PKFZ a Failed Project From The Start .

PKFZ a 4.6 Billion Ringgit White Elephant ? Tax Evasion ?

Back to PKFZ , The intention of this blog is to show the sequence of happenings and the key players in this fiasco that led PKFZ to its present state of sad affairs . However in between postings , I shall be posting articles of interest and concern to our well beings .

In the two previous issues on PKFZ , we have seen how Kong Choy had evaded questions on PKFZ and on the queries by Jafza executive chairman Sultan Ahmed Sulayem and its Senior Vice President (international operations) Chuck Heath complaining about the difficulties working with the PKA , which Kong Choy did NOT reply.

Today , we shall touch on the subject of PKFZ being turned into a 4.6 Billion ringgit White Elephant and tax evasion ?

On record, Dubai-based Jebel Ali Free Zone (Jafza) pulled out of the management of the Port Klang Free Zone (PKFZ) on July 18, for " strategic purposes ".

However, the separation was acrimonious, as documents obtained reveal. The correspondence, which include strongly worded emails , disclose that Jafza bailed out because of bureaucracy, interference by politicians and others with vested interests, deliberate incorrect minuting of meetings and even attempts at tax evasion by the Malaysian negotiators.



The dossier, which borders on deceit and lies, points the cause of the collapse of the deal between Jafza and PKFZ at the government machinery at one woman , PKA General Manager Datin Paduka O.C. Phang appointed by Ling Liong Sik.


A draft report from Ernst & Young Malaysia on a meeting between PKA, PKFZ and Jafza at Jafza’s Dubai headquarters on Nov 29 2006 over the funding of the PKFZ also raised concerns.

Ernest & Young indicated that the details of the payment schemes involved tax evasion.
The Ernst & Young report was submitted by Graham Lovett, Gulf Managing Partner of Clifford Chance to Chuck Heath , Jafza's Senior VP.

On Dec 12, Lovett in an email to Heath further expressed his distrust of the Malaysian negotiators, which included OC Phang. He noted that there were stark contrasts between minutes of a meeting taken by his firm and that by PKA/PKFZ.

One example was the service and operation agreement (SOA), where PKA/PKFZ’s minutes indicated that Jafza had agreed to details of the SOA, which included a tax structure that provided loopholes to side step Malaysian tax laws.
Clifford Chance’s minutes, meanwhile, showed that Jafza was unwilling to do so.
The meeting notes added: Graham Lovett expressed his grave doubts as to the propriety of the tax structure and expressed the view that the more he heard the less he liked about it .

" Jafza did not and does not want to be a party to any tax problems with the Malaysian government "

In the email to Heath, Lovett added: " The differences are so pronounced it is pretty clear to me that they are not acting in good faith ... there is no way that they could have got the key discussions at the meeting so badly wrong "

The whole mess that is the PKFZ is also a testimony as to why foreign investors shy away from Malaysia.

In a letter to Transport Minister Datuk Seri Chan Kong Choy dated May 29 2006 , Heath said red tape had hampered the progress of the free trade zone as among others, Jafza had to deal with 27 government departments that were involved in the client approval process.

Heath further wrote: " There has been a total lack of government planning .. which has seen the most fundamental issues being considered and resolved only after the event rather than before. "

He added that the lack of transparency from the start had also hampered the development of the free trade zone, with Jafza not having access to relevant details of the main development contract.

" The Board of Directors structure has not provided any fundamental support and in fact has drawn us into political issues that have a negative impact on the development " Heath wrote.

" The Malaysian political and economic landscape has too many vested interests seeking involvement and control in this project. " he said, taking a swipe at the Finance Ministry for placing obstacles in the form of obsolete regulations as well as the non issuance of licences and financial incentives.

" Unfortunately," Heath added, " without radical surgery in cutting out the above obstacles, we feel this project is doomed to failure. "

Jafza CEO Salma Ali Saif Hareb, in a letter to Chan, said the final version of the SOA " had never been presented to Jafza management for final approval ".

Perhaps in desperation, Salma threw in the Prime Minister’s name for good measure to ensure that PKA kept its side of the bargain.

He wrote on the need for an " immediate review and implementation of a program to deliver a competitive and attractive business environment within the PKFZ that mirrors that of Jebel Ali Free Zone as per the instruction of the Prime Minister of Malaysia on March 14, 2006 ".

It is learnt that Jafza officials met Datuk Seri Abdullah Ahmad Badawi to express their concerns on the success of the project and other anomalies and shortcomings in the setting up of PKFZ.


Meanwhile back to 2009

Ex minister sought Queen s Counsel advice over PKFZ documents










KUALA LUMPUR, July 29 , Former Transport Minister Datuk Seri Chan Kong Choy sought legal advice from a Queen’s Counsel in the UK before giving his testimony to the Parliament Public Accounts Committee (PAC) today on his involvement in the scandal-hit Port Klang Free Zone(PKFZ) project.

Chan testified today that the three letters he had signed in support of PKFZ did not contain guarantees. The distinction is important as the ministry is not empowered to guarantee the project and a letter indicating otherwise would be tantamount to fraud.
According to sources, Chan provided summary legal advice from a Queen’s Counsel to back his claim which he showed to members of the PAC but without distributing copies.

Why the need to seek the services of a Queen's Council in UK if he is not guilty ? Unless he thinks he is indeed GUILTY of the whole mess .
Attorney General Tan Sri Abdul Gani Patail had indicated Chan’s letters have elements of a guarantee.

Is Kong Choy the one who benefitted and pocketted from Tiong King Sing's gracious Donations of 10 million ? I leave it to you to think about it !