Storm brewing over proposed STS hub in Johor

This article first appeared in The Edge Malaysia Weekly, on April 8, 2019 - April 14, 2019.

Mahathir being briefed by Shahrul before the signing ceremony for the joint development of the STS hub in the waters of the Johor Baru port last Tuesday. Looking on are (from left) Saifuddin, Ip and Loke. Photo By Bernama

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THE proposed ship-to-ship (STS) transfer hub in the waters of the Johor Baru port is facing its biggest battle yet despite the federal government having given its blessing to the project’s developer KA Petra Sdn Bhd.

It boils down to whether there has been sufficient communication between KA Petra, the federal government and the other stakeholders of the project, some of whom wield enormous power in the state.

KA Petra executive chairman Datuk Shahrul Amirul Sivagnanam says no discussions were held between the company and the Johor government about the project. This is because the location of the hub comes under the jurisdiction of the Marine Department, which is a federal agency under the Ministry of Transport (MoT), he tells The Edge after the signing ceremony between KA Petra and Hutchison Port Holdings Ltd for the joint development of the project last Tuesday.

“The current STS operation at the location is regulated by the Marine Department, which comes directly under MoT. If you are doing STS in PTP (the Port of Tanjung Pelepas), then the Johor Port Authority, which is an agency of the state government, has jurisdiction. That is why when we proposed the project, we went through the Marine Department and the MoT,” he explains.

On March 31, a group called Gerakan Muafakat Johor posted a statement on its Facebook page rebuking the federal government for allegedly “bulldozing” the proposed STS hub through without first consulting the Johor government.

The group said the move was akin to an attack on the state’s economy and jeopardised the rice bowl of the current operators there, and alleged that the federal government had interfered in the state’s powers over land and water matters.

“It should be reminded that even though Putrajaya can approve the licence for the joint venture, the project still requires the approval of the state authority. If Putrajaya still continues to interfere in the sovereignty of Johor, it is akin to challenging the peoples of this state to take Johor out of the Federation of Malaysia,” the statement reads.

According to the Territorial Sea Act 2012, the breadth of the territorial sea of Malaysia shall for all purposes be 12 nautical miles from the baseline. However, a state’s territorial sea is limited to only three nautical miles measured from low-water line, the Act says.

Shahrul says the STS hub will be located 3.5 nautical miles from the shore.

Nevertheless, officials of existing STS licensed holders there tell The Edge that KA Petra has not approached them to discuss the development of the hub, although they are still operating there and their licences are still valid.

“This is the crux of the matter. We are licensed by the Marine Department to operate STS there, and yet we have not been approached by KA Petra regarding the hub. How can you simply build a hub there if there are other licensed holders operating in the area?” asks one of the officials.

Sources tell The Edge that there are currently four other STS licensed holders operating in the area, including Contemporary Logistics Sdn Bhd, which is wholly owned by the Sultan of Johor, Sultan Ibrahim Sultan Iskandar, according to filings with the Companies Commission of Malaysia.

Another licensed holder, Perintis Corp Sdn Bhd, is owned by the Tengku Panglima of Selangor, Tengku Shakirinal Shah Tengku Sulaiman Shah Alhaj, together with Tunku Kamariah Aminah Maimunah Iskandariah Sultan Iskandar, the sister of the Sultan of Johor.

On whether the current operators will be adversely affected by the STS hub, Shahrul says, “I don’t see the hub jeopardising the business of the other operators there. By building it, we are creating a ring-fence around the area with better regulation and controlled by state-of-the-art facilities.

“This means we are building a facility to accommodate everybody. Now there are only nine berths but once the hub is developed, there will be 30 — ample space for everybody. As the service level in the area improves, you can charge your customers more.”

Speaking to The Edge on the sidelines of the signing ceremony, Hutchison Ports group managing director Eric Ip says he is unperturbed by the ongoing tug of war as he is confident the federal government will sort things out with the Johor government.

The signing ceremony saw Hutchison Ports taking up a 30% stake in the STS hub project, becoming KA Petra’s strategic partner.

Hutchison Ports is a member of CK Hutchison Holdings Ltd, the flagship of business tycoon Li Ka-shing.

Preliminary studies show that the construction of the STS hub will cost between US$150 million and US$180 million, and will be financed by a combination of internally generated funds and debt financing.

The signing ceremony was witnessed by Prime Minister Tun Dr Mahathir Mohamad, Minister of Transport Anthony Loke and Minister of Domestic Trade and Consumer Affairs Datuk Seri Saifuddin Nasution.

At the ceremony, Mahathir brushed aside claims that the Johor government was not informed of the project. However, this was refuted by Johor Crown Prince Tunku Ismail Sultan Ibrahim on Facebook. “Whoever says that Johor is aware is lying,” he says in the Facebook posting.

It is worth noting that Hutchison Ports is a substantial shareholder of Westports Holdings Bhd with a 23.55% stake. Besides its investment in Westports, Hutchison Ports has a presence in 26 countries and operates 51 ports worldwide.

Once completed, the STS hub’s 30 berths will give it the capacity to handle nine million metric tons of crude oil, fuel oil, gas oil, liquefied natural gas and other petroleum-based products. The hub will also be the largest of its kind in the world.

However, without the blessing of the southern state’s powers that be, will the STS hub see the light of day?


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