POLITICAL and business interests drove land swap deals at Ministry of Defence (Mindef), a special audit report revealed.

The report found that only two out of the 16 land-swap development projects – Puspahanas and TUDM facility in Bukit Banang, Johor – were part of Mindef’s development master plan.

“The other 14 projects were not identified as priorities by Mindef,” an executive summary of the report said.

The special audit report, which was prepared by former auditor-general Ambrin Buang, was tabled by Defence Minister Mohamad Sabu in the Dewan Negara today, where he read out the executive summary.

The 59-page summary is downloadable from the Mindef website. It has redacted the names of private companies involved in the land swaps.

The summary states that the audit reviewed 16 land swaps covering an area of 1,180ha acres valued at RM4.756 billion. The audit, done between July and December 2018, looked at transactions dating back to 1997.

It found that 10 out 16 of the swaps were unsolicited proposals mooted by private sector firms, which identified the land they wanted in exchange for development projects for Mindef elsewhere.

“As most of the projects were not planned for by Mindef, there were cases where the project scope had not even been finalised when it was brought to the cabinet for approval (in principle).”

The other issues highlighted include inconsistent land valuation, projects that did not fulfil Mindef’s needs, lopsided contracts that did not protect the government’s interests and lands transferred to developers before the project was completed.

“As a result of that, the time taken between the cabinet approval (in principle) and the agreement date spanned a period of eight years.

“The delays in finalising meant that Mindef could not obtain its facilities and suffered losses in terms of higher construction costs and changes to the land valuation.”

The government suffered around RM515.21 million in losses due to delays, supplementary contracts and poor land valuation.

Mohamad first said in February that the government lost RM500 million in the land swaps.

Project scope changed

It was also found that the uncertainties and delays also allowed private companies to take advantage of the government by adding to the project scope if the value of the land (to be exchanged) appreciated. 

“In the development of TUDM’s Squadron 323 facility from Bukit Lunchu to Bukit Banang in Johor and Pahang, a company requested Mindef to increase the job scope by RM40.7 million after the land valuation increased by RM54.7 million.”

The report summary said this led to “overbuilding”.

The land valuation is done by Valuation and Property Services Department.

Political interference was also found in 13 of the land swaps.

“Checks with the Election Commission (EC) confirmed the committee’s findings that the army camps in Bera, Segamat, Paloh and Hutan Melintang were built for political purposes and to move army voters before GE14.

“The presence of EC at several camps proved that the construction of these camps was a strategy to win GE14 as these were not strategic areas for the Mindef.”

The report also noted that 12 of the projects were through direct negotiations while many of the private firms picked for the jobs did not undergo proper due diligence.

“This resulted in doubtful technical abilities whereby the firm had no expertise nor experience to develop the projects. In other cases, the companies ran into financial difficulties.”

Out of the 16 projects, only five have been completed while two were still being constructed. One was termed as failed while the remaining eight are in various stages of negotiations. 

The objective of the audit is to identify weaknesses and negligence in the deals and to recommend corrective actions. 

The land-swap system occurs when government land is privatised in exchange for the construction of facilities.

In 1997, the cabinet decided that land used to swap for facilities would only be given 99-year leases instead of freehold. – May 9, 2019.