IN a written reply to the previous minister, the Transport Ministry confirmed that Integrated Marine Works Sdn Bhd (IMW), a subsidiary of Inai Kiara Sdn Bhd, had been appointed as the contractor to undertake dredging and reclamation work at the country’s ports from July 7, 2021.
The ministry also said the appointment was made because IMW is a subsidiary of Inai Kiara, which is a local company, and it took into account the company’s strengths – sufficient assets and technical know-how in dredging works – and achievements, as compared with other local companies that are still using foreign machinery to undertake the same job.
IMW was the concession holder for maintenance dredging for all federal ports between December 21, 2004, and December 21, 2019. Federal ports include Port Klang in Selangor, Port of Tanjung Pelepas and Johor Port in Johor, Penang Port, Teluk Ewa Port in Langkawi, Tanjung Bruas Port in Melaka, Kemaman Port in Terengganu, Kuantan Port in Pahang, Bintulu Port in Sarawak and Labuan Port.
The ministry, however, said it is still finalising and upgrading the main concession terms to safeguard Putrajaya’s interests as well as the operations of all federal ports.
As it stands, there are no rules relating to the evaluation of tenders in Malaysia, and the general criteria for the evaluation of tenders for public contracts are governed quite extensively by a myriad of circulars and directives from the Treasury, loosely based on the following, among other things:
1. The tenderers meets all the requirements stated in the tender documents;
2. Technical capabilities of the tenderers;
3. Financial capacity of the tenderers in terms of capital, credit facilities, value of work in hand and others; and,
4. Price of tenders.
These circulars and directives however, do not carry strong legal obligations as with violations against legislation passed by the Parliament. For instance, the circulars and directives do not outline any rules for any breaches to procurement procedures. Thus, in the absence of penalties, acts of non-compliance are taken less seriously.
Additionally, government projects procured through concession and/or public-private partnership methods are not bound by circulars and directives issued by the Treasury for procurement activities. The procedures are determined by the Public Private Partnership Unit under the Prime Minister’s Department.
In advanced countries, the pre-qualification documents for public procurement usually indicate the following mandatory principles and eligibility requirements considered appropriate in establishing the qualifications of all bidders:
1. Technical competence, financial resources, facilities
2. Reliability, experience and reputation of product
3. Personnel to perform the contract
4. Legal capacity
5. Fulfilment of tax obligations
6. Solvency
7. Absence of criminal record
8. Satisfactory past performance
If the above criteria are applied by the Transport Ministry, IMW and its holding company would have failed in meeting item 5, 6, 7 and 8 above.
In 2017, the government via the Inland Revenue Board (IRB) obtained a summary judgment against the holding company of IMW, Inai Kiara, for arrears of income tax due and payable amounting to RM11.6 million for the years of assessment 2008, 2009 and 2010, inclusive of late payment penalties under the Income Tax Act 1967.
A quick search on the internet would revealed that for the period from 2015 to 2021, there were a total of 29 petitions filed by different creditors against Inai Kiara, the holding company, for the winding up of the company. Even though there were no details as to the amount owed and whether these petitions were struck off or withdrawn voluntarily by the creditors, to be served on average four petitions per annum by creditors to wind up the company either shows the company is a bad paymaster or is having cash flow problems that forces it to juggle its financials. This doesn’t seem to qualify as having sufficient assets to meet the requirement in a normal tender in the private sector.
Prior to January 1 last year, under Section 466(1)(a) of the Companies Act, a creditor must have a minimum debt of RM10,000 – raised to RM50,000 after January 1, 2021 – that has yet to be settled by the company to the creditor before it can commence winding-up proceedings against a debtor company for “inability to pay debts”.
Even the company appears confused about its own financial position when in a recent statement to confirm its solvency, the holding company claimed its subsidiary IMW has completed 14 dredging projects with contracts worth RM700 million. Of this amount, the holding company utilised RM400 million to repay Maybank, which earlier appointed a receiver and manager over the assets of the company, while RM270 million was utilised to pay its suppliers and other debtors and the balance RM30 million for working capital.
Based on this statement, it appears that the net profit received by IMW was RM670 million, an incredible margin that even the best-managed companies in the world would have salivated for. Is there a probability that IRB will issue another assessment against the company for arrears?
Based on filings with Companies Commission of Malaysia (CCM), IMW reportedly made an audited loss for the financial years ended December 31, 2019 (FY2019) and FY2020. In FY2019, IMW had revenue of RM203.6 million and a loss after tax of RM15 million. In FY2020, it reported revenue of RM60.6 million and loss after tax of RM603,466. As at end- FY2020, IMW appears to be solvent with RM174.7 million in assets and RM122.1 million in liabilities.
As for criminal records, three directors of Inai Kiara Sdn Bhd were reportedly charged in the Sessions Court in Kuala Lumpur on April 8, 2014, for conspiring to bribe a former Sarawak Public Works Department quantity surveying assistant director via instalments on a car registered under the name of the wife of the assistant director from April 2007 to January 2008.
As for satisfactory past performance, IMW had in 2012 filed a lawsuit against Bintulu Port Holdings Bhd and the government of Malaysia alleging that Bintulu Port ought to have awarded the contract for the dredging of the navigational channel at the Samalaju Port through direct negotiation instead of calling for a tender exercise, as IMW was the concession holder for maintenance dredging for all federal ports during that period.
The High Court decided against IMW and agreed with Bintulu Port that Samalaju Port is a state port and did not come under the concession agreement.
With all the above historical baggage, one wonders how the Transport Ministry can confirm in Parliament that the company has sufficient assets and achievements to undertake dredging and reclamation works at the country’s ports.
Under the National Anti-Corruption Plan 2019-2023 issued by the Prime Minister’s Department in January 2019, in Strategic Objective 3.1 – Strengthening Public Procurement Framework, the initiative under Item 3.1.5 to be undertaken by the Finance Ministry from 2019 to 2023, was to introduce legislation on public procurement in regulating the procurement activities, improving efficiency resource utilisation, safeguarding public and national interests, as well as protecting the rights of contracting parties will be.
Thus, instead of sniping away, Pakatan Harapan (PH) as the leading opposition coalition should work together with the government to expedite the drafting and passing of the public procurement framework set out in the National Anti Corruption Plan, prepared when it was in government, so that all government procurement are subject to stricter criteria and not the loose requirements based on circulars and directives as currently practised.
Or has the National Anti-Corruption Plan been set aside, and the proposed public procurement framework will no longer be implemented by the present administration? – March 16, 2022.
* FLK reads The Malaysian Insight.
