Sunday, May 31, 2009

PKFZ: Should It Be Kept Alive?

I've made a statement a few days back that the Government should seriously consider cutting losses and shut down the Port Klang Free Zone (PKFZ) project with cost potentially ballooning to RM12.5 billion, based on optimistic estimates by the Port Klang Authority (PKA) itself.

The Ministry of Finance has already extended a RM4.6 billion soft loan at 4% interest rate to PKA to salvage the project in 2007, and now it appears that they will have to extend an additional RM3.56 billion loan to cover the cashflow deficit over the next 20 years! As projected by PriceWaterhouse Coopers (PwC), this restructured financing will cost an additional RM5 billion in interest costs over the next 42 years!

Hence the total commitment required to keep this project alive by the Government is a whopping RM8.6 billion, on top of whatever funds that has already been extended!

The obvious question is, should we throw good money after bad? Will there ever be a businessman (or even government) in the world, who will invest in a commercial project which is projecting cumulative cashflow deficit (note: we are not even talking about profits here!) after 33 years (2042)!!

And that in itself is an optimistic projection! Current occupancy at PKFZ is only 14%, but it's projected to reach 20% in 2010, and full occupancy by 2018 (or was it 2014?).

And what did the Minister of Transport, Datuk Seri Ong Tee Keat say to this?
"I am disappointed to learn that some opposition members have proposed that the Government cut losses and close down PKFZ. This is a premature statement by politicians who think they can make well-informed financial decisions based on a few hours of looking through the PKFZ report."
"Premature statement"? You'll really need to be blind like MCA and BN leaders to not see something as obvious as this!
Post a Comment