Malaysia

Kong admits ‘partly true’ in restoring PKFZ bond payments

By Clara Chooi
April 27, 2012

KUALA LUMPUR, April 27 — Datuk Seri Kong Cho Ha has admitted that it was “partly true” he had invoked his ministerial powers as the transport minister to compel the Port Klang Authority (PKA) to continue payments to Kuala Dimensi Sdn Bhd (KDSB) bondholders for the Port Klang Free Zone (PKFZ) project.

PKA had withheld the payments pending legal suits over RM1.6 billion worth of work for the controversial PKFZ but had to resume paying on orders from the government.

“That could be partly true... yes,” Kong (picture) told The Malaysian Insider when met privately after the MCA central committee meeting at the party’s headquarters yesterday.

But the MCA secretary-general also pointed fingers at the PKA, saying it was the authority that has been providing his ministry with the actual figures for repayment every year.

“So if PKA says that we pay although they have asked to stop the payments, but every time the figure to be paid is on advice from the PKA.

“The PKA actually advises us on what is the amount outstanding,” he said. 

Kong added that the continued repayments were to avoid breach of contract with the bondholders, repeating a point earlier made by PKA chairman Datuk Teh Kim Poh.

The Lumut MP was responding to claims that he had invoked his ministerial powers under the Port Authorities Act in 2010 to order the PKA board to pay the special purpose vehicle (SPV) representing the KDSB bondholders.

His predecessor in the ministry, Datuk Seri Ong Tee Keat, and former PKA chairman Datuk Lee Hwa Beng last week claimed that it was him and Prime Minister Datuk Seri Najib Razak who had reversed decisions made to withhold payments to the bondholders.

Ong had earlier been accused by PKA’s new leadership of authorising the payments despite a dispute over whether KDSB, the turnkey developer for the controversial PKFZ project, had completed up to RM1.6 million in work.

PKA chairman Teh had insisted that the continued payments made under his and Kong’s watch were “just a continuation”.

Following this claim, Ong insisted to The Malaysian Insider that he had issued a directive to suspend the payments in 2009 but this was overruled by the Finance Ministry, which Najib heads.

“I don’t want to implicate the prime minister but on July 4 (2009), he told me to reverse the decision. I said no way. But the board, under Lee’s stewardship, had to convene a meeting grudgingly to reverse the decision,” he said.

The Pandan MP said the payment was then made a few days later but “by now, both Kong and the PKA chairman should have details of the reversal and not deliberately mislead the public”.

Lee, who was PKA chairman from March 2008 to March 2011, also confirmed Ong’s version of the events, saying that Kong had invoked his ministerial powers in 2010 to order PKA to make payments to the KDSB SPV.

The former Subang assemblyman, who recently launched a book into the PKFZ scandal, said the PKA board had already met that year and decided to suspend the payments to ensure that its outstanding amount would not drop below the RM1.6 billion currently being disputed in the courts.

The PKA is suing KDSB RM1.6 billion for uncompleted work.

Kong confirmed yesterday that RM1.6 billion was still the amount outstanding to KDSB.

He said the final payment, according to the repayment schedule prepared when the bonds were first raised, should be made in 2017.

“There are actually four bonds... which have been structured into a repayment schedule… since the bonds were raised,” he said.

Kong added that the first bond repayment of RM510 million was made in 2007 when Tan Sri Chan Kong Choy was transport minister.

The second and third payments in 2008 and 2009, he said, were made during Ong’s tenure as minister.

Subsequent payments in 2010 and last year, he added, were made under his watch.

Kong took over from Ong as transport minister in June 2010 after the latter was dropped from the Cabinet following his ouster as MCA president that year.

“That is the repayment schedule, that was the schedule done up when the bonds were raised,” he said.

The Sun reported yesterday that KDSB had agreed to pay its bondholders should there be a shortfall in payments by the government or PKA to it for the PKFZ project.

The daily reported that KDSB had agreed in four letters to “undertake to cover the shortfall in the event of any shortfall in the amount payable by PKA in the year 2012 vis-à-vis the bond repayment amount.”

According to The Sun, KDSB, which also sold the land for the project at an allegedly inflated price of RM25 per square foot, also indemnified the SPV representing the bondholders from liabilities and expenses incurred should KDSB not comply with the various development agreements it had signed with PKA.

The PKFZ project, initially tagged at RM1.1 billion after it was mooted by then Transport Minister Tun Dr Ling Liong Sik in 1997, more than quadrupled to RM4.6 billion by 2007.

A position review by top accounting firm PricewaterhouseCoopers revealed in 2009 that the total cost including interest from debt repayments could reach RM12.5 billion.

Since December 2009, six individuals have been charged in court including ex-MCA president Dr Ling and his successor as transport minister, former MCA deputy chief Chan, who are both accused of lying to the Cabinet.