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Friday August 11, 2006

Bad calls led to Matrade mess


KUALA LUMPUR: Poor decisions by the Finance Ministry and the Public Works Department led to mismanagement and loss of funds in the Malaysia External Trade Development Corporation (Matrade) building project. 

This was shown in the project management audit report received by the Public Accounts Committee, said PAC chairman Datuk Shahrir Abdul Samad. 

The problem came to light when the ministry decided to appoint a contractor through direct negotiation after the project site was relocated from Changkat Pavilion to Jalan Duta, he said. 

Shahrir noted that direct negotiation was for specific contracts that were technical in nature and which required specific skills from certain suppliers and manufacturers. 

“Even though the project comes under the ministry’s jurisdiction, it is difficult to understand why direct negotiation was used to appoint the contractor,” he said.  

“Although the project site was changed, it could have been undertaken within three months through open tender.  

“It is not appropriate to use direct negotiation.”  

He was speaking to reporters after chairing a meeting between the PAC and officials from the ministry, the PWD and the Audit Department at Parliament House yesterday. 

Shahrir also questioned the ministry’s decision to postpone compensation payment to the previous contractor for cancelling the project. 

“Why should compensation for the cancelled project be postponed? The Government could have used its power to work out a discount in settling the payment to the contractor,” he said. 

He said the PWD’s failure to take immediate action to terminate the contract when it was clear there was a delay worsened the situation. 

He said the report would be made available to MPs so that they would understand the process that had led to the delay of the project and the loss of funds.  

The PAC has also asked the Finance Ministry to provide more information on how the decision was reached on the merger of Government-linked company Avenue Capital Resources Bhd and ECM Libra Bhd. 

“In terms of legality – the role of the regulator in assessing the value of the companies and mergers, processing the undertaking of mergers and (protecting) interests of minority shareholders – all have been adhered to,” he said. 

“We want to know how the decision making process was done because it involves two well-known personalities, Datuk Kalimullah Hassan and Khairy Jamaluddin.”  

He said the PAC acknowledged that the merger had increased the value of the GLC but the committee was not sure if the Government would still maintain control over and management of Avenue Capital. 

On whether family members of the Finance Minister should be involved in any Government-linked company, Shahrir said: “In principle, this can be a conflict of interest. In this case, maybe, it is a question of approval from the minister because it was probably not referred to the Cabinet.” 

The committee has requested another briefing on Aug 25 for further clarification. 

Avenue Capital shareholders in May agreed to a merger with ECM Libra to create investment bank ECM Libra Avenue Bhd (ECMA).  

ECMA will take over Avenue Capital’s listed status, while ECM Libra will be de-listed upon completion of the corporate exercise. 

After the distribution of ECMA shares to the shareholders, the Ministry of Finance Inc will emerge as its biggest shareholder, with equity of 15.4%, via Aroma Teraju Sdn Bhd.  

ECM Libra co-founder Lim Kian Onn will have 9.2%, while his partners Kalimullah and Chua Ming Huat will own 6.7% each.  


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