PKFZ: Big guns to answer to PAC
S Pathmawathy & Kuek Ser Kuang Keng
Jul 1, 09
5:32pm
Former transport ministers Chan Kong Choy and Dr Ling Liong Sik are among those likely to appear before the Public Accounts Committee (PAC) in relation to the Port Klang Free Zone (PKFZ) inquiry.

chor chee hungtiong king singDeputy Finance Minister Chor Chee Hueng (left) and Kuala Dimensi Sdn Bhd chief executive officer Tiong King Sing (right) - also Barisan Nasional Backbenchers chairperson - are also expected to be called up.

According to a source, the PAC had a “long debate” this morning and came up with a list of names of those involved with the project since 2002.

parliament session 031108 azmi khalidPAC chairperson Azmi Khalid, told reporters at the Parliament lobby today that the individuals will have to explain certain matters, in order to connect the dots on how the project cost escalated from RM2 billion to RM12.5 billion.

Azmi said the committee is “digging deeper” into several aspects that may have been overlooked by the Malaysian Anti-Corruption Commission (MACC).

“At the moment we are updating our report and we are calling a lot more people to give an explanation...but we in PAC have no powers to ransack for files, so this we leave to this to MACC,” he said.

Last week, MACC head Ahmad Said Hamdan had appeared before the PAC, but little was discussed as the scandal is still being investigated.

Advice obtained from AG

An audit report released in May had named three top politicians as among those involved in the scandal, with two being cited as having a conflict of interest.

Azmi said the PAC has also outlined several questions for those are to be called up.

“We have been advised by the attorney-general on several issues... sometimes things that may look wrong may not be legally wrong and these are certain things that need legal clarification,” said Azmi.

port klang free zone pkfz audit“We went into detail on the areas that need to be clarified... and in two weeks we expect to have some feedback.”

He did not specify how many people or who would be required to give a statement to the PAC.

“We hoping to talk to all those who were involved in the project, including contractors, civil servants and ministers,” said Azmi.

“We have our suspicions but we cannot base our findings based on suspicion... we have to clarify whether the wrong(doing)s are legally wrong.

"These people are not necessarily at fault... people who have been accused can also clear their name.”

Azmi added that the report is expected to be submitted to Parliament by the next session, as the committee is holding meetings every week.

Port Klang Free Zone (PKFZ) turnkey contractor Kuala Dimensi Sdn Bhd (KDS today filed a libel suit at the Kuala Lumpur High Court over the publication of the PKFZ report on May 28, naming PricewaterhouseCoopers (PwC) and the Port Klang Authority (PKA) as defendants.

In the suit, KDSB claimed that the report contained various allegations which were highly damaging to its reputation and trade.

kuala dimensi kdsb pc on pkfz report 290509 faizal abdullah 02KDSB is alleged to have:

* grossly overcharging PKA for interest in relation to the purchase of the land


* overpricing the value of its work


* overcharging the development of the project


* colluding with one Abdul Rahman Palil and/ or Chor Chee Heung whilst they were in a position of a conflict of interest to secure advantages and benefits


* receiving payments in excess of the true value of the works done by it as the turnkey developer of the project.


At a media conference at his Petaling Jaya office, KDSB group deputy chief executive officer Faizal Abdullah said that PKA and PwCAS had attempted to absolve their liability in the report by wording it in such a way that meant "Don't take my word for it."

He also refused to specify the quantum of damages that they are seeking.

Faizal said that PKA and PwC had deliberately made damaging allegations against KDSB without providing a proper opportunity for KDSB to respond prior to the publication of the report.

He added that the libel suit is a prelude to others that will follow.

The Port Klang Authority (PKA) had decided to defer further payments due to Kuala Dimensi Sdn Bhd on June 30 pending the completion of a full review by a task force set up by the Transport Ministry on June 10.

Payments withheld

PKA was supposed to have paid RM660 million in four instalments to four companies created by KDSB, namely the Special Port Vehicle Bhd, Transhipment Megahub Bhd, Valid Ventures Bhd and Free Zone Capital Bhd.

The PKA chairman said that the Finance ministry had made available the money for the payments but was withheld pending ongoing investigations.

He added that the taskforce had been expected to submit their full recommendations to the PKA and the ministry by August.

lee hwa beng pkfz pc 210509 02PKFZ's development cost may eventually balloon to a staggering RM12.5 billion from an initial cost of less than RM2 billion, according to the report.

Other key issues highlighted in the report include weak project management, cost overruns and conflict of interest.

PKA entered into discussions with KDSB in 2001 to purchase 404 hectares of Pulau Indah land in Port Klang that cost RM1.8 billion (including interest).

They also appointed KDSB as the turnkey contractor to develop a distribution megahub in the area in 2003.

Faizal also challenged the legality of the extension of Lee Hwa Beng as PKA chairman, alleging that Transport Minister Ong Tee Keat had abused his power by extending the tenure without the consent of the Agong.

He cited Section 2 of the Port Authorities Act 1963 which states that, "it shall be lawful for the Yang di-Pertuan Agong to appoint the general manager as the chairman of the authority".

He said that this is a "mockery" of the system and urged the authorities to investigate.

Entire PKFZ episode smells of fraud, corruption
K Siva Kumar Jul 1, 09 7:24pm
I refer to the Malaysiakini report Sue us but no payment for now, PKA tells Kuala Dimensi.

The conditions of contract (CC) in the development agreement for the PKFZ project between the Port Klang Authority (PKA) and developer Kuala Dimensi allow for a maximum permitted variation of 20 % beyond the development cost.

The CC also mentions that the professional fees shall be borne by PKA although no figure is quoted. In normal contracts, the professional fees vary between 7-10%, with the lower rate being the norm for large contracts such as that for the PKFZ.

As been widely reported, the variation costs and professional fees have widely exceeded these figures. For a development cost of RM1 billion, the variation should not exceed RM200 million while the professional fees should be limited to RM100 million if the higher rate of 10% is paid for professional services.

Now, PKA being the sole implementor of the project, had a project management team comprising the general manager, the engineers, the accountants and legal officers and this team would be fully responsible for the execution of the project from conception to completion.

Their functions include ensuring the rules and regulations are complied with as per the CC, evaluation and approval for change in scope of work or variations, compliance to specifications, determining fair pricing with relation to variations, meeting datelines and targets etc.

Here, as reported in the media, the variation and professional fees have grossly exceeded that stipulated in the CC and the project management team should be held responsible and answerable for the huge positive deviation in costs.

All contracts have CC and specifications and these are legally binding. Ensuring compliance should be the cardinal rule of the project management team. It is a requirement that when variations exceed the stipulated rate, ie. 20% in this instance, the entire project has to be reassessed and renegotiated or re-tendered to benefit the client ie, PKA in this case. This seems to be have been overlooked by the project management team.

Again, the limit of the approving officer for the variations is guided and limited depending on the rank of the officer in the project management team concerned as these are clearly spelt out in the financial regulations of PKA.

So the issue of whether the approving officer had exceeded his limit becomes questionable and going by the huge variations in this case, the financial regulations were possibly grossly violated.

It has been reported that the quantity surveyor (QS) appointed by PKA had also been on the payroll of Kuala Dimensi. Why was it so necessary for PKA to appoint such a surveyor when the government has a long register quantity surveyors available?

It is appropriate that a thorough investigation of the performance management team be undertaken on the need to appoint a quantity surveyor who is not neutral. The surveyor by norm should be beneficial to PKA.

It must be emphasised that the QS plays a very vital and crucial role in determining costs of contracts especially when huge variations are involved. In this situation, there has been no check and balance.

The performance management team, being the sole implementor of the PKFZ propject, had a free hand to change the scope of works which invariably led to vast variations and therefore the increase in costs. Rules and regulations had been vigorously violated and ignored.

For the Transport Minister to now say that a committee on good governance headed by the president of Transparency International Malaysia has been formed to review the procedures in PKA is another excuse with the intention to mislead the public.

To the layman, the entire episode of PKFZ and its performance management smells of fraud, corruption and mismanagement so why is no action being instituted as a immediate positive response when all evidences seem to be right in front of our eyes?

Forming committee after committee is just evading the issues at hand and protecting the culprits. What is the MACC doing? They do not even seem to be moving when so much evidence is already on their plate!

Looks like while Malaysia is already known around the world as having a tainted judiciary, now the government's poor project management and governance is giving a negative impression to the world. What a shame.

PKA pays up after gov't, bondholders pressure
Jul 6, 09 4:41pm
The Port Klang Authority (PKA) has reversed an earlier decision to withhold a RM660 million payment due to contractor Kuala Dimensi Sdn Bhd for the Port Klang Free Zone (PKFZ) project.

lee hwa beng pkfz pc 210509 02In a statement issued today, PKA chairperson Lee Hwa Beng (left) said that the about turn was due to instructions from the Treasury and in consideration of appeals by the bondholders trustees.

"PKA has also received instructions from the Treasury that the board should be mindful of the implications that might affect the confidence of investors, local or foreign, in the Malaysian private debt securities market," said Lee.

PKA decided to withhold the payment, due June 30, as its special task force to probe the PKFZ debacle is currently pending, despite legal threats by Kuala Dimensi.

The sum was to be paid to four companies created by Kuala Dimensi - Special Port Vehicle Bhd, Transhipment Megahub Bhd, Valid Ventures Bhd and Free Zone Capital Bhd - in four installments throughout June and July.

On the appeal by the trustees, Lee said the letter dated July 3 described the background of the issuances of private debt securities comprising Bonds and Commercial Papers (CP) as well as Medium Term Notes (MTN) by the four special purpose companies.

"It also spelt out the consequences of non-payment and the possibility of the trustees acting upon the directions of the bondholders and CP/MTN holders to enforce the security charge," he said.

"The (PKA) board has, after taking into consideration the appeal from the trustees and the stand of the Finance Ministry, decided to release the repayment amounts due," he added.

Paid half today

Contacted for clarifications later, Lee said that the board has made RM360 million payment to Kuala Dimensi this morning and has until the end of the month to pay the balance.

ong tee keat pkfz klang visit 060508 12Kuala Dimensi is the turnkey contractor for the troubled PKFZ project and according to the audit report on the project by Pricewaterhouse Coopers (PwC), has already been paid RM1 billion thus far.

The PwC report, commissioned by Transport Minister Ong Tee Keat, has led to revelations implicating two former transport ministers and many other politicians who once sat on the PKA board or control Kuala Dimensi for financial irregularities.

The audit report by PricewaterhouseCoopers on the PKFZ project found that the development cost for the project may balloon up to RM12.5 billion from an initial cost of less than RM2 billion.

Todate, no one has been charged of any wrong doings.

Having read the Position Review of the Port Klang Free Zone (PKFZ) project, I am baffled by the bizarre circumstances the contracts are awarded. It is not only haphazard but also thoroughly unprofessional.

It thoroughly exposes the Port Klang Authority (PKA)'s system of awarding this huge contract through 'negotiations' of prices with pre-determined contractors. It is an utterly nonsensical and an unacceptable practice, unimaginable in a democracy in this modern age. It is a system fraught with opportunities of corruption by officials and profiteering by contractors.

Sadly, like all mega-projects there were no public consultation on this gigantic financial commitment.

How on earth can contracts of billions of ringgit be entered on the basis of estimated amounts, without detailed plans and without competitive bids?

Why was there such a haste in the completion in two years contrary to the JAFZI/TSG Masterplan which recommended multiple phases over eight years? As a result only 77 units of the 512 of the Light Industrial Units are rented out.

We must congratulate the transport minister for his full disclosure and instructing PKA to report this matter for Malaysian Anti-Corruption Commission (MACC) to conduct an investigation. Let the chips fall where they should regardless of however high ranking whosoever is involved.

It is hoped that MACC's investigation would bring those responsible to book and be a lesson to others in the future to demonstrate Malaysia's seriousness in demanding high standards of responsibility among those entrusted with the financial future of the country.

It was most encouraging to learn that the PKA had deferred the payments of RM660 million to the contractors on the recommendation of the Special Task Force of legal eagles, subject to a complete quantitative assessment of the work done.

However, this deferment was short-lived! The Finance Ministry (MOF) ordered that PKA to pay immediately. This is a questionable instruction. In the first place, had MOF done the necessary calculations to satisfy itself that the implementation of this project will not bring catastrophic financial consequences that may burden taxpayers for generations to come.

How could the MOF erred in such a big margin in approving the financing of this colossal project, considering their formidable cumulative expertise in project evaluation and lending?

As Malaysian taxpayers, the public are the real losers in this colossal scam. Doesn't the BN and the prime minister with his 1Malaysia vision owe the people a full explanation?

Parliament must take a more serious view as the lack of financial propriety, probity, integrity reflects on the government of the day. The time is not too late to stop the rot by plugging the massive haemorrhage of our financial resources by discarding corrupt and wasteful projects and injecting some good sense to restore rationality to the management of this country.

PM Najib must take the lead.

Ong in a huff over PKFZ query
S Pathmawathy
Jul 14, 09
7:07pm
Transport Minister Ong Tee Keat has deflected questions on his alleged role in the Port Klang Free Zone (PKFZ) scandal, instead targeting opposition politician Lim Kit Siang for criticism.

“Today we are not going to talk about PKFZ. If I want to talk about it, I'll tell to keep you updated,” he told reporters after chairing MCA's pre-cabinet meeting at party headquarters in Kuala Lumpur today.

The minister, together with his predecessors Dr Ling Liong Sik and Chan Kong Choy, have been summoned to testify before the Public Accounts Committee (PAC) tomorrow over alleged discrepancies in the PKFZ project.

He was asked to respond to Lim's blog-post, which demanded if Ong would “tell all” to PAC on how the project cost had escalated from RM2 billion to RM12.5 billion.

“He (Lim) has been outdated for a long time. He should go back and read his own 180 questions (on this issue, based on 2-3 questions a day since late May),” said Ong before walking off.

“He is his own copycat, copying what he has mentioned before, again and again. If this is the model for a politician, it will be sad for Malaysian parties politics.”

Ling is expected to appear before the parliamentary committee tomorrow at 11am, while Ong is slated to respond on Thursday at 2pm.

PAC chairperson Azmi Khalid had said that a list of names has been compiled, of those involved with the project since 2002.

Since the release of the PricewaterhouseCoopers report on the project in May, Lim has been attacking Ong. He has also accused Ling and Chan of “unlawfully issuing four letters of support resulting in the RM12.5 billion burden to the people”.

The four letters, issued to turnkey developer Kuala Dimensi Sdn Bhd, allowed it to raise RM4 billion in bonds that appeared to be guaranteed by the government.

Lim said the transport ministers had no powers to issue financial guarantees as such assurances could only be issued by the finance minister with the cabinet's approval.

PAC's investigation on the alleged discrepancies is expected to be compiled and distributed to members of parliament in October.

'Increase time for English lessons'

On another matter, Ong addressing the reversal of the policy to teach Science and Mathematics in English.

He said that, although MCA welcomes the change, there is a need to ensure that the teaching of English as a language is reinforced.

“We are mindful that there is a need for continuity and it is our primary concern. We would like to propose that the schools increase the time allotted for English to a level that is comparable or at least with no disparities with mainstream schools,” said Ong.