PwC audit reveals mismanagement, clandestine deals, conflict of interest
By S JAYASANKARAN
IN KUALA LUMPUR
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THE cost of Malaysia's Port Klang Free Zone (PKFZ) project could balloon to more than RM12 billion (S$5 billion) by 2012 if occupancy does not rise or debt is not re-financed, according to sources familiar with an audit commissioned by the Transport Ministry.
This would make the PKFZ debacle the second-largest financial scandal ever in Malaysia - dwarfed only by the RM18 billion Perwaja Steel fiasco in the 1990s.
The findings of an independent audit by PriceWaterhouseCoopers (PwC) could be released by Transport Minister Ong Tee Kiat as early as today. Mr Ong, who was appointed minister in March last year, has promised to reveal all in the interests of transparency.
The Sun newspaper, citing sources, said yesterday that the PwC report is 'a damning disclosure of mismanagement, clandestine deals, conflicts of interest and total disregard for transparency and accountability'.
It would have to be. Originally budgeted at RM1.845 billion, the project's cost has - by Mr Ong's own estimate - escalated to RM4.6 billion. But The Edge weekly said that interest costs may even have pushed it up to RM8-10 billion now. It is not clear how these costs will affect the viability of the state-owned Port Klang Authority, PKFZ's owner-operator.
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The PKFZ episode will be a test of sorts for new prime minister Najib Razak - whether he has the political will to push the PwC report to its logical conclusion. Many of the project's protagonists are either politicians in Malaysia's ruling Barisan Nasional coalition or people linked to them.
According to The Sun, PwC found that no proper feasibility study was done before the project and that major decisions were made without approval being sought from the port authority's board.
The PwC report is also said to say that the port authority's manager and chairman - both appointees of the Malaysian Chinese Association - struck agreements without seeking the advice of relevant government agencies.
The PwC is further said to disclose glaring conflict-of-interest situations. The report is said to have noted that Abdul Rahman Palil, a Selangor state assemblyman, was chairman of a fisherman's cooperative and a board member of the port authority at a time when land that once belonged to the cooperative was sold to PKFZ.
The land was first sold to private company Kuala Dimensi for RM3 per sq ft, then on-sold to PKFZ for RM25 psf. Kuala Dimensi paid a total of RM95 million, while PKFZ paid a huge RM1.1 billion.
The report is said to point out that the port authority's board was not advised that the authority's chairman was at one time also deputy chairman of listed Wijoya Baru Global, a company related to Kuala Dimensi that was appointed as the main sub-contractor to develop PKFZ.
The report is further said to list three other conflict-of-interest situations.
All sorts of ironies still abound. Despite the huge investment, occupancy at PKFZ is under 16 per cent.
Tiong King Sing, chairman of the Parliament's Backbenchers' Club chairman and a lawmaker from Bintulu, is the controlling shareholder of Kuala Dimensi. Azim Zabidi, former treasurer of the politically dominant United Malays National Organisation, is also a director of Kuala Dimensi.
All told, the PwC report paints a troubling picture of seeming disregard for governance or government regulations and procedures. It is not clear, however, whether it will be turned over to the Anti-Corruption Agency for investigation. Mr Ong has only said that he is 'contemplating' such a move.
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