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Government bails out debt-laden Port Klang

Government bails out debt-laden Port Klang

Kuala Lumpur: The government of Malaysia will give a soft loan to the country's main port authority to rescue it from $1 billion in debt related to a duty-free port project, the Wall Street Journal reports.

The scandal centers on the Port Klang Free Zone, a much-hyped shipping area that opened in western Malaysia last year. Its original cost of 1.85 billion ringgit (US$531.3 million) ballooned to 4.2 billion ringgit.

However, the total amount committed to the project by its 30 investors is only 725 million ringgit.

"Because the cost of PKFZ is so high, the government has agreed to give a soft loan to [Port Klang Authority]," the Transport Ministry said. A soft loan typically has an extended grace period in which only interest is due, and the interest charged is often lower than conventional bank loans.

The project's financial woes became apparent after the Dubai-based Jebel Ali Free Trade Zone Authority said last month it was pulling out of a pact to manage the zone for what it called strategic reasons.  [24/08/07]

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