PORT Klang Free Zone Sdn Bhd (PKFZ), which manages and markets the RM4.6 billion free zone in Pulau Indah, Selangor, has begun a campaign to allay negative perceptions about it and its operations.

It is in talks with potential investors and working with trade associations to win them over after being recently hit by controversies surrounding the project, a senior PKFZ official said.

Critics of the project had questioned the project’s development cost which had ballooned from an original estimate of RM100 million to RM4.6 billion, including land acquisition.

“When investors ask me about the controversies (involving the cost of developing the project), I ask them whether they are a politician or a businessman … because invariably a businessman will see the viability of the development,” PKFZ general manager for business development Chia Kon Leong told Business Times yesterday.

He was speaking after a visit by the Public Accounts Committee (PAC), which is investigating the PKFZ project’s operations following recent controversies.

A 16-member delegation comprising members from the Audit Department, the Finance Ministry and PAC headed by Datuk Shahrir Abdul Samad, had toured the PKFZ site earlier.

Shahrir, after the meeting, questioned why a provision had been made in the PKFZ project for additional expenditure of 20 per cent to be factored into the RM2.8 billion development cost.

“We are curious about this 20 per cent provision.This has been factored into the RM2.8 billion development cost,” he added.

He said the Port Klang Authority, which owns the free zone, has agreed to get back to the PAC with an explanation for the provision.

Shahrir said the PAC was satisfied with explanations so far, but he added: “We are not finished with PKFZ. We will have a briefing with the Attorney General.

“Then we will look at other areas before we table a report to the Dewan Rakyat.”

“We are not a group of anti-development people. We are interested in the financial procedure. We want to know how the cost overrun occurred in a government project,” he said.

The project first raised eyebrows when PKA bought 405ha in Pulau Indah in 2002 for RM1.088 billion, or RM25 per sq ft from Kuala Dimensi Sdn Bhd.

The land purchase was followed by RM1.845 billion in costs for the development of the zone.

In July, the then zone operator Jebel Ali Free Zone Authority withdrew from a contract to manage the PKFZ.

Last month, the Transport Ministry said the government had agreed to extend a loan for an unspecified amount to PKA to help cover the cost of the project which had ballooned to RM4.6 billion.

To date, PKFZ has 32 confirmed investors, taking up 31.2ha of open land for development and investing some RM725 million into the free zone.

Chia said there are another 12 customers that have booked 98 acres for
construction.

These investors are in the process of obtaining licensing, but have not signed any agreement or put up a deposit with PKFZ.

MMC Corp Bhd, controlled by businessman Tan Sri Syed Mokhtar Al-Bukhary, has finally put the group’s plans in motion to develop 913.3ha of land in Tanjung Bin, Johor, that its subsidiary bought two years ago for petrochemical and maritime industries.

MMC announced on Monday that it will work with Dubai World to develop a RM16 million maritime centre there.

Analysts said the project has lent credibility to the MMC group in particular Johor Port Bhd after receiving much flak from analysts and minority shareholders for buying the land located opposite Port of Tanjung Pelepas (PTP) for RM403 million in 2005.

Reasons given included little indication of potential profitability of the land, the premium to land cost was high, the near-term earnings deterioration and concerns over Johor Port’s inexperience in property development.

OSK Research Sdn Bhd senior manager Chris Eng said the project augurs well for Seaport Terminal Sdn Bhd, the controlling shareholder of MMC, and shows the strength of MMC’s Middle East relations.

“This is reflected in Dubai World agreeing to work with MMC in developing a maritime centre master plan, despite the recent withdrawal of Jafza International from the Port Klang Free Zone (PKFZ),” he told Business Times yesterday.

“We also understand from MMC management that Dubai World will take up part of the land in south Johor,” he said.

Attempts by Business Times to obtain further details from MMC failed.

Eng also said the local research house has always considered the project as economically viable, but that it may take some time to materialise.

“With Dubai World coming in, things will probably move faster,” he said, raising his price target from RM8 to RM8.30 with a “trading buy” rating on MMC shares.

An analyst, who declined to be named, said he expects the proposed maritime centre to benefit from its geographical proximity to and the land limitations in Singapore.

He also believes that unlike Jafza’s management contract with PKFZ, Dubai World will be able to retain operational control as an equity stakeholder in the proposed maritime centre project.

International Shipowners Association of Malaysia vice-chairman Ooi Lean Hin described the project as “positive”.

“For Dubai World to come in, there must have been clear advantages for them to cooperate with MMC and that the project has potential to be developed,” he said.

Ooi, who is also Evergreen Marine Corp (Malaysia) Sdn Bhd vice-chairman, said Johor and PTP are in a good position to tap into the petrochemical and maritime markets and offer what Singapore has.

“Today, shipyards in Singapore are full. Property prices in Singapore are also very high compared with Johor,” he added.

MMC and Dubai World had on Monday signed a memorandum of understanding to jointly develop a maritime centre masterplan that will comprise oil terminal activities, dry docks, a shipyard, conventional cargo handling facilities, logistic parks and property development.

MMC shares closed 25 sen higher to RM7.90 yesterday.

IN A surprise move, Jafza International, the operator of Dubai’s Jebel Ali Free Zone, has pulled out of a 15-year contract to manage the Port Klang Free Zone (PKFZ), citing a change in business strategy.

Jafza, in a statement yesterday, said it had given notice of termination to the Port Klang Free Zone Authority (PKFZA), the body in charge of PKFZ, 12 years short of its contract expiry.

PKFZ, a RM4 billion government initiative, is meant to be a magnet for foreign investments. It is touted as the first of its kind where investors can carry out manufacturing activities.

Free trade zones are special areas where investors are normally given incentives such as tax breaks and undergo less red tape.

Jafza said it is now mainly interested in free zone projects in which it can retain operational control as an equity stakeholder.

PKFZ held a soft launch in November last year. An official opening was expected to be held in the first quarter of this year, but this has since been delayed.

On Tuesday, Port Klang Authority (PKA) general manager Datin O. C. Phang said the arrangement between PKA, the regulator of PKFZ, and Jafza had not changed.

This was despite the departure of Jafza representative Noel Gulliver in April, who was called back to take care of Jafza’s interests elsewhere.

Sources close to the matter told Business Times that Jafza had decided to withdraw as it seeks to focus more on projects around the world in which it has stakes.

PKA fully owns PKFZ.

“As it did not have a stake in PKFZ, the project became its lowest priority,” a source said.

The source added that Jafza had changed its general manager three times in the last three years.

It is understood that both parties will not seek compensation and have agreed to part amicably.

Jafza had originally signed the agreement with PKFZ in October 2004 to manage and market the free zone.

“It is a mutually acceptable decision and Jafza can (still) offer its marketing services if it wants to,” Phang said.

Phang is also the chairman of PKFZ.

“As far as we are concerned, we can manage on our own as we have capable Malaysians who have experience with (developing and marketing) free zones,” she added.

Jafza said it will work with PKFZ to ensure a smooth handover of management responsibility at the development.

PKFZ involves an area of 405ha in Pulau Indah, Port Klang.
Jafza’s role as operator and manager of PKFZ was much publicised given its success with the Jebel Ali Free Zone.

Plans were under way for Jafza to promote PKFZ to its existing clients in Jebel Ali.

PORT Klang Authority (PKA), the regulator of Northport and Westports, is still looking for someone to fill the position of managing director at the Port Klang Free Zone (PKFZ), left vacant by Noel Gulliver William’s return to Dubai in April.

Gulliver was seconded by Jafza International, the international arm of Dubai’s Jebel Ali Free Zone Authority (Jafza), to PKFZ last year to establish its mega distribution park in Pulau Indah, Selangor.

PKA general manager Datin O. C. Phang said the authority has decided not to replace the position with another Jafza International appointee. Instead, it will be taking out an advertisement for the position soon.

“We are open (to candidates interested in the position). We will not limit ourselves to local applicants, but also those from abroad,” she told a news conference in Port Klang yesterday.

“However, I am confident that we have good Malaysians who are capable of taking up the position. So let’s wait for the results,” she added.

Newly-appointed PKA chairman Datuk Chor Chee Heung had told Business Times last week that PKA was in talks with Jafza International over who will replace Gulliver.

PKA, which owns PKFZ, signed a 15-year contract with Jafza International on October 24 2004 to manage and market its free zone.

Phang said the arrangement between PKA and Jafza International has not changed and the latter will continue to help market and render its services to make PKFZ a success.

“We would like to use the marketing expertise of Jafza International to help make PKFZ better known (internationally) and to attract international businesses, but that doesn’t stop our own team from working hard and that’s why we have focused on getting additional marketing staff for this,” she said.

It is understood that PKA has hired two former Northport (Malaysia) Bhd senior executives to help drive the free zone’s growth.

It has appointed Chia Kon Leong, former assistant general manager of marketing and corporate communications at Northport, as general manager of business development and Helen How Mei Leng, former commercial manager of Northport, as general manager of marketing and corporate communications at PKFZ.

The Government, through PKA, is spending some RM4 billion to develop the 405ha PKFZ, which is slated for completion by April 2008.

In another development, Chor said PKA is leasing another 8ha to Northport to develop Southpoint, which serves as Northport’s centre for coastal trade.

He said the authority will terminate lease agreements with four parties to accommodate Northport.

Chor also said the dredging works on Port Klang’s north channel is expected to be completed by the end of this year at a cost of more than RM300 million.

The north channel is set to be deepened to 15.5m, similar to that in the south channel and enabling large vessels to go in and out both ways.

The dredging of the north channel is set to benefit Northport as well as other players in the shipping community as it will cut sailing time by three hours.

PORT Klang Authority (PKA), the regulator of Northport and Westports, said discussions are ongoing with Jafza International, the international arm of Dubai’s Jebel Ali Free Zone Authority (Jafza), over who will replace Noel Gulliver William as managing director of the Port Klang Free Zone (PKFZ).

The position has been left vacant since Gulliver’s return to Dubai in April. An Australian logistics executive, Gulliver, who has 13 years of experience in Asia, five of them as a senior executive with Maersk Logistics in Singapore, was seconded to PKFZ last year to establish its mega distribution park in Pulau Indah, Selangor.

“We don’t know yet. We have yet to decide (whether to appoint a local or someone from Jafza International). We expect to come up with a firm organisational structure in due course,” newly-appointed PKA chairman Datuk Chor Chee Heung told Business Times in an interview.

Meanwhile, Chor dismissed talk that Jafza International was pulling out of its contract with PKA due to a lack of progress in marketing PKFZ. The setting up of PKFZ Sdn Bhd to manage and market the free zone has fuelled further speculation that PKA was taking over the project.

“Gulliver’s departure was due to the company’s (Jafza International) restructuring initiatives, but both PKA and Jafza are still partners. The latter continues to play an advisory role in terms of marketing PKFZ. We still need their help internationally,” he said.

“We continue to have talks with Jafza International to see what is best for PKFZ,” he added.

PKA, which owns PKFZ, signed a 15-year contract with Jafza International on October 24 2004 to manage and market its free zone.

Under the agreement, Jafza International will partner PKA in conceptualising the development and marketing of PKFZ. These include management, administration, marketing and sales.

The Government, through PKA, is spending some RM4 billion to develop the 405ha PKFZ, which is slated for completion by April 2008. The project components comprise prepared land, light industrial and warehouse units, and a business complex.

“PKFZ is making good progress. Since the project started in November last year, without full infrastructural amenities, we have managed to attract RM468.3 million worth of investments from six companies for prepared land to build manufacturing facilities, eight companies for the light industrial or warehouse units and seven companies for the leased business complex,” said Chor.

“For 2007, we have received committed investments (not signed) from 21 companies for prepared land to build manufacturing facilities worth RM795 million and RM15 million for the light industrial or warehouse units and RM510,000 for the leased business complex.

“In addition, we have potential customers in the process of negotiations with RM258.6 million worth of investments,” he added.

In a statement released last week, PKFZ chairman Datin Paduka O.C. Phang said the latest investor in PKFZ was Pantech Group Holdings Bhd, which has taken seven acres of prepared land.

Pantech Group, a company listed on the main board of Bursa Malaysia,
manufactures and supplies pipes, fittings and flow controls products.

PKFZ is the Government’s biggest investment in the port industry since 1990.

To attract investments to the free zone, the Government, through the Malaysian Industrial and Development Authority, is offering companies that are set up there with tax exemptions, export incentives, research and development incentives, 100 per cent foreign equity ownership and 100 per cent repatriation of capital and profits.

THE Port Klang Free Zone (PKFZ) in Pulau Indah is expected to bring in another 20 to 25 investors in the next couple of months, investing more than RM100 million in the area.

PKFZ general manager Noel Gulliver told Business Times that the project is on schedule and that there is a healthy interest from investors to set up there.

“I think we’ll get past 20 investors quickly,” Gulliver said.

The free zone’s customs checkpoint is also to be fully operational soon, with the key handing over ceremony to customs officials happening this week.

“It is a small but important milestone as this would be the point where investors’ interest in the free zone will accelerate,” Gulliver said.

He said so far PKFZ has signed up seven new tenants, bringing the total to eight.

The seven have taken up 28.4ha of land, and ten warehouses.

Industry sources have said that operations in the free zone have been slow and investor interest waning.

Gulliver said there had been a minor glitch in the lease agreement that the free zone had rectified and expects to come out with by today.

The revised lease agreement leaves out a paragraph which Gulliver said the free zone was not very comfortable with. He did not elaborate.

He also said some of its clients like Aker Kvaerner have even started shipping containers in and out of the free zone bearing its equipment.

Norwegian oil and gas company Aker Kvaerner was the first company to take up a lease at PKFZ.

Gulliver said the free zone has seen increasing interest from the oil and gas industry as well as trading companies.

He said even warehousing and storage is starting to pick up.

Port Klang Authority, the sole owner of the free zone, has allocated RM2.2 billion for the development of the free zone.

PKFZ is the first free zone in Asia-Pacific to be managed by Jafza International, the consulting and management division of Jebel Ali Free Zone Authority in Dubai.

Jafza International will manage the free zone for 15 years in which time PKA hopes to develop the right local expertise to take over the management of the free zone.

WESTPORTS Malaysia is bullish about growth and is confident of playing a significant role in the country’s development into the next decade, said its executive chairman Tan Sri G. Gnanalingam.

He said the port is poised to benefit from the emphasis placed by the Government on the transport industry under the Ninth Malaysia Plan.

Westports expects growth of containers from 12 million TEUs to 18 million TEUs (20-foot equivalent units) in the next five years. “We are ready to achieve this target,” Gnanalingam told delegates at the Fourth Asean Ports and Shipping 2006 conference in Kuala Lumpur yesterday.

He said Westports has done well by growing to 2.91 million TEUs last year from about 500,000 TEUs eight years ago. Westports, which now handles more than half Port Klang’s cargo, aims to handle 3.5 million TEUs this year.

Gnanalingam optimism was based on Malaysia’s economic competitiveness as the 17th largest trading nation and the seventh largest country for containers in the world. He also noted that Malaysian ports offers the lowest tariffs in the world and the fastest connectivity to other developing and fast growing markets.

For the next decade, Westports will continue to grow by leveraging not only on its world-class facilities and services, but also through the development that is taking shape within its vicinity.

Westports will play the role of logistics enhancer due to its location in the vicinity of the Selangor Halal Hub and the development of the halal hub currently taking shape at the Port Klang Free Zone (PKFZ).

Both these facilities, located on Pulau Indah, mark a significant development in making the country as a centre for the manufacturing and exporting of halal products. “There’s a great opportunity for Malaysians to spearhead the Halal Hub to serve two billion Muslims with consumption valued at RM500 billion,” he said.

He said that Westports stands to gain by the soon-to-be-opened PKFZ, which will pave the way for the emergence of many industries that will be a boon for the future growth of the port.

The aim of this mission is to attract investors, manufacturers and shipping liners to come to Port Klang and be a part of the Port Klang Free Zone (PKFZ) as well as participate in Malaysia’s halal initiatives in Port Klang and other parts of the country.

Transport Minister Datuk Seri Chan Kong Choy will lead this mission.

Other members of the mission include Westports executive chairman Tan Sri G. Gnanalingam, Port Klang Authority (PKA) chairman Datuk Yap Pian Hon, PKA general manager Datin Paduka O. C. Phang and PKFZ managing director Noel Gulliver William.

“The objective of the mission is to attract investors from the United Arab Emirates (the UAE) to invest and do business in Malaysia, particularly in the logistics and halal trade and to enhance bilateral trade between Malaysia and the UAE. Other benefits include raising the profile of the Malaysian participants to foreign investors through business matching programmes.

“We intend to bring about 100 local businessmen to further enhance business collaboration between the private sectors of Malaysia and the UAE,” Chan said in a statement yesterday.

Among the possible halal industries that the delegation will explore are food products such as dairy, food and beverages, confectionary and culinary as well as non-food products such as pharmaceuticals, herbal supplements, leather goods, cosmetics and toiletries.

The recently-held World Halal Forum in Kuala Lumpur paves the way for Malaysia in becoming a “Centre Of Halal Excellence”.

“We want to help Malaysian businessmen especially Bumiputera SMEs realise the full extent of the market potential for halal manufacturers, both food and non-food.

“This Dubai mission is also geared towards growing the numbers and range of halal-certified products on offer in the global market, coming off Malaysian Centres of Halal Excellence,” he said.

“The halal industry is important and it has been identified as the next wave of development for Malaysia’s economy. With our already good infrastructure in place including highways, world-class airport and port, the multimedia corridor, broadband as well as 3G telecommunications facilities, the halal sector gives us a fantastic opportunity to be the capital of halal food trade,” he added.

The upcoming visit to the UAE is also one of the initiatives taken by Malaysia to strengthen economic ties with member countries of the Organisation of Islamic Conference (OIC).

The International Trade and Industry Ministry (Miti) had said Malaysia’s trade with OIC countries has expanded significantly over the last decade.

Malaysia’s total trade with OIC member states increased more than four fold from US$4.1 billion (RM14.88 billion) in 1995 to US$18.4 billion (RM66.79 billion) in 2005.

All the markets in this region recorded increases in exports, with the UAE, Saudi Arabia, Turkey, Yemen and Iran registering the most significant growth.

Westports also said it is excited about the prospect of engaging more Middle East main line operators to call at its port.

Currently, Westports’ capacity is 6 million TEUs (20-ft equivalent units) and has the capacity to handle up to 10 million TEUs within the next five years.

The recent surge in trade between Malaysia and Middle East is also exemplified by the strong growth of containers from West Asian Shipping Lines such as UASC, IRISL and Simatech, who are all major customers of Westports.

They view Westports as their favourite port due to the efficiency and productivity that the port provides.

The stage is now set for Malaysia to become a global halal hub, using its edge over other Muslim nations in trading, logistics, Islamic banking and halal certification.

Westports, the country’s leading and world-class seaport, will play the role of logistics enhancer due to its location in the vicinity of the Selangor Halal Hub and the development of the halal hub currently taking shape at the Port Klang Free Zone (PKFZ).

Both of these facilities, located on Pulau Indah, home to Westports, marks a significant development in making the country a centre for the manufacturing and exporting of halal products.

Indeed, Westports is ready to play its role as the logistics enhancer.

The port has begun its promotional efforts by wooing potential investors from China to come to Port Klang. At its recent shipping mission to Shanghai and Shenzhen, Westports discovered how excited the Chinese were about the developments taking place in Port Klang.

The halal hub at PKFZ, coupled with the impressive productivity rate of Westports, has impressed the Chinese business fraternity.

Chinese Muslims regard the development of the halal hub at PKFZ and Westports as the launching pad for their food products. The growth potential of the halal food market is huge and the Chinese are seeking opportunities to manufacture such products and penetrate countries that
they have been unable to enter for a long time.

The World Halal Forum is expected to determine the direction of the world halal industry and will be an eye opener for the world.

Malaysia, as one of the biggest trading nations in the Muslim world, is widely recognised and acknowledged for its certification standard for halal food. Its halal standard (MS 1500:2004) meets both the requirements of the Muslim community and the international health and safety standards.

Malaysia’s strategic role as chairman of the Organisation of the Islamic Conference and the Non-Aligned Movement, the country’s recognised leadership in the development of the global halal market and the Prime Minister’s personal commitment to the Malaysian halal industry as well as the Government’s commitment to the halal industry in the Ninth Malaysia Plan speak well of the future of this booming sector.

All these factors will certainly propel and heighten business activities not only at Port Klang but also at other parts of the country.

Both Westports and PKFZ, with the cooperation and support of the Transport Ministry, will be organising more roadshows in the coming months to entice more shippers and investors to Port Klang, particularly to sell Port Klang halal hub’s unique features and Westports’ capacity.

The growth momentum in the container throughput in the period January to March 2006 is expected to continue for the rest of the year, leading to the 3.5 million TEUs projection for the port in 2006.

Last year, Westports’ total volume was 2.91 million TEUs.

Today, Westports handles 22 per cent of the total container volume in the country. More than half of Port Klang’s cargo go through Westports.

The port also notched two world records for productivity in March.

“One month after clinching its latest world record of 421 moves per hour, the Westports operations team did it again when it managed to hit crane productivity of 452 moves in a single hour of operations with an eight-crane deployment on March 9,” said Westports Malaysia executive chairman Tan Sri G. Gnanalingam in a statement yesterday.

“Though we have just within a month made another milestone achievement, this is only the beginning,” he added.

Today, Westports stands among the top five ports in the world to have achieved such a remarkable rate of productivity.

“With continuous improvement in productivity, we will be able to double our volume from 3 million TEUs to 6 million in the next five years,” said Gnanalingam.

In March this year, Westports also introduced its e-billing, a custom-made system, designed and innovated in-house, to cater to the needs of the port’s customers with the aim of streamlining and improving billing systems.

E-billing is one of the modules that appears in the port’s electronic submission and tracking link – WestportLINK.

Gnanalingam also said Westports stands to gain by the soon-to-be-opened Port Klang Free Zone (PKFZ), which will pave the way for the emergence of many industries that will be a boon for the future growth of the port.

“This duty free zone and the Government’s continuous backing to attract main line operators and forging alliances with international ports, especially Port Klang, will ensure that Malaysia remains as one of the top 10 countries in terms of handling containers and logistics business.

“Besides the PKFZ, the Halal Hub Centre will be a boon for the growth of Westports as these multimillion ringgit projects will create economic stimulus, especially from new industries that will emerge from PKFZ,” he said.

He added that the recent unveiling of the Ninth Malaysia Plan, which placed importance on the transportation industry, had set the right priorities for seaports for the next five years.

It calls for the growth of containers from 12 million TEUs to 18 million TEUs.

For the next decade, Westports will continue to grow by leveraging not only on its world-class facilities and services, but also through the development that is taking shape within its vicinity.