KUALA LUMPUR, May 19 — Tun Dr Mahathir Mohamad today said action should be taken against all those involved in Sime Darby Berhad’s cost overruns for the Bakun project and not just chief executive Datuk Seri Ahmad Zubir Murshid.
Last Tuesday, Ahmad Zubir was asked by the board to take a leave of absence prior to the expiry of his contract in Nov 26, 2010 after the discovery of RM964 million in cost overruns from four energy and utilities projects, including the Bakun dam project, racked up by the company during his tenure.
“Is it only the CEO who was responsible? Who are the others who were involved with the project and failed to see that the cost overrun was very high and the project has been delayed by almost 3 years.
“I think responsibility should be shared. I was told of this cost overrun and delay three years ago,” the former prime minister wrote in his weblog today.
Sime Darby chairman Tun Musa Hitam said he will resign if necessary following the conglomerate’s huge losses of nearly RM1 billion for this quarter arising from cost overruns in four projects.
“Resignation is no big deal... When I have made my own assessment, if necessary. Yes, I am prepared. Needs to be sacked? Yes. Needs to be suspended? Yes. The whole board or anything,” he said when responding to concerns about the board of directors’ failure in supervision.
However, Musa, who resigned as Dr Mahathir’s deputy in 1986, said he would leave it to the shareholders to decide whether or not members of the board should be made to resign.
Dr Mahathir said the government’s response to the debacle brought up the question whether the government conglomerate had learnt lessons and begun to look at the other major projects it was handling?
“I think the people are entitled to know when a public company loses over a billion ringgit. Proton lost only RM500 million so that is acceptable. Is losing RM1 billion also acceptable?” he asked.
He noted that Zubir has been dismissed as group president and chief executive officer because of cost overrun in the Bakun project amounting to RM900 million although government compensation of RM700 million meant the overruns are bigger.
“So total cost overrun would be almost equal to the bidded (sic) price of RM1.8 billion. The price has been doubled. How come the bid is so low? I would think the engineers would know that they would not be able to build at RM1.8 billion.
“Who are the consultants in Sime Darby? How come they okayed such a low cost for the project?” the country’s longest-serving prime minister asked.
Dr Mahathir pointed out that the Sarawak government had promised the Bakun hydroelectric project would be the biggest power project with the cheapest electricity price. It was planned to produce 2,400MW of power, of which 1000MW was for Sabah and Sarawak.
He said the excess power could be transmitted to the Malay peninsula but required 600 miles of undersea cables, which was unprecedented as the longest cables were just 200 miles, leading the government to look for other solutions.
Dr Mahathir then explained the rationale for bringing an aluminium smelter from Dubai which had agreed to take a 30 per cent stake in the hydro power plant and a major share in a 300,000 tonne aluminium smelter, which paid RM90 million as a 10 per cent deposit and 30 per cent share in the power plant.
“It was a win-win investment for them. When power price goes up they may make less money from the smelter but the profit from power generation would be greater. If the power price goes down they would profit less from power sales but more from smelting,” he said, lamenting that his successor returned the deposit after he stepped down in October 2003.
He said the project was then handed over to Sime Darby with a mainland Chinese partner at bid so low that it astounded even a Malaysian bidder who said it was impossible at that price.
“I could not intervene for fear of being accused of cronyism as I knew the Malaysian contractor very well. In fact he built the first phase of the project, the coffer dam and the spillway and had completed it without cost overrun as far as I am aware.
“Sometimes, and I am not saying this of the contractor for the main project; sometimes very low price would be proposed so as to win the contract. Then as the construction is in progress there would be cost overruns and eventually the total cost would be far higher than the price of the bid.
“The owner of the project would be asked to pay for the new cost,” Dr Mahathir added
Last Tuesday, Ahmad Zubir was asked by the board to take a leave of absence prior to the expiry of his contract in Nov 26, 2010 after the discovery of RM964 million in cost overruns from four energy and utilities projects, including the Bakun dam project, racked up by the company during his tenure.
“Is it only the CEO who was responsible? Who are the others who were involved with the project and failed to see that the cost overrun was very high and the project has been delayed by almost 3 years.
“I think responsibility should be shared. I was told of this cost overrun and delay three years ago,” the former prime minister wrote in his weblog today.
Sime Darby chairman Tun Musa Hitam said he will resign if necessary following the conglomerate’s huge losses of nearly RM1 billion for this quarter arising from cost overruns in four projects.
“Resignation is no big deal... When I have made my own assessment, if necessary. Yes, I am prepared. Needs to be sacked? Yes. Needs to be suspended? Yes. The whole board or anything,” he said when responding to concerns about the board of directors’ failure in supervision.
However, Musa, who resigned as Dr Mahathir’s deputy in 1986, said he would leave it to the shareholders to decide whether or not members of the board should be made to resign.
Dr Mahathir said the government’s response to the debacle brought up the question whether the government conglomerate had learnt lessons and begun to look at the other major projects it was handling?
“I think the people are entitled to know when a public company loses over a billion ringgit. Proton lost only RM500 million so that is acceptable. Is losing RM1 billion also acceptable?” he asked.
He noted that Zubir has been dismissed as group president and chief executive officer because of cost overrun in the Bakun project amounting to RM900 million although government compensation of RM700 million meant the overruns are bigger.
“So total cost overrun would be almost equal to the bidded (sic) price of RM1.8 billion. The price has been doubled. How come the bid is so low? I would think the engineers would know that they would not be able to build at RM1.8 billion.
“Who are the consultants in Sime Darby? How come they okayed such a low cost for the project?” the country’s longest-serving prime minister asked.
Dr Mahathir pointed out that the Sarawak government had promised the Bakun hydroelectric project would be the biggest power project with the cheapest electricity price. It was planned to produce 2,400MW of power, of which 1000MW was for Sabah and Sarawak.
He said the excess power could be transmitted to the Malay peninsula but required 600 miles of undersea cables, which was unprecedented as the longest cables were just 200 miles, leading the government to look for other solutions.
Dr Mahathir then explained the rationale for bringing an aluminium smelter from Dubai which had agreed to take a 30 per cent stake in the hydro power plant and a major share in a 300,000 tonne aluminium smelter, which paid RM90 million as a 10 per cent deposit and 30 per cent share in the power plant.
“It was a win-win investment for them. When power price goes up they may make less money from the smelter but the profit from power generation would be greater. If the power price goes down they would profit less from power sales but more from smelting,” he said, lamenting that his successor returned the deposit after he stepped down in October 2003.
He said the project was then handed over to Sime Darby with a mainland Chinese partner at bid so low that it astounded even a Malaysian bidder who said it was impossible at that price.
“I could not intervene for fear of being accused of cronyism as I knew the Malaysian contractor very well. In fact he built the first phase of the project, the coffer dam and the spillway and had completed it without cost overrun as far as I am aware.
“Sometimes, and I am not saying this of the contractor for the main project; sometimes very low price would be proposed so as to win the contract. Then as the construction is in progress there would be cost overruns and eventually the total cost would be far higher than the price of the bid.
“The owner of the project would be asked to pay for the new cost,” Dr Mahathir added
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