Published November 5, 2009

Port Klang report points finger at ex-minister, official

It seeks probe over letters of support for bonds issued by Kuala Dimensi

By S JAYASANKARAN
IN KUALA LUMPUR

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THE Public Accounts Committee (PAC) recommended in a report released yesterday to Parliament that former transport minister Chan Kong Choy and the former general manager of the Port Klang Authority (PKA) O C Phang be investigated for criminal breach of trust over their roles in the scandal-plagued Port Klang Free Zone (PKFZ) project.

Originally envisaged to cost RM2.5 billion (S$1.02 billion), the PKFZ development's costs soared to what could finally be RM12 billion amid allegations of mismanagement and chicanery. The project is owned and managed by the PKA which is now bearing the brunt of the cost overruns and could face bankruptcy without government aid.

Since Ms Phang 'retired' from the PKA last year, PKA's new management - appointed by Mr Chan's successor Ong Tee Keat - have filed multibillion legal suits against Ms Phang and office bearers of PKFZ's developer, private company Kuala Dimensi. They have also filed complaints with the police and the Malaysian Anti-Corruption Agency.

The PAC recommendations centre around letters of support issued by Mr Chan and letters of undertaking from Ms Phang to support bonds issued by Kuala Dimensi, bonds that might otherwise not have been rated as investment grade.

Mr Chan had indicated that the letters he issued were merely that - support - but the Attorney General has ruled that since they came from a minister, they were implicit government guarantees.

Government guarantees can only come from the finance ministry and so the PAC said that Mr Chan might have been in breach of the Financial Protection Act 1957. Meanwhile, Ms Phang, apparently, had no right to issue letters of undertaking as the government had ruled, before the fact, that the PKFZ project be self-financing.

The PAC's public ventilation of its report illustrates the government's awareness of the public's anger over the enormous waste surrounding the project at a time when the economy is in slowdown. Indeed, this is the third public report to indict the project's promoters since news of the fiasco leaked last year.

The PAC also noted that Mr Chan and Ms Phang had not informed the Cabinet 'in timely fashion' about PKA's inability to finance the project although the matter had been repeatedly raised in the Auditor General's reports between 2003 and 2007.

The body recommended that other government officials serving on the PKA during the PKFZ development also be investigated.

The PAC's report also noted that RM645.9 million would have been saved if the land on which the development was built had been bought under the Land Acquisition Act - the original recommendation of the finance ministry - instead of what actually transpired.

It isn't clear why the finance ministry's recommendations weren't heeded but eventually the PKA bought the land from Kuala Dimensi for a staggering RM1.088 billion before interest.

The PAC also recommended that the bonds might have to be redeemed by the government to save interest costs. The bonds carry a coupon rate of 7.5 per cent.

Even so, it isn't clear if any action will be taken as the Malaysian Anti-Corruption Commission had already investigated and cleared Mr Chan from any wrong doing. Prime Minister Najib Razak has gone on record as saying there would be no cover-up in the probe.