Progressive premonition of Penang Port privatisation

The controversy of the recent announcement of Seaport Terminal (Johor) Sdn. Bhd. win of the bid to the take over and privatize Penang Port has grown into falsehood sentiments, without being objective.

Syed Mokhtar wins bid to privatise Penang Port

Posted on 13 June 2012 – 08:25pm
Last updated on 14 June 2012 – 08:48am

Hemananthani Sivanandam
newsdesk@thesundaily.com

KUALA LUMPUR (June 13, 2012): Seaport Terminal (Johor) Sdn Bhd owned by tycoon Tan Sri Syed Mokhtar al-Bukhary has won the bid to privatise the Penang Port.

The Transport Ministry, in a written reply said that the company had won the bid via its equity ownership in Penang Port Sdn Bhd.

“The negotiations with the company on the privatisation agreement however is still ongoing,” said the ministry in reply to Chong Eng (DAP-Bukit Mertajam).
Chong Eng had asked the ministry on the latest update of the port’s privatisation and which party had won the bid to do so.

The ministry further said that one of the conditions to be included in the privatisation agreement was that the successful company must bear the cost of dredging Penang Port.

It was reported that the RM351 million dredging scheme for the northern part of the Penang channel has yet to take off although the amount had been allocated under the 10th Malaysia Plan.

The project to deepen the channel from the current 11.5m to 14.5m is vital to bring large transshipments into the port.

It was reported that the cabinet had on Nov 25 last year had endorsed Syed Mokhtar to take over the Penang Port in a privatisation exercise.

The Finance Ministry had also on March 29 confirmed that Seaport Terminal, which is a holding company for the Port of Tanjung Pelepas (PTP) in Johor, had initiated due diligence process on Penang Port.

But Penang Port chairman Datuk Seri Dr Hilmi Yahaya has maintained that there has been no decision, adding that: “If it is privatised we would be the first to know.”

It was also reported that there were concerns if Syed Mokhtar would turn 225-year old Penang Port into a feeder port for his operations in Johor if his privatisation bid for the former was succesful.

******************

The Penang Port Commission Chairman Dato’ Seri Dr Chua Soi Lek saw the strategic advantage of Seaport Terminal’s ability to bring the Penang Port into better position and DAP’s opposition on the matter isn’t being objective but instead, ‘self sabotaging’.

Soi Lek: Penang self-sabotaging by rejecting port privatisation

By Shannon Teoh
June 16, 2012

Chua Soi Lek asserts the plan to privatise Penang Port is to improve the efficiency of the port. – file pic

KUALA LUMPUR, June 16 — Datuk Seri Dr Chua Soi Lek has 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 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,” the MCA president told The Malaysian Insider last night.

The Penang government resolved yesterday to reject the privatisation of Penang Port Sdn Bhd (PPSB) to logistics tycoon Tan Sri Syed Mokhtar al-Bukhary and demanded Putrajaya undertake a promised RM353 million dredging project crucial for the port’s expansion.

Lim, who is also DAP secretary general, also said yesterday that the state executive council had resolved to condemn Dr Chua for “selling out” the rights of Penang folk.

He said it was unlikely Syed Mokhtar’s Seaport Terminal Sdn Bhd would channel resources into PPSB as the latter would prefer to boost his main transshipment hub Tanjung Pelepas Port (PTP) in Johor while “condemning” Penang Port into a “feeder port.”

“There was no consultation with the state government. Of course, they can go ahead and carry out the port operations without consulting the state but do not forget — some of the pieces of land there are owned and belong to the state government,” the Penang chief minister had told a press conference in George Town.

But Dr Chua dismissed the implied threat, saying Penang did not own a large chunk of the land.

The former health minister also repeated his stand 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 Labis MP 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 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 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 Kon Yeow, said the Johor-born former minister 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.

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.

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.

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 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 Lim said had grown to handle 1.3 million TEUs last year.

******************

Operationally, Penang Port is not economical. The margin Penang Port makes per freight weight tonnes (FWT) is below industry standards. In fact, there are rooms to maneuvre upwards for the tariff being charged in Penang Port. It is obvious that Penang Port needs new management and operational methods. There is a need to revitalize the port financially and operationally.

Penang Port is not a feeder port. In fact, Several international shipping lines such as Evergreen, Wan Hai, Yang Ming and OOCL which currently operate direct services to Penang Port.

The statistics are evidently clear that Penang Port has it potential to be a major port instead of what the Opposition claimed what it will be become, when Seaport Terminal takes over. 50% of vessel calls into Penang Port are direct calls. 60% of current volumes at Penang Port are direct shipment which was not feedered through other ports

The new owner cannot afford to allow Penang Port to be neglected and relegated to be a feeder port. One of the way to achieve this is to vigorously grow the business and volumes of the port. This objective will not be achieved by way of turning the port into feeder port
The claim that Penang Port will only be able to attract direct services after the channel is deepened is not true. As with current operations, it is already able to serve the vessels that called directly into the port from destinations abroad.

Financially, Penang Port is in bad shape with borrowing amounting more than RM1.2 billion. The CAPEX against FWT of Penang Port is 13 times the industry averages.

The fact is that, Seaport Terminal proven itself with PTP. It became a worthy opponent to the Singapore Port. PTP was developed from a greenfield, to challenge directly against one of the busiest and high popular entreport in the world. Today after thirteen years operations, the amount of TEUs handled by PTP is one third of Port of Singapore. That alone is a testimony why Seaport Terminal should be given the opportunity to turn around Penang Port.

Seaport Terminal could create subsidiaries for peripheral activities that could be created from the operation of Penang Port. This will be an added revenue. This is important as currently, Penang Port’s revenue per employee is low. Some of these people probably needed to be redistributed for other operations, especially those which can bring better productivity.

The privatization of Penang Port is not without financial commitment to Seaport Terminal and the Al Bukhary Group. The argument of Al Bukhary Group is over geared should be mitigated with the Group’s performance so far. Many of the acquisition made under the Group was on plc which are laden with debts. Examples are DRB Hicom Group, Pernas Hotels, BERNAS and MMC. Slowly, all these plcs were turned around and operationally making healthy profits and cash position which enable all these financial commitments be served productively.

So far, all the acquisitions made under Al Bukhary Group not only still remained within the group without any of them being hived off, but most of these plcs shown tremendous improvements and performance.

Having that argument, one might stop to think which corporation is willing to undertake Penang Port as is and develop it further to greater position, by committing into financial commitment twice; once for the privatization and the other one for the operation and financial revitalization, which include more CAPEX.

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Published in: on June 26, 2012 at 09:00  Comments (9)  

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9 CommentsLeave a comment

  1. Bro.
    Tan Sri Halim told me he give to UMNO johore 20percent shares in UM Land.He was suprise the block of shares end up in Syed mokhtar name.How come.

    • I say, Hamid, if you want readers to believe you, you need to give more particulars than those. Anybody can say so and so said such and such but what proof was there that the 20% was given to UMNO Johore, or was given at all? And what evidence was there that whatever UM shares Syed Mokhtar has/ had, 20% of it was the one given to UMNO Johore? Come come, now, Hamid.

  2. I am not familiar about port operations, shipping traffic or economics. I just wanna say that from what are said above, I get the feeling that the privatizing of Penang port is a good move and Syed Mokhtar has the means to do it.

    DAP is of course the incorrigibly loud-mouthed, glib, quick-on-the-draw, shoot-from-the-hip type, oppose for the sake of opposing fellows. Just disregard what they say. The sun rises in the west, some of them might even say.

    • But don’t you think it is a highly risky to put everything in 1 basket. If our friend was to go burst, someone please help us.

      It is not about whether it is DAP or UMNO or …., it’s about common prudent sense!!

      Have a nice day

  3. I agreed with this article…last time LGE himself mentioned in newspaper that PPSB containers throughput is on decline only to be dispute with the actual facts that it’s rising…DAP thought they knew everything…btw PTP itself is a clear proof that Seaport Terminal had taken our port efficiency to a greater height..if this is not considered as CAT that LGE had always cried for then i suggest he just relinquish his CM post..as in his BAGAN area..at night the Jalan Bagan Luar is almost dark without street lights although the lamp post is there..very scary…he do get his allowance..but where it goes? how about hill slope issues? flood issues especially involve those people along Sungai Pinang river? people there paying all kind of taxes only to get free floods every year..as usual the answer – Act of God…lastly what that i can summarize is that Penang Port Privatisation issues is not about transperancy but a smear allegations by certain parties to make sure the deal can be put off forever as if PTP & Johor Port (Pasir Gudang) teamed up with PPSB then PSA (Port of Singapore) will be in danger of losing it top spot at least in ASEAN region as mega vessel will no longer need to ply through the already congested Straits of Malacca to the PSA and this in turn will cause it’s entreport status affected which in turn will affect it’s status as happened in 2000 when Maersk & Evergreen shifted their base to PTP…thanks ;)

  4. [...] Chief Minister’s Office to some of he resolutions send by various parties with regards to the privatization of Penang Port by Seaport Terminal Sdn.Bhd., a Johor based company. The Edge, Wednesday 11 July [...]

  5. [...] after 13 years of operations, PTP is handling one third of TEUs that is passing through Port of Singapore. He has proven his worthiness to be a captain-of-the-industry. The man who saw the opportunity to [...]

  6. […] exercise are raised via commercial means on their own merits and financial strength. Often, more resources are needed to be injected into these corporations and projects. The immediate next step  there on is to consolidate all operations and holdings. Then the […]

  7. […] exercise are raised via commercial means on their own merits and financial strength. Often, more resources are needed to be injected into these corporations and projects. The immediate next step  there on is to consolidate all operations and holdings. Then the […]


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