KUALA LUMPUR: Prime Minister Datuk Seri Najib Razak's assurance that the government will guarantee around US$1 billion (RM3.37 billion) in bonds issued by Kuala Dimensi Sdn Bhd (KDSB) to fund the Port Klang Free Zone (PKFZ) project is tantamount to an official bailout, said Tony Pua (Petaling Jaya Utara-DAP).

Pua said that since the government via Port Klang Authority (PKA) was clearly disputing a huge amount of RM1.4 billion payable to KDSB, PKA should not be making further payments to KDSB and to its bondholders until the disputed amount was resolved.        

"This is because, should the courts decide that KDSB has made wrongful or excess claims amounting to RM1.4 billion, the outstanding loans due to the bondholders must be settled by the owners of KDSB themselves (since they borrowed the money) and not by the Malaysian government," he said at a press conference in the parliament lobby today.

On Aug 26, PKA sued KDSB for wrongful or excess claims amounting to RM1.4 billion, which included excess interest calculations of RM720 million; wrongful claims for RM255 million for monsoon drain works and water supply works; excess claims of RM93 million for office blocks and light industrial units; and RM83 million for electricity supply and other works which had yet to be carried out.

"Hence, the prime minister's guarantee tantamounts to an official bailout of KDSB which may be unable to repay the bondholders, if PKA is successful in its suit against KDSB.

"What is happening is that the government on the one hand believes that KDSB should not be paid RM1.4 billion for wrongful claims, while on the other hand assures the bondholders that it will pay all debts owed by KDSB to its creditors.

"The rakyat will want to ask why is the government giving an iron-clad assurance to settle KDSB's debt obligations, even if KDSB is subsequently proven to have failed to perform a satisfactory job on PKFZ and should not be paid in full?

"This only goes to show that at best, the government is completely clueless about its actions, or worse, it is sanctioning a bailout of KDSB, which is owned by Barisan Nasional Backbenchers Club's chairman Datuk Seri Tiong King Sing," said Pua.

He said the government should only pay for the services and works which had been satisfactorily completed and not pay a sen more for wrongful claims.

"Any outstanding debt to bondholders as a result of payment shortfalls by the government must be settled by KDSB or its shareholders without involving a single sen of public funds," he said.

Pua said the guarantee was "very awkward" as the government would have to pay the bondholders even if KDSB did not do its work or did not do its work properly or made extra claims.

"The government will pay on the assurance given by Najib. We think this is unfair on the taxpayers. This is actually a bailout of KDSB," he said.

Asked if the guarantee was aimed at shoring up investor confidence, Pua said: "I lend money to you and you decide not to pay me. What has the government got to do with it?"

He said the situation had been complicated by the four letters of guarantee issued by the transport ministers.

"The four letters — all it said is we guarantee if we receive the services. So if KDSB provides the services, government guarantees we will pay. But in this case, KDSB didn't even fulfil its obligations and yet we have to pay. That is the difference," said Pua.

To date PKA has paid RM2.04 billion for the purchase of land and construction works. There is another RM2.8 billion outstanding payable to KDSB.