Malaysia’s PKFZ: A look into the multi-billion dollar scandal with no culprits


Source: Asian Correspondent


Image via @PKFZ, taken from Asian Correspondent

ALMOST a decade ago, Malaysia was rocked by a colossal RM12 billion (US$2.6 billion) corruption scandal involving the development of a regional shipping hub known as the Port Klang Free Zone (PKFZ).

But despite wide-scale investigations on allegations of funds misappropriation, several arrests and countless lawsuits, not a single person has been held accountable to date.

The 1,000-acre PKFZ, an integrated commercial and industrial zone nestled in Malaysia’s most affluent state of Selangor, was mooted in 1997 by former politician Dr Ling Liong Sik, who was transport minister at the time.

It was originally budgeted at RM1.1 billion (then around US$300 million) but the construction bill mysteriously quadrupled to RM4.6 billion (US$1.2 billion) by 2007 when the project was completed.

In 2008, an audit by accounting firm PricewaterhouseCoopers commissioned by then-transport minister Ong Tee Keat concluded that the total cost of the project could balloon to RM12.5 billion, after factoring in interest payments.

The incident sparked public outcry, made headlines for years and became campaign fodder for the Malaysian opposition for at least two federal elections – but still led to no conviction.

And the likelihood of anyone being taken to task over the controversy looks to be wearing thinner by the day.

Last Friday, a Malaysian court acquitted and discharged three people charged with cheating in the construction of PKFZ.

The court ruled that the prosecution had failed to show a prima facie case against the three – PKFZ turnkey developer Kuala Dimensi Sdn Bhd’s (KDSB) project manager Law Jenn Dong, KDSB chief operating officer Stephen Abok, and architect Bernard Tan. They were facing 24 counts of defrauding trust company OSK Trustees Bhd in paying RM116.85 million (US$2.5 million) to KDSB for two projects at the PKFZ. With their acquittal, they were spared from 10 years of imprisonment, a fine, and caning for each charge.

The three – the last few individuals facing trial over the case – joined Dr Ling, another former transport minister Chan Kong Choy, and former Port Klang Authority (PKA) chairman OC Phang, who were earlier cleared of similar charges.

Local media, when reporting on the matter, said with the decision, the scandal will likely turn into one with no culprits.

The issue began when the Malaysian Parliament’s Public Accounts Committee demanded an explanation over unusually high cost overruns from PKA – a government agency of Malaysia that oversees almost all activities at the country’s most important port – associated with the PKFZ.

According to the allegations, PKA had purchased 1,000 acres of Pulau Indah land from KDSB at RM25 per square foot (then US$8.3) for a total consideration of RM1.8 billion (then US$600,000), inclusive of interest.

From the land deal, KDSB reportedly made a capital gain of RM993 million (then US$330 million) because it had purchased the land from Pulau Lumut Development Cooperative Berhad for only RM95 million (then US$31 million), totaling RM3 (then US$1) per square foot.

This lucrative deal, alleged Malaysia’s former opposition leader Anwar Ibrahim in 2007, involved politicians from the United Malays National Organisation (Umno) and Malaysian Chinese Association (MCA), two component parties in the ruling Barisan National (BN) coalition, including then Umno permanent chairman Tan Sri Onn Ismail; then Umno treasurer Azim Mohamed Zabidi and MCA’s Chor Chee.

“This affair is one of the many examples from the present administration that reveals conflict of interest, corruption and mismanagement involving politicians, business interests and public officials,” Anwar, who is now in jail for sodomy, said in a statement in 2007.

Anwar was not the only opposition politician to weigh in on the scandal.

Lim Kit Siang, another influential opposition leader from the Democratic Action Party, wrote a book about it in 2009, discussing cost overruns of the project and alleged malpractices, as well as the role of the individuals involved.

That same year, the politician decried the formation of a 30-member task force by the country’s anti-graft agency to investigate the matter, asking why action was only being taken four years after reports were lodged over alleged misappropriations in PKFZ.

After 3 yrs working on scandal 2day last of those charged acquitted. Won’t B 1st scandal 2 have zero culprits! @CitizenNades@hwabeng

An earlier special task force comprising PricewaterhouseCoopers Advisory Services (PwCAS) managing director Chin Kwai Fatt and PwCAS senior executive director Lim San Peen, among others, produced a 370-page report with 2,500 appendices which pointed to possible fraud, unsubstantiated claims and over-charging by KDSB ranging from RM500 million (US$166 million) to RM1 billion then (US$300 million).

“The MACC (Malaysian Anti-Corruption Commission) had the opportunity to ‘clean house’ in the RM12.5 billion PKFZ scandal but it failed in a colossal manner,” Lim said in a statement in 2009.

SEE ALSO: PKFZ Scandal: RM4.6b done with a 5-page statement

Lee Hwa Beng, the PKA chairman from 2008 to 2011 who was also part of the probing team commissioned by Ong (former transport minister), expressed his disappointment after Friday’s release of the three remaining suspects.

He also expressed remorse that his efforts in the investigations had failed to bring anyone to justice over the case.

“I have to apologise to all who have suffered because of my actions on the PKFZ expose,” he told the Asian Correspondent when asked to comment on the acquittal.

“I also apologise to taxpayers for using so much government funds in employing lawyers and accountants in my investigation, and also to those who have been inconvenienced by my actions,” he added.

Like Lim, Lee wrote a book about the scandal titled, PKFZ: A Nation’s Trust Betrayed, that was launched in 2012.