Proposed Kulim airport may cost RM3.89 bil

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KEDAH’S plan to have an international airport built in Kulim to serve the northern region is estimated to cost RM3.89 billion, sources say. This is higher than initial estimates of  RM2 billion to RM3 billion, and includes land acquisition costs.

The latest estimate has put the proposed  airport’s cost somewhat near the recently completed klia2, which cost slightly over RM4 billion and drew much criticism.

“The state hopes the airport will be fully or partly funded by the federal government and managed by MAHB (Malaysia Airports Holdings Bhd). But obviously, there are many ways to go about the funding. We can also get in private investors, if necessary,” one of the sources tells The Edge.

The state government had in September presented its plan for the two-runway airport to be built at that estimated cost to the Economic Council (EC) chaired by Prime Minister Datuk Seri Najib Razak. It also proposed a RM2 billion highway, known as the Sungai Petani-Inner Kedah Expressway (SPIKE), to improve connectivity to the airport.

The two-way, four-lane SPIKE, expected to be carried out as a private finance initiative, will stretch about 80km and will be done on a build-operate-transfer basis, the source says.

The estimated cost for the two projects includes land acquisition costs, the source adds. It is understood that the EC has instructed the Economic Planning Unit to carry out a feasibility study on the proposed projects.

Kedah wants the airport to be built in Sidam Kiri in the Kuala Muda district, a 20-minute drive from the Kulim Hi-Tech Park (KHTP) industrial zone. A big part of the proposed 43-sq-km site is now oil palm plantations owned by Sime Darby Bhd.  

“The land is wide enough to house the 36 sq km that is needed for the airport. The soil is hard ... suitable on which to build an airport,” the source says.

If the federal government approves the project, it will be the fourth commercial airport to emerge in the north of the peninsula after the Penang International Airport, Sultan Abdul Halim Airport in Alor Setar and Langkawi International Airport.

It will, however, be the first to have two runways — something sorely needed to support passenger and particularly cargo growth as the northern region continues to develop.

Proponents of the project say the airport, which will complement the Penang airport, is necessary to support the industries in the north. The proposal comes at a time the 18-year-old KHTP, which houses multinationals such as Intel Products and Infineon Technologies and has helped attract RM34 billion in foreign direct investments into the state, is expanding.  An additional 186.15ha will open next month under phase four of its development, Kedah Menteri Besar Datuk Seri Mukhriz Mahathir said last week.

The SPIKE, which will pass through KHTP, will shorten the distance for these companies to an international airport.

The Penang airport alone does not have the capacity to support the growth in the north unless it expands. Last year, the airport recorded 15.1% growth in passenger volume to 5.49 million and is expected to reach its maximum capacity of 6.5 million next year. As for cargo, volumes have shrunk every year since 2007, with the exception of 2010, before growing again last year by 24.7% to 153,703 tonnes, according to MAHB’s latest annual report.

“The Penang airport has no more space to build a second runway unless it reclaims more land, which will be costly — it’s not a viable exercise. That’s why you need the Kulim airport. It shouldn’t be seen as a political Penang-versus-Kedah thing ... this new airport will complement the industries from Penang and everyone stands to gain from it.

“It will be a proper airport that can cater for the whole northern region, also southern Thailand, for all three — premium, low-cost and cargo operators. We are hoping to start with two runways, but we’ll have the space to eventually have four if needed,” one of the proponents of the Kulim airport project tells The Edge.

Penang Chief Minister Lim Guan Eng, however, insists that the state has enough land to accommodate the airport’s expansion and that it needs a second runway. He told reporters in June that Penang was not afraid of competing with a new airport in Kulim, provided it was on a level playing field, with Penang being given an additional runway, integrated air cargo facility and maintenance, repair and overhaul hub.

He said expanding the Penang airport would cost RM600 million. But it will be up to the federal government, which owns and regulates the airport, to decide on any expansion.

“We can be sure that in Penang, the second runway will be utilised, it will be maximised, but in Kedah, we are not sure,” Lim, who is also DAP secretary-general, had told reporters.

It will be interesting to watch how developments play out over the next few months. A new airport in Kulim or an expansion of the Penang airport will boost the economy of the northern region. But then again, cost will still be the ultimate concern.

This article first appeared in The Edge Malaysia Weekly, on November 10 - 16, 2014.