Debacle over privatisation of Penang port

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Here’s another example of how privatisation has not benefited the people.

In 2014, Penang Port Sdn Bhd was privatised to Syed Mokhtar Albukhary’s Seaport Terminal (Johore) Sdn Bhd in a restricted tender for RM170m – a figure that was described as “low”.

Barely three years on, Penang Port Sdn Bhd is now being sold to listed MMC Corp Bhd (which is 52 per cent owned by Seaport Terminal) for RM420m. This means Syed Mokhtar’s Seaport Terminal makes an easy profit of RM210m by flipping the port, which reportedly has over RM1.2bn in debt, over to a listed company.

The profits from Penang Port (last year profit after tax was RM67m) have been effectively “privatised”.

But the dredging of Penang port, estimated to cost around RM350m, has not yet been done. The Penang state government is crying foul as it claims Seaport Terminal was supposed to see to the dredging to deepen the port waters from 11m to 15m. The deepening of the Penang channel was deemed necessary so that larger ships could call at the port.

Did Penang lose out to other major ports in the country, including the Port of Tanjung Pelapas, which falls under Syed Mokhtar’s empire, because the dredging has not yet been carried out?

Penang has also lost out in another way. In the past, the funds from the operation of the port were used to cross-subsidise the iconic ferries, which were providing an essential public service. But after the privatisation, the loss-making ferries were further neglected and reduced to a skeleton service. In the end, MMC wanted the ferry service hived off – and the service eventually landed up with Prasarana Malaysia Bhd.

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So, the public is left holding the costs: federal government-owned Prasarana is saddled with the RM15-RM20m in annual losses from the ferry service. (In the first place, why is the ferry service incurring losses when fuel prices have dropped significantly?) And who will bear the dredging cost now? Will MMC now absorb the cost – or the public?

There are a couple of other issues as well.

First, has any study been done to find out why Penang port needs to be periodically dredged at great cost? What is the impact of all the existing land reclamation, which earns huge profits for private developers? Who bears the long-term cost of any dredging that may be required? The public? Why should they, if the siltation of surrounding waters is aggravated by land reclamation, which reaps large profits for private interests?

Second, the ownership and management of Penang port and the ferries, which were under Penang Port Sdn Bhd, should have been handed over to the Penang state government rather than privatised or handed to a federally owned entity like Prasarana.

In almost all federal systems, the responsibility for education, culture, welfare, labour, policing, healthcare and public transport (other than inter-state rail) comes under state or local government jurisdiction. We should be moving towards decentralisation. Numerous studies on ‘subsidiarity’ (the principle that decisions that affect people at the local level should be best decided at the local level) have shown that such decentralisation would actually enhance accountability and transparency in government.

Privatisation is not the same as decentralisation, nor does it guarantee efficiency. In fact, it can often work against the public interest, while profiting private interests. Indeed, the privatisation of Penang Port illustrates for us once again the maxim “privatisation of profits, socialisation of losses”.

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Aliran executive committee
7 July 2017

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SAP
SAP
13 Nov 2020 4.58pm

Part 4:

  1. The Penang ferry was ‘given’ to Prasarana because it is a lossmaking public service. Prasarana should qualify for subsidised diesel (unlike PPSB), and also integrate it as they have done with Pas Mutiara.
  2. The Ferry tariffs have not been raised for decades. It still only costs RM1.20 for a pedestrian’s return journey. Nobody will invest in such a service.
  3. Initially the Ferry was included in the PPSB concession for the profitable port services to cross-subsidise the lossmaking ferries. It was taken out when PPSB was ‘privatised’ to MMC to help the port to improve as cargo gateway to north semenanjung and south thailand, heal its financials and pay back the RM1.2 bil debt.
SAP
SAP
13 Nov 2020 4.55pm

Part 3:

  1. Penang Port is a federal port, built on land owned by FLC, leased to Penang Port Commission. PPC is a federal entity. PPC, via concession, leases the port and its operations to PPSB.
  2. It should not have been “handed over to the state government” as PPSB themselves had financed and built most of the modern port, prior to PPC.
SAP
SAP
13 Nov 2020 3.26pm

Continued (Part 2):

  1. PPSB’s concession does include a requirement for ‘capital dredging’ of the channel. This means a one-off dredging to deepen the channel, as opposed to ‘maintenance dredging’ which is to maintain the current depth.
  2. Maintenance dredging needs to be done annually by all ports as siltation reduces their depth/draft.
  3. It was agreed with the Federal Government that the capital dredging should not proceed as there is no need to do so. No ships which planned to call Penang Port’s many terminals required a depth of 15m. Penang is not a transshipment hub, unlike Port Klang or Tanjung Pelepas.
  4. Since the takeover, PPSB has improved its finances, posting profits and pays dividends and also pays for its own dredging.
SAP
SAP
13 Nov 2020 3.19pm

As an insider to the sale of PPSB, allow me to explain:

  1. Penang Port was corporatised into Penang Port Sdn Bhd, owned 100% by MOF, Inc. This is technically a privatisation as PPSB was given a concession (despite being a GLC. The concession included the ferry service as the definition of “Penang Port” includes the ferry service as per the Penang Port Commission Act.
  2. PPSB under MOF was badly mismanaged. They spent too much on capex and incurred a debt of RM1.2 bil and losses of up to RM50 mil a year.
  3. In 2012, PPSB was ‘privatised’ in that it was sold to a private entity. The price was determined based on the losses it was making, and the debt burden. It may be a low price, but an individual took RM1.2bil debt off the govt’s books.
Khoo Soo Hay
Khoo Soo Hay
8 Jul 2017 12.10pm

Privatization is nothing but a scam to channel public utilities profits into selected crony companies, who are politically connected with the ruling party. That is all.

Soo Hay