PUTRAJAYA: Despite red flags being raised, the previous government entered into an agreement with a company from China to construct two gas pipelines worth RM9.4bil that are now subject to investigations because of discrepancies with regards to the schedule of payments and work done.
Details from one of the red files in the Ministry of Finance (MoF) revealed that Suria Strategic Energy Resources Sdn Bhd (SSER), a company backed by the ministry, had approved payments amounting to a total of 87.7% of the project sum to China Petroleum Pipeline Bureau (CPPB).
Finance Minister Lim Guan Eng described the transactions undertaken by SSER as “highly suspicious”, as work done on the two pipeline projects averaged only 13%, out-stripping the drawdown of almost 88%.
“I instructed my officers to file a report with the Malaysian Anti-Corruption Commission last week,” said Lim at a press conference, adding that Prime Minister Tun Dr Mahathir Mohamad was briefed on the matter.
“The main contractor is from China. But what’s important is why was the agreement signed in the first place by Malaysian leaders and officials?” asked Lim.
“The contracts were negotiated by the Prime Minister’s Department without involving Treasury officials.
“The Attorney General’s Chambers has also confirmed that these contracts were signed despite numerous unanswered questions and red flags being raised,” he said after receiving a cheque amounting to RM3mil from property developer Matrix Concepts Holdings Bhd for Tabung Harapan.
Apart from the RM9.4bil expenditure for the two gas pipeline projects, another RM1bil was allocated to two consultant firms and a company to undertake maintenance of the pipelines. All three companies are from China.
Under the agreement, the two consulting firms are to be paid a total of RM525mil and RM476mil for a maintenance job.
Lim also said that SSER had links to the troubled 1Malaysia Development Bhd (1MDB) and Strategic Resources Corp International (SRC).
The Finance Minister said Treasury officials had informed him that SSER was an off-shoot of the same people behind SRC and the president of SSER was a board member of Putrajaya Perdana Sdn Bhd.
Putrajaya Perdana is a company directly linked to Low Taek Jho – better known as Jho Low – the main figure authorities are seeking in their investigations into the RM35bil debt accumulated by 1MDB and US$1bil (RM4.3bil then) liabilities in SRC.
“We have strong suspicions. We have documents to prove ... it’s all part of the 1MDB scam. I have even mentioned Jho Low by name,” said Lim.
SRC is a subsidiary of the controversial 1MDB, the federal government-backed fund that took on debts of more than RM35bil within a short span of less than five years and had to be rescued.
Jho Low has been identified as one of the key figures behind the 1MDB fiasco. SRC was a company set up in 2011 and it took a US$1bil (then RM4.39bil) loan with not many assets to show.
The terms of payment for SSER’s gas pipeline project have several similarities with another controversial project in Malaysia – the East Coast Rail Link (ECRL). Among others, both projects are subject to scrutiny by the new Government as the amount drawn down is not commensurate with the work done.
In the case of the ECRL, RM19.70bil has been drawn down in the project after the first year, with another six years more to go for its completion. The amount drawn down is 36% of the job.
SSER is a company wholly owned by the MoF to undertake the gas pipeline project in Peninsular Malaysia and Sabah.
Just like the ECRL project, China’s Export-Import Bank gave 85% of the funding and the remaining 15% to come from Malaysia via the issuance of Islamic bonds for projects undertaken by SSER.
In Peninsular Malaysia, SSER is to build a 600km gas pipeline from Melaka to Port Dickson ending in Jitra under a project called Multi-Product Pipeline (MPP).
In Sabah, it is to build a gas pipeline from Kimanis to Sandakan and Tawau under the Trans-Sabah Gas Pipeline (TSGP) project.
The MPP project is worth approximately RM5.356bil, while the TSGP project is estimated at RM4.06bil.
Both projects were awarded to CPPB on Nov 1, 2016, during former prime minister Datuk Seri Najib Tun Razak’s trip to China. The former Treasury secretary-general of the MoF, Tan Sri Mohd Irwan Serigar Abdullah, who resigned on May 23 this year, signed the agreements.
The project started in April 2017 and the drawdowns for both the projects started in the first week of May last year.
SSER officials briefed the MoF on May 28, 2018, that as of end-March this year – after one year of the project starting – MPP was 14.5% complete and only 11.4% of the work completed for TSGP.
“The drawdowns were approved by the consultants. They were approved by the federal government of the day,” said Lim.
He said this was one of the cases in the hidden files marked as the “red files” in the Treasury.
“We have gone through a number of files and hope that there are no more nasty surprises,” said Lim.