PM: Govt seizing back RM1b in unused funds from China-backed pipeline project

Tun Dr Mahathir speaks during a Bersatu press conference in Perdana Leadership Foundation in Putrajaya July 15, 2019. — Picture by Ahmad Zamzahuri
Tun Dr Mahathir speaks during a Bersatu press conference in Perdana Leadership Foundation in Putrajaya July 15, 2019. — Picture by Ahmad Zamzahuri

KUALA LUMPUR, July 15 — Prime Minister Tun Dr Mahathir Mohamad said today the Malaysian government is entitled to seize the RM1 billion held by China Petroleum Engineering Ltd (CPP).

The Langkawi MP said the seized fund is money yet to be spent for the controversial pipeline project, which was scrapped after Pakatan Harapan took power in last year’s general election.

“For the part that they have not delivered the government is claiming back the money,” Dr Mahathir told a press conference after chairing his party’s supreme council meeting here.

“I understand that money for 80 per cent of (the) pipeline was paid, but the work completed was only 13 per cent so the government is entitled to get back the money.”

The assertion confirmed a news report that the government had seized more than RM1 billion of funds held by CPP, amid a dispute involving billion-ringgit pipeline projects in Sarawak that was suspended since last year.

Singapore’s Straits Times (ST) cited sources as saying that the federal government had earlier this month ordered banking giant HSBC to transfer the funds in CPP’s Malaysian account to a company owned by the Ministry of Finance, Suria Strategic Energy Resources Sdn Bhd (SSER).

The prime minister said the funds were seized since the project was cancelled, and that it was taken straight from the company’s account.

“Since the project was cancelled the money for the part that was cancelled we want to get back the money that was not implemented,” he said.

In May, Putrajaya said it was negotiating with China-based contractors on the total compensation amount to be paid by SSER, following the cancellation of the RM9.4 billion pipeline.

SSER was incorporated as a wholly-owned unit of the Finance Ministry in 2016 to undertake two projects: the Multi-Product Pipeline (MPP) and Trans-Sabah Gas Pipeline (TSGP).

Both contracts were awarded to China Petroleum Pipeline Bureau in November 2016 in contracts signed by former Treasury secretary-general Tan Sri Irwan Serigar, who is also SSER chairman.

CPP officials responded to the news by saying they were perplexed by the move, and claimed the transfer was done “unilaterally” without due notification. The firm then said it will take “the necessary and appropriate actions to protect its rights.”

Dr Mahathir did not state which law allowed the government to recoup the funds, but maintained that the contract empowers the administration to claim back portions of money from incomplete construction. The prime minister suggested he acted on the advice of Finance Minister Lim Guan Eng.

“Well the finance minister said the prime minister is responsible,” Dr Mahathir asserted.

“I am responsible for the principle, that when a contract is given and the contractor does not use the money given to them for constructing the whole project and if the rest is not constructed then the government is entitled to get back the money.”

It remains unclear how much of the funds Putrajaya expect to recoup still.

“That you have to ask the Singaporean authority. They were the ones that published about this,” Dr Mahathir said, referring to the ST report.

HSBC’s Kuala Lumpur branch has so far declined to comment over the report.

The MPP is a RM5.35 billion project to build a 600km oil pipeline from Jitra to Port Dickson while the TSGP is a 662km gas line connecting the Kimanis Gas Terminal to Sandakan and Tawau at a cost of RM4.06 billion.