GEORGE TOWN: The government wants the Port Klang Authority (PKA) to recover payments that were overcharged to the Port Klang Free Zone (PKFZ) project, said Transport Minister Datuk Seri Ong Tee Keat.

“It is our duty to engage legal consultants to probe (the PKFZ development) and even consider the recovery of payments that were overcharged as the project outlay could be less than RM4.6 billion,” he said here yesterday.

Speaking at the launch of the inaugural AirAsia flight from Penang to Singapore, Ong said legal proceedings should also be initiated into the project.

The PKFZ, modelled after the Jebel Ali Free Zone in Dubai, was meant to transform Port Klang into a national load centre and regional transshipment hub.

Consulting firm PricewaterhouseCoopers (PwC) had carried out an audit of the project for PKA, and the report made public last week said “significant project costs, weak governance and weak project management have severely undermined the viability of the project”.

Overcharging of interest in connection with the land purchase is among 20 issues that the audit firm had identified for the attention of the PKA board. These issues cover the PKA’s authority to enter into agreements, the financial implications of these agreements, project management and status, its ability to meet financial obligations and the financial position of PKFZ Sdn Bhd.

The PwC report found that the project outlay had escalated from RM1.957 billion to RM3.522 billion, excluding interest cost. Including interest cost, the project outlay increases to RM7.453 billion.

As PKA was unable to meet its obligations to Kuala Dimensi Sdn Bhd (KDSB), with which it entered into several agreements to buy the land and develop the project on a turnkey basis, the authority took a soft loan of RM4.632 billion from the Ministry of Finance (MoF). It  made its first scheduled payment to KDSB in 2007.

The audit firm recommended that PKA take immediate action to restructure the soft loan to avoid a potential default in 2012.

“Should PKA fail to meet the MoF soft loan instalments as scheduled, and if these instalments are deferred to match its projected cashflows, it would incur additional interest cost of approximately RM5 billion. This would increase the outlay of the project to RM12.453 billion,” PwC said.

In Petaling Jaya, DAP adviser Lim Kit Siang said the Ministry of Transport should cut its losses in the PKFZ project instead of allowing an additional RM5 billion in losses from interest costs to accumulate.

Lim, who is also the MP for Ipoh Timur, said there should be a policy decision over the project as it would burden present and future generations with a “RM12.5 billion white elephant”.

“Ong cannot pass the buck by saying that the financial consultants and management experts will work out a more viable solution based on further in-depth studies before a solution is implemented,” he said at a press conference
yesterday.

The PwC report said that based on PKA’s assumptions, it would be in cumulative cashflow deficit until the year 2041.

Lim said DAP would push for the setting up of a Royal Commission of Inquiry to investigate the controversial project. The party was also looking at possible legal avenues on the matter.

He pointed out that DAP lawmakers could not study thoroughly and satisfactorily the 20 appendices of the PKFZ audit report that was kept at the PKA library, adding that Ong should direct PKA chairman Datuk Lee Hwa Beng to give a complete set of the appendices to the DAP parliamentary team.