May 28 2009, 05:23 PM
Audit: PKFZ cost ballooned to RM7.5bil
May 28, 09 4:49pm
PKFZ audit report has shown that the project outlay has ballooned from RM1.957 billion to a staggering RM7.453 billion since the project inception in 2001.
According to the report prepared by PriceWaterhouse Coopers (PwC), the astronomical figure includes interest costs. Without interest, the project outlay stands at RM3.522 billion.
port klang free zone pkfz audit"The original estimated cost for the land purchase and development works in 2001 was RM1.957 billion... (the) project outlay has escalated to RM3.522 billion as at Dec 31, 2008.
"Interest cost of the deferred payments to KDSB (Kuala Dimensi Sdn Bhd) amounted to RM1.425 billion resulting in a total project outlay of RM4.947 billion.
"PKA (Port Klang Authority) was unable to fund its obligations to KDSB from its own resources when the first scheduled payment was due in 2007. PKA secured a 20-year soft loan of RM4.632 billion from MOF, of which RM4.382 billion is available for draw down.
"This loan would impose an additional interest cost of RM2.506 billion resulting in a total project outlay of RM7.453 billion," read the report that was released today.
Other highlights of the report:
1. The land was purchased by PKA at a price of RM25 psf on the basis that the land was of special value, through the Property Evaluation and Services Department had valued the land at RM10.16 psf in August 2001. add: This is a difference between buying the land at 1.808 million and a mere 442 million
2. The report noted several weaknesses in the governance and project management.
Add from the edge:
Contracts were entered into on the basis of estimated amounts and without detailed building plans. The development agreement DA3 was entered into based on an estimated amount of Rm1 billion and without detailed plans.
Development contracts totaling RM1.846 billion were all awarded to KDSB without competitive bids.
Entire project completed in two years, contrary to JAFZI/TSG Master plan which recommended mixed development strategy. The strategy was a single phase for infrastructure works and multiple phases over eight years for the light industrial units (which represented 42% of total construction cost of RM1 billion under the JAFZI/TSG Masterplan). As at Dec 31, 2008, only 77 units out of a total 512 units of the light industrial units were rented.
The report said that there had been failures to inform cabinet over several key decisions.
State Government checks and balances were bypassed:
Add from the edge:
For instance the agreements were not vetted by the Attorney General despite the significant amounts involved and PKA’s lack of experience in projects of this nature;.
Treasury guidelines on vetting of agreement by the Attorney General and approval of variation orders by MoF were not adhered to;
Letters of support, which could be construed as guarantees, were issued by the Minister of Transports without MoF approval; and
PKA did not adhere to MoF’s stipulation to issue government guaranteed bonds for the development of the project.
The PKA board, as an important statutory body, was expected to demonstrate good corporate governance.
PKA's apparent reliance on approvals by senior government offices such as the the Cabinet, Ministry of Transport and Prime Minister. While such approvals were important, the board still retained the overall responsibility to run PKA in a professional and sustainable manner. This would include the responsibilityto not enter into agreements which may threaten PKA's long-term financial viability.
Meanwhile, the report lamented that many important decisions were made without the PKA PKFZ board's oversight.
MACC report tomorrow
Speaking at a press conference to release the report, Port Klang Authority chairperson Lee Hwa Beng said that he will lodge a report with the Malaysian Anti-Corruption Agency tomorrow.
pkfz report lee hwa beng pc 280509Lee said that he was instructed to do so by Transport Minister Ong Tee Keat.
"The transport minister has instructed me to lodge a report with the MACC tomorrow morning at 8am," said Lee.
Lee said that the report was not aimed at anyone, and it was up to the MACC to act on the contents of the audit report.
This post has been edited by omores: May 28 2009, 05:49 PM
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