Report finds Mindef land swaps also occurred during Dr M's first term

The summary report on Defence Ministry land swaps shows "political considerations outweighing government interests", even during Dr Mahathir Mohamad's first term as prime minister.

When tabling the Governance, Procurement and Finance Investigating Committee report in the Dewan Negara on Thursday – the anniversary of Pakatan Harapan's first year in power – Defence Minister Mohamad Sabu pointed out that political interests prevailed in 13 of 16 land swap deals that took place since 1997.

Although not naming names, Mohamad said that past prime ministers and defence ministers were involved in these deals. 

In a press conference later that day, Mohamad denied the involvement of Mahathir in these cases.

A look into the 59-page summary report uploaded onto the Defence Ministry's website, however, found that four of the 13 land swap deals took place during Mahathir's first term.

Four cases

The four land swap deals are: 

• The reconstruction of a transit camp and the Regiment 502 Territorial Army camp in Kuala Lumpur, in exchange for 4ha of land in Jalan Ampang costing RM66 million. This was approved in principle by the cabinet in October 1995 via open tender. Syed Hamid Albar was the defence minister during this time. It was only completed in September 2008.
• The construction of Skudai Brigade 7 Headquarters in Pulai, in exchange for 154.6ha of land in Plentong, Tebrau, costing RM256 million. This was approved in principle by the cabinet in February 1997, but was a failed project. Syed Hamid was the defence minister during this time.
• The construction of Division 1 and Camp 4 RRD, in Muara Tuang, Kota Samarahan, as well as the construction of Akademi Tentera Malaysia (Atma), in exchange for 284.9ha of land in Kapar and Kuching via direct negotiation. This was approved in principle by the cabinet in May 1996. Syed Hamid was the defence minister during this time. The deal was only inked a decade later, under the Abdullah Ahmad Badawi administration. It was completed in August 2011. 
• The construction of a sports facility in Sungai Besi Camp and upgrading of six armed forces family housing (RKAT) for the Royal Malay Regiment (RAMD) battalion in Kedah, and four RAMD battalions in Tapah, in exchange for 1.6ha of military headquarters land in Jalan Kuching. This was approved in principle by the cabinet in February 1997. Syed Hamid was the defence minister during this time. Until today, the deal has not been signed.

Malaysiakini has contacted Mohamad for clarification.

Two contracts given to one developer

The names of all developers are redacted in the Governance, Procurement and Finance Investigating Committee report summary.

It is worth noting, however, that two of the deals listed above – the construction of Regiment 502 Territoral Army camp in Kuala Lumpur and the Skudai Brigade 7 Headquarters in Pulai – were given to the same unqualified contractor.

Despite failing to complete the Regiment 502 Territorial Army camp project in time, this same contractor was awarded the Skudai Brigade 7 Headquarters project, which was worth four times the cost of the first.

According to the investigating committee report summary, the Defence Ministry argued at the time that the Skudai Brigade 7 Headquarters project was awarded to "contra" the liquidated agreed damages for the Regiment 502 Territorial Army camp project.

"According to the Defence Ministry, this allowed the government to ‘contra‘ (exchange) with the Skudai headquarters project, (by engaging) the same developer," the report read.

Audit advice to terminate developer ignored

The inability to complete the Regiment 502 Territorial Army camp was raised in the 2002 auditor-general's report, which proposed that the government terminate the contract to prevent further bleeding of funds.

The advice fell on deaf ears. Ultimately, the government had to fork out RM15.9 million to fix various defects. This amounted to one-fourth of the project cost.

The maintenance bond issued on this project failed to be disbursed, as the two issuing entities were not registered under the Finance Ministry. Both companies have since ceased operations. 

Despite the government's decision only to give 99-year lease lands to the private developers involved in the land swap deals, the developer for the Regiment 502 Territorial Army camp project received 4ha of freehold land in Jalan Ampang.

The project was said to contain various weaknesses – including a lack of due diligence being carried out, such as the contract being signed before the detailed scope of the project was finalised.

Failed to complete polytechnic building

The Defence MInistry's failure to issue a certificate on non-compliance (CNC) had worsened the situation, according to the Governance, Procurement and Finance Investigating Committee report summary.

Without this certification, the government was unable to impose liquidated agreed damages for the project.

A subsidiary of this developer was also awarded the construction of the Politeknik Muadzam Shah in Pekan, which also failed to be completed.

As the report points out, the developer, with a paid-up capital of RM3 million, was not qualified to construct the Skudai Brigade 7 Headquarters, as the government had emphasised in its guidelines that the deal should be awarded to a company with stable finances. 

The report also states that the government ignored the advice of the Attorney-General's Chambers to cancel the Skudai Brigade 7 Headquarters project, or at least obtain "final costings and final drawings" before any contract was signed.

However, the contract was inked in July 1997, before the  "final costings and final drawings" were obtained.

The report also notes how the Economic Planning Unit ignored the Defence Ministry's suggestion to terminate the contract two years later.

"From 2002 to 2011, the interest of the government was not safeguarded, given that both bonds expired," it reads.

Gov't seeks billion of damages

According to the report summary: "The project failed to be completed until now, and the government is pursuing compensation in court." It also notes that the government is seeking RM1.48 billion in compensation, almost six times the original cost of the project.

This was not included in the RM500 million losses claimed by the defence minister in February.

The Governance, Procurement and Finance Investigating Committee, headed by former auditor-general Amrin Buang, was entrusted with investigating the land swap deals.

Mohamad's special functions officer Mohd Nasaie Ismail has lodged an MACC report over allegedly dubious elements in two of these projects, involving army camps in Hutan Melintang and Paloh.

Between 1997 and May 9 last year, those who served as defence ministers were: Syed Hamid Albar, Najib Abdul Razak, Abdullah Ahmad Badawi, Ahmad Zahid Hamidi and Hishammuddin Hussein.

Abdullah succeeded Mahathir as prime minister in 2003, and was replaced by Najib in 2009. - Mkini