By Shazwan Mustafa Kamal
The Malaysian Insider
Nov 15, 2011
KUALA LUMPUR, Nov 15 — Tan Sri Nor Mohamed Yakcop changed his testimony today, reversing his assertion made a day earlier that Tun Dr Ling Liong Sik’s support letter in the Port Klang Free Zone (PKFZ) project amounted to a government guarantee.
The former second finance minister testified yesterday that only the Finance Ministry could issue a letter of support with the Cabinet’s approval, and that every time such a letter was issued, the government would have to bear the responsibility if anything went wrong.
Nor Yakcop also said that Dr Ling’s letter of support was actually a “guarantee letter” as it helped secure a top-tier rating for bonds raised for the construction of the scandal-hit Port Klang Free Zone (PKFZ) and was sold for a profit of RM40 million.
But the minister in the Prime Minister’s Department also stressed that the support letter from the transport minister had not received the approval of the Finance Ministry or the Cabinet.
“I got the impression that his (Nor Yakcop) evidence yesterday showed that the support letter is a guarantee letter,” said defence lawyer Wong Kian Kheong.
Wong proceeded to read out excerpts from the testimony given by Attorney-General Tan Sri Abdul Gani Patail in 2009 during a Public Accounts Committee (PAC) inquiry into the PKFZ project.
According to the lawyer, the A-G had said that Dr Ling’s support letter was “not a government guarantee” as it did not give any assurance as to whether the government would ensure PKA would make any repayment on the project loan.
“I have shown the A-G’s opinion. You still hold to your view that P148 (Dr Ling’s support letter) is a guarantee letter?” asked Wong to which Nor Yakcop hesitantly answered “no”.
But the minister sought to explain himself later during the prosecution’s re-examination, saying that the reason why he viewed the support letter as a government guarantee was due to Malaysian Rating Corporation (MARC)’s triple A rating for the bonds issued after the support letters had been given by the Transport Ministry.
“Because we saw MARC had given the triple A rating for the bonds … MARC saw the letters as a guarantee. When we looked at the support letters, generally we considered it as a letter of guarantee.”
Nor Yakcop also said that although the government listened to and often followed the A-G’s views, it was not “bound” to always abide by them.
Critics allege that the letter of support penned by the then-transport minister on May 28, 2003 — which coincided with his last day in office — and three others by his successor, Tan Sri Chan Kong Choy, were seen by the market as government guarantees to fulfil PKA’s obligations to landowner Kuala Dimensi Sdn Bhd (KDSB).
Dr Ling was charged in July last year with knowingly deceiving the Cabinet into approving the land purchase for the PKFZ, which resulted in wrongful losses for the government.
The prosecution has argued that the additional interest of 7.5 per cent per annum, amounting to some RM720 million, had pushed Port Klang Authority’s (PKA) land purchase from RM1.09 billion to RM1.88 billion for the port project.
The former MCA president also faces two alternative charges of deceiving the Cabinet into believing that the purchase at RM25 psf and the 7.5 per cent interest rate were acknowledged and agreed to by the government’s Valuation and Property Services Department (JPPH) despite knowing that there was no such agreement.
Dr Ling faces up to seven years’ jail and a fine if convicted of the principal charge under Section 418 of the Penal Code.
The trial resumes tomorrow morning.
Why are there so many flip-flops in UMNO?
Shows the quality of the ministers we have. MARC gave the highest AAA rating after reviewing the letters of support, so they must view the letters as guarantees. However, we are sure these aren’t guarantees, notwithstanding the AG’s opinion. If they are not, why bother with bailing out the bondholders ? Why didn’t the government raise the alarm and tell MARC they were wrong ? Each rating was publicised and the rating rationale published. I was told that MARC did seek a clarification from the MoF, and was advised that the MoF would stand by these letters. So the same government said they were de facto guarantees at one time, and not guarantees at another time.
The way they are talking is to protect Mahathir and sacrifice Ling.
Ling is a very sick man…some secret arrangements may have been made.
The Govt lawyers are opening holes for prosecutions to end the case fast…..saying Ling did all that…including issuing Govt guarantee letter without Govt, approval….that is without Mahathir’s approval.
Concerning billions…you expect Malaysians to believe Ling is so smart…doing thing behind Mahathir’s back…..cheating the PM too?
All these sandiwara on all the screwed-up projects are just held to soften the image of Bn for the election. If they stay in power { Almighty forbid!} then the sandiwara will come to a close. So Malaysians , if you really want to find the REAL truth behind all these sandiwaras, you have only ONE CHOICE! come the 13th GE! Otherwise, the truth will be swept under the carpet into the Malacca Strait! Even among the BN leaders, especially those of the past, they are not that gungho if BN actually fails to maintain power! Only those with dirty linen are fighting desperately to cover their tracks! So Fellow MALAYSIANS, THE CHOICE IS YOURS!
Our Financial Procedure Act speaks of ‘guarantees’. It requires any guarantee involving a financial liability to be given only with the written authority of the Treasury. As Treasury did not give written approval for Ling’s issuance of letters of support, Ling’s letters of support were not government’s guarantees. Otherwise why call them letters of support – why not call them guarantees? The fact that a rating agency like MARC gave triple A rating for the bonds issued against a Minister’s support letters without the Treasury’s authority as if they were as good and credible as government guarantees given with the Treasury’s authority is a phenomenon of the rating agency’s perception/judgment but that phenomenon does not by itself define and cannot turn a letter of support to become a guarantee.
The fact that the Market/banks get influenced by the Rating Agency’s perception and get equally misled to think a letter of support tantamount to a guarantee again does not define and cannot turn a letter of support to become a guarantee. The fact that the government honours in a specific case a letter of support as if it were a guarantee because of the importance of a project does again define and cannot turn a letter of support to become a guarantee, though the effects of issuance are similar. This is because the government has honoured this particular letter of support like a guarantee out of expedience and special circumstances of the project. It does not mean that the government will do the same equally for all other projects for which letters of support have been issued.
Correction : “…because of the importance of a project does NOT again define and cannot turn,,,”
Ong Tee Keat had pointed out once before that the Malaysian International Tuna Port Sdn Bhd (MITP) did not create a ripple in the market when MITP, 40 per cent owned by the Fisheries Development Authority, defaulted on payments to bondholders in November 2009. The bonds of MITP were also backed by government support letters but government did not bail bondholders out as it ought if support letters are guarantees – See TheMalysian Insider report, July 30, 2010. There are many “letters of support” issued by officials of both Federal and State govts for all kinds of projects. If they were all construed as guarantees can one imagine the scale of Treasury’s exposure and extent of bail out waiting in line?
Besides – Ling’s letters of support were issued to Kuala Dimensi Sdn Bhd (KDSB), the PKFZ turnkey contractor. If the 4 letters were really guarantees, only the party in whose favour they were issued could call on them for recourse, ie in this case KDSB. But KDSB did not call on them: it was the bondholders of KDSB’s subsidiaries or special purpose vehicles. In fact KDSB itself had given undertakings or guarantees to bond holders that it would back to back cover any shortfall in repayments towards the bondholders. So by what measure could Ling’s letters of support be ever considered guarantee without straining common sense and grammatical meaning as to what a guarantee means?
Ling Long Sick gasps: “Et Tu, Brutus…Ouch! Then Falls Long Sick…”
Without doubt the rules of the Treasury had been abused but since the Super-Ego was the boss then, UMNO will be on trial if the then PM is called for explanation. So to avoid this, they came out with all the controversial explanation. One needs to go back to the MOT’s KSU then when the issue was first exposed. She siad that she spent 3 hours briefing the CABINET on the proposal! Now, even she had preferred to act like a robot after the initail outburst! If the letters were NOT Guarantees, does that mean PKA is not responsible for the money? If so, why did the Minister of Transport directed PKA to pay to the contractor? PR should dig this issue as its platform for the coming GE!
Jeffrey, now you are talking. Didn’t we argue this when the issue first emerged? It is time the bond issuers, the bond holders and arrangers suffer the consequence of their follies. They are sophisticated investors; they should know the difference between a guarantee and a support letter. This is a moral hazard issue which was used again and again, thinking that the government will always come to their rescue from toll roads, to IPPs to, to PKFZ to tuna fish project. There must be a “reason” why our smart AG was quick to state that the letter of support is actually a guarantee. Any person with rudimentary knowledge of Financial Procedure Act knows it is NOT.
http://cdn.malaysia-chronicle.com/media/k2/items/cache/0cdda3647ffc2c760f33a8b40e2f7ec2_M.jpg
The fat lady sings– “But I took so little only compared to Long Sick’s RM 12.5 billion!”
I am not saying the government is totally not responsible to all these. Who knows those in government could actually act in cohort with the promoters of projects to cheat public money. A project is not financially or commercially viable, but never mind, let’s get a letter of support or a letter or guarantee. Bonds are then issued and the buyers are happy thinking they can get higher returns with minimal risk (since guaranteed by the government). Those nincompoops in government do not understand how much a letter of guarantee or even a letter support is worth because they do not have finance 101. I know for a fact.
DPM told Mohtar…all millions abused must be discussed privately amongst cabinet ministers ….not talk publicly like he did…concerning Shahrizat and her family and her position as Agriculture Minister and the cattle project worth more than RM250 million…awarded to her husband.
This must be discussed privately.
Where can you find a better idiotic DPM than him?
When first appointed, Abu Kassim said he would resign if there was a single case not investigated? Where is the resignation?
It depends from whose vantage point one is arguing this. From the govt’s angle, there are certainly guidelines. They cannot be seen getting Treasury to issue guarantees and incur an exposure on the Consolidated Fund without adhering internal guidelines (like National Project) legislation on eligible corporates to be guaranteed (eg Loans Guarantee (Bodies Corporate) act 1965, red tape etc. However ours a system of government intervention in business cum crony capitalism and raising money from the Market (eg Private Financing Initiative). Government Agencies, Quasi agencies, whether Port Klang Authority or Fisheries Development Authority take the lead – to privatize, joint venture etc….So to lend credibility to these ventures, govt will treat letters of support as guarantees even though they are (legally) not in circumvention of the strictures under Financial Procedure Act.
Govt will say it is its moral obligation to support the Bond market to treat support letters as guarantee. Whether its to advance public interest strictly or simply to give credibility to govt sponsored projects in the eyes of the market so that it will always provide funds, you can decide for yourselves. However because of the lack of viability of many of these projects and their frequent need for bail out from public coffers – we have a record of such cases- it is from rakyat’s vantage point, something to consider in respect of Lim Kam Put’s suggestion to let “bond issuers, the bond holders and arrangers suffer the consequence of their follies”. Because once they suffer they will think again what letter of support implies.
A letter of support simply implies that the govt will always place in funds and monies in respect of their sponsored projects. But placing funds does not mean a guarantee ie answering for govt agencies’s debt is extended to the debts of government agencies’ turkey contractors, contractors and sub contractors down the line even in a situation where project is proven a failure and not viable and pouring in money is like pouring salt into the Ocean – unless it is for the suspected cause of bailing out cronies under the “system” above described.
If govt needs funds from market to finance projects then they cannot dispense with convenience of letters of support. Don’t tell me every time they (whether Federal or State Govt’s agencies) have to go back to Financial Procedure Act and its strictures on govt’s issuance of guarantees. Even the Pakatan Rakyat dare not dump this instrument and its use into the bin. For eg the PKFZ first exploded with this issue of support letter versus guarantee, Selangor MB (Khalid)’s first reaction on August 10 2010 was to say there was no ban on support letters. He somewhat back tracked on August 26th to say that he had directed the state legal adviser to produce a guideline on the issuance of letters of support.
To be sure, there’s a place for issuance of guarantee and there’s also a place for support letter. But since the latter is more often used, we have to make sure its effects and implications on the market are clearly defined – so that market and rating agencies can respond accordingly and proportionately in viewing their value. And of course support letters should not be used to circumvent financial propriety on govt’s part a way to support unviable projects frittering the public purse for private benefit of politicians and their cronies.
PKFZ was a scheme from the very first time it concept was born with a sole purpose to siphon out the tax payers money to feed the cronies from all the components parties with in BN. The investigative journalist from the Sun paper, Nades has from very beginning report on the unusual land deal. As it go he has complied his writing over the years into a book.
It was very unfortunate that nothing has been done to stop it and mind you billions has down the drain into the corrupt the pockets. Most likely all these moneys have form part of the capital freight from the country to elsewhere.
What happened to this MCA head can not right all the wrong doings of the BN. While this is on going, BN gift us another deal call Lembu Kondo Jutaan @Bangsar. How much do we need this kind blood sucking projects to make people abandon and kick BN ass out off the parliament?
Ling’s favourite song–
Money, Money, Money (from Mamma Mia! The Movie)
I work all night, I work all day, to pay the bills I have to pay
Ain’t it sad?
And still there never seems to be a single penny left for me
That’s too bad!
In my dreams I have a plan, if I got me a wealthy PKFZ
I would’t have to work at all, I’d fool around and have a ball
Money, money, money, must be funny, in a rich man’s world
Money, money, money, always sunny, in a rich man’s world
Ohhh All the things I could do, if I had a little money, it’s a rich man’s world
It’s a rich man’s world
.
.
Shahriz’s favourite song–
Rhinestone (Mamak) Cowgal
I’ve been walkin’ these streets so long
Singin’ the same old song
I know every crack in these dirty sidewalks of Broadway
Where hustle’s the name of the game
And nice gals get washed away
Like the snow and the rain
There’s been a load of compromisin’
On the road to my horizon
But I’m gonna be where the lights are shinin’ on me
Like a rhinestone cowgal
Riding out on a BMW in a star-spangled rodeo
Like a rhinestone cowgal
Getting condos and loans from people I don’t even know
And offers comin’ over the phone
All of them from same gang. These gangsters robbing Malaysians’ money in day time.
Action is speaks louder than speaking. Must go to each long house in Sarawak to expose how super rich is Taib. Let each long house to see the property portforlio of Taib (www.sarawakreport.org).
We need Sarawak and Sabah to destroy Barisan Nasional.
Whatever they (BN) did, let them be. Pakatan must take action now and more open talks (Ceramah) nationwide without stopping now. Please do not do this last minute.
Use projector to air and show on big white screen about all their corruption. List it out quickly please ! Show this too: http://iff-update.gfintegrity.org/ and please show Taib property portfolia from http://www.sarawakreport.org. etc.
Once Sarawak is under Pakatan, the federal government is close.
NO FEAR 1, pak beh si 1, finally NO CASE 1 mah, free like BR, d AS-C4 case
Now that Nor had said that the guarantee letters could not bind the Gomen’ is PKA on its own now? OTK refused to release the claim of $167 million from Dimensi and he was forced out and came Kong who directed PKA Board to release the money to Dimensi. So Kong had acted on his own? Should he be asked to repay PKA then? Yes, MCA has still some asset, if this is MCA’s decision, then MCA’s REp should be held accountable!
In reality, such shows must end! It can only come to an end when Malaysians say so!