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Ports and Policy

Malaysia’s successful port policy needs integration with transport planning, writes Wong Hin Wei, Senior Researcher at the Centre for Economic Studies & Ocean Industries, Maritime Institute of Malaysia

Rapid growth: PTP continues to increase its regional trade

A formal and explicit transport policy, encompassing a well-documented master plan and long-term development policies for the port and the transport sector in general, still does not exist in Malaysia.

Since the Fifth Malaysia Plan (1986-1990), however, more emphasis has been given to trade facilitation, manufacturing and transnational trade. Prior to this period, Malaysia’s implicit national transport policy was not designed to facilitate international trade. Its strategic thrust was to facilitate state-building and national integration. The emphasis, therefore, was on road networks to connect sub-regions, open up hinterland for agriculture development, eradicate poverty and redistribute income as part of the New Economic Policy’s social re-engineering programme.

As is evident from Table 1, road infrastructure has always topped the government’s infrastructure development programme. Of the RM50.1bn spent on transport infrastructure during the seven Malaysia plan periods (1966-2000), RM32.6bn (65%) went to road infrastructure as compared with RM8bn (16.0%) for rail and RM4.1bn (8.2%) for ports.

Supply-driven changes
In recent years, nonetheless, a more supply-driven policy has been adopted. Some of the main policy objectives pertaining to port development throughout the various stages of economic growth are as follows:

• development and expansion of port facilities;
• enhancing utilisation of existing port facilities;
• improving efficiency and productivity of port operations;
• enhancing port capacities;
• promoting multimodalism;
• port privatisation;
• development and improvement of ancillary services;
• development and improvement of land-side transportation;
• enhancing and promoting automation and use of computers in port operations; and
• promotion of Electronic Data Interchange (EDI).

Klang first
In declaratory terms, one policy thrust stands out clearly. The Ministry of Transport and other related agencies through their public statements since 1993 have made it clear that their main objective is to make Port Klang the national load centre and the regional transhipment centre. Implicitly, as noted in the Seventh Malaysia Plan (1996-2000), cargo from all other Malaysian ports, acting as feeder ports, would be consolidated where possible through Port Klang.

Table 2 shows the significant results achieved by Port Klang over the years.

However, while the declaratory policy was to make Port Klang the premier port, state governments have been free to establish new ports. The five major federal ports located in Peninsula Malaysia are Port Klang, Penang, Johor, Kuantan and Kemaman. These are federal ports managed by their respective port authorities within the ambit of the Ministry of Transport, while the ports in Sabah and Sarawak (except Bintulu) are under the state ministry’s supervision (see final note).

The laissez-faire approach allows these federal ports to function independently of each other in terms of establishing physical port facilities, port expansion and infrastructure investment. Port Authorities, however, retain the ultimate property rights over ports and fulfil all regulatory functions concerning their respective ports.

Meanwhile, private ports have also been developed. The most prominent of these is the Port of Tanjung Pelepas (PTP), which began operation in January 2000. PTP, when fully operational, will be capable of handling 4.5m TEUs per year. (The present scenario indicates that Port Klang and PTP are well positioned in the system of port networks in the region, with Port Klang catering for local trade and PTP concentrating on regional trade. In the long run, in view of the coexistence of these two ports, further strategies are needed in order to enhance Malaysia’s port competitiveness.)

The growth scenario of Malaysian port facilities under the supply-driven policy has been impressive. Based on projections made under the Seventh Malaysia Plan, total port capacity was anticipated to increase from 257.2m tonnes from 1998 to 314.3m tonnes in 2000 (Tables 3 and 4).

Correspondingly, the number of berths was expected to increase from 203 in 1998 to 223 in 2000. The number of cranes employed was also expected to increase more than double, from 51 in 1995 to 110 by the year 2000.

Going private
Increasing emphasis was also placed on improving the efficiency and productivity of port operations. Private sector participation in port development was encouraged. As a result, Klang Container Terminal was privatised in 1986, making it the first public entity to be privatised in Malaysia. The process of port privatisation was intensified in the early 1990s under the Port Privatisation Act 1990, the process involving ports first undergoing corporatisation, with a new government-owned company taking over the port’s services and assets, and this company then divesting the common shares to private interests, while the government remains as the major shareholder of the port. The ports of Penang, Johor (Pasir Gudang), Kuantan and Bintulu, together with all terminals at Port Klang, were privatised in the 1990s. Hence port authorities are left mainly with the role of trade facilitators and regulators, while the private operators carry out the commercial operations of the ports.

Prospect for future growth
Today, Malaysian ports are considered relatively efficient. The port sector is now equipped with sufficient infrastructure and equipment to cope with the projected expansion of seaborne trade. Port capacities are projected to grow faster (22.2%) than cargo throughput (15.42%). (Port experts are of the view that the initial phase of promotion of a load centre image requires extensive additional investment in infrastructure and superstructures while volume will only materialise after a lead-in period, assuming the port is ultimately successful in its endeavour.)

In terms of container turnaround time, the 12-hour and 14-hour times achieved respectively by Klang Container Terminal and Klang Port Management is on par with those of Singapore (10 hours) and Hong Kong (12 hours). Port Klang, Penang and Johor are also relatively cheaper compared with Singapore and Hong Kong.

Port Klang’s combined handling capacity for containerised cargo (of up to 3.6m TEUs per annum) gives it the potential to be developed into the load centre for Malaysia. Penang Port is growing rapidly as an important feeder port and gateway for the northern region.

A need for integration
However, other transport linkages, and coordination between them, remain rather weak. Therefore, there remains a number of obstacles to be overcome before Malaysia can make Port Klang the national load centre and regional transhipment centre. (Port Klang currently stands around 21st largest container port in the world in terms of total TEUs handled.)

From the policy perspective, an overall integrated approach is needed to address the issues of transport inefficiency systemically or structurally. The weaker links are between the ports and other transportation systems (road and rail) and the supporting and ancillary services. It is important for the government to re-examine and rationalise the key economic role of ports. Are they to function as trade facilitators, or should they be made another key earner of foreign revenue for the country? The strategy to be adopted for each would have different thrusts.

In economic terms, ports should help to deliver competitive advantage to shippers, hence the free market approach should be adopted. However, this may not be the ideal approach, as ports are also strategically important to the country. Therefore, we are at an opportune moment to re-examine the policy objectives and priorities of both the overall transport and national port policies.

Author: Wong Hin Wei, Senior Researcher,
Centre for Economic Studies and Ocean Industries,
Maritime Institute of Malaysia (MIMA).
Website: www.mima.gov.my

Note: In Sarawak, Bintulu is a federal port while Kuching, Rajang and Miri are under the purview of the Sarawak State Ministry of Infrastructure Development. Ports in Sabah are grouped under Sabah Ports Authority and are within the purview of the Sabah State’s Ministry of Communications and Works.

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