Another scandal to cost country RM 4.6 billion

The Port Klang Free Zone (PKFZ) will cost a mind-boggling RM 4.6 billion. Since the Port Klang Authority (PKA) which owns the PKFZ is not in a financial position to pay for the costs, a government bailout seems to be on the cards and the taxpayers will ultimately be footing the bill. What is amazing is that early warning signs of problems and irregularities in the project including warnings from the auditor-general were not heeded.

As early as 2004, an Opposition member has lodged a police report over the land purchase by PKA. It does not look like there has been any investigations yet after 3 years. This is in contrast to the swift action they took to investigate a police report by Muhammad Muhammad Taib against Malaysia Today's Raja Petra Kamarudin within days.

Land Purchase

Area: 405 hectares
Cost: RM1.05 billion (RM25 per sq ft)
Seller: Kuala Dimensi Sdn Bhd (KDSB)

The seller KDSB originally bought the land - farm land and mangrove swamps - from Pulau Lumut Development Cooperative Bhd (PLDCB) for a total of RM 95 million. KDSB sold the land to PKFZ in 2002 for RM1.05 billion making a handsome profit of RM955 million on the land sale alone. These raise a few questions.

What is the justification for the Selangor government to give 405 hectares of land to Pulau Lumut Development Cooperative Bhd (PLDCB) just a few years before it was approached by KDSB? What happened to the RM 95 million and what is it being used for now? According to this report, "Blood runs deep in troubled RM4.6b PKFZ", the present PLDCB chairperson is a Selangor executive councillor, Sementa state assembly person and is the head of the Kapar UMNO division.

Next, is the 10-fold increase in land price within a few years warranted? According to industry sources, the land should not cost more than RM17 - RM19 per square foot even with reclamation works and the provision of basic infrastructure. Without reclamation works the price should be lower. Did PKFZ tried to get the best price? Apparently not. The lawyer firm appointed to represent them in this billion dollar land purchase is the same lawyer acting for the seller KDSB! (According to the same report, the head of this lawyer firm happens to be the vice-chief of the Kapar Umno division). It seems like PKFZ is so anxious to buy the land that 2% of the purchase price was paid to KDSB on the same day the offer letter of purchase was issued - before getting the approval from PKA’s board of directors and before the purchase agreement was signed!

Development costs

Original estimate - RM 100 million
Final costs RM 3.6 billion
Developer: Kuala Dimensi Sdn Bhd (KDSB)

According to a Business Times report on 11 August 2007 titled "RM4.6b white elephant?",

• "The Government initially approved a cost of RM100 million to develop PKFZ, after which any additional cost had to be approved first by the Ministry of Finance. However, Kuala Dimensi has flagged a RM3.6 billion in cost overruns since starting the project in 2003," said a source close to the matter.


• "How did they (PKA) decide to invest that amount (RM3.6 billion)? Why 512 warehouses? Did PKA conduct a feasibility study to determine what type of infrastructure would be required before starting construction? As it is, the take-up rate for space at PKFZ remains low," an industry source told Business Times.


• "For example, PTP will only develop the land in its Pelepas Free Zone when there is investment. "To date, the port has spent some RM300 million to develop infrastructure in Pelepas Free Zone which is similar in size to PKFZ," the source added.

It is not surprising that eight months after its completion, the PKFZ now resembles a ghost town, with only about a dozen tenants scattered about the site which has 512 warehouses and four blocks of 8-storey office complexes.

All those responsible for making the decisions to spend RM4.6 billion on PKFZ must be made accountable for the scandal. If there are improprieties which warrant investigations by the ACA or the police, they must be carried out immediately.

There should be no more bailout. PKA is a privatised entity which has exposed itself to the tremendous financial liabilities. It should resolve its own problems without the government and ultimately the taxpayers having to bear the cost of its imprudence. Malaysians are sick and tired of the series of bailouts in the past and will not tolerate another one mega-bailout!