Published July 1, 2009

Row over Port Klang free zone deepens

The project's owner decides to hold RM660m payment to the contractor

By S JAYASANKARAN
IN KUALA LUMPUR

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THE Port Klang Authority (PKA), owner of the controversial Port Klang Free Zone (PKFZ) project, said yesterday it will stop payment of RM660 million (S$271.6 million) to private company Kuala Dimensi pending a review by a state-appointed task force set up on June 10. Kuala Dimensi is the turnkey contractor appointed by PKA to build the PKFZ development.

PKA chairman Lee Hwa Beng said yesterday the decision was made by the PKA board, acting in the authority's best interests. It could trigger a lawsuit - Kuala Dimensi had already threatened to take legal action against PKA in the event of non-payment. Dr Lee said PKA will fight any such move.

The new toughness on PKA's part signals the government's awareness of public anger at a colossal waste of public funds during an economic downturn.

The development cost of PKFZ could reach RM12.5 billion, up from the original budget of RM1.84 billion, according to a PricewaterhouseCoopers audit report released last month.

That would make the PKFZ debacle the second-largest scandal ever in Malaysia, dwarfed only by the RM18 billion Perwaja steel fiasco in the 1990s. It is not clear how the huge additional costs will affect the viability of state-owned PKA.

Despite the release of the audit report, no one has been held accountable, although the Malaysian Anti-Corruption Commission has promised a thorough investigation.

Dr Lee said PKA has, on the instructions of the Transport Ministry, commissioned a task force to investigate the PKFZ project. The task force, composed of lawyers and eminent Malaysians, recently started gathering information.

'The full recommendations of the task force are expected to be submitted to PKA and the ministry in August,' Dr Lee said.