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"Whither the True Cost of Mega-Port Development?" a Commentary by Serina Rahman

2017/6, 25 January 2017

The development of the Klang Valley’s third port and industrial city in Carey Island will add to the list of Malaysian mega-port developments such as the Malacca Gateway and the Kuala Linggi International Port, many in collaboration with mainland Chinese investors. While some have questioned the political and military implications of such strategic investments encircling the Malaysian Peninsular, Port Klang Authority (PKA) Chairman Tan Sri Kong Cho Ha claims that every port in China is expanding, and Malaysia needs to keep up.

The Carey Island port is a 20-year project that will amount to RM200 billion in investments and a projected total gross development value of more than RM1 trillion. The project is said to ensure Malaysia’s competitiveness and will complement the existing Westport facilities, which together with Northport, make up the Port Klang Free Zone (PKFZ). The CEO of PKFZ, Datuk Chia Kon Leong expects that a PKFZ2 in Carey Island’s vast landbank of more than 100 sq km will help to expand capacities and drive growth.
 
Proponents of the port development feel that the third port is crucial; Maybank IB Research projected full capacity in both Westport and Northport by 2020. However Ruben Emir Gnanalingam, CEO of Westport, feels that it is highly unlikely that the necessary growth of more than 10% per year over the next 5 years can be reached. He feels that a third port may not be necessary and that other options can be examined.

All of this comes against a backdrop of a slump in the international shipping trade and a 2015 report by the World Bank that also stated that another port on Malaysia’s west coast is unnecessary. The Edge Malaysia noted the uncertainty of future port services due to the formation of mega-alliances of container carriers for economies of scale in response to current over-capacity. The redirection of traffic to specific ports could portend problems for these new developments. In addition to these proposed port cities, the Port of Tg Pelepas in southwest Malaysia is expanding and Singapore is also increasing capacity with a new mega-port in Tuas.

The maritime industry publication, Seatrade, reported that ties to China are less important than the transhipment hubs of the mega-alliances and their future plans. Over-capacity can lead to cannibalisation between ports and Carey Island may suffer from other ports’ long-established relationships. The beneficiaries of these developments will end up being the shipping lines and developers, with the ports and taxpayers losing out.

Sime Darby as the main landowner in Carey Island has only stated that they will look into ‘value-enhancing opportunities’ for the group. Tan Sri Kong of PKA seemed to be ‘pushing’ them to be the ‘anchor’ in the plan. While Sime Darby has port operations in China, this is not its core business and analysts see little synergy between the Weifang multi-purpose port and a Carey Island mega-port city.

Add to that the potential impacts on the Mah Meri indigenous group, the original inhabitants of the island they once knew as Pulau Si Alang. While most of the population of only a few thousand fear the loss of livelihoods and traditions given the planned use of their primary forest, a local Tok Batin (village headman) felt that the port will create more jobs. Non-indigenous residents also believe that it will increase the value of their property.

A full assessment of the economic, socio-cultural, environmental, political and strategic impacts of this development needs to be done. Even as the immediate lure of possible financial gain at the expense of Singapore’s shipping pie beckons, further analysis of its implications on other Malaysian ports as well as its economic and security risks needs to be carried out.

Dr Serina Rahman is Visiting Research Fellow under the Malaysia Program at ISEAS-Yusof Ishak Institute.

The facts and views expressed are solely that of the author/authors and do not necessarily reflect that of ISEAS – Yusof Ishak Institute.  No part of this publication may be reproduced in any form without permission.