Effective port policy delivers strong results, benefits

 

Among the many policies implemented by the government over the years, one that has stood out for me has been the privatisation of our ports.

In the 1970s and 1980s the nation’s ports were underfunded, inefficient, suffered from low productivity, and were highly unionised.

Due to its limited resources, the federal government was unable to allocate the funds needed to modernise Malaysia’s ports, including by expanding their capacity and purchasing the necessary equipment.

This led to the privatisation of our ports, a practical solution which would allow them access to private sector funding – critical for expansion and better management.

This was a viable solution given the potential for an increase in port and handling charges that could be collected from many international users. It allowed for good revenue forecasts and attractive returns for private investors.

In other words, there was a strong case for transferring these inefficient ports to private sector management.

Critically, the move did not place a financial burden on the public.

The Port (Privatization) Act 1990 

A pilot project began with the injection of a private sector management team into the Klang Container Terminal in 1986.

The move received mixed reactions, particularly from civil servants, but the operational productivity and financial statistics were very promising.

As a result, the government took a gamble by introducing the Port Privatization Act 1990 (PPA), allowing federal ports to be either corporatised or privatised.

The former port authorities were left as residual bodies, assuming a new but minor role as regulatory authorities over private port operators.

After Port Klang was privatised in 1991, the privatisation wave moved southward to Johor.

The Johor Port Authority was incorporated in 1993, and two years later, its port was privatised, becoming Johor Port Berhad, now a wholly-owned subsidiary of MMC Corporation Berhad.

In parallel, the Port of Tanjung Pelepas (PTP) was conceptualised and developed using private sector funding. By 2001, PTP had become Malaysia’s largest transshipment hub, and was second only to Singapore regionally.

The dominance of Singapore’s port as the major transshipment hub in Southeast Asia was finally challenged when a leading main-line container operator chose to relocate to PTP and establish it as their main hub in Southeast Asia.

In September 1994, the Westports Privatisation Agreement was signed between the government, the Port Klang Authority, and Westports Malaysia Sdn Bhd for a 30-year term, ending on Aug 31, 2024.

Recently, this concession was extended for another 58 years, from 2024 to 2082, covering both existing and planned new facilities.

Development expected during the concession period will involve an investment of about RM39 billion, a sum the government would be unlikely to be able to afford otherwise.

In 1998, Kuantan Port followed suit and became Kuantan Port Consortium Sdn Bhd.

An ambitious development plan, which started in 2013, resulted in the port now boasting a water depth of 16 meters and a cargo capacity of 17 million tonnes per annum.

This sort of capacity and cargo handling achievements would not have been possible had the port remained under government control.

Sarawak Ports Authority

The privatisation wave then continued to Sabah, where all eight state-owned ports – Kota Kinabalu, Sepanggar Bay, Kudat, Sandakan, Kunak, Lahad Datu, Semporna, and Tawau – were grouped together and sold to a state-owned company, Suria Capital Holdings Berhad.

Although not a private company, since it is owned by Warisan Sabah, it is a public-listed entity nonetheless.

In Sarawak, another federal-owned port in Bintulu was corporatised in 1996 and became Bintulu Port Sdn Bhd. It was later listed on the KLSE in 2001 and has been performing well financially ever since.

Recently, a new ownership and operating structure was put in place and Bintulu Port is now regulated under Sarawak Ports Authority (SPA) which also looks after the ports in Kuching, Rajang and Miri.

Meanwhile, in Peninsular Malaysia, Penang Port was corporatised in 1994 to become Penang Port Sdn Bhd.

Seaport Terminal (Johore) Sdn Bhd took over the company from the Ministry of Finance Inc. in January 2014 and eventually sold it to MMC Ports, which also owns Pasir Gudang, the Tanjung Pelepas Port and Northport Holdings, formerly the Klang Container Terminal.

Profitable venture 

All privatised Malaysian ports have performed exceptionally well to date, showing steady growth and high profitability.

Under private sector management, new investments have been made in port capacity and cargo handling capabilities, in contrast to the time when these ports were managed by the government.

As a result it has attracted more shipping lines to call, increasing the ports’ cargo throughput volume and adding to their yearly revenues.

Better efficiency and higher productivity have also seen their operating margins increase, leading to more profits yearly.

Unlike highways, which burden their users, ports generate revenue primarily from international shipping companies, large manufacturers, and shippers – made up of both importers and exporters.

On top of more employment opportunities, these ports have also seen their hinterlands grow economically and activity-wise.

In short, the port sector is definitely one of our success stories that I have had the pleasure of analysing. - FMT

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.