This article first appeared in The Edge Malaysia Weekly on November 13, 2017 - November 19, 2017

FRESH from the announcement of his retirement, former Port Klang Free Zone (PKFZ) CEO Datuk Chia Kon Leong was looking relaxed and rested during an interview with The Edge last week.

Chia came into PKFZ as general manager of business development during the tumultuous days of 2007, and later took on the role of CEO. He says he has “absolutely no regrets at PKFZ”.

“Rather, I have a sense of accomplishment. I am proud that in 10 years the project has turned around and is well positioned today, paving the way for the next era to begin,” he says.

Chia adds that he was encouraged to move to PKFZ by Westport Holdings Bhd founder Tan Sri G Gnanalingam, and he attributes part of PKFZ’s success today to the support he received from Gnanalingam, among other people.

In 2007, Gnanalingam was on the board of the Port Klang Authority (PKA), which owns PKFZ.

“I must thank him for supporting me all the way. I would say it helped in a very big way to get things moving in the early days,” says Chia.

Navigating the challenges

Chia says one of the biggest challenges he faced was the negative public perception of the company due to the corruption scandal at PKFZ. He says that rather than try to change the negative public perception, he engaged with the business community and addressed their concerns.

“Managing public perception was tough. Everywhere you went, if you mentioned PKFZ it was like a four-letter word. So, how do you change public perception? You can’t. I told myself not to waste time because the more statements I made, the worse it was going be.

“So, I went about addressing investors’ perception. If the perception of investors is positive and their testimony [is good], I thought it would automatically address public perception.

“If you are going to put in money to do business and you make money out of your business in PKFZ, will the public say it’s a bad place for you to go? Investors would see that if others have done well and made money, there is nothing wrong,” says Chia.

Besides public perception, Chia says working across the political divide was also challenging. While PKFZ is a federal project under the Ministry of Transport, the Selangor government also has a hand in it because land matters fall under the jurisdiction of the state. He says he is thankful the Pakatan-led government saw that PKFZ would benefit the state.

“In the early days, when Tan Sri Khalid Ibrahim became the menteri besar of Selangor, he spent half a day at PKFZ. Coincidentally, Khalid knew me from my Northport days when he was the CEO of Permodalan Nasional Bhd. I was comforted when he said [PKFZ] was a good project and that he would help us if we needed any assistance,” Chia reminisces.

PKFZ flourishing today

Today, PKFZ is a thriving business entity, which has gained international recognition from investors in various industries as a choice location. In fact, all 1,000 acres at PKFZ have been taken up — a stark contrast to what it was 10 years ago when the free zone was compared to a ghost town.

Chia says his strategy was to selectively allocate land to investors, going for businesses that could not only generate rental revenue but also create activity with long-term value for PKFZ and the surrounding ports.

“Based on the first market study done by US-based company, The Service Group, land development was projected to be completed after 2024, and that was the best-case scenario.

“If you go to PKFZ today, you see a lot of development going on. There are still a few parcels of empty land, which have been allocated and are pending various approvals, so, I reckon that by the end of next year or early 2019, it will be fully built up,” he says.

Financially, Chia says PKFZ has recorded operating profits since 2009, and the numbers have been improving each year. However, there were many tough decisions to be made in order to plug the bleeding in PKFZ’s initial years.

“We terminated the management contract with Jebel Ali Free Zone International (Jafzi), which had a 15-year contract, and it was quite costly. When I came to PKFZ in July 2007, it was on condition that I would not work with Jafzi and PKA would take over the management completely, under its subsidiary PKFZ Sdn Bhd.

“We also cut all advertising expenses, which didn’t serve any purpose because the idea of the advertisements was to change the public perception, which couldn’t be done. I also cut travel on trade promotional trips,” says Chia.

The initial operating deficit of RM8 million in 2007, was reduced to RM1 million the following year. By 2009, the third year of operations, PKFZ managed to churn out an operating surplus of RM5 million. This was the year PKFZ was accredited as a Good Delivery Point by the London Metal Exchange (LME).

In 2016, PKFZ had an operating surplus of over RM50 million, which is expected to increase further this year.

In addition, land prices in Pulau Indah have skyrocketed over the years. According to real estate sources, land owned by the Selangor government’s Central Spectrum Sdn Bhd is valued at over RM70 per sq ft now, from RM15 to RM20 psf three to four years ago. In August, it was reported that IKEA and Central Spectrum would be setting up a new regional distribution and supply chain centre in Pulau Indah, at a cost of RM908 million.

This implies that PKFZ’s asset value today would have surpassed the government’s investment of some RM4 billion.

PKFZ set for business transformation

Now that PKFZ is in operating surplus and internationally recognised, says Chia, the next step is for it to undergo a transformation to accommodate the changing global environment.

“E-commerce, the Digital Free Trade Zone, China’s One Belt, One Road initiative and trade liberalisation all open up a big window of opportunity. To exploit all these opportunities, we need to transform,” he says.

But apart from the internal transformation of PKFZ, reforms of regulatory procedures are needed in order to facilitate this new breed of businesses, he adds.

Chia may have stepped down as CEO of PKFZ, but he plans to continue to put his 44 years of experience in the shipping industry to good use.

“My post retirement plan is to get involved in working ... on strategic development projects in this industry, within the Port Klang area. One of the areas will be Carey Island,” he says.

With PKFZ’s 1,000 acres fully allocated, Chia says his ambition now is to see PKFZ 2 materialise. This can only happen on Carey Island, he adds, which has a vast amount of land.

“Potential investors are already asking when PKFZ 2 is coming up. If PKFZ is not a good brand, why would people talk about PKFZ 2? And PKFZ 2 will be critical for Port Klang because you really need a big hinterland to generate cargo. There is a need for another bridge that will connect directly to Westports.

“Carey Island, given a good master plan for the next 30 years, will be a game changer and ensure the sustainability of Port Klang. It will definitely give Singapore a run for its money,” he says.

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