Will PKFZ turnaround plan work?

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IT will be difficult to recover the huge investment made in Port Klang Free Zone (PKFZ) as the project is not attractive enough to draw companies to the area, says former Port Klang Authority (PKA) chairman Datuk Lee Hwa Beng.

“This, coupled with the more than RM4 billion spent on it, makes it a non-viable business model. Bringing it from red to black is going to be very difficult,” he tells The Edge.

Lee says the four office blocks and convention centre were completed in 2007 but remain unoccupied. He casts doubt on the rosy picture of a PKFZ turnaround painted by chairman Datuk Teh Kim Poo, as reported in the Nov 3 issue of The Edge.

Teh had said that PKFZ is now making an operating surplus with 100% occupancy. He added that the turnaround plans were going smoothly and that PKA had even rejected the final drawdown of the loan from the Ministry of Finance amounting to RM689 million.

The PKFZ soft loan, amounting to RM4.3 billion, was divided into four packages with the final drawdown of RM689 million made available at the end of last year.

Lee says despite claims by PKFZ that its open land and light industrial units are almost 100% occupied, the area looks empty except for pockets of development. He adds that there are many office blocks in other parts of Klang that are still empty.

“So, why should they relocate to one corner that is not easily accessible? The hotel that they are building — who is going to stay there when there are good established hotels in Klang?”

Lee also questions the progress of the cases involving various personalities in the PKFZ scandal.

“One former minister was acquitted and the prosecution did not appeal while another former minister had the charges withdrawn. The other pending cases have been postponed so many times.”

Lee, who wrote a book about the RM12.5 billion scandal where overvalued land was purchased for the free zone, says it looks like the scandal will not be resolved. He also questions what message the government is sending with the appointment of former transport minister Tan Sri Kong Cho Ha as the new PKA chairman.

 “One of his first actions as minister was to stop investigations into PKFZ and he has now been made PKA head,” Lee points out.

He had consistently said someone must be accountable for the RM720 million that was charged as interest and which he tried to recover from turnkey contractor Kuala Dimensi Sdn Bhd (KDSB).

However, former Transport Minister and MCA president Datuk Seri Ong Tee Keat was more diplomatic, saying, “when there is a will, there is a way” in reference to whether PKFZ can make a turnaround.

“It all depends on how the management does it.” He says he does not have detailed access to PKFZ’s current operations,  and “it won’t be fair to comment solely based on past perceptions”.

Ong also suggested that it would be best if PKFZ could be run by a private entity and not by regulator PKA itself. PKFZ is a wholly owned subsidiary of PKA.

 A suit against KDSB to recover the money was initiated but that case is pending.

So far, former PKA general manager Datin Paduka OC Phang was charged with criminal breach of trust amounting to RM254 million.

KDSB chief operating officer Stephen Abok and Bernard Tan Seng Swee of project consultant BT Architect were also charged with making false claims.

Two former transport ministers, Tun Ling Liong Sik and Tan Sri Chan Kong Choy, were also charged with misleading the Cabinet and cheating respectively.

This article first appeared in The Edge Malaysia Weekly, on November 24 - 30, 2014.