Government studying early redemption of PKFZ bonds

Written by Sharon Tan
Wednesday, 26 August 2009 23:26

KUALA LUMPUR: Kuala Dimensi Sdn Bhd (KDSB) has suggested that the Port Klang Authority (PKA) redeem early the bonds issued to finance the construction of the controversial Port Klang Free Zone (PKFZ) project as a way to reduce its cost, a move that is also being seriously studied by the government, said Public Accounts Committee (PAC) chairman Datuk Seri Azmi Khalid.

Azmi said the real cost was interest cost which would rise with delays in payments. "If you want to cut cost, you pay now," he said.Asked if the suggestion came from KDSB, which was represented by its deputy chief executive officer Datuk Faisal Abdullah at the PAC hearing today, Azmi said: "Even KDSB has suggested (the early redemption) but I think the government is also seriously studying that.

KDSB has suggested the ways to cut the figure of RM4 billion to much less if you redeem the bonds now, especially in the current financial situation. People are willing to get cash back at a negotiated price.""The government just needs to buy back the bonds at the current price. Don’t wait for 15 years. You do it now, you cut the cost," he said, adding that it would cost the government between RM3.2 billion and RM3.5 billion for such an exercise.

Presently, PKA enjoys a soft loan of RM4.6 billion to service the interest of the bond.Another PAC member William Leong (Selayang-PKR) said: "PKA should try to look at ways to resolve this, among which is an early redemption so that it can save on the interest cost. These are things that PKA should be looking at.

"On KDSB, Azmi said it only received RM1.6 billion to RM1.7 billion from the contract out of the RM4.6 billion that has been much talked about. "The rest of the amount is interest cost. The people's perception of KDSB is as though the company makes big profits. They explained that the (bulk of the) money is the cost of the bonds and the money goes to the bank," he added.

Azmi, who chaired the three-hour inquiry today, said there were certain matters that KDSB could not answer because it bordered on matters involving lawsuits that have already been filed.He said KDSB answered all questions as best as they could and gave a better picture on certain issues that were not clear previously.

Azmi said there would be more inquiries next week but the committee realised that the weaknesses were in the project management."The contract management is one of the big weaknesses. And if this project could be marketed and if there is 90% occupancy, then the issue does not arise. But because the marketing is a big issue, it adds to the burden of the cost," he said.

On the issue of overbilling, Azmi said KDSB told the committee that the issue did not arise. "It is not our job to determine (the overbilling)," he added.Datuk Abdul Rahman Dahlan (Kota Belud-BN), who is another member of the PAC, said KDSB also mentioned that even if there were disputes, there were provisions in the contract that allowed for arbitration."They (KDSB) are waiting for the claims from PKA.

If there is dispute, they can go to court or arbitration. There are avenues for discussion," he said.Azmi added that the parties have not gone to court because there were arbitration clauses in the contract.

KDSB had also told the PAC that it was willing to go to arbitration.KDSB chief executive officer Datuk Seri Tiong King Sing was present briefly at the inquiry today but according to Azmi he (Tiong) had to leave early because he had an appointment with the police or the Malaysian Anti-Corruption Commission (MACC).