Monday, 17 September 2007

Malaysia Turning into a Nation of Block-Buster Scandals

Read here full article by Kim Quek in Malaysiakini: " Naval scandal: Najib must explain or quit "
Kim Quek is a retired accountant

Excerpts: Read here for more

Read HERE related articles, and HERE and HERE

RM6.75 BILLION Patrol Vessel Scandal

From the RM4.6 billion PKFZ ‘Ghost Town’ scandal to another mega bombshell - the RM6.75 BILLION Patrol Vessel Scandal.

A RM5.35 billion contract to build naval vessels awarded in the 90s that has been inflated to RM6.75 billion.

The 2006 Auditor General’s Report, tabled in Parliament on Sept 7, has revealed astounding details that indicate:

  • dubious award of contract to an obviously unqualified contractor,

  • failure of technical and financial management,

  • hefty illegitimate contract price increases and overpayment,

  • unjustifiable waiver of penalties,

  • huge undocumented payments and

  • complete failure of ministry oversight.

  • Background

    In September 1998, a company owned by an UMNO stalwart Amin Shah Omar Shah was awarded a contract to design and build six patrol vessels for the Royal Malaysian Navy for the contract price of RM5.35 billion. The company is PSC-Naval Dockyard Sdn Bhd (PSC-NDSB), which is a subsidiary of Penang Shipbuilding Construction (PSCI) Sdn Bhd, a company owned by Amin Shah .
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    UMNO Stalwart
    Amin Shah Omar Shah

    "....In 1995, Govt. privatised the state-owned Naval Dockyard, a shipyard in Lumut, in northern Perak state, to a consortium led by Mr Amin's PSC Industries, or PSCI, for RM300 million. Together with the privatisation came a bag of goodies. Naval Dockyard received exclusive rights to build 27 offshore patrol vessels for Malaysia's Navy for RM24 billion. It also won the right to maintain and repair all of the country's naval craft.

    (But) the entire project is in shambles with the government cutting off funding in 2004 after PSCI was hit by a slew of lawsuits amid losses and a net liabilities position. The RM300 million that the consortium paid the government on Dec 11, 1995 was borrowed, according to a June report by Ernst & Young commissioned in March by PSCI's management.

    Naval Dockyard alone has debt of RM1.4 billion, 70 per cent of which is owed to trade creditors and suppliers. According to the report, the government had paid the group RM3.63 billion as at Dec 31, 2004 out of an estimated project revenue of RM5.35 billion for the building of the first six vessels. Read here for more

    PSC-Naval Dockyard Sdn Bhd
    Royal Malaysian Navy Base
    32100 Lumut , Perak Darul Ridzuan

    Telephone 05-6835701/7 ; Fax 05-6835708

    CONTACT PERSON: Dato' Amin Shah Hj. Omar Shah /En. Azlan Shah Hj. Omar Shah
    (According to Malaysian Defence Council Website, it describes PSC-Naval Dockyard Sdn Bhd as: "A modern and sophisticated shipyard with the latest technology and comprehensive equipment to meet the demand of marine activities. Highly superior facilities for refitting, refurbishing,repairing and maintenance of all types of ships. Specializes in complete overhaul, upgrading and maintenance of all types of ships. Specializes in complete overhaul, upgrading and maintenance of medium calibre canons, naval guns, artillery equipment and its associated systems. Universal tests elecronic defence industry especially in the field of combat, command and control system." )
    Under the terms of contract, the contractor is obligated to deliver the vessels in stages, starting from March 2004 and completing delivery in April 2007.

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    (Courtesy of Malaysiakini)

    The Auditor-General's Findings:

    1. PSC-NDSB could only deliver the first two vessels in mid-2006, and the remaining FOUR are still remote from their final stages of construction, with their completion assessed at 19% to 56% at December 2006.

    2. The Defence Ministry has not only kept the contractor but also made hefty overpayment, increased the contract price drastically and waived all penalties, all WITHOUT any justification.

    3. The contract price was increased from RM5.35 billion to RM6.75 billion in Jan 2007, for which the auditor-general could find NO justification.

    4. The generous payment of RM4.26 billion to the contractor up to December 2006 when value of works done was only RM2.87 billion - an overpayment of RM1.39 billion or 48%.

    5. The cabinet’s decision in Nov 2006 to waive the imposition of penalty for late delivery amounting to no less than RM214 million.

    6. The abnormally generous payment of RM1.07 billion as deposit, which amounts to 20% of contract price, upon signing the agreement.

    7. The Defence Ministry is found to have made huge payments to the contractor WITHOUT supporting documents. Between December 1999 and January 2002, 14 progress payments amounting to RM943 million were made, for which NO payment vouchers or relative documents were found.
    In spite of these enormous overpayment and contract price increases, the AG found the contractor in serious financial deficit and warned the government of further losses ahead due to contractor’s weaknesses.

    The Irresponsibility of the Badawi Govt

    The auditor-general criticised the Project Steering Committee – headed by defence minister cum deputy prime minister Najib Abdul Razak – for failing to provide the necessary oversight over the project.

    While Mahathirism is characterised by corruption and cronyism, Abdullah allows these characteristics to flourish and at the same time compounding them with his unique brand of hands-off leadership - indecision and indifference.

    Abdullah would let nature take its own course. Needless to say, such policy (or the lack thereof) would spell disaster on a mega project gone foul.

    No doubt Mahathir is faulted for having awarded such a huge and high-skill project without tender to an obviously incompetent crony – a glaring case of corruption and cronyism. (But) Abdullah was the leader who allowed the failed contractor to drag on and dubiously rewarded him with contract price escalation and overpayment, entailing all sorts of irregularities with criminal implications, causing the public to loose billions with no end in sight.

    (Although) the real decision-maker may not be Abdullah but Najib, but still as the prime minister, he must take responsibility for having failed to provide the kind of leadership that could have averted the deterioration of this disaster.

    In fact, I doubt whether the cabinet has been properly briefed or consulted, much less given meaningful deliberation over the relevant issues, in spite of their stupendous nature in monetary terms.

    I wouldn’t be surprised if the cabinet is carrying on its traditional role as largely a rubber stamp, busybody over trivial issues such as Namawee’s Negarakuku, but oblivious to massive hemorrhage of public funds through such fiascos as this RM6.75 billion patrol vessel contract or the RM4.6 billion PKFZ ‘Ghost Town’ project.

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    (Image courtesy of Mob's Crib)

    Najib Must Explain or Resign

    Najib must bear the brunt of the present disaster.

    As Defence Minister and leader of the project steering committee monitoring and overseeing the progress of the project, he is responsible for major decisions and development relating to the contract.

    And NAJIB must now answer the following crucial questions:

    1. Why wasn’t the contract promptly terminated when the contractor committed a major breach through its severe failure to deliver the vessels?

    2. Why was the contract price increased from RM5.35 billion to RM6.75 billion? Who authorised the increase?

    3. Why was the penalty for late delivery amounting to no less than RM 214 million waived? Who authorised the waiver?

    4. Why was the contractor overpaid by 48% by December 2006 – being paid RM4.26 billion for works done valued at RM2.87 billion? Who authorized the payment?

    5. Why were there no payment vouchers or other supporting documents relating to 14 progress payments amounting to RM943 million made between December 1999 and January 2002?
    Unless Najib can provide satisfactory answers to the above question, he must resign forthwith.

    Meanwhile, the Anti-Corruption Agency should waste no further time in commencing earnest investigations into the many serious irregularities of this project, in particular, criminal collusion with the contractor and breach of trust by top government leaders and officials, including those relating to the award of this contract.

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