PETALING JAYA (Aug 19, 2007):The Port Klang Authority (PKA) bought land meant for the Port Klang Free Zone (PKFZ) well aware that it was encumbered property. This, say government sources, is highly irregular as anything the government and its agencies buy must have a clean title.

PKA entered into discussions with Kuala Dimensi Sdn Bhd (KDSB) in 2001 to buy 404ha. At RM25 per sq ft, the deal was worth over RM1 billion.

On inking the sale and purchase agreement in late 2002, PKA paid 10% of the purchase price.

The state government had originally alienated the land to the Pulau Lumut Development

Co-operative (KPPL) which in turn sold it to KDSB for RM3 per sq ft.

It was noted that the chairman of KPPL at the time of the sale - Sementa Assemblyman and State Executive Councillor Datuk Abdul Rahman Palil - was also a director of PKA.

When the sale to PKA became public knowledge, several members of the co-operative put private caveats on the land to prevent any sale without their interests being considered.

Besides, at the time of the PKA-Kuala Dimensi deal, there were at least "five or six" further interests registered on the titles by mortgagors.

Several months after the purchase, the government and PKA were advised that misrepresentation had been made in the deal and that it was not a "willing buyer, willing seller" arrangement, as KDSB could not transfer the land free of encumbrances.

However, KDSB director Faizal Abdullah told theSun that the transfer took place within a year of the signing and PKA owns 100% of the land. "Anyone who says otherwise is lying," he said when contacted.

Meanwhile, KDSB was also appointed - via direct negotiations - as the turnkey contractor to design and build the infrastructure and complete the free zone.

The first signs of impending problems surfaced in 2003 when the Auditor-General in his annual report remarked that the PKA did not have money to fulfil its obligations on the project. PKA, however, repeatedly assured the government that the project would be self-funded without federal assistance and this was reiterated by then transport minister Datuk Seri (now, Tun) Dr Ling Liong Sik.

With its reserves of about RM500 million dwindling, there was an urgent - albeit futile - attempt at a government bail-out.

Bordering on insolvency, and in a desperate attempt to save the sinking ship, PKA sought soft loans of up to RM4.6 billion from the government.

When the project was already in financial trouble in mid-2005, it asked the Treasury for grants and a soft loan at an interest of 4% per annum with a six-year moratorium. However, what was not said was how PKA would find the money to repay the loan after the six-year period.

With almost zero reserves, PKA would have been hard-pressed for income to keep its end of the bargain, should the government approve the loan.

Industry sources said an idea was mooted to set up a Malaysian Ports Commission to collect levies from all ports to repay the government. This was despite assurances from ministry and PKA that the project will be self-financed.