Arrests in Malaysian Port Scandal

Written by Our Correspondent

Thursday, 10 December 2009

Three down, more to come, although concerns abound that no big fish will be landed

Malaysian authorities Wednesday arrested Phang Oi Choo, the former general manager of the Port Klang Authority and two other persons in connection with a massive scandal in the construction of the Port Klang Free Zone, which has ballooned to RM4.6 billion from RM1.1 billion and could go as high as RM RM12.45 billion if the port defaults and is forced to pay interest on its debt, according to a report by PriceWaterhouseCoopers Advisory Services.

The arrests had been expected in the wake of a devastating report by the Public Accounts Committee of the parliament that found widespread conflicts of interest, corruption and cost overruns at the port. The three were expected to be charged with criminal breach of trust. More arrests are expected in the coming weeks, possibly including former Transport Minister Tan Sri Chan Kong Choy and Tiong King Sing, an influential Sarawak lawmaker and chairman of the parliament's Backbencher's Club, who holds 70 percent of the shares in Kuala Dimensi Sdn Bhd, the company hired to build the project.

Chan and Phang were found by the Public Accounts Committee earlier to have issued letters of support and undertaking for the project to cover massive loans without the approval of the finance ministry, in effect creating government guarantees for the loans, which resulted in vast cost overruns. The cabinet later ratified the letters despite their illegality. (see Asia Sentinel, Malaysia's Growing Port Scandal, 27 November 2009 and Malaysia's Port Storm, Aug. 24, 2009)

The 400-hectare Port Klang Free Zone was conceived during the reign of former Prime Minister Mahathir Mohamad as a multi-modal project for international cargo distribution and consolidation at Port Klang, 70 km. west of Kuala Lumpur. Unofficially, the development was entrusted to the Malaysian Chinese Association, the ethnic Chinese component of the national ruling coalition, the Barisan Nasional. From the start, with the original purchase of the land, the project was dogged with scandals. Requests to investigate it by the Malaysian Anti-Corruption Commission were turned down and the agency only reluctantly reversed itself as the scandal grew in proportion.

As the scandal has grown, contending factions in the MCA have charged each other with complicity, with the result that the party has been virtually paralyzed, exacerbating strains that grew out of the MCA's debacle in 2008 national polls, in which the opposition Pakatan Rakyat made strong electoral gains.

The question is how far up the government chain the investigation will go, and how seriously it will be investigated. “It is going to be very difficult to prove," said a lawyer with ties to the United Malays National Organization. "They have all covered their tracks, I'm sure."

According to the PriceWaterhouseCoopers report, Kuala Dimensi sold the land to the Port Klang Authority for RM1.09 billion, or RM25 per square foot although by using Malaysia's Land Acquisition Act, it could have been purchased for RM10 per square foot. Kuala Dimensi acquired the land from the Pulau Lumut Development Cooperative for only RM3 per square foot. A flock of UMNO officials were involved in various roles including the party's permanent chairman, Onn Ismail, his son-in-law Faizal Abdullah, the former party treasurer Azim Zabidi and others. Read more.