Malaysia ramps up investment in ports 

Maritime Fairtrade interviews Associate Professor Dr. Mohd Yazid Zul Kepli, deputy dean, Ahmad Ibrahim Kulliyyah of Laws, International Islamic University Malaysia, on the country’s latest Budget, also known as the Madani Budget. 

In his Budget 2023 speech on February 24, Malaysian Prime Minister Datuk Seri Anwar Ibrahim said substantial investment will be allocated to ports and related infrastructure. For example, Sanglang Port in Perlis will be expanded to handle petroleum cargo and bulk cargo; and to increase international trade, the government supports the private sector to develop a new mega-port in Carey Island to bolster Klang Port’s potential as a major regional shipping hub.

The Sanglang Port project is developed under the Perlis Maritime Corridor, which aims to facilitate the state’s development in terms of logistics, tourism, aquaculture and fisheries. What are your thoughts?

The Sanglang project, including the development of a new coastal erosion structure between Kuala Sanglang in Perlis, Kuala Jerlun Kubang Pasu in Kedah, and the Perlis Inland Port (PIP) located in Chuping Valley, will add value to the economies of Kedah and Perlis.

How will the Sanglang project benefit Malaysia’s economy?

In 2017, the State Government of Perlis approved the plan for the Perlis Maritime Corridor, which stretches from Sanglang to Simpang Ampat, Kuala Perlis. The Sanglang project is expected to have a positive impact on Malaysia’s economy, with an estimated 5,000 job opportunities being created.

One of the main goals of the Sanglang project is to provide jetty facilities for berthing of merchant ships, luxury cruises, yachts, deep-sea fishing vessels, and oil and gas vessels; as well as provide maintenance, repair, and overhauling services for merchant ships.

In September 2022, the authority studied the proposed Sanglang project and an additional budget was allocated specifically for it in the Madani Budget as there are strong support from both the federal and state governments.

Former prime minister Datuk Seri Ismail Sabri Yaakob stated the project would also involve a land bridge connecting Southern Thailand and Malaysia, which would provide added value to the economy of Kedah, including increasing investor confidence in the state and the Northern region in general.

Will the construction of Sanglang Port have a detrimental effect on the nearby Yan Port? 

The state government has assured that the construction of Sanglang Port will not have a detrimental effect on Yan Port and the local interests, including those of farmers, which will not be compromised. To proceed with such a project, various approvals are needed, including an Environment Impact Assessment (EIA) report from the Department of Environment.

Furthermore, it is unlikely that there will be an overcapacity or duplication of investments. The Albukhary Group submitted a proposal to the state government to develop the port, along with a land-bridge project to Songkhla, Thailand, in order to reduce the distance and travel time between the Strait of Malacca and the Gulf of Siam. Prior to suggesting the proposal, its merits and demerits have been completely evaluated.

What are your thoughts on the Sanglang Port’s role in handling petroleum and bulk cargo? Why is its location ideal for this specific role, rather than Yan Port?

This commercial decision was made by an entity with interests in both ports, so I’m sure the pros and cons have already been analyzed properly. In general, the development of a new port will not necessarily be a negative thing for other ports. For example, it was reported the Penang Port Commission welcomed the existence of a new port (Yan Port) in Kedah, as it promises development to our country’s import and export sector.

You highlighted that a significant issue in the bulk shipping industry is the “inability of Malaysian tonnage to meet domestic demand… ” Do you think the Sanglang project will be part of the solution? 

Indeed, this project can be part of the solution. Malaysia’s dry bulk shipping sector is especially vulnerable to numerous risks and complications, including fluctuations in global oil prices (since dry bulk ships rely on bunker fuel for operation), the threat of maritime piracy and armed robbery, delays caused by port congestion, as well as increased cost of operations.

Industry players must have the relevant industry and technical knowledge of the dry bulk shipping market and operations, such as establishing a customer base to secure orders, understanding port conditions, and complying with the relevant regulatory policies of the dry bulk shipping industry.

Kedah has proposed that the troubled Kuala Kedah/Kuala Perlis-Langkawi ferry service be relocated to the proposed aggregate port in Kuala Sanglang in order to improve sea links to the island resort. What is your opinion on this?

Constructing a new port in Kuala Sanglang appears to be a reasonable decision due to its potential benefits. Menteri Besar Datuk Seri Muhammad Sanusi Md. Nor said the proposal to relocate could ease the often disrupted trips between the two riverine jetties at Kuala Kedah in Kedah and Kuala Perlis in Perlis to Langkawi. Trips from the two jetties have begun to encounter worsening low tides, caused by sediment erosion of the waterways. A large-scale dredging exercise in the two river mouths would require frequent scooping of mud and debris, incurring high costs. Therefore, many organizations in Langkawi are looking for a new route.

Will the array of activities taking place in Kuala Sanglang, a fishing village located on the coast, bring more benefit or more harm to the community? 

That will depend on many factors; the primary contributor to the economy in Kuala Sanglang is fishing. In addition, rearing prawns has recently become an important industry in addition to traditional fishing. In the past, when the sea and rivers were the primary means of transportation, Kuala Sanglang played a major role as a port and trade center. With the hinterland planted with rice, rice processing also became an important industry. As roads developed, Kuala Sanglang declined as a port and transport center.

The proposed project will definitely affect the village in many ways. Despite the creation of new job opportunities, active consultation and engagement with the villagers must be done to ensure their interests are always taken into consideration.

Dr. Mohd Yazid Zul Kepli’s most recent book is “Shipping and Logistics in Malaysia” (Firdaus Press).

Editor’s note: Port Klang Authority (PKA) has announced a project to build a cargo port on Carey Island with an estimated cost of RM28 billion (US$6.3 billion). This includes building berths, equipping operations, constructing roads and utilities. It is expected to be completed by 2060. Before construction commences, significant investment and effort must be put in place for land reclamation, dredging and building a breakwater. These are all necessary steps for the successful completion of the project.

Do you think the Carey Island project is something Malaysia should pursue?

The idea is understandable; however, there is no need to rush to develop the new facility on Carey Island, as Westports Phase 2 will soon begin and is estimated to be fully operational in 10 to 12 years’ time, which could make Port Klang a prominent hub for Southeast Asia, thus providing more efficiency for transportation and trade.

The Carey Island development will be carried out in four phases: Phase 1A (2025-2030), Phase 1B (2030-2040), Phase 2 (2040-2050), and Phase 3 (2050-2060), space out over 35 years, and PKA aims to get started by 2025. When PKA completes the four phases, there will be a total wharf length of approximately 16 km, with a capacity to handle 30 million TEUs and another 20 million tons of conventional cargo. This is something that Malaysia can pursue if we can attract investors.

Several studies such as Cullinane et al. (2005), Xiao, Ng, Yang, and Fu (2012), and Choi and Lim (2018) have highlighted the drawbacks of port privatization which is applicable to Malaysia’s current situation. Do you think the Carey Island project is suitable for this privatization strategy?

There are pros and cons of port privatization. As we can see, perhaps the most positive impact is that the responsibility for making new investments and expanding services to meet market demand rest in the hands of the private sector instead of the government.

Civil servants should not be burdened with these commercial responsibilities, as they are not trained to understand business and make commercial decisions. The government stands a chance to forego the responsibility of allocating its limited financial resources while retaining minority ownership and potentially reaping the benefits from its profit upturn and dividends.

Examples of positive impacts of privatization on Malaysia’s economy included NCB (operator of Port Klang’s Northport), Malaysia Airports (MAB), Bintulu Port as well as several Petronas-owned companies. They are privatized and have since become successful listed entities.

The services offered by Labuan Port, for instance, have improved since its privatization in 2020, and it is now looking to attract cruise ships. The turnaround time for vessels docking at the port has improved from approximately three days to just 24 hours.

Is the Carey Island Port project detrimental to Klang Port? 

A detailed cost-benefit analysis is necessary before embarking on such a large project. However, such projects can also backfire in certain situations. Chinese-funded Belt and Road projects in Sri Lanka is one example. Also, there is a question over the revenue model of these projects, as they are not financially viable. They were built with unsustainable, large amounts of borrowing at high interest rates. 

To be on the safer side, an investment-based model should be preferred over a debt-based model, regardless of the terms used.

In your opinion, how will Malaysia’s maritime sector look like in the next three years?

The prospects are good, unless certain global events escalate out of control, such as the Russia-Ukraine/Europe conflict and the China-Taiwan tension.

Generally, maritime industry players in Malaysia need to invest in human capital, new expansions, and technologies to strengthen their resilience for upcoming crises. To remain competitive, stakeholders must invest in training and retaining experts, upgrading technology, increasing cargo capacity, reducing labor shortages, guaranteeing an adequate supply of skilled labor, enhancing performance, and strengthening regional transport connections.

Malaysia must take note of the rapid development of our neighbors, especially Vietnam and Indonesia, or we will eventually be left behind.

All photos credit: Annjil Chong

The best maritime news and insights delivered to you.

subscribe maritime fairtrade

Here's what you can expect from us:

  • Event offers and discounts
  • News & key insights of the maritime industry
  • Expert analysis and opinions on corruption and more