1,000 acre Pulau Indah land.

(2) The ballooning of the PKFZ cost from RM1.1 billion to RM4.6 billion and its development costs from RM400 million to RM2.8 billion.

When PKFZ proposal was first mooted as a feasible and self-financing project, the development costs mentioned was RM400 million. But the development costs  have ballooned to RM2.8 billion, although the Transport Ministry and PKA have tried to camouflage such an escalation by the  sleight of hand by  taking out  RM1 billion to be categorized separately as �interests, professional fees and variation order� which were previously incorporated as part of development costs, as in the previous Auditor-General�s report.

The RM2.4 billion excess in development costs from the RM400 million originally approved by the Cabinet were unlawful as they were made without approval and authority from the Cabinet and the Finance Ministry.

There is a pathetic attempt to blame Jebel Ali Free Zone Authority (Jafza) for the escalation of the development costs from RM400 million to RM2.8 billion for suggesting that both phases be developed at the same time � which not only lacks credibility but reflects very poorly on the professionalism and competence of the PKA officials.

(3) The four �letters of support� by Transport Minister  for the RM4.6 billion bonds issued by KDSB through special purpose vehicles

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).

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.

It is regrettable that Awang had misled the House on the �Letters of Support� issued by the Transport Minister.

Awang said: �Saya baca sendiri letter of support ini, sebenarnya dia bukan merupakan gerenti hanya sokongan oleh seorang Menteri bahawa projek ini adalah projek kepentingan awam dan sebagai Kementerian Pengangkutan dia akan berusaha untuk memastikan syarikat dapat bayar balik.� Or as he earlier said:  �Letter of support ini hanya menyatakan kepada rating agensi bahawa ini adalah projek kerajaan dan Kementerian Pengangkutan akan memastikan yang bayaran loan ini akan dapat dibuat sebaik mana yang boleh, to be best of the ability dengan izin.�

What Awang said is untrue. The �letter of support� of the Transport Minister for the KDSB bonds provides implicit government guarantee to investors although the Minister concerned has no power to do so, as it reads:

��We shall at all times in the future ensure that PKA (Port Klang Authority) is in the position to meet (and do meet on a full and timely basis) their liabilities in respect of the Repayment Amount for so long as an amount in respect of the  Repayment Amount remains outstanding��

The implicit guarantee is clear from its contents and there is no need to argue over it, leaving  the question why Awang tried to mislead the House by giving a completely wrong picture.

I 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 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.

Was there an independent audit as to how the RM4.6 billion PKFZ scandal could have occurred, resulting in the Malaysian taxpayers having to bear its costs  while a handful of cronies would have waxed rich with a windfall of millions, tens and hundreds of millions of ringgit?

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.

Recently, Ling had been having selective memory about his role in the PKFZ scandal which was initiated when he helmed the Transport Ministry.

How can Ling hide his head under the sand and claim that the PKFZ plan to �emulate Dubai�s Jebel Ali Free Zone was a good strategic idea� when it has become a national calamity, requiring  a RM4.6 billion bail-out?

Ling said the intention of PKFZ was to copy Jebel Ali Free Zone, which had 4,500 factories supplying to the whole of the Gulf, by combining port trade with Jebel Ali and bring at least half the factories to PKFZ to supply to Asean.

After spawning the monster of a RM4.6 billion mega-financial scandal, what has PKFZ to show in terms of achieving the target of attracting 2,250 factories from Jebel Ali Free Zone to Port Klang? Has it achieved 10, five or even one per cent of this target so far?

What is worse, the Jebel Ali Free Zone (Jafza) which originally had a 15-year contract to be management consultants of PKFZ to tap into Jafza�s expertise in this field had been driven out of the country because of hanky-panky in the administration and management of PKFZ.

It is intriguing why Ling had brought out the name of the former Prime Minister, Tun Dr. Mahathir Mohamad, specifically saying that the Cabinet meeting chaired by Mahathir had approved his (Ling) recommendation �to acquire the land� for the PKFZ project.

Is Ling trying to pass the buck by implying that it was Mahathir who must bear full and final responsibility for the RM4.6 billion PKFZ scandal?

However, Ling has a very selective memory about the Cabinet decision on the acquisition of the 1,000 acres of land for PKFZ, claiming that he could not remember the actual price paid for the land. Is this credible?  Would he have also faulty memory about the letter of support which he unlawfully extended for KDSB bonds on his last day in office as Transport Minister on May 28, 2003?

It was most improper and unwarranted for the Minister in the Prime Minister�s Department, Datuk Seri Nazri Aziz to tell  Datuk Shahrir Abdul Samad to �shut up� about the Public Accounts Committee (PAC) investigation into the RM4.6 billion Port Klang Free Zone (PKFZ) bailout scandal especially when Nazri is an interested party, being a member of the Cabinet which decided on the bailout.

On Thursday, the PAC had a two-hour meeting on the PKFZ bailout scandal, with a briefing by the Port Klang Authority (PKA) general manager Datin Paduka O.C. Phang, who was accompanied by  an accountant and administrative staff and Transport Ministry officials, including its secretary-general Datuk Zakaria Bahari and representatives from the finance, planning and port divisions.

After the two-hour meeting, Shahrir as PAC Chairman told the press that the PAC was �unsatisfied� with how the meeting went.

Shahrir said: �The problem with the Port Klang Free Zone is far bigger than what the papers have reported.  Far too many questions were left unanswered.�

It was over Shahrir�s comments that Nazri blew his top yesterday, telling Sin Chew Daily that Shahrir should �shut up� on the ground that it was wrong to talk to the press before the end of the PAC investigation.

This was not the first time that Shahrir as PAC Chairman had made comments about ongoing PAC investigations in the past three years but Nazri had never voiced any objections in the past.

Why is Nazri so sensitive and high-strung now over the PAC investigation into the RM4.6 billion bailout scandal?  Is it because Nazri has a vested interest, being an interested party as a Minister of the Cabinet which had approved the RM4.6 billion PKFZ bailout?

It is Nazri who should �shut up� about PAC investigation into the PKFZ scandal and not interfere with the independence of the PAC to carry out its tasks mandated by Parliament as the PAC is answerable to Parliament and not to Nazri, though he is Minister in charge of parliamentary affairs for the Cabinet.

(10/9/2007)