Penang Port’s good health raises more questions over privatisation

Malaysian Insider, 23 June 2012


KUALA LUMPUR — Penang Port Sdn Bhd’s (PPSB) sixth consecutive annual profit last year and a plan to boost incoming cargo by 60 per cent in three years have led lawmakers from the island to pose further questions of Putrajaya’s plan to privatise the port.


PPSB managing director Datuk Ahmad Ibnihajar had said yesterday PPSB made a net profit of RM15 million last year, contradicting Penang Port Commission (PPC) Chairman Datuk Seri Dr Chua Soi Lek’s assertion that it only earned RM180,000.


He also said that dredging the port to 14.5 metres to approach channel depth from the current 11.5 metres, a project that has been shelved by the federal government, would be a key driver to increase transshipment services from five to 20 per cent.


“The deepening works will enable PPSB to attract more mainliners and larger vessels from the Middle East, China and India. PPSB is expected to handle two million TEUs (20-foot equivalent units) by 2015 from 1.2 million TEUs in 2011,” he said, adding that the port would likely handle 1.278 million TEUs this year.


This led two Penang MPs today to call for Dr Chua and the federal government to explain why it was refusing to carry out the dredging as promised earlier and the rationale for privatising a port which is currently bringing in profits for a company wholly-owned by the finance ministry.


“It is time for Chua to explain to the Malaysian public on Ahmad’s assertions,” said Chow Kon Yeow and Liew Chin Tong in a joint statement, who have previously accused the MCA president of conspiring with the logistics tycoon in a “sinister” plot to undermine Penang’s economy.

“And whether Chua’s intervention on behalf of Tan Sri Syed Mokhtar al-Bukhary has ruined Penang Port’s viability and expansion plan,” added the two lawmakers from DAP, which controls the state government.

Liew also told The Malaysian Insider “Chua has been painting a picture of Penang Port being a loss-making outfit and unviable so privatising it will appear financially prudent on the part of the federal government.
“Ahmad’s response now raises doubt over the rationale of the privatisation exercise,” he said.

Dr Chua had last week told Penang not to “sabotage itself” by refusing to cooperate with the federal government’s plan to privatise Penang Port, a move he insists would increase its competitiveness.


The PPC chief warned Lim Guan Eng’s administration that its decision to reject the privatisation of PPSB and implied threat to derail the move “would just mean the whole port won’t work.”


The Penang government has resolved to reject the privatisation of PPSB to Syed Mokhtar’s Seaport Terminal and demanded Putrajaya undertake a promised RM353 million dredging project crucial for the port’s expansion.


Lim, who is also DAP secretary general, also warned that the privatisation plan would be “disjointed” as “strategic portions of land” in the port belong to the state.


Dr Chua has also repeatedly said that while he did not know if dredging was a pre-requisite of the privatisation deal, it would not make good business sense to take on PPSB’s RM1.3 billion debt without making the necessary investment to build the business.


“But dredging is not the sole factor that will expand Penang Port into a transshipment hub. It will take some time. Penang thinks if you dredge deep enough, then everyone will come but it doesn’t work like that,” he said.


The former health minister pointed out that PPSB still had a long way to go, claiming it only made about RM180,000 in profit last year as compared to Seaport Terminal’s Johor Port which made RM185 million.

Putrajaya confirmed last week Seaport Terminal had won the bid to take Penang port private but said the firm must foot the bill of dredging work although it failed to specify if dredging would be compulsory under the concession.

Dr Chua had last weekend brushed aside the accusation that he is masterminding a plan that will see Penang Port being relegated to a feeder port, insisting that the decision was made by the prime minister.

The PPC chief was reported as saying that any decision is at the discretion of Datuk Seri Najib Razak and the matter has been discussed for years with the intention of increasing the efficiency of the port.

But Datuk Seri Ong Tee Keat, who was transport minister from March 2008 to June 2010, had said last month the controversial decision to privatise Penang Port only materialised after Dr Chua was appointed chairman of its regulatory body in November 2010.

“Yes, because the government had no plans to privatise when I was transport minister,” Ong had told The Malaysian Insider when asked if plans to privatise the port, which has seen the federal government pour in RM1.1 billion in capital expenditure between 2004 and 2009, only came about after Dr Chua’s appointment.


Several DAP lawmakers from Penang had also accused Dr Chua last month of trying to stifle the economy of the island state controlled by their party by shelving plans to dredge the port’s channel.

Three MPs, including Penang DAP chief Chow, said the Johor-born former Labis MP was conspiring with Syed Mokhtar to benefit his home state of Johor at Penang’s expense and relegate Penang Port to a feeder for the logistics tycoon’s PTP.


But Dr Chua responded by saying the decision not to embark on the RM350 million dredging was made collectively by the National Economic Council (NEC) as the port is set to be privatised by the Finance Ministry (MoF) and the cost should be borne by the concessionaire instead.

But several shipping industry players expressed doubt over whether Syed Mokhtar will deepen its channel at his own cost when he also controls the rival PTP.

“Definitely it makes more sense to turn Penang Port into a feeder port instead of splitting up resources and competing with yourself as well asPort Klang,” said a former top port official.

The Penang DAP lawmakers have said that the dredging was needed to allow bigger ships measuring 8,000 TEUs (twenty-foot equivalent units) to call on the island state along the Straits of Malacca, the world’s busiest waterway.


Bukit Bendera MP Liew has warned that Syed Mokhtar may “engage in asset stripping by bringing the seven units of Super Port Panamax cranes from Penang to PTP” and replace them with six smaller quay cranes from Johor Port, run by the tycoon’s Seaport Terminal.

The DAP strategist said that with the smaller cranes unable to handle ships measuring 4,000 TEUs and above, Syed Mokhtar would have no reason to carry out dredging work around the Penang channel.

The Penang DAP MPs have repeatedly called for the privatisation exercise to be aborted after Dr Chua’s rationale that the government should not spend on an asset it is planning to sell.


They said that following the same logic, the RM1.1 billion — or over three times the cost of dredging — spent over five years up to 2009 to double the port’s capacity to two million TEUs meant that Putrajaya should scrap the sale altogether.

The Malaysian Insider reported in December 2010 that the Cabinet had approved the MoF’s sale of PPSB to PTP despite competitive bids from other businessmen and also the Penang government, which owns the port land.


Penang Chief Minister Lim wrote to Prime Minister Datuk Seri Najib Razak in early December 2010 to put in a bid to run the port, which has declined since the MoF took over in 1994.


The port lost its free-port status in 1974 but Najib’s Barisan Nasional (BN) is offering to reinstate its free-port status if the federal coalition regains Penang which it lost in Election 2008.


PPSB is a wholly-owned subsidiary of MoF Inc while the regulator, PPC, also reports to Putrajaya through the Transport Ministry.

It is learnt that cargo volumes at Penang Port have failed to match that of Port Klang and Tanjung Pelepas, growing only 5.8 per cent a year between 1995 and 2009, against Klang which grew 14.2 per cent annually.


PTP began in 1999 but now handles more than six million TEUs a year, five times more than Penang Port.
Penang has complained that federal ownership of the port operator has worsened itsts financial position, with net debt rising from RM148 million in 2004 to RM832 million in 2009 — a 462 per cent increase in five years.