Bailout for PKFZ bad for Malaysia's TI CPI standing

I am now in Perak State Assembly Hall, waiting to present a memorandum to the Parliamentary Select Committee on Integrity.

I will present something on the scandalous Port Klang Free Zone in which the government has bailed out using a total of RM4.6 billion taxpayers money.

Below is my presentation:

15th August 2007

Y.B. Dato’ Dr. Wah Hashim bin Wan Teh
Chairman of the Dewan Rakyat Select Committee on Integrity
Malaysian Parliament,
Bangunan Parlimen, Jalan Parlimen
50680 Kuala Lumpur. BY HAND

Y.B. Dato’ Dr,

RM4.6 billion bailout scandal for Port Klang Free Zone (PKFZ) violates National Integrity Plan (NIP) and poses far reaching impact on Malaysia’s standing in the TI CPI 2007

DAP Selangor would like to refer to the various media reports on the RM4.6 billion PKFZ (Port Klang Free Zone) scandal under the authority of Port Klang Authority (PKA) to the Parliamentary Select Committee on Integrity .

PKFZ is modeled after the highly successful Jebel Ali Free Zone in Dubai and it was conceptualized as the region’s hub of choice for the export and trans-shipment of manufactured goods.

However, six months after its completion, the ambitious PKFZ now resembles a ghost town, with only about a dozen tenants scattered about the site instead of the anticipated crush of clients, raising question marks on the viability, feasibility and integrity of the project.

Recent reports in Malaysiakini (http://www.malaysiakini.com/news/69074), Singapore Business Times and The Sun (http://www.sun2surf.com/article.cfm?id=18941 and http://www.sun2surf.com/article.cfm?id=18951) have reported about the Federal Government’s RM4.6 billion bail out on the PKFZ project with taxpayers’ money.

Among the scandalous allegations are:

• That the development costs for PKFZ have ballooned to RM4.63 billion from the original estimate of RM1.1 billion;

• That the government has to step in to salvage the 405-hectare PKFZ project with a bail-out package as a result of massive cost overruns;

• The PKFZ had been approved on the assurances that it would both feasible and self-financing. It is proven to be neither so.

• The controversy over the purchase of the 1,000 acres for the PKFZ, with the Finance Ministry and Attorney-General Chambers proposing forcible land acquisition at official valuations – then at RM10/sq foot – but the port authority bought it at RM25/sq foot on a willing-buyer-willing-seller basis and the Transport Ministry’s assurance that the PKFZ would be both feasible and self-financing.

• The multi-billion ringgit cost overruns were unauthorized and therefore illegal as any RM100 million increament in a project’s cost had to be first approved by the Ministry of Finance and this had not been done.

• The Transport Minister had illegally and without sanction from the Finance Ministry issued letters of support to enable Kuala Dimensi, the private company tasked by the Port Klang Authority to develop the site, to issue bonds in excess of RM4 billion to cover its costs – the totality of which have now to be bailed out by the Federal Government. The unauthorized and unlawful letters of support by the Minister of Transport “were instrumental in getting the bonds at the time a triple-A rating” as such letters “are akin to government guarantees”.

General public demands an explanation not only as to why the total amounts involved for the project jumped from RM 1 billion (Dec 2004) to RM3.1 billion (June 2007) and now RM 4.63 billion, but also whether the RM4.6 billion bail out from the Federal Government on PKFZ project with taxpayers’ money goes against the National Integrity Plan (NIP).

The National Integrity Plan (NIP) was launched by Abdullah in May 2004 and proclaimed a five-point NIP Target 2008. Its first target is to “effectively reduce corruption, malpractices and abuse of power” with the specific objective of improving Malaysia’s ranking in the Transparency International (TI) Corruption Perception Index (CPI) from 37th place in 2003 to at least 30th position in 2008.

Sadly speaking, we have been heading in the opposite direction in the past three years, falling to 39th placing in 2004 and 2005 and plunging to 44th placing in 2006, with all signs of further drop to 50th placing this year when the nation is celebrating its 50th Merdeka anniversary.

Therefore, DAP Selangor would like to make a strong urge to the Parliamentary Select Committee on Integrity that the whole scandalous bail-out worth RM4.6 billion on Port Klang Free Zone should be given grave concern as it will pose far reaching impact on our standing in the TI CPI this year.

Has it not been used for the bail out, that RM4.6 billion could be better used to improve the livelihood of Malays, Chinese, Indians, Kadazans and Ibans from the lower income groups since it can be translated into:

• 110,000 low cost houses in Selangor based on selling price of RM42,000 per unit,
• 418 schools based on RM11 million per school as in the case of the new building of SJKC Damansara,
• 9 hospitals based on RM500 million per hospital as in the case of Johor Bharu, and
• Oil subsidies which can be used to reduce the fuel price 30 sen cheaper than now when the government decided to increase fuel price by 30 sen/litre on 28th Feb 2006 in which the exercise was said to have saved the government a total of RM4.4 billion in terms of fuel subsidies.

Thank you.

Yours truly,

LAU WENG SAN
Secretary,
Selangor DAP State Committees