Challenging the norm

Forward thinking: the Sapangar Bay development could kickstart East Malaysia’s industry, but it will take political vision to back it up

Forward thinking: the Sapangar Bay development could kickstart East Malaysia’s industry, but it will take political vision to back it up

Malaysia's grand Sapangar development could give Port Klang a run for its money, explains Stevie Knight

The ambitious expansion project at Sapangar Bay, Borneo could prove to be more than a blessing for East Malaysia: it might even ring some changes for Southeast Asia as a whole. But it stands to ruffle more than a few feathers.

Sapangar Bay Container Port (SBCP) is looking at no less than a 150% upgrade from a large RM372m ($90m) government investment that will push capacity up to 1.25m teu from the current 500,000 by the end of 2019: the plans are to lengthen the quay from the current 500m to 1.2km alongside, increasing the stacking area from 15 to 60 hectares.

Given the present 300,000 teu throughput it’s a truly big step change, even if, according to main port operator and developer Suria Capital, SBCP’s growth “has been on the uptrend at about 5% to 6% annually” since privatisation back in 2003. So what’s the driver?

The issue is something of a hot potato. The problem is partly geography: West and East Malaysia is divided between the mainland and the island of Borneo. Since port development has favoured the peninsula, cargo to the island has to be transhipped via Port Klang. Therefore while Port Klang has grabbed all the available ‘economies of scale’, it's left East Malaysia, over 3,000km away, out in the cold and has pushed up local prices and local disgust in equal measure.

It’s been called a ‘chicken and egg’ situation as the domestic industries are, say local news sources, hamstrung by the expense of getting goods to market, leaving them without export traction: a self-perpetuating circle with the added complication that the cabotage regulations first introduced to protect local interests have had the reverse effect, although it seems this is element is slowly being relaxed.

Certainly this port development in Sabah will help to reduce bothersome time and distance costs for importing raw materials and exporting finished goods as well as kickstarting competition among local and foreign shipping companies, but Datuk Seri Panglima Wong Khen Thau of the Federation of Sabah Industries (FSI) believes ending the inequity will require more than that, adding it will take “political vision” to see it through.

Government role

While he explains the Sapangar development will pull in direct calls from Taiwan, Japan, Korea, Hong Kong and China he also believes the federal government needs to realise that Sabah could and should play “a critical role as a gateway-hub” for the East Asia region. Therefore East Malaysian development will need to be actively pursued with an accelerated port program which allows foreign participation in facility development “as part of the push to attract foreign shippers with confidence that the containers can be offloaded efficiently”.

However, most importantly he says it will take a hard rewiring of the trade routes – away from Port Klang.

It’s certainly worth a lot of money. The FSI has calculated this state of affairs impacts no less than RM37.47bn ($8.99bn) of Sabah's imports, of which around RM800m ($192m) is down to shipping costs, equivalent to 2.15% of the total import bill. So it’s with good reason that local industry is pushing hard to bring this element down.

Even though Datuk Seri says this would require “political willpower” it’s not as outlandish as it sounds. Currently RM440bn of Malaysia's international trade (evenly split between import and export) is with other East Asia region countries, making geographical sense of development at Sapangar Bay. “That is RM220bn ($52.8bn) of Malaysia imports that can be unloaded at Sabah port,” he says, but adds to succeed “the government needs to push this through... officially endorsing Sabah's hub status, plus executing a load distribution strategy”. Realistically, he says it might best begin slowly “by designating certain goods such as construction materials” for shipment through Sapangar, “even that 10% or RM22bn ($5.28bn) will increase Sabah's GDP tremendously”.

Will the Malaysian government pursue the idea? It will require nerve, and no-one would expect that vested interests in Port Klang will take this lying down.

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