An open door

“Some things are expensive, such as the dredging work which would allow the larger ships in. It is typically something that you’d might look to the state to do, but in many places the government hasn’t really got the capability to put in place major improvements – so the ports will be looking toward making private arrangements,” says Holman Fenwick Willan’s Alistair Mackie.

This actually leaves the door wide open for private operations to scoop a very good deal. As the owner of the Malayan Port of Tanjung Pelepas is doing right now. Tan Sri Syed Mokhtar Al-Bukhary, who owns not only PTP but Johore Port through MMC Corp, is taking over Penang from the Malayan government where it has been languishing since 1994. It’s true it hasn’t done well in state hands, with a debt rising by over 460% in five years and people point out that growth is nowhere near that of Port Klang (which saw increases of 14% per year) or Tanjung Pelepas, which has throughput six times that of Penang.

However, David Wignall of David Wignall Associates points out that these comparisons don’t necessarily give the whole picture: “Half of Port Klang’s container throughput is transhipment, which is not great from a commercial perspective,” he says.

Still, the Malaysian Cabinet has approved the deal over and above other alternatives, including a bid from local government Minister Lim Guan Eng. Importantly, this ‘de facto’ takeover (at the time of writing it has not yet been inked) incorporates an RM400m dredging requirement.

Despite this, many think that MMC don’t really have Penang’s best interests at heart. They are sceptical that further dredging by MMC will actually be carried out as it is quite possible that it sees Penang port as better employed as a feeder, simply passing freight through to its other operations, especially Tanjung Pelepas. Further, the port regulator may not be able to do much about this as it reports to the federal authority, not the central government.