KUALA LUMPUR – Long before 1MDB hogged the headlines, there was PKFZ – the Port Klang Free Zone multibillion-dollar scandal involving Malaysia’s busiest sea port.

It was arguably the country’s most well-publicised case of mismanagement of public funds, with alleged corruption greatly inflating the costs of building a free trade zone within the Port Klang regional shipping hub, to the tune of some RM12 billion (S$3.9 billion) including loans guaranteed by the government and interest charges.

However, 13 years after the case first came under the spotlight, no one has been held accountable.

And it is increasingly looking as though the scandal might not have a culprit.

On Jan 13, the Federal Court, Malaysia’s highest court, dismissed the government’s appeal to forfeit more than RM37 million from nine respondents – including a lawmaker and the former contractor of the PKFZ project- for offences allegedly committed in relation to the scandal.

A week later, Ms O. C. Phang, the former general manager of Port Klang Authority (PKA)- the government agency that manages the port- was declared bankrupt, hampering another attempt by the authorities to claim compensation over the scandal. In 2018, Ms Phang was instructed by the Malaysian High Court to pay over RM2 billion in damages to the PKA for breach of fiduciary duties, following a civil suit brought by PKA against her.

The government previously brought charges against six people – including two former transport ministers – for cheating and deceiving the government over the PKFZ scandal.

Ms Phang was also charged with criminal breach of trust, along with representatives of Kuala Dimensi Sdn Bhd (KDSB), the contractor, and also the architect of the project.

However, the charges have not led to any conviction.

Both former ministers were acquitted, while charges against Ms Phang were dropped in 2016. In 2017, three remaining people standing trial for PKFZ were also acquitted by Malaysian courts. The government has not appealed against the acquittals.

The PKFZ scandal involved the construction of a mega distribution hub in Port Klang, Malaysia’s biggest port and among the busiest ports in the world. The original cost of the project, which was greenlit under Tun Dr Mahathir Mohamad’s administration in 1999, was supposed to be just under RM2 billion.

However, by the time the project was launched in 2006, the cost had ballooned to RM4.6 billion. An audit commissioned in 2008 revealed that based on revenue projections and interest costs at the time, the eventual cost of the project could go up to RM12.45 billion, six times the original amount.

Klang MP Charles Santiago said there is clearly something wrong with the way Malaysian prosecutors had prosecuted the PKFZ criminal cases.

“This sends a wrong message. A Royal Commission of Inquiry should be called and the whole case has to be reviewed,” he told The Straits Times, adding that there has been “plenty of literature” written about the PKFZ scandal.

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One of the authors of such literature is Datuk Lee Hwa Beng, a former state lawmaker from Selangor who was appointed as PKA chairman when the scandal broke out with the specific mandate to investigate the project, and had written a book about it.

Mr Lee said that he was saddened that his years of efforts investigating the project- especially when he was PKA chairman between 2008 and 2011 – have not resulted in any conviction. It was during Mr Lee’s tenure that PKA initiated civil suits against both Ms Phang and KDSB. While the suit against Ms Phang resulted in ordering compensation to be paid, some nine years after it was filed, PKA later on withdrew the suit against KDSB.

“If PKFZ was handled properly, 1MDB would have never happened. We never seem to learn,” Mr Lee said, pointing out that a PKFZ conviction would have spurred greater observance of government regulations in state-owned projects. The 1Malaysia Development Berhad (1MDB) scandal involved more than US$4.5 billion that is not accounted for after initially being raised using bonds guaranteed by the government. Then Prime Minister Najib Razak co-founded 1MDB as a sovereign wealth fund.

Mr R. Nadeswaran, who was among the journalists who broke the PKFZ story, said that the government could still pursue fresh charges and go after the directors of state firms involved in the project.

“This is also a lesson on the quality of board members at government-linked companies and statutory bodies. In the case of PKA, you had political appointees deciding on port operations,” he told ST.

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