Thursday November 5, 2009
PAC: Government kept in the dark
By Lee Yuk Peng
KUALA LUMPUR: The Government was not informed of the appointment of Kuala Dimensi Sdn Bhd (kdsb) as the developer for the Port Klang Free Zone (pkfz) project.
Neither did the appointment, made by Port Klang Authority (PKA), comply with the Finance Ministry’s regulations, said the Public Accounts Committee (PAC) in its report.
“The failure of the (Transport Ministry’s) secretary-general and PKA general manager to adhere to the regulations in appointing KDSB is an offence and action should be taken against them.”
It stressed that the Finance Ministry’s approval was required to perform due diligence to check on the financial capability and expertise of KDSB as the project involved huge sums of money.
The PAC was of the view that the then Prime Minister cum Finance Minister was not given a complete scenario on the development of PKFZ although the Transport Minister had sought approval from the Prime Minister to develop 1,000 acres at one go.
The PKA had yet to conduct a feasibility study at that time.
The PAC also found that Datin Paduka O.C. Phang, the general manager of PKA then, signed a development agreement with KDSB before receiving the master plan and market assessment study conducted by Jebel Ali Free Zone International (Jafzi), a consultant appointed for PKFZ.
It also said fees of RM6.99mil paid to Jafzi was a waste of public funds since its report was never utilised.
Four development agreements, totalling RM2.2bil, was signed by the general manager without the Finance Ministry’s approval.
The PAC, in its report, urged the Malaysian Anti-Corruption Commission to investigate those involved in breaching the Government’s regulations on land acquisition for the project so that legal action could be taken against them, including Phang.
It said the act of Phang signing the land deal, including developing its basic infrastructure at RM1.088bil, had breached financial regulations as she did not seek approval from the Finance Ministry.
This was against the Port Authorities Act which stressed on obtaining approval from the PKA board of directors.
The report noted that the Government had agreed for KDSB to build the basic infrastructure but PKA was requested to negotiate the price and then seek approval from the Finance Ministry if the cost exceeded RM100mil.
However, PKA did not obtain the approval although the construction work and land purchase hit between RM350mil and RM400mil.
The report said the Treasury secretary-general, in a letter dated June 12, 2001, had instructed that land for PKFZ be acquired under the Land Acquisition Act, funded by the Transport Ministry’s allocation and then leased to PKA. This instruction was not complied with.
The PAC was of the view that a total of RM645.87mil could have been saved; that only RM442.13mil was needed to acquire the land.
It also noted a 7.5% annual interest rate charged for the land prior to the signing of the sales and purchase agreement of the land deal.
The deal, signed by the PKA general manager, resulted in PKA paying RM1.088bil for the land and an additional interest rate of RM730mil, making the total land cost hit RM1.818bil.
“This means that the cost of land for each sq ft is RM41.76 or 67% higher than the price quoted by the Valuation and Property Services Department. The 7.5% interest rate had also created a double charge scenario for the Government.”
It also noted that the Valuation Department, in fixing the land price at RM25 per sq ft, had taken into account the interest rate for 15 years.
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