PKFZ sham: What now?
Some RM4.95 billion has been spent and the final bill to taxpayers could come up to RM12.45 billion.

And what do we have for all that? A huge complex that is only 14% occupied after two years of operation. And there is not a glimmer of light at the end of this very dark tunnel called the Port Klang Free Zone (PKFZ).

Now, with RM4.95 billion or RM12.45 billion, whichever figure you want to use, how many thousands of students would have been able to receive federal government scholarships to study overseas and at home? Instead, we read in the newspapers every day the sad stories of outstanding students whose dreams are shattered because the government does not have enough money to go round. How many new roads could have been built in the kampungs and how many hospitals equipped with live-saving medical equipment, with all those billions?

There is actually enough money to do all those things we say we don’t have the funds to do. As Mahatma Gandhi said, there is sufficient in the world for one’s need but not for one’s greed.

The PricewaterhouseCoopers (PwC) report clearly shows that this project was approved and done in haste without adequate consideration and supervision. Why? Why were the Transport Ministry and the Port Klang Authority (PKA), in particular, so eager to spend those billions?

The report also suggests that the dealings between PKA and the promoter/turnkey contractor of PKFZ were short of being at arm’s length, as one would expect. Instead, they acted as one, and even used the same lawyer to draw up all the agreements.

We leave it to the public and the Malaysian Anti-Corruption Commission (MACC) to draw their own conclusions.

But what we do know is that we now have a giant white elephant, a port authority that is virtually bankrupt and a taxpayers’ bill of RM12.45 billion, while some people are building huge mansions, driving expensive sports cars and flying in the luxury of private jets.

Why the discount for special shares?
It’s ironical that while the authorities have been gradually dismantling the regulations that facilitate the allocation of cheap shares to bumiputera investors, there are listed companies that still opt to undertake special issues at a discount to the market price.

Last week, the shareholders of AMMB Holdings Bhd approved the company’s proposal to issue 3.05% of special bumiputera shares to its existing shareholders.

The special issue came about as part of a condition set by the Securities Commission (SC) when it approved the entry of the ANZ group into the banking group in 2007.

While nobody would dispute the special issue, the question is, why did shareholders approve the proposal for it to be issued at a 15% discount? The cost of the discount will be borne by the company as it gets less proceeds for the share issue, compared to one that is done at market price.

Also, why did AMMB shareholders allow an exercise whereby the discounted shares are offered only to existing shareholders?

In the circular to the shareholders, the company had disclosed that the special issue is restricted to existing bumiputera shareholders of AMMB. So, shareholders cannot complain that they were ignorant of that fact.

But why the need to impose such a clause? That effectively shuts the doors on the possibility of undertaking a book-building exercise by placing out the shares to bumiputera institutions that are not shareholders of the company.

Although recent fundraising exercises involving banks, especial ly in the US, have been at a discount, it does not necessarily mean AMMB’s special issue would not have been well received. Perhaps, the discount would have been less than 15%.

At present, when the authorities are constantly telling investors that the practice of issuing cheap shares to bumiputera investors is slowly but surely being phased out, companies should not consider issuing cheap shares just to comply with the ruling.

If there is a need to undertake a special issue, companies should set the price and open it up to the market. If there are no takers, it can appeal to the SC for a waiver of the 30% bumiputera quota.

Currently, the rule is being relaxed for new listings. The company sets the price for new shares to be issued and makes an offer.

If there are no takers for the bumiputera portion after it has been offered to the market, the company is deemed to have complied with the condition.

With such relaxed conditions, why must companies issue special bumiputera shares at a discount?

No Sunshine
The termination of a lucrative contract is enough to set tongues wagging, but when the partner in the venture is a relative unknown, it begs the bigger question of how the contract was awarded in the first place.

On May 22, soon-to-be-delisted Isyoda Corp Bhd announced that it was walking away from a RM451.2 million contract with private company Sunshine Fleet Sdn Bhd. The project was for Isyoda to build and commission the Shah Alam Hospital. 

It is odd enough that Isyoda wants out. The ailing construction player is hardly in a position to say no to the sizeable project, especially in these tough times.

However, the bigger question is, who is behind Sunshine Fleet? The announcement in November 2007 that Isyoda had secured the project was sketchy on the details of Sunshine Fleet as well as its track record.

So, on what basis did Sunshine Fleet secure the hospital job? Who actually awarded the contract to Sunshine Fleet and was it awarded via direct negotiation or by open tender?  

Even if all these questions are water under the bridge, the current status of the project remains unknown. A search reveals that Sunshine Fleet has employed an ICT consultant for the job and will pay Isyoda for work done up to the date of termination.

Isyoda’s stock has already been suspended and it will soon fall off investors’ radar screen. But in light of the current uproar concerning the mismanagement of government projects, the matter of the Shah Alam Hospital and Sunshine Fleet’s involvement should not be allowed to quietly flicker out.

This article appeared in The Edge Malaysia, Issue 757, June 1-7, 2009