MMC Corp Bhd wants to own and operate the third port in Port Klang that will be located on Carey Island. The heavily criticised project, which is expected to start only in 2020, will cost the conglomerate about RM20 billion to RM30 billion.
“We have had a few rounds of discussions with the government. MMC is the front runner because we have A to Z experience [in building a port],” says managing director Datuk Seri Che Khalib Mohamad Noh.
He is confident of getting the financing for the third port project considering that MMC is expected to list its port assets late next year.
He does not foresee a financing burden on MMC despite the conglomerate’s current high gearing.
He also shrugs off criticisms levelled at the massive port city development, telling The Edge that “we are facing the same music as before, when MMC wanted to develop PTP (Pelabuhan Tanjung Pelepas)”.
“We are going through the same experience we had 20 years ago … people were saying, who wants to go to [call at] PTP. Some even said PTP would be a white elephant,” says Che Khalib, one of the young professionals picked to drive the reform of government-linked companies (GLCs) in the early 2000s.
“Look at what PTP is today. It is recognised worldwide. MMC is currently the world’s eighth largest port operator.”
In fact, he feels the concerns about the port city are exaggerated. “The capacity of [handling] 30 million [containers] is not coming in tomorrow,” he stresses. The third port will commence operations in 2025 — eight years from now.
According to Che Khalib, the proposal for the third port was submitted to the authorities by Northport long before MMC took over its operator NCB Holdings Bhd. It is an unsolicited proposal, he adds.
As Port Klang is strategically located in the Strait of Malacca — the world’s busiest shipping route — Che Khalib believes it should expand its capacity to ride future growth.
The main worry about the third port is overcapacity but Che Khalib sees the pie growing bigger as the world’s population continues to increase.
“Singapore is spending money on doubling its capacity. Why would it build things if there is no demand? What I am trying to say is that before Singapore makes us irrelevant, we had better do something,” he says. “Of course, they [Singapore] are also watching what we are doing.”
According to Che Khalib, Port Klang’s advantage over Singapore is that there is a lot of land around it that could be developed into a port city where logistics companies could build up their warehousing space and manufacturers could have their plants.
The 10,000ha owned by Sime Darby Bhd on Carey Island would be ideal to build a port city at Port Klang.
“This is like Shenzhen in China. They have the luxury of land there,” Che Khalib explains. However, he stresses that MMC will only take part in the development of the port and not the massive land bank surrounding it. “Sime Darby will do the development because the land belongs to them,” he says, adding that Sime Darby is keen on the project.
Private, not public, project
The proposed port city on Carey Island has raised eyebrows partly because of the price tag of RM200 billion that has been reported by the media. Che Khalib explains that this is just a ballpark figure for the entire development, which will stretch over 20 to 30 years. And he points out that the project will be driven by the private sector, which means no public money will be involved in its development, except basic infrastructure such as connecting roads and highways, and the supply of electricity and water.
He also denies that there is already an agreement to partner China-based companies on the project. He says MMC is talking to several parties, some from China and some from India and Europe.
“We are not talking exclusively to Chinese companies but also to Indian and European companies that control the shipping industry. We are evaluating their commercial proposals. There is no rush to make a decision as it will take about two to three years to complete the study and obtain all the relevant approvals, such as EIA (environmental impact assessment).”
Che Khalib, however, does not rule out the possibility of the potential partner holding a 30% stake in the port; PTP is 30%-owned by shipping giant Maersk Line. He reasons that if the partner owns equity, it will be more committed to provide volume and ensure the port’s success.
Although 10% of global shipping movement is from China, Che Khalib says MMC is not giving priority to a Chinese company as a decision would depend on which partner makes more commercial sense to the group.
Meanwhile, he says it may be too early for MMC to inject the Carey Island port into the group’s IPO.
“We will see how it goes because by the time we list the port, the project will not have taken off yet. We need to settle the issue of partnership. The partner will not want to come in until we get all the approvals, and figure out how much it is supposed to invest,” Che Khalib says, adding that the group may need to finalise the concession agreement, which may take years to negotiate.
It is helpful to have a strategic investor, nonetheless, Che Khalib says. He also knows that efficiency is the name of the game.
“It is true that a lot of countries are expanding their ports but shipping companies are very competitive these days. They have to look at costs. The competition today is not just on the product alone but also its marketing and distribution,” he says.
“We can do better than Singapore in terms of movement. The difference is that they are quite consistent in delivering results while we are not as we face typical Malaysian problems like maintenance, workers and so on.”
Nevertheless, he opines that Malaysia could be more cost-effective if more infrastructure were in place compared with that of Singapore and Indonesia, which are expanding their ports.
“Malaysia is blessed with its location. In terms of cost, our competitor is Indonesia. I don’t think Singapore can be cheaper than us. In infrastructure, probably, Singapore is better than us. But we can say we are better than Indonesia,” he says, adding that Malaysia has a mature ecosystem to support business.
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