Port Klang free zone debacle may lead to probe
Focus is on whether there'll be bail-out, and implications for
foreign investment
By S JAYASANKARAN
IN KUALA LUMPUR
NEW concerns that the fallout over the RM4.63 billion (S$2.02
billion) Port Klang Free Zone could affect foreign investor
confidence seem to be prompting an investigation into the
matter.
Mr Abdullah: Seeking answers from Transport Minister Chan Kong
Choy
On Wednesday, government backbencher and Public Accounts Committee
chairman Shahrir Samad said that he intended to call a hearing on
the matter following reports about an acrimonious falling out
between the free zone's foreign partner - the Dubai-based Jebel Ali
Free Zone or Jafza - and the Port Klang Authority (PKA), the zone's
ultimate owner.
He said that the hearing would focus on whether the debacle would
lead to the PKA being bailed out, and its implications for foreign
investment.
Possible effects on the planned Iskandar Development Region in
Johor were a specific concern, Mr Shahrir told reporters. 'The IDR
encourages domestic and foreign investments. Although it is not a
free zone, I am worried some foreign investors might pull out
following the fallout between Jafza and the Port Klang
Authority.'
The IDR is the multi-billion ringgit development that seeks to
transform southern Johor into a growth driver for the economy. It
is a key priority of the administration of Prime Minister Abdullah
Badawi.
Even Mr Abdullah expressed unease over the reported dispute,
although he confined his remarks to saying that he would ask
Transport Minister Chan Kong Choy for an explanation. Asked about
the explanation on Wednesday, Mr Chan said that he would call a
press conference on the matter soon.
The dispute between Jafza and the PKA highlights several
contentious issues that have long plagued Malaysia's business
scene.
Going by the correspondence between Jafza and the Malaysian
authorities, the dispute is an indictment of Malaysia's
labyrinthine bureaucracy with its seemingly endless need to get
approvals. On another level, it highlights the nexus between
business and politics in projects that require extensive
funding.
The free zone affair originally involved an escalation in its costs
and the need for Kuala Lumpur to provide a RM4.6 billion soft loan
to the PKA to keep it from becoming insolvent, but the focus has
now shifted to why Jafza, the free zone's founding partner and
original inspiration, pulled out.
The free zone idea was rooted in Kuala Lumpur's desire to mirror
Jafza's hugely successful complex in Dubai. Jafza was brought in to
manage the free zone and promote it internationally, with the PKA
financing the project.
But three years on, Jafza slammed the system. In a letter to Mr
Chan in late May last year, Jafza managing director for
international operations Chuck Heath says: 'Jafza does not see this
as the failure of PKA or any individual, but rather the Malaysian
political and business environment that does not support quick
change and innovative plans.'
Then, he became specific, saying that the process of company
formation and power-of-attorney that gave Jafza the actual power to
manage 'took 29 months to complete'.
Mr Heath added that there was an 'obvious lack of clear funding'
while 'we were finding much resistance to selling the free zone
concept among the 27 government departments' involved. He said that
there had been 'a total lack of government planning, with the most
fundamental issues only considered after the event rather than
before'.
The letter continued with its indictment of Malaysian public
affairs. 'The political and economic landscape has too many vested
interests seeking interest and control in this project. The
overlapping jurisdiction of government agencies who do not
understand, nor care too, the business has hindered the Jafza
business model. Even the one-stop agency - directed by the Prime
Minister - has shown little evidence that change will come.
Unfortunately, without radical surgery in cutting out the above
obstacles, we feel this project is doomed for failure.'
It is not clear if Mr Chan ever responded but last month, Jafza
officially announced that it was pulling out of the project.
