31st January 2011
GEORGE TOWN: Over the past few months, rumours and media reports have been rife about several parties having submitted proposals to the federal government to take over the operations of the Penang Port. The names which have cropped up include Tan Sri Syed Mokhtar Al-Bukhary who controls the Port of Tanjung Pelepas (PTP) and Johor Port, and Oriental Pearl Harbour’s Datuk Siew Ka Wei. The Penang government has also submitted a proposal to the federal government.
Penang Port Sdn Bhd was incorporated on Dec 7, 1993 as a wholly owned subsidiary of the Minister of Finance (Inc). The management and operations of Penang Port were corporatised on Jan 1, 1994 under the government’s privatisation programme.
Penang Port took over all facilities and services from the Penang Port Commission (PPC) which licensed Penang Port to operate, manage and maintain all port facilities and services. The PPC is the regulatory body for the port.
The 30-year concession period ends in 2023.
Penang Port managing director Datuk Ahmad ibni Hajar sees the keen interest shown by various parties to take control of the port as a clear indication that many see the port as a viable and profitable venture.
“We must be doing well for so many parties to be interested. As our records show, over the past 11 years, since I took over, we have experienced steady growth,” said Ahmad who is also chief executive officer of Penang Port in an interview with The Edge Financial Daily.
In 2010, the port breached the one million TEU barrier; it has targetted two million TEU in the next five years.
While Ahmad views the interest positively, the rumours have resulted in the port’s 1,800 employees getting jittery about their future with the proposed takeover bid.
“For me, all this talk about takeovers or proposals is not a deterrent. It is work as usual and I do not let the rumours affect our operations.
“However, the staff are worried about what is going on and we have to keep reassuring them that in the event it does happen, their welfare wuld be taken care of. The present management will ensure that they are not left in the lurch regardless of who takes over.
“I am sure, even if there is a change in management, the ‘new owner’ would want as little friction as possible and it should not affect the port operations,” Ahmad added.
As far as Ahmad is concerned, the talk has not stifled his team’s plans for the port in years to come.
Penang Port recently concluded a survey on the state’s ferry operations, which have been the proverbial thorn in its side, incurring huge losses annually.
Talk about the ferry services being terminated has drawn flak from many parties, as the ferry is seen as a Penang icon.
In 2010, the ferry services suffered RM15 million in losses. In 2009 it was RM15.3 million while in 2008 at the height of the fuel crisis, losses hit an all-time high of RM18 million.
To date, since Penang Port’s corporatisation, losses from the ferry operations have escalated to RM170 million, which could have been put for better use.
Ahmad says despite repeated requests to the federal government, Penang Port pays industrial rates for fuel, even though the ferry services are deemed as part of its “corporate social responsibility”.
He added that a report on the actual cost of ferry operations and proposal for injection of capital have been submitted to the federal government.
“How they want to go about this is up to the government, but we have prepared the report so that they are aware that this is what we pay to subsidise the ferry operations annually.
“If they follow our proposal strictly, the ferry operations will break even within a few years,” he added.
Using the present ferry system, he says, would not be fruitful. Using lighter craft and imposing higher ferry charges would help turn it into a profitable venture.
Currently, Penang Port has eight ferries, the newest purchased 10 years ago while the oldest is 35 years old.
Also, each ferry is required by the seafarers regulations to have between nine and 10 staff, which Ahmad feels is a waste of manpower as ferries in Hong Kong only employ up to three personnel on board each ferry. Penang Port has been unsuccessful in seeking listing over the past decade due to the losses suffered by the ferry operations which Ahmad says should be separated from the profitable port operations.
Penang Port’s net profits were RM12.75 million in 2006, RM23.03 million (2007), RM22.7 million (2008) and RM76.74 million (2009). For 2010, its profit is estimated at around RM40 million.
The lower profit in 2010 has been attributed to lower tax incentives. Ahmad said depreciation would also bring down profits in 2011.
With a tariff increase due in 2012, the port’s profits are expected to improve after 2014.
Ahmad is confident that having achieved 1.1 million TEUs in 2010, the port is poised to reach 1.19 million TEU this year and two million TEU by 2015.
The target is highly dependent on the proposed dredging of the north channel costing RM352 million in federal funds. The channel would be dredged to a depth to 14.5 metres from the present 11.5 metres to enable larger vessels to call. It is part of Penang Port’s master plan to transform it from a feeder port into a premier port by 2012.
Ahmad expects the number of TEU to surge as the Ipoh-Padang Besar electrified double-track project, expected to be completed by 2013, would facilitate the movement of containers from Ipoh and southern Thailand via Padang Besar in Perlis.
The dredging project slated under the 10th Malaysia Plan was initially scrapped but reinstated recently and is expected to be overseen by the PPC, a move by the federal government which has not gone down well with Penang Port.
Ahmad says the process via PPC would only result in duplication of work as PPC would eventually have to confer with Penang Port on what needs to be done.
He argued that it should be handled by Penang Port, just like what was done with the PTP, where the port operators were given the task.
Despite the current tussles faced by Penang Port and with the concession period ending in 12 years (Penang Port has already submitted its proposal for an extension which has yet to be approved), Ahmad says work on the port has to go on.
Identified as the logistics hub for the Northern Corridor Economic Region (NCER), Penang Port has just completed its five-year business plan to transform the port into a regional transshipment hub and a port of choice in the region with its achievement of one million TEU in 2010.
Among the projects which were carried out are the RM1 billion North Butterworth Container terminal Phase 3 which included the wharf extension of 600 metres, new stacking area (740m x 79m) for export containers, purchase of seven super-post panamax QGCs, eight RMGs and two mobile harbour cranes and construction of a back-up container yard facility costing RM100 million.
Ahmad said while some people were of the view that they could do better, Penang Port managed to achieve tremendous success over the past decade.
It has overtaken Johor Port and is now ranked third in the country after North Port and Westports in Port Klang, and PTP.
Internationally, Penang Port has jumped in ranking among ports in the world from 100th position to 64 last year. It is hoping to achieve 50th placing in the next few years.
Once the dredging is completed, Ahmad said the port would be able to undertake transshipments, which are now mostly concentrated in the southern part of Peninsular Malaysia.
He is confident that Penang Port will be a potential hub for the Indonesia-Malaysia-Thai Growth Triangle and Bay of Bengal as it is ideally located, and with no other big commercial ports in the region and its potential markets beyond the northern part of Peninsular Malaysia and Southern Thailand.
Ahmad said intra-Asian trade was already a major earner for Penang Port with 45% of vessel calling there being intra-Asian direct calls.
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