Allegations abound: are nepotism and corruption behind the Sabah coal plant?

Allegations of government corruption and corporate kick-backs are swirling around a planned 300 MW Chinese coal plant in the Malaysian state of Sabah.

While the plan to build the coal plant in Lahad Datu Bay has come up against strong and unrelenting grassroots opposition, the federal government continues to largely turn a deaf ear to opposition, arguing that the energy plant is necessary to power Sabah and stop blackouts. However, critics say the coal plant—which is to be built on the edge of the Coral Triangle and 20 kilometers from Tabin Wildlife Reserve—will damage fish stocks with chlorine and thermal discharges, upend the lives of locals dependent on fishing, and devastate eco-tourism in the region. In addition, the coal plant goes directly against Prime Minister Najib Tun Razak's agreement at Copenhagen to reduce the country's carbon emission intensity by 40 percent by 2020.

Despite these clear concerns—and increasing opposition—sources who spoke on the condition of anonymity say the plant has continued to move ahead due to government nepotism, corruption, and kick-backs. In fact, sources say the federal government has already paid out nearly a quarter of the cost of the coal plant to the contracted company, China National Electric Equipment Company (CNEEC), and that at least one official has seen a significant kickback from this.

Woe to journalists

Malaysia is not an easy place to find answers about behind-the-doors government deals. In fact, finding answers in some situations can actually be against Malaysian law.

The circle denotes the coal plant. Tabin Wildlife Reserve is to the west, Semporna (Tun Sakaran Marine Park) is to the south. Map courtesy of Green SURF.
"Malaysia has some laws that make it almost impossible for journalists to find out stuff about people in power. Reporters here can be charged if they do get hold of info, and if it is published," a source told mongabay.com, adding that such charges fall under Malaysia's Official Secrets Act. A citizen can also be held for up to 60 days without seeing a courtroom if it's said they threatened national security, according to the Internal Security Act.

Newspapers are also tightly tied to the government in Malaysia. Under the Printing Presses and Publications Act, newspapers must be issued annual permits by the Malaysian Home Ministry. If a paper reports on something the government is unhappy with it can order the paper to close down within 24 hours.

"This is why investigative journalism is weak in Malaysia," another source explains.

When asked why Malaysian newspapers are ignoring these connections, another source stated simply, "No one dares".

Given the difficulty of obtaining information that the government doesn't want aired, Malaysians are often left with speculation, rumor, and hearsay to offer explanations behind their government's action. This is the case with the Sabah coal plant.

The coal plant will be built on the northern edge of Lahad Datu Bay. Photo by: Cede Prudente.
"It is like an open secret, but no one can confirm," a source who wishes to remain anonymous said.

Is corruption behind the Sabah coal plant?

Much of the current speculation centers around Tan Sri Leo Moggie, the chairman of Tenaga Nasional Berhad (TNB) and former MP for 30 years. TNB is the federal energy company which is pushing the coal plant. When a second location for the coal plant was rejected—the plant has been moved once before—Leo Moggie took out an ad arguing in several newspapers in Sabah arguing for a coal plant.

"The irony is he signed off simply as 'Leo Moggie.' there was no mention of him being the chairman [of TNB], or that TNB wanted this plant. This of course, raises questions."

Locals have been told that Leo Moggie received a sizable kickback from the deal with China National Electric Equipment Company (CNEEC) for the coal plant.

"It was speculated that a payment of RM 400 millions been paid upon agreement signed. Some said half of that amount had been kicked back to [Leo Moggie]. One minister said only 10 percent. God knows," a source says.

In addition to this allegation, sources say that the deal for the coal plant is aiding Leo Moggie's family.

"We suspect his family members control the import of coal from Kalimantan," said a source. According to published plans, the coal plant will be powered by mines in Indonesian Borneo.

Another source adds that, "I have heard also that his son, Michael Kallum Moggie, is involved in some coal mine deals in Kalimantan."

Several people contacted in connection with this story stated that while nepotism was officially frowned upon in Malaysia, it is commonly practiced.

To date Malaysian newspapers have not reported on any of these allegations. However, given that Leo Moggie is a board member of the New Strait Times, Malaysia's biggest newspaper, this is perhaps not surprising.

Sources also say that the Malaysian government has already paid China National Electric Equipment Company (CNEEC) 400 million Malaysian ringgit ($125 million) in order to build the power plant.

"They probably signed it thinking that the project would be approved. Coal is after all listed in the country's five-fuel policy," said a source.

Yet the price of the coal plant continues to rise. When first proposed it was estimated a RM 1.1 billion then RM 1.3 billion for the second site, and now RM 1.7 billion. When asked why the plant had jumped RM 400 million from one site to the next, the sources had different answers. One said the rising price of raw materials was largely to blame, while the other said the money was used "[by the government] for buying favors or supports, even speculated for the [Barison Nasional, Malaysia's ruling party] campaign of last election."

To date, many details of the project remain obscured by government and corporate silence. No one knows if the total cost includes the cost of building a transmission line, or the route this transmission line will follow, though it could very possibly cut through rainforest. While the coal will be supplied by TNB Fuel Supplies, officials have also not shared which coal mines in Kalimantan will supply the plant or how long they plan to export coal from Indonesia. Environmentalists fear that if the plant goes ahead, it will spur coal mining in Sabah's own backyard, upending the state's last pristine ecosystems.

According to local activists, it doesn't have to be this way. Compelled by social, environmental, and economic concerns, the organization Green SURF (Sabah Unite to Re-Power the Future) recently hired the Renewable and Appropriate Energy Laboratory (RAEL) at the University of California Berkeley to conduct an energy audit for Sabah. The audit found that power from either biomass or hydropower could provide the same power at a competitive price with coal. Geothermal and solar were slightly more expensive, but greener options.

However, if the allegations of government corruption are true—and we may never know for certain—then convincing the government to pursue a different course may prove next-to-impossible even for the most impassioned activists.

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