The Public Accounts Committee (PAC) wants the police and Malaysian Anti-Corruption Commission (MACC) to haul up former transport minister Chan Kong Choy over the Port Klang Free Zone (PKFZ) scandal.

chan kong choy come back 130907 office The committee recommended that Chan, a former MCA deputy president, and Port Klang Authority (PKA) former general manager OC Phang be both investigated for criminal breach of trust.

According to the PAC report, the duo should be proved over the wrongful issuance of three letters of support by Chan and three letters of undertaking by Phang without the approval of the Finance Ministry.

The report said the PAC was informed by the attorney-general that the three support letters issued by Chan and three letters of undertaking issued by Phang were implicitly a form of guarantee from the government to ensure that there would be allocations for PKA, to enable it to meet its obligations under the development agreement.

"Therefore, a thorough investigation must be conducted by the Malaysian Anti-Corruption Commission (MACC) and police into this matter as the letters were issued without the approval of the Finance Ministry, as required under Section 14(1) of the Financial Procedure Act 1957.

NONE "For their actions, Chan and Phang ( left ) can also be charged with criminal breach of trust under Section 409 of the Penal Code, read with Section 409B," it read.

The PAC began its investigations into the fiasco when questions were asked in Parliament over the viability of the PKFZ project.

The free trade zone, a commercial and industrial project south of the capital, was conceived as a RM1.82 billion venture constructed over 1,000 acres.

However costs are now expected to balloon to RM12.5 billion, making the affair one of the country's biggest financial scandals and a major embarrassment for the government.

Probes into the project's financial records since then have revealed instances of corruption, conflicts of interest and breach of trust.

Meanwhile, Prime Minister Najib Abdul Razak said the government would not cover up the wrongdoings in PKFZ and took note of PAC's recommendations.

He added that the government would consider taking actions against those named in accordance to the law.

Government suffers 'great loss'

Meanwhile, the PAC report further stated that the government suffered "a great loss" because the bond issuance were not done through proper channels because the funds received from the government was not fully utilised for the project.

"This is because it is common practice by the government to release bond at a rate of within only four percent compared the to the 7.5 percent imposed by KDSB (Kuala Dimensi Sdn Bhd)," it said.

"To help reduce the amount of debt from increasing due to the high interest rates, it is recommended that the ministry review the bonds to be redeemed in the near future."

port klang free zone 070607 signboard It also said that the letter of undertaking issued by Phang was against the government's decision to approve the PKFZ project.

"This was because when the government authorised the project, the government decided the project should be developed through self-financing.

"In relation to this, Phang and the Transport Ministry failed to inform the cabinet in a timely manner of PKA's inability to finance PKFZ on its own, although this matter has been raised in reports of the auditor-general’s financial statements from 2003 (to) 2007."

The PAC report also said both parties had failed to engage the Finance Ministry and the Economy Planning Unit (EPU) to get allocations to support the mega-project.

port klang free zone 230607 ware houses empty Besides that PAC found that Phang had also "committed misrepresentation" when she issued a letter of undertaking to OSK Securities Bhd stating that PKA would consult the government to remit funds from the budget allocation to a 'special reserve account or special code of account' managed by the port authority.

The committee said PKA did not have the authority from the Transport Ministry or the Finance Ministry in this case.

PAC stated in their conclusion that they backed PKA's decision to set up a task force to study the issues related to misappropriation.

Conflict of interest

They had also listed out a number of matters that can be probed by MACC:

1. Conflict of interest in making decisions

  • Perunding BE Sdn Bhd, which is under the Quantity Surveyor Consortium appointed by PKA to estimate the actual cost of the PKFZ. Perunding BE was also the quantity surveyor for KDSB, contractor for PKFZ, for infrastructure work.
  • Legal firm Rashid Asari & Co is involved in two of the four development agreements signed between PKA and KDSB. The firm was also involved sales-and-purchase agreement between Koperasi Pembangunan Pulau Lumut Bhd and KDSB back in 1995.

2. Several actions by Phang such as the appointment of KDSB as contractor, the signing of sale-and-purchase of land and the appointment of Jebel Ali Free Zone International (JAFZI) and later terminating its services without the authorisation from the Finance Ministry's board of directors.

3. PKA general manager (Phang) had also failed to comply with the financial procedures and legal procedures in implementing PKFZ. The general manager was recommended to be investigated as she should be aware of such procedures as she had served in several ministries and departments, including the Finance Ministry.

NONE Members of the PAC committee are chairperson Azmi Khalid (BN-Padang Besar), deputy chair Tan Seng Giaw (DAP-Kepong), Nur Jazlan Mohamed (BN-Pulai), Tan Ah Eng (BN-Gelang Patah), Hanim Samuri (BN-Ledang), Mojilip Bumburing Wilfred (BN-Tuaran), Liang Teck Meng (BN-Simpang Renggam), Alexander Nanta Linggi (BN-Kapit), Abdul Rahman Dahlan (BN-Kota Belud), Kamarul Baharin Abbas (PKR-Teluk Kemang), William Leong (PKR-Selayang), Kamaruddin Jaffar (PAS-Tumpat) and Tony Pua (DAP-Petaling Jaya Utara).

Committee member Pua said the project's developer, owned by tycoon-cum-BN politician Tiong King Sing, ran out of money and received loans from the government and letters from Chan to guarantee a RM3.6 billion bank loan.

"As a result of the letters signed, the government is now liable for the RM3.6 billion owed by the developer to the banks," Pua, an opposition lawmaker, told AFP .

He said a report by the PKFZ's external auditors indicated it would be loss-making until 2029 because of debt servicing costs, and would only break even in 2051.

"With interest costs pegged at RM5.0 billion, the overall cost of the project is expected to balloon to RM12.5 billion," he said. "This is Malaysia's biggest financial scandal ever."

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