This article first appeared in The Edge Malaysia Weekly on April 10, 2017 - April 16, 2017

IT is exciting times for the cruise industry in Penang. The Penang Port Commission (PPC), which regulates Penang Port, is laying out a master plan for the redevelopment of the Swettenham Pier Cruise Terminal on the island city, which would require an investment of more than RM900 million over the next five years.

According to its chairman Datuk Tan Teik Cheng, now is a good time to redevelop the 114-year-old cruise terminal, located on the northeastern tip of George Town as the cruise industry in Penang is growing. Its inclusion on Unesco’s list of world heritage cities in 2008 has fuelled the growth. The last time Swettenham Pier Cruise Terminal underwent a major refurbishment was reportedly in 2010.

Tan says the master plan is being finalised before it is presented to the commission’s board of directors for approval. The PPC will then call for a request for proposal (RFP) by the end of 2017.

“It (redevelopment) needs to be done because the number of cruise ships and passengers has been growing. It is embarrassing to let them see our current facilities,” he adds, noting that PPC has already received several RFPs from interested parties.

Tan says PPC will evaluate all submissions, although he believes that Penang players should be given the opportunity to participate in the redevelopment of the cruise terminal.

The proposed project will be divided into three phases. Phase 1 and 2 involve the extension of the berthing terminal while Phase 3 will see the consolidation of PPC and Penang Port Sdn Bhd (PPSB) offices, makeover of three Class Two heritage-listed unused godowns and the refurbishment of the Church Street Pier.

Tan says the RM900 million investment is only centred on the Phase 3 development.

“The figure is only a rough estimate. The actual amount will be reviewed once the detailed master plan is announced,” he adds.

It is understood that the PPC is taking a cautious stance on the Swettenham Pier Cruise Terminal’s redevelopment amid concerns that it will be criticised by the public and the Penang government if it fails. The failure of the RM43 million Tanjung City Marina project next to the cruise terminal, funded by the federal government, has cast a shadow on PPC’s efforts.

Tan says there are no plans to restore the marina, which has since sunk and been left abandoned since mid-2011 due to poor planning and failure to build a good breakwater.

“The marina cannot work anymore and we don’t want to say what can be done about it, otherwise we would be criticised if it is not fulfilled. However, we have a programme to redevelop the godowns and the area surrounding the pier,” Tan tells The Edge at his office in Penang.

Along with the construction of the marina in 2005, Church Street Pier was rebuilt and now houses several eateries.

According to PPC’s Annual Report 2015, total arrivals of cruise ships and passenger ferries increased 4.9% to 2,308 in 2015, from 2,201 in 2014.

Penang has become a main focus for Western cruise liners that call not only during the winter but throughout the year.  We estimate passengers spend about RM1,500 to RM2,000 each when they visit,” Penang State Tourism Development and Culture Committee chairman Danny Law tells The Edge via text.

PPSB chief operating officer Sasedharan Vasudevan says the Swettenham Pier Cruise Terminal has been handling around one million passengers each year, and expects a 40% rise in passenger arrivals this year.

PPC’s Annual Report 2015 showed that the cruise terminal handled 1.16 million passengers in 2015.

Liners that call at the terminal come from cruise operators that include New York-listed Royal Caribbean Cruises Ltd, New York and London-listed Carnival Corp & plc, Luxembourg-based Star Clippers Ltd, TUI Cruises and Genting Hong Kong Ltd’s Star Cruises.

According to Sasedharan, PPSB is a natural choice to take part in the redevelopment of the Swettenham Pier Cruise Terminal, which it currently operates under a three-year lease with PPC.

Indeed, the company submitted its redevelopment plans for the entire Swettenham Pier Cruise Terminal to the PPC two years ago, estimated to cost about RM500 million.

More recently, on March 17, the port operating company announced that it will be upgrading the existing cruise terminal by extending the existing berths to 688m, from 400m currently, under a 60:40 joint venture with RCL.

PPSB has entered into a Heads of Agreement with RCL to upgrade and improve the Swettenham Pier Cruise Terminal at a cost of US$35 million (RM140 million). RCL is expected to make 38 calls in Penang this year.

Meanwhile, Sasedharan says PPSB will seek to convert the lease of the Swettenham Pier Cruise Terminal from the PPC to a concession similar to that to operate Penang Port, failing which the JV with RCL will also not take off.

“[A concession] was part of our deal with RCL before we were to invest RM140 million (in the upgrade). It did not want to do it on a rented piece of land,” explains Sasedharan.

“We are the private sector. Anyway, we are confident [of getting the concession] because RCL is on board. We wouldn’t embark on the upgrade if we did not engage both the PPC and the state government. Both parties see the need and benefits from doing so. Let us have it and we will bring in the revenue,” he adds.

Under the proposed JV, Sasedharan says 20% of the RM140 million cost will be via equity financing and the remaining 75% to 80% from borrowings.

PPSB and RCL’s proposed project centres on Phase 1 and 2 and includes spaces for tour buses and accessibility for the aged and physically challenged throughout the terminal from ship to shore.

PPSB was taken over in January 2014 by Seaport Terminal (Johore) Sdn Bhd, which owns 51.76% of MMC Corp Bhd. MMC Corp is in the midst of buying the rest of PPSB from Seaport Terminal (Johore) for RM220 million, after completing the acquisition of a 49% stake recently.

Sasedharan says in the last 15 months, its commercial team has made trips to the US and Singapore to talk to cruise industry players.

He says with more cruise liners calling in Penang, it would be easier for cruise companies to package trips.

“That is why we are hoping Melaka Gateway Port’s cruise terminal takes off. It will augment us very well as the calls could include Singapore, Melaka, and Penang. We [also] want more quality stuff like international transit passengers who spend an average of US$150 per person.

“I don’t see any other conduit in the state that can bring 4,000 high-spending tourists from Europe and the US.”

The popular deals, he notes, are the “cruise to nowhere” trips jointly operated by Star Cruises and Singapore-based New Century Tours Corp Pte Ltd.

The cruises also bring 70,000 to 80,000 tranship passengers a year, and PPSB hopes to raise the number to 100,000 this year.

On Phase 3, Sasedharan says PPSB is prepared to submit its plan again when PPC calls for an RFP and is confident of being selected as it has a better relationship with PPC than the previous management. “We estimate the entire project would cost about RM500 million. We feel we are a better candidate is it complements the facility. We can bring in some international flavour to it.” “MMC Corp is keen on developing the waterfront development as well but that is in subsequent phases. It is a bit too early. The cruise business is new to us but we have the right partners,” he adds.

On why he believes the Swettenham Pier Cruise Terminal will succeed unlike the failed Port Klang cruise terminal in Pulau Indah, Selangor, Sasedharan says the Swettenham Pier Cruise Terminal has the benefit of being located in George Town.

“We are located close to city centre as opposed to Pulau Indah, which is about 30 minutes from Kuala Lumpur,” he adds.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.