Syed Mokhtar’s Seaport must bear cost of dredging Penang Port, says MOT

By Shannon Teoh

Malaysian Insider, June 13, 2012

KUALA LUMPUR, June 13 — Putrajaya has confirmed that Tan Sri Syed Mokhtar al-Bukhary’s Seaport Terminal has won the bid to take Penang Port Sdn Bhd (PPSB) private and must foot the bill of dredging work deemed crucial to making the port competitive.

The Transport Ministry said in a written reply to a parliamentary question by Bukit Mertajam MP Chong Eng yesterday that negotiations with the company controlled by the logistics tycoon that runs Johor Port are currently ongoing.

An aerial view of Penang Port.

The Penang-based DAP lawmaker, one of three who have accused MCA president Datuk Seri Dr Chua Soi Lek of a “sinister plot” to privatise the port in the interest of his home state of Johor, also asked if “dredging Penang Port will be a condition of the contract.”

But Transport Minister and MCA secretary-general Datuk Seri Kong Cho Ha replied that “one of the conditions in the privatisation agreement is that the successful company must bear the cost of dredging Penang Port” without specifying if Seaport must undertake the work in question.

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 Penang Port Commission (PPC) chairman 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.

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 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 Kon Yeow, said the Johor-born former Labis MP was conspiring with Tan Sri Syed Mokhtar al-Bukhary to benefit his home state at Penang’s expense and relegate Penang Port to a feeder for the logistics tycoon’s Tanjung Pelepas Port (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.

He also told The Malaysian Insider it did not make sense for any bidder not to improve the port’s performance as “it is not doing as well as it should be and has accumulated a debt of around RM1.3 billion.”

Tan Sri Syed Mokhtar al-Bukhary. — file pic

“How will the new owner settle the outstanding debt without deepening the harbour? It does not make sense to assume the liabilities and not dredge. It only makes sense to DAP but it makes no sense to any businessman,” he said.

But several shipping industry players expressed doubt over whether Syed Mokhtar, who has emerged as a frontrunner to take Penang Port private, will deepen its channel at his own cost.

Industry players, who declined to be named, told The Malaysian Insider it would not make economic sense for a private player to dredge the port’s channel, especially for Syed Mokhtar 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 as Port 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.

One of them, Liew Chin Tong, also rejected Dr Chua’s explanation, saying the former health minister was trying to project a “false image of Penang Port as a loss-making outfit when the debt is mostly due to the RM1.1 billion investment.”

The Bukit Bendera MP 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 also 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.

Three DAP MPs have accused the Johor-born MCA leader Dr Chua of conspiring with Syed Mokhtar to benefit his home state at Penang’s expense. — file pic

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.

Although Dr Chua also insisted that PPC has not been informed of any winning bid, the elected representatives challenged him to deny knowledge of a Cabinet decision on November 25 to endorse Syed Mokhtar’s Seaport Terminal.

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 Guan Eng 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, which Liew said had grown to handle 1.3 million TEUs last year.

Penang has complained that federal ownership of the port operator has worsened its financial position, with net debt rising from RM148 million in 2004 to RM832 million in 2009 — a 462 per cent increase in five years.