PKFZ questions ï¿½ why Transport Ministry should not cut losses instead of continuing to throw good money after bad to create a RM12.5 billion PKFZ ï¿½white elephantï¿½?

Media Conference Statement by Lim Kit Siang in DAP PJ Hqrs on Monday, 1^st June 2009:

3^rdset of three PKFZ questions for OTK ï¿½ why Transport Ministry should not cut losses instead of continuing to throw good money after bad with another RM5 billion losses to create a RM12.5 billion PKFZ ï¿½white elephantï¿½?

In less than two days, MCA President and Transport Minister, Datuk Seri Ong Tee Keat has forgotten the directive of the Prime Minister, Datuk Seri Najib Razak to ï¿½provide answers on every question raised by any partyï¿½ on the PricewaterhouseCooper (PwC) audit report on the Port Klang Free Zone (PKFZ) and has started to be abusive and refused to answer the many queries raised by the Malaysian public in the past three days.

Ong even refused to answer the six questions I have posed on the RM12.5 billion PKFZ scandal in the past two days, but I will pose another three questions today, as this is what the Prime Minister had promised ï¿½ that he had directed Ong to respond to ï¿½every question raised by any partyï¿½ on the PKFZ.

Ong seems to be ï¿½on the runï¿½ from these questions, like his predecessor as Transport Minister, Datuk Seri Chan Kong Choy in November 2007. Why is this?

At the media conference at Port Klang Authority (PKA) on Friday, after a DAP team had spent five hours leafing through the three-and-a-half-inch high documentary annexure to the PwC audit report on PKFZ, containing 20 appendices, I had asked the government to consider the option to cut losses in PKFZ instead of continuing to incur further losses in view of the PWC warning that the cost of the ill-advised project could skyrocket by another RM5 billion to reach the astronomical total of RM12.453 billion.

This is the first of my three questions on the PKFZ today, why the Transport Ministry should not cut losses instead of continuing to throw good money after bad with another RM5 billion losses to create a RM12.5 billion PKFZ ï¿½white elephantï¿½?

Ong had tried to pour scorn on the proposal that the government cut losses and close down PKFZ as ï¿½a premature statement by politicians who think they can make well-informed financial decisions based on a few hours of looking through the PKFZ reportï¿½, saying that he will let ï¿½the financial consultants and management experts work out a more viable solution based on further in-depth studies before a more structured approach and solution is implementedï¿½.

Ong had said quite a mouthful, but it is no answer at all. It is just meaningless gobbledegook, another example of Ong refining to a fine art his specialty of making a very complex statement because he is incapable of giving a simple answer!

I did not say last Friday that the Transport Ministry should cut losses and liquidate the PKFZ, even allowing the Port Klang Authority (PKA) to go bankrupt if this is one inescapable consequence ï¿½ but that such an option should be seriously considered by the Transport Minister, as such an option stared me in the face when reading the shocking disclosures in the PwC audit report and the three-and-half-inch high annexures in the PKA library.

The Malaysian Trades Union Congress (MTUC) has called on the government to ensure the completion of the PKFZ project despite its present shortcomings.

Its vice-president, A. Balasubramaniam, said it would be a great waste to abandon the project mid-way as billions of ringgit of taxpayersï¿½ money had been poured into it.

ï¿½With better management and adjustments the project can become a future money spinner for the Port Klang Authority,ï¿½ he said.

Balasubramaniam, who is also secretary of the Union of Employees in Port Ancillary Services Suppliers (Unepass), said the PKFZ would also open up opportunities for hundreds of jobs for local workers.

I respect Balasubramiamï¿½s views. Let us have an informed and intelligent national debate whether the government should continue with the PKFZ ï¿½white elephantï¿½ although it has snowballed from a RM1.1 billion scandal in 2002 under Datuk Seri Dr. Ling Liong Sik as Transport Minister, more than quadrupled to RM4.6 billion under Datuk Seri Chan Kong Choy as Transport Minister and now skyrocketed to RM7.453 billion under Ongï¿½s watch, and likely to require another RM5 billion commitment to reach the astronomical total cost of RM12.5 billion!

This is why I am posing this first of my three questions on the PKFZ today, for Ong to explain why the Transport Ministry should not cut losses instead of continuing to throw good money after bad with another RM5 billion losses to create a RM12.5 billion PKFZ ï¿½white elephantï¿½?

Ong cannot pass the buck by saying that the financial consultants and management experts will ï¿½work out a more viable solution based on further in-depth studies before a more structured approach and solution is implementedï¿½ when there should first be a policy decision whether the government should cut losses on PKFZ or continue to burden the present and future generations with a RM12.5 billion PKFZ ï¿½white elephantï¿½.

This option must now be seriously on the agenda of policy makers because it is now revealed by the PwC audit report that PKFZ, based on its own assumptions, will be in cumulative cash flow deficit for the next 42 years, until 2041!

PKFZ's assumptions are obviously too optimistic. Just to give two reasons:

1) Occupancy rates. Current occupancy rate is only 14%. PKFZ assumes that occupancy rates for its Light Industrial Units (LIU) will rise to 20% in 2009, 47% in 2011 and 100% by 2014.

2) Rentai rates. The current actual LIU rental rate is already 20% below forecast. (RM1.20 per square foot per month vs RM1.50 forecast)

The PKFZ project cost now is already RM7.453 billion. If, as it appears, PKA will not meet its own cash flow assumptions, there would be an additional RM5bn cost.

With this scenario, the question that is legitimately asked is: Rather than wasting this further RM5 billion, shouldnï¿½t PKA just be declared insolvent and the PKFZ ï¿½white elephantï¿½ shut down?

DAP MP for PJ Utara, Tony Pua, in his blog yesterday, ï¿½PKFZ: Should it be kept alive?ï¿½ asked a most pertinent question:

ï¿½Should we throw good money after bad? Will there ever be a businessman (or even government) in the world, who will invest in a commercial project which is projecting cumulative cashflow deficit (note: we are not even talking about profits here!) after 33 years (2042)!!ï¿½

Can Malaysians expect a decent, sensible and well-considered response from Ong to my first question today (or No. 7th question) on the PKFZ?

Now to my second question on PKFZ today. The PcW audit report is very polite to say that ï¿½PKA may not have received value for money due to its heavy reliance on KDSB as turnkey developerï¿½.

Lets put aside the period before Ong became Transport Minister, but can he answer what he has done since becoming Transport Minister in the past 15 months to ensure that PKA truly receive value for money from the PKFZ turnkey contractor, Kuala Dimensi Sdn Bhd, giving facts and figures.?

My third question is very simple. Although the DAP team had spent five hours at the PKA Library to leaf through the three-and-a-half-inch high PwC audit report annexure with 20 appendices, we have not been able to study them as thoroughly and satisfactorily as we wanted.

As Ong has directed the PKA Chairman, Datuk Lee Hwa Beng, to submit a copy of the PwC audit report, complete with the 20 appendices, to the MACC and the PAC, is he prepared to direct the PKA Chairman to give to the DAP Parliamentary team a complete set of the PwC report together with the 20 appendices for thorough study?

This might give us more ammunition to grill Ong and the PKA, but if Ong believes in the principles of accountability, transparency, integrity and good governance, he should be prepared to say ï¿½yesï¿½.

In directing Ong ï¿½to answer every question raised by any partyï¿½ on the PKFZ, the Prime Minister is clearly prepared to subject the PKFZ scandal to the widest and tiniest scrutiny.

For this reason, Ong will be invited to a public forum on the RM12.5 billion PKFZ Rip-Off and I hope he will appear at this forum to answer all questions whether by panellists or concerned members of the public on the PKFZ. Tony Pua is organising the forum.

*Lim Kit Siang, DAP Parliamentary leader & MP for Ipoh Timor