EXCLUSIVE The Port Klang Authority (PKA) will decide next Tuesday whether to pay RM723 million of taxpayers' money to Port Klang Free Zone (PKFZ) turnkey contractor Kuala Dimensi Sdn Bhd (KDSB).

PKA had been urged not to settle the amount as it had filed two civil suits against KDSB last September for allegedly overcharging for the PKFZ project.

port klang free zone pkfz audit Part of the RM722.584 million payment falls into the disputable amount claimed by PKA.

The payment is divided into four parts - RM150 million, RM230 million, RM120 million and RM222.584 million, according to four agreements.

Two are due on June 30 and the others on July 31.

It was learnt that PKA board of directors will convene a meeting next Tuesday, a day before the first deadline, for a final decision on the matter.

KDSB is owned by tycoon-cum-politician Tiong King Sing, who is currently the Bintulu MP.

It is believed that the PKA board is under political pressure to make the fund transfers.

Money might just evaporate

The RM222.6 million payment is stipulated in the Supplemental Agreement for New Additional Development Works (NADW) signed by PKA and KDSB on April 26, 2006.

PKA alleged that KDSB had made a false claim of RM83 million for two development works listed in the agreement - 33kv supply to Precinct 2 and 8 and the civil and infrastructure work to the main electrical substation - all yet to be carried out.

Currently the two suits that involve a total disputable amount of up to RM1.6 billion are still pending in the Shah Alam High Court.

NONE Transparency International Malaysia president Paul Low, appointed by former transport minister Ong Tee Keat ( right) to investigate and resurrect the PKFZ, warned that should PKA make the payment, it might not be able to get its money back if it won the suit.

"The company is not going to keep the money. It would have spent the money. The money would be gone.

"If they know they will lose the case, why will they keep the money?" asked Low, when contacted by Malaysiakini yesterday.

He suggested that an escrow account agreed to by both sides be set up to hold the funds before the court decides the matter.

Board  could be sued

PKA chairperson Lee Hwa Beng confirmed to Malaysiakini that the board will arrive at a decision before Wednesday, which is the deadline for settlement. However, he refused to touch on the other issues.

bar council media civil society forum 280706 paul low Low ( left ) reminded PKA directors that they could be hauled to court if the decision went against the port operator's interests.

The board has to exercise its fiduciary duty in the interest of PKA, stressed Low. "They can be sued for paying the money."

Last year, PKA withheld the RM660 million payment to KDSB pending a full review by a task force established by Transport Ministry.

However, the board made a U-turn acting on instructions from the Treasury and taking into consideration appeals from bondholder trustees.

The Treasury wanted the board to consider investor confidence, both local and foreign, in the Malaysian private debt securities market.

chan kong choy come back 130907 office This was due to the four letters of support issued by former transport ministers Lim Liong Sik and Chan Kong Choy ( left ) to KDSB.

The Parliamentary Public Accounts Committee had once pointed out that the three letters by Chan were implicitly a form of government guarantee for the bonds issued by KDSB.

Hence PKA's refusal to settle payments to the four special vehicle companies - created by KDSB to issue bonds for financing PKFZ - would affect Malaysia's credit rating.

Furthermore Prime Minister Najib Razak had told an investor briefing in New York last November that the government would honour all PKFZ obligations up to US$1bil (RM3bil).

Government guarantee not a reason

However, Low maintained that the board bears the responsibility of safeguarding PKA interests despite government guarantees.

The directors' responsibility is to make sure they do not pay a sum that is in dispute, he said.

PKA has been making annual payment to KDSB since 2007 - RM510 million in 2007, RM660 million in 2008 and 2009 respectively.

The funds came from the controversial RM4.6 billion soft loan from the Treasury.