This article first appeared in The Edge Financial Daily on March 28, 2019

KUALA LUMPUR: Former transport minister Datuk Seri Liow Tiong Lai has justified the decision to award the Vehicle Entry Permit (VEP) system contract through direct negotiations in 2014, saying it was to avoid delaying the implementation.

Liow told reporters this yesterday after testifying before the Public Accounts Committee (PAC) in its inquiry into the VEP system between Johor and Singapore. The VEP is a permit issued by the Road Transport Department that allows foreign vehicles to enter the country.

Liow said the transport ministry was given instructions by the cabinet to implement the system as soon as he took over the ministry in 2014 as Singapore had increased its VEP charge of S$20 to S$35 for Malaysian vehicles entering the country. Following this, the ministry on Aug 18, 2014 proposed a solution to the National Economic Council, which was approved by the cabinet in March 2015.

The decision of the cabinet was to approve a collection of RM20 for vehicles entering the country from Singapore, of which RM5 would be channelled to the Johor government.

“We did not want to waste any time because the time given to us to implement the system was very short. We were given the instructions [by the cabinet] in March and the system was expected to be implemented in August,” Liow said.

“That is why through our discussions within the ministry, we found that this project is urgent, so we decided that we can use the treasury circular VK713 to proceed via direct negotiations,” he added.

On top of that, Liow cited the case of the automatic fare collection project for KTM Bhd which failed even though it was awarded by the ministry through an open tender.

Liow said that although the VEP project was awarded through direct negotiation, the ministry had set a condition where the payment for the contract will only be disbursed to the contractors when the project is successfully completed.

“The process is transparent to ensure that we protect the interests of the government and the people. I would like to stress that the direct negotiations do not hide any malice because we went through the process as stipulated in the government’s guidelines,” he said.

Liow claimed that upon its implementation on Nov 1, 2016, the project was a success as it managed to collect RM250 million in the first year.

“This year, the project has been fully completed and it has been taken over by the government,” he noted.

Chief secretary next witness to be called

PAC chairman Datuk Seri Dr Ronald Kiandee said that the next witness to be called in the VEP inquiry will be the current chief secretary to the government, Datuk Seri Ismail Bakar, who was serving as the secretary-general of the transport ministry at the time.

“We are satisfied with the information that we have obtained through the statements given by the former minister, which will be used by the PAC for further proceedings,” he said.

The PAC inquiry follows the findings of the Auditor-General’s Report 2017, in which questions were raised over the implementation of the RM149.45 million system, including a drastic hike in operational expenditure and the project being awarded through direct negotiations instead of open tender.

The VEP system contract was awarded without an open tender to TCSens Sdn Bhd, which was believed to be a “crony” company to the previous government, as 25% of the firm’s shares were held by former MCA deputy secretary-general and former Tanjung Piai member of parliament Datuk Wee Jeck Seng.

Liow, who was then the MCA president, had reportedly assured former prime minister Datuk Seri Najib Razak of the contractor’s capability, but it was later learned that the contractor only had RM35.54 in its accounts instead of the required RM2.3 million to carry out the project.

The contract was worth RM149.45 million, comprising a RM45.15 million capital expenditure portion and RM104.3 million operational expenditure (opex) portion.

The opex portion was subsequently sub-contracted to Dagang Nexchange Bhd (DNex) on Jan 13, 2017, according to a filing at the time. This was said to be in breach of the original contract issued by the ministry.

DNex’s 51%-owned DNeX RFID Sdn Bhd was contracted by TCSens to operate and manage the VEP and Road Charges System Project for five years.

Auditors also found that equipment related to the system worth RM4.07million, including cameras, barrier gates, fix readers were left uninstalled.