Details on how PKFZ blew up to RM4.6b revealed in court

SHAH ALAM, June 30 Port Klang Free Zones (PKFZ) journey from an estimated RM400 million project in 2003 ballooning to RM4.6 billion by 2007 was revealed in court today.

During the trial of Kuala Dimensi Sdn Bhd (KDSB) chief operating officer Stephen Abok and two others accused of cheating PKFZ investors, Port Klang Authority (PKA) legal adviser Fazilah Surkisah Mohammad told the Sessions Court the RM400 million figure was stated in the first agreement on the PKFZ project signed between PKA and KDSB on February 27, 2003.

The project was supposed to be completed in two phases but during the second agreement between KDSB and PKA on March 27, 2004, which made KDSB the turnkey contractor, the amendments include completing the project in a single phase, leading up to increase in costs and additional development works, as well as interest rates.

Fazilah said PKA bought the PKFZ project land from KDSB who were then given the rights to develop it.

The purpose of the additional agreement is based on the consultants advice to develop the project in one phase instead of two phases. Cost development for the whole phase was estimated to be about RM1 million including the professional fees and the order variations, she said.

When asked by the defence lawyer Tan Hock Chuan if the consultant was Jebel Ali Free Zone (Jafza) from Dubai, the 46-year-old legal adviser said she dont really know and that it is more appropriate to ask the engineers for the project.

PKA agreed to appoint KDSB to undertake, to design, complete and finance the project in a single phase, she said.

The cost of the project has been further projected to swell to as high as RM12.5 billion due to interest from deferred payments if the trans-shipment hub fails to perform.

The PKFZ was modelled after Dubais successful Jafza, but has thus far failed to attract enough business to be self-su! fficient .

Fazilah added that in the amended agreement, the interest rate was grew from 7 per cent to 7.5 per cent per annum from the notice of payment date to amend the repayment schedule.

In order to complete the project in a single phase, the amendments to the agreement made were the junction improvement to the PKFZ at the cost of RM285.3 million to be completed within 24 months, construction of electrical infrastructure which cost RM135 million, and the construction of a business class hotel at the cost of RM90 million.

It must be filed and approved by the consultants who are consulting architects, engineers, quantity surveyors, other professional consultants who are duly registered to professional bodies in Malaysia and appointed from time to time by KDSB and approved and consented by PKA for the purpose, she said of the additional development works.

On April 26, 2006, a supplemental agreement was made between KDSB and PKA for new additional development works, which cost an additional RM335 million.

Stephen, 53, former KDSB project manager Law Jenn Dong, 52, and architect Bernard Tan Seng Swee, 49, from BTA Architect were charged last November 8 with 24 alternative charges of cheating OSK Trustees out of RM116.85 million for two projects at PKFZ. They were charged under Section 420 of the Penal Code for each count, punishable by a maximum of 10 years imprisonment, whipping and fine upon conviction.

Stephen and Tan also pleaded not guilty to two alternative charges of cheating OSK Trustees into believing that the electrical infrastructure works for the 33kV system at PKFZ and the same system for Precinct 2 and Precinct 8 had been implemented. Their action had induced OSK Trustees to make a payment of RM5.42 million to KDSB.

The trial adjourns tomorrow.