A FINANCIAL crisis at Malaysia’s main port agency, which could saddle the government with losses exceeding RM12 billion (S$5 billion), is shaping up as a major policy test for the administration of Prime Minister Najib Razak.
Senior government officials told The Straits Times that the soon-to-be-released audit report on a foray by the Port Klang Authority will show that losses stemming from bonds issued to finance the project could plunge it into insolvency by 2012.
The report, which is expected to be released later this week, also details an array of alleged management irregularities at the free-trade zone development, the officials who are familiar with the report said.
The Port Klang Free Zone project includes industrial buildings, offices and an exhibition centre.
The alleged problems began during the final years of the Mahathir Mohamad government, and continued during the Abdullah Badawi administration, the report by accounting firm PricewaterhouseCoopers will show.
Datuk Seri Najib, who took over early last month, must now deal with the fallout from the deepening scandal. It is set to expose the government to the repayment of the bonds that could exceed RM12 billion because of mounting interest charges.
Analysts said the move by the government to make the report public is likely to be welcomed. But they said that Mr Najib’s real test will be whether his government will pursue legal action against those responsible for the huge losses.
That is because the PricewaterhouseCoopers report alleges serious conflict-of-interest breaches between officials of the port authority and executives of private companies with close ties to the ruling Barisan Nasional (BN) government.
‘It is a tough situation for the PM,’ said a chief executive of a state-controlled commercial bank who is familiar with the audit report. ‘But the best thing to do is to come clean because it didn’t happen during his watch.’
Among other things, the report will show that the Port Klang Authority failed to carry out detailed studies before pushing ahead with the project and that major decisions were made without consultation with relevant government agencies.
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