Philosophy Politics Economics

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PKFZ: PKA Does Not Need to Pay KDSB Posted: 22 Apr 2012 12:54 PM PDT It was disclosed by former Transport Minister, Datuk Seri Ong Tee Keat that the Port Klang Authority (PKA) has continued to pay Kuala Dimensi Sdn Bhd (KDSB) bondholders despite the fact that PKA has filed RM1.6 billion worth of claims against KDSB for breaches of contract, particularly for making excessive, dubious and fraudulent claims, some of which was for works never commenced.  The last payment made was in June and July last year totally RM733.3 million. PKA insisted yesterday it had paid holders of bonds issued by Kuala Dimensi Sdn Bhd (KDSB) to avoid breach of contract in light of on-going legal cases in the Port Klang Free Zone (PKFZ) scandal. The defence is an outright lie because there is no contract term which requires payment by PKA to KDSB or its bondholders if the necessary construction works are not completed.  In fact it is the reverse, where a criminal breach of trust offence has been committed if PKA continued to make the relevant payments despite discovering that the works have not been executed or the claims were fraudulent! It makes absolutely no sense for the Government to insist on making the payment when the Government itself disagrees that work has not been carried out.  The only possible reason for the PKA and the Minister of Transport, Datuk Seri Kong Cho Ha to insist on making the payment is to protect KDSB.  This is to ensure that KDSB does not get into financial trouble with its bondholders. This is because, as part of the bond agreement's security arrangements, KDSB has issued two letters of undertaking.  The first is for the construction, development and completion of the project on a turnkey basis; and the second, is to cover any shortfall in the amount payable by PKA vis-a-vis payment obligations under the bond after taking into account the credit balance in the Escrow Account. KDSB has also granted a "Power of Attorney to [the bondholders] as security to ensure that the development works are completed pursuant to the terms and conditions of the agreements which can only be invoked and exercised by [the bondholders] upon KDSB having defaulted under the agreements." Based on the above letters and power of attorney, it basically means that should the Government fail to make payment for the project to the bondholders due to incomplete works, the bondholders will then demand from KDSB any shortfall in the amount payable by PKA, and on top of that undertake legal action against KDSB for failing to complete the project and for the bondholders to take over the development works of the project. These actions will obviously mean substantial losses of profit by KDSB, a company owned by Barisan Nasional (BN) backbencher's chairman, Datuk Seri Tiong King Sing. PKA's claim also contradicts the advice from its legal advisors during the tenure of Datuk Lee Hwa Beng as its chairman who specifically advised withholding the payments to ensure maximum recoverability in the event of fraud proven. Hence to avoid the above outcome, Datuk Seri Kong Cho Ha has chosen to instruct PKA to make the payments which are "due" despite the on-going dispute and litigation, to ensure that one of the biggest beneficiaries of BN patronage projects remains an on-going concern.

Did Dr Mahathir Forget He Awarded the MEX Concession? Posted: 22 Apr 2012 12:54 PM PDT It was reported in newspapers on Wednesday that Dr Mahathir criticised the sale of Maju Expressway by concessionaire owner Tan Sri Abu Sahid Mohamed for essentially selling "what is not his" and making a huge killing in profits as a result. Tan Sri Abu Sahid Mohamed who owns 96.8% of the highway has only effectively forked out RM60 million for the project, but with the proposed acquisition by EP Manufacturing Bhd (EPMB), he would effectively be making a NET profit of RM1.09 billion.  That works out to more than an astronomical 1,800% return on investment in less than 8 years since construction began in 2004 for MEX. The rape of Malaysian tax-payers which made a billionaire out of Tan Sri Abu Sahid Mohamed on this exercise alone is simply outrageous and unacceptable because out of his "profit", RM976.7 million was paid for by Malaysian tax-payers.  The grant hence constitutes 74% of the total cost of construction for the RM1.32 billion highway. According to Dr Mahathir, the Maju Expressway sale appears to be an exercise of making money from government assistance and Tan Sri Abu Sahid Mohamed should explain himself to the public.  "You sell what is yours, you don't sell what belongs to others. It could be as bad as selling APs," Dr Mahathir told reporters, referring to the frowned upon practice of well-connected Bumiputera businessmen making quick profits from nothing more than selling import licences granted by the government. Dr Mahathir's argument is twisted and illogical on the simple basis that it was he himself who had awarded this lopsided concession agreement to Tan Sri Abu Sahid in 1997 and subsequent revised the agreement and terms of the concession in 2003 prior to his retirement. Dr Mahathir did not offer a government loan amounting to RM976.7 million to Tan Sri Abu Sahid which will require repayment to the Government.  Dr Mahathir had instead given Maju Expressway a grant of the same amount from the tax-payer's coffers which by definition, did not require any repayment by the concession. Hence it is extremely rich, coming from our former prime minister to chastise Tan Sri Abu Sahid for making astronomical profits from the government concession, when it is in fact the Dr Mahathir who gave to him on a silver platter! Whether Tan Sri Abu Sahid sells the concession valued at RM1.7 billion or decides to keep it for the remainder of the concession period ending 2037, he will still be making that ridiculous amount of profit in return for his tiny RM60 million investment.  In fact, if he were to keep the concession, he is expected to collect more than RM7.6 billion in toll over the next 25 years. Hence whether Tan Sri Abu Sahid sells his concession today to realise RM1.09 billion in profits or to keep it over the next 25 years and realise even more profit is moot.  The issue is simply, the BN government has chosen to award outrageously lucrative concession contracts to its cronies and this practice has continued today with the award of the West Coast Expressway, despite the so-called Economic Transformation Programme by Datuk Seri Najib Razak. Dr Mahathir Mohamed's crying over spilled milk smacks of hypocrisy and self-righteousness, because it was his Government who awarded these unfair contracts to its cronies enabling them to make ludicrous profits at the expense of the man-on-the-street.  If Dr Mahathir is sincere about not allowing the concessionaires to make these crazy profits, he should support Pakatan Rakyat's position to expropriate MEX per the concession contract at only RM400 million to ensure that the people's welfare is protected.

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