PKFZ Scandal–MP Charles Santiago’s Perspective: It’s Institutional Failure


posted by din merican- May 30, 2009

http://www.malaysiakini.com

May 29, 2009

PKFZ scandal: Freeze their bank accounts

by Charles Santiago

The PriceWaterhouseCoopers (PwC) audit report on the Port Klang Free Zone (PKFZ) fiasco has lend greater credibility to claims that have long been reported but swept aside by the government – that serious shortcomings, irregularities and abuses have from the very beginning plagued the publicly-funded project.

Among the facts confirmed by PwC is that PKFZ has been hobbled by inflation of costs, weaknesses in governance and management of the
port klang free zone pkfz white elephant 280509project, improper and poor decision-making, and conflict of interests by PKFZ and other officials.

However, the manner in which the PwC report has been unveiled by the Port Klang Authority (PKA) should also be questioned. Why is the report available only until June 10? Why restrict the number of hard copies available to only 15? It is also incredulous that PwC has not only stated that it is not obliged to respond to any queries, and does not owe a duty of care to any party other than PKA, but has also stipulated that readers are not authorised to use or rely on the report to arrive at any conclusion!

If PwC is so afraid of being identified with even the conclusions people reach on the basis of its own report, will the international firm stand by its own auditors? Why is there no party willing to defend the integrity of the document?

The decision to submit the 51-page report to the Malaysian Anti-Corruption Commission (MACC) should nevertheless be applauded. But will there be serious action taken against all those responsible for the shortcomings, irregularities and abuses in the scandal? If there is such action, to what extent and to what level will it be taken against these individuals?

The government should freeze the bank accounts of all persons implicated in the fiasco – and those in government positions should be immediately suspended – until MACC investigations have been completed. This may include – but not be confined to – MCA and UMNO figures, members of parliament and Selangor executive council, former or current PKA and PKFZ officials, developers, lawyers and consultants, as well as the various shareholders and directors.

Among the pressing questions for the government to answer pertains to the issue of the runaway project costs. Assuming the project costs RM7.453 billion – and may balloon to RM12.453 billion by 2051 – where will the government find the money, especially given the global financial crisis that has hit Malaysian shores?

RM7 billion is after all the total amount allocated in the government’s first package to stimulate the national economy and RM12 billion is one-fifth of the second RM60 billion stimulus package. How will this affect plans to address the economic crisis confronting us?

Many questions left answered

In light of the many failures and breaches of regulations brought to light by PwC, what do our domestic regulators have to say for themselves?

* In particular, the Auditor-General Department, which was instrumental in revealing the ballooning of costs of PKFZ and the financial viability of PKA to undertake the project. Could it not have done more? To what extent did it warn the government about the heavy price that taxpayers would have to pay when the PKFZ bubble bursts?

* Is the Auditor-General Department satisfied with merely crunching accounts numbers and stating these in its annual reports? How does the department today compare with the times during the likes of such vibrant, vigorous and vigilant auditors as the late Tan Sri Ahmad Noordin?  The RM2.5 billion BMF scandal that Ahmad Nordin investigated pales in comparison to the gargantuan RM12.5 billion PKFZ scandal.

* How far did the Attorney-General’s Chambers go to ensure that legal procedures, provisions and standards were adhered to? Were there any steps taken once it was determined that all these were bypassed by PKA officials?

* Could the Bar Council not have played a role in probing the possible breach of legal ethics – such as the element of conflict of interest – by lawyers involved in the PKFZ project? What can be done to lawyers who are supposed to represent the interests of the state – and thus its citizens – and yet act contrary to them?

* Bursa Malaysia had “reprimanded” the PKFZ developer in 2006 when it failed to inform the stock exchange and obtain the consent of its shareholders on the disposal of the land. Was that the best Bursa could have done?

* What did the Finance Ministry do when it was determined that many Treasury regulations and procedural requirements had been trampled upon?

* Did Parliament’s Public Accounts Committee play its role when probing the PKFZ? Why did the investigations end with the exit of Shahrir Abdul Samad as the committee’s chairperson? Is the PAC truly serving as a watchdog of public accounts or merely posturing as one?

* The MACC’s predecessor, the Anti-Corruption Agency (ACA), had also gone through the motions of “interviewing” PKFZ officials and carted away documents from PKA. Needless to say, nothing came out of that.

Our regulators fail to do their job

It has been five years since the first police reports were lodged against the PKFZ, shouldn’t the MACC take the issue more seriously? Scandalous as it is, the significance of PKFZ lies not only in the billions of ringgit of public funds involved, especially at a time when a global financial crisis of unprecedented scale looms over us.

The long-term implications of this debacle are equally troubling given the crucial and critical role that should be played by the nation’s regulatory agencies – such as the Auditor-General Department, the Attorney-General’s Chambers, the Securities Commission.

It is partly due to their dismal failure in performing their job that this scandal has exploded in our face. The country’s viability and prosperity lies in the hands of regulators such as those above. If they cannot be trusted to do their job, then what are they actually doing in the offices they are occupying?

Among the main factors said to have caused the global financial and economic crisis is the failure of US regulators to monitor and control the increasingly risky and adventurist instruments and activities of financiers and bankers.

Given the failure – or unwillingness – of Malaysia’s regulators and enforcers to do their job, it looks like we’re headed towards a similar disaster.

*CHARLES SANTIAGO is the DAP Member of Parliament for Klang.

6 thoughts on “PKFZ Scandal–MP Charles Santiago’s Perspective: It’s Institutional Failure

  1. If the relevant documents had been carted away by the former ACA then thats the end of the story. Stamped N F A (no further action). Look what happened to Kugan’s DNA samples. It is a habit that starts as simple as stealing a pencil and then graduating with a doctorate in looting without direct pain to anyone.

  2. Dear DM

    It’s astonishing how even the MSM’s financial reporter-hacks have latched on to this $12 billion figure without understanding what the actual losses amount to.

    Having read the report, the potential losses to date is appx. 5$ billion comprising:

    Land $ Buildings Contract cost of KDSB – $3.5 b
    Accumulated interest – $1.5b

    The balance of $7 billion comprise interest on bond and Govt soft loan which MAY occur between 2012 and 2041, if PKFZ is unable to meet its loan repayment and bond interest obligations. (Which it will 100% not be able to)

    I see it as a simple matter of the Govt, PKFZ and the KDSB sitting round a table and hammering out a compromise. There is still an amount of $4.2 billion of the MoF soft loan that has not been drawn down. This they should guard like fort KNox and use it as a negotiating tool with KDSB to waive all these fancy interest cost on inflated land price and unauthorized project cost beyond the initial $2 billion. You saw how Obama whacked GM, Ford and Chrysler who thought they could cow him with talk of ‘massive layoff’s and ‘armageddon’.

    The project should be wound up as currently occupancy is about 14% and it’s a total disaster, i.e. Chapter 11 a la USA is the best option!! There’s no way of turning it around even if Donald Trump or Warren Buffet were to take an interes, given the mentality of our politicians and fraudtrepreneurs. The best scenario shows cash flow shortfalls until 2041 !!

    So, they should auction off the land and buildings by open tender.
    The balance of losses will have to be borne by the Govt (taxpayer). There’s no choice. This is in line with the flavour of the month preferred by USA, UK & Europe who used to lecture Dr.M about free-market economy – TARP or what is commonly referred to as Taxpayer Bailout Shit!

    But the heads of Ling, Chan, BBC Chairman & MP’s involved and those found guilty of aiding in fraudulently inflating land price should roll!!

    It’s as simple as that. If they offer me the re-structuring and liquidation job, I’ll accept and complete the whole thing within 3 months.

    Anyone wants to sue? Let them. Ther’s no money in a bankrupt PKFZ for KDSB to go after!

  3. din,

    now you cannot mention mongolia, perak and court cases or else sedition charge is thrown at you. next, you can’t mention PK Fleece Trade Zone. Gee, looks like we are in Burmaland or KIM juntaland. Surely, this is not 1Malaysia.
    _________
    1Malaysia is a figment of Najib’s imagination. In truth, he is the new head of a band of thieves who are continuing to our country. Billions of ringgits have been lost since 1981 when Mahathir took over. Privatisation deals, bailouts, name it and we got it. The is Fleece country where semua boleh lah!—Din Merican

  4. The government is practicing day-light-robbery scheme. So, how would not the country went into bankruptcy under such robber’s ruling. The people have eyes to witness and have their brain to diagnose what had actually happening, even with false reporting by the pro-government medias. It is such a shame that Malaysia claimed that it is a country with democracy, but fail to show and bring up it democratic ruling.
    If the current government still practicing such a ruling system, for sure that they will continue to shed off the rakyat’s confidence in them. When the rakyat’s in the country doubted, do you think that the current government can ruin?

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