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.
