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.

MP warns Parliament of exposure to Syed Mokhtar’s mounting debt

By Shannon Teoh
Malaysian Insider, June 20, 2012

KUALA LUMPUR, June 20 — The surging debt of companies under Tan Sri Syed Mokhtar al-Bukhary has led a federal lawmaker to warn of a repeat of the financial system’s collapse in 1998 that had then been spurred by the failure of Renong Bhd to fulfill its liabilities.

With China’s economy quickly cooling and the persistent euro-zone crisis looming over Malaysia’s export-oriented economy, Petaling Jaya Utara MP Tony Pua told Parliament that a recession may cause the logistics tycoon’s (picture) empire to fall.

“Syed Mokhtar’s group of companies has a combined debt of RM34.3 billion or more than 10 per cent of all local corporate bonds as of 2011 with only RM7.8 billion cash as of May 2012,” he said while debating the supplementary supply bill.

The DAP publicity chief also pointed out that debts raked up by Renong, led by Tan Sri Halim Saad, was about RM20 billion or seven per cent of loans in the banking system 14 years ago, far less than the risk posed by Syed Mokhtar’s four listed entities.

“But Renong’s bankruptcy caused hundreds of millions in losses to investors, the collapse of the stock market and a RM10 billion government bailout,” he also told a press conference.

He pointed out that just like Renong, which won government contracts for highway, rail, property and telecommunications deals, Syed Mokhtar now controlled power, water, port, rail and toll businesses as well as national carmaker Proton with billions in government-guaranteed debt.

The largest is MMC Corporation, in which Malaysia’s richest Bumiputera owns 52 per cent, which has an outstanding debt of RM24.2 billion, followed by DRB-Hicom (56 per cent stake), which raised RM3 billion to take over Proton, Pua said.

“Despite the expansiveness of his empire and debt load, the Prime Minister’s Department wants to privatise Penang Port to him,” he said, adding that there were also reports Syed Mokhtar would acquire Port Klang and Keretapi Tanah Melayu, chalking up even more debt.

Pua called on the government to guarantee “Malaysian taxpayers that in the event of default, their money will not again be used to pay for the follies of Barisan Nasional cronies.”

The Asian financial crisis was a period of financial instability that gripped much of Asia beginning in July 1997, and raised fears of a worldwide economic meltdown due to financial contagion.

By the end of 1997, credit ratings had fallen from investment grade to junk and the stock market and ringgit lost more than half their value, the latter falling from above 2.50 to under 4.57 to the US dollar.

It forced then prime minister Tun Dr Mahathir Mohamad imposed strict capital controls and a 3.80 peg against the dollar.

The opposition has repeatedly questioned Putrajaya’s policy of “contingent liabilities”, or Treasury-guaranteed loans for various “off-balance sheet” projects, pointing to the failure of initiatives such as the Port Klang Free Zone, which could cost taxpayers up to RM12.5 billion.

Malaysia’s contingent liabilities now stand at about RM117 billion, including the Klang Valley Mass Rapid Transit (MRT), Malaysia’s largest infrastructure project to date with a potential RM50 billion price tag.

No nod for Maju Expressway sale, Putrajaya tells Parliament

By Shannon Teoh

Malaysian Insider, June 14, 2012

KUALA LUMPUR, June 14 — The controversial RM1.7 billion sale of the Maju Expressway (MEX) appears to be scuppered for now after the federal government said it had not approved the sale of the concession held by Maju Holdings.

The Prime Minister’s Department said in a written reply to a parliamentary question by Petaling Jaya Utara MP Tony Pua yesterday that no permission has been given for the deal due to “several policy matters related to this highway concession that must be studied by the government.”

“The government has never given permission in relation to the proposal for the sale of the KL-Putrajaya Highway to EP Manufacturing Berhad (EPMB),” it said.

Maju Holdings had hoped to walk away with RM668 million in profit.

But the DAP publicity chief told The Malaysian Insider that “while it appears the deal is off, the answer only says it has not but does not say it will not give approval.”

EPMB had in March entered into an acquisition agreement with Maju Holdings to acquire MEX for RM1.15 billion and also assume debts totalling RM550 million, valuing the deal at a total cost of RM1.7 billion.

This would allow Maju Holdings, controlled by Tan Sri Abu Sahid Mohamed, to walk away with a “whopping” return of RM668 million, taking into account that the construction cost of RM1.3 billion was offset by a huge government grant of RM976 million.

MEX is 96.8 per cent owned by Maju Holdings, in which Abu Sahid controls a 91 per cent stake.

The opposition had promised the same month to buy back the MEX concession if it took over federal power after a coming general election and later called the deal a “rape” of taxpayers perpetrated by Tun Dr Mahathir Mohamad while he was still prime minister.

Pua had said the concession agreement was awarded “on a silver platter” to Abu Sahid in 1997 and revised in 2003 just prior to Dr Mahathir’s retirement.

“The rape of Malaysian taxpayers which made a billionaire out of Abu Sahid... is simply outrageous and unacceptable because out of his ‘profit’, RM976.7 million was paid for by Malaysian taxpayers,” he said, referring to the grant which was worth 74 per cent of the RM1.32 billion construction cost.

Pua said it was the former Umno president who made the decision to offer the RM976.7 million grant instead of a loan, allowing Abu Sahid to cash out quickly.

Penang says port privatisation will hurt Malaysia’s competitiveness

By Shannon Teoh

Malaysian Insider, June 19, 2012

KUALA LUMPUR, June 19 — Penang warned today Malaysia's competitiveness as a trade and investment destination will be hurt by plans to privatise Penang Port Sdn Bhd (PPSB), which it says will relegate it to a feeder port.

Chief Minister Lim Guan Eng told a press conference today that as Penang accounted for a quarter of Malaysia's trade and attracted the most manufacturing foreign-direct investment (FDI) of all states in the past two years, the move "made no sense at all."

"You can't afford to let Penang Port become a feeder port," the DAP secretary-general(picture) said, referring to Putrajaya's proposal to let Tan Sri Syed Mokhtar al-Bukhary's Seaport Terminal run the port.

His policy adviser Liew Chin Tong also added that "once you are a feeder port with no direct call, it will cost more and take longer to ship there."

"The current plan damages Malaysia's competitiveness by making it more difficult to do business in Penang, one of its main trade and industry centres," the Bukit Bendera MP said.

The plan has come under fire from Penang DAP lawmakers who say the logistics tycoon will strip assets from the island's port and prefer to boost his main transshipment hub Tanjung Pelepas Port (PTP) in Johor while condemning Penang Port into a feeder port.

They had also accused Penang Port Commission (PPC) chairman Datuk Seri Dr Chua Soi Lek last month of conspiring with Syed Mokhtar to stifle the economy of Penang by shelving plans to dredge the port’s channel, benefitting the MCA president's home state of Johor.

Penang resolved last week to reject the privatisation of PPSB to Syed Mokhtar, demanding Putrajaya undertake the promised RM353 million dredging project crucial for the port’s expansion and condemned Dr Chua for “selling out” the rights of Penang folk.

But the former health minister told the state government 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 Penang Port Commission (PPC) chief warned Lim Guan Eng’s administration that its decision to reject the privatisation of Penang Port Sdn Bhd (PPSB) and implied threat to derail the move “would just mean the whole port won’t work.”

“The privatisation is not to sabotage but to improve the efficiency of the port. They can fight the federal government or try to derail it but if they refuse to cooperate they will be sabotaging themselves,” he said last week.

But Lim insisted today that "no self-respecting government will agree to diminishing the status of its own port."

"We want to cooperate but we cannot agree to Penang Port being reduced to a feeder port," adding that the state owned "strategic portions" of land on which the port is sited.

Although the Bagan MP refused to say if his administration would take back its land, he said "it will be very difficult to move forward... the port will be disjointed where this part you have but another part you don't."

Putrajaya confirmed on Wednesday that Syed Mokhtar’s 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 has said the federal government's 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 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.”

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 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.

Liew has also rejected Dr Chua’s explanation, saying the former Labis MP 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 federal lawmaker 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.

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 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 wholly-owned by the finance ministry 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 PTP, 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 Lim 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.

Murky practices in rail tenders deter foreign firms, weekly reports

By Lisa J. Ariffin

Malaysian Insider, June 17, 2012

Since the late 1980s, Malaysia has preferred direct negotiations in awarding public works and the construction of infrastructure projects over public tender. — file pic

KUALA LUMPUR, June 17 — International companies are shying away from Malaysia’s rail sector due to less-than-transparent decisions in the tender process, The Edge weekly has reported.

According to an article in the business and investment weekly’s latest edition, “intense lobbying, glitches in the tender process and political favouritism” are among some of the reasons why foreign firms are snubbing rail tenders, a move which could deprive the country of a high-quality rail system.

The Edge reported that the response to open tenders has been poor purportedly due to the unfair selection of large contracts, adding that government officials have acknowledged the problem but have defended it as a relatively new phenomenon.

“It is a learning process, but the government is committed to the open tender system,” an unnamed official from a government transport agency that oversees the country’s rail networks was quoted as saying.

However, the weekly reported that international investors are not convinced of this assurance, with a representative of a company in pursuit of engineering contracts in Malaysia saying: “Most tenders start off well. It is in the evaluation process where things get very murky and you are often left feeling that it is not a level playing field”.

Another foreign consultant pointed out: “Not attracting bids only raises more questions about the tender process”.

The weekly added that since the late 1980s, Malaysia has preferred direct negotiations in awarding “public works and the construction of infrastructure projects over public tender because the government was keen to speed up the development of the country’s infrastructure”.

“But the practice has long been criticised because the awards have often favoured politically well-connected business groups.

“Critics also gripe that the negotiated tender practice is littered with failed projects that have resulted in costly government bailouts,” it reported.

It added that with contracts valued at more than RM1 billion up for grabs in the coming months, the loss of international investors would prove detrimental.

“More than RM70 billion worth of rail projects have been slated for the next decade, including the prized RM50billion Klang Valley MRT project,” it pointed out.

“Industry executives have noted the government needs to quickly deal with the grievances faced by international companies to salvage the open tender system,” it added.

Syabas wants compensation from Selangor govt

STAR, 15 June 2012

KUALA LUMPUR: Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) is applying for a court order that the Selangor Government owes it RM1.05bil in compensation for not increasing the water tariff.

Syabas is asking the Selangor government to pay the money with interest at the rate of 4% per annum from Nov 10, 2010 until it’s settled.

It has named Selangor state government as a sole defendant while the Malaysian Govern­ment was named as the third party in the lawsuit.

Selangor government’s lawyer Fahda Nur Ahmad Kamar said her client would appeal against the May 29 decision by the High Court to allow amendment to Syabas’ statement of claim.

“High Court judge Justice Mary Lim Thiam Suan had ordered parties to finalise documents including over issues to be tried and to file them by July 31.

“One issue is on water tariff rate,” she said yesterday.

In its amended claim, Syabas said it had never agreed to the postponement on the implementation of a new water tariff pending the restructuring of the water industry in Selangor.

Syabas claimed that it is entitled to be compensated by the Selangor government for the postponement.

The Selangor government said this suit has been filed in bad faith and is an abuse of process.

In a related development Selangor Barisan Nasional coordinator Datuk Seri Ir Mohd Zin Mohammad rebuked the state government for their handling of the critical state water supply issues, saying they were “insincere” and “arrogant”.

He said the Selangor Water Forum 2012 held on Wednesday, had not reflected the state government’s transparency in finding the best solution to problems, but instead had turned into a one-sided forum which ignored the voices of the people of Selangor and the related agencies.

“They should have invited all interested parties if they had honestly wanted to receive views which would solve their water problems for the good of the people of Selangor,” Mohd Zin said in a statement.

Malaysia Airlines fined $6m for price fixing

ABC News, June 14, 2012

The Federal Court has slapped a $6 million fine on Malaysia Airlines's air freight business for price fixing as part of an international cartel.

The Australian Competition and Consumer Commission (ACCC) says this latest fine brings the total penalties in the case to a record $58 million - the highest of any of its investigations.

The competition watchdog says Malaysia Airlines Cargo admitted to making deals with other international airlines on surcharges and fees to deliver freight from Indonesia.

The company, which changed its name last year to MASkargo, admitted to fixing prices on fuel surcharges, security surcharges and customs fees between 2001 and 2005, says ACCC chairman Rod Sims.

"This penalty sees the total penalties ordered against this international cartel increase to a record $58 million," Mr Sims said.

"These penalties are the highest generated by a single ACCC investigation."

The ACCC launched proceedings against the company in April 2010.

Other airlines involved in the case include Singapore Airlines, Cathay Pacific, Emirates, Air New Zealand, Thai Airways International and Garuda Indonesia.

KWAP assumption of MAS perp sparks concerns of high-risk bailout

By Shannon Teoh

Malaysian Insider, June 13, 2012

Abdul Farid Alias, deputy president & head, global wholesale banking, Maybank; Ahmad Jauhari Yahya, MAS Group CEO; and Datuk Azian Mohd Noh, KWAP CEO, at the signing ceremony yesterday. — Picture by Choo Choy May

KUALA LUMPUR, June 13 — The RM1 billion ploughed into Malaysia Airlines’ (MAS) fund-raising efforts by the civil service retirement fund (KWAP) has raised alarm bells as the statutory fund is taking up high-risk perpetual sukuk from the national carrier that recently posted record losses.

Opposition lawmakers have been quick to signal their concern with Datuk Seri Anwar Ibrahim telling The Malaysian Insider it was “irresponsible” of the government to use “funds held in trust as a bailout fund for sick companies.”

“These are savings for their future,” the opposition leader said, referring to the 1.3 million-strong public sector.

MAS is proposing to raise about RM9 billion through a combination of perpetual sukuks, commercial loans and government financial assistance.

MAS announced yesterday the pension fund had taken up the entire first tranche of RM1 billion of its perpetual sukuk, which does not carry a government guarantee, and will pay a 6.9 per cent coupon in perpetuity.

Perpetual bonds, also known as perps, are considered higher risk bonds as there is no guarantee of repayment and the issuer does not have to redeem them.

However, MAS, which is the world’s first corporation to issue an Islamic perp, has a call option to redeem the sukuk at the end of the 10th year and on each following periodic distribution date.

But DAP publicity chief Tony Pua told a press conference today “the government chose to put at risk decades of savings by our civil servants, digging deep into its reserves.”

“Should anything happen to MAS’ ability to repay its debts, then the government will be forced to conduct bailout after bailout,” the Petaling Jaya Utara MP said of the deal which places the RM1 billion loan by KWAP at the lowest priority of repayment.

MAS’ move to issue a total of RM2.5 billion in perpetual sukuk allows the troubled airlines, which posted a record RM2.5 billion loss for the last financial year, to raise money without affecting its gearing ratios as it is treated as equity under Malaysian accounting conventions.

MAS, which has posted consecutive losses for the past five quarters, is proposing to raise about RM9 billion through a combination of perpetual sukuks, commercial loans and government financial assistance.

Datuk Seri Anwar Ibrahim today told The Malaysian Insider it was “irresponsible” of the government to use “funds held in trust as a bailout fund for sick companies.” — file pic

Interest in perpetual bonds has risen in the region, prompting the Monetary Authority of Singapore to express concern over the demand for the higher risk fixed income instruments.

The Thai SEC (Securities and Exchange Commission) also issued a warning earlier this month for investors to fully understand the details of subordinated debentures, which is corporate debt that ranks as a low priority for repayment.

MAS said that the perpetual junior sukuk will be recognised not as debt but as equity, and payment obligations will at all times be junior to the claims of present and future creditor of MAS but ahead of other share capital instruments.

Interest in perpetual bonds has grown as companies look to take advantage of the opportunity to raise funds without any impact on gearing ratios and investors look for higher payouts in the current low interest-rate environment.

Reuters reported that more perpetual bonds, which are uncommon in Malaysia and mostly issued by banks, were sold in Singapore in the first three months of 2012 than in the previous 15 years.

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.