PORT Klang Authority, regulator of Northport and Westports, plans to build a multi-purpose berth to help increase the port’s occupancy rate to 65 per cent, said its general manager and chief executive officer (CEO) Lim Thean Shiang.

“The multi-purpose berth, which should be built in the next 1 1/2 to two years, is crucial and is in our national interest.

“Whether Westports will do it or we get someone else – shipping lines or international operators – to do it as a concession, will be looked at soon,” he told Business Times in an interview in Tokyo last week.

Lim, who is in his second month as CEO, said the lack of the berth is one of the main reasons why companies like Technip, Dialog and a lot of Middle East oil and gas companies are not entering the port.

A multi-purpose berth could cost up to RM60 million.

Orient Overseas Container Line Ltd, a Hong Kong shipping line, has enquired if PKA was willing to provide a dedicated berth for which it would consider bringing one million TEUs (twenty-foot equivalent units) first.

“It is important to make Port Klang a gateway to Malaysia – being nearest to Europe-bound shipments. If we don’t make it now, we stand to lose to Vietnam and in the next 20 to 30 years, India as well as Africa,” he said.

Another potential area of growth is in the warehousing of dangerous goods, he said.

PKA is the manager and marketer of the Port Klang Free Zone (PKFZ), which enjoyed 6,000 TEUs last year compared with 4,000 TEUs in 2006.

Lim said the entrance of the port, which is the last area to be developed, is targeted for completion by the end of July.

Dubai-based Oilfields Supply Centre Ltd, which is developing part of PKFZ as an oil and gas hub in the Asean region, is already opening up office and is expected to construct its own centre in December.

Under the Mid-Term Review of the Ninth Malaysia Plan, PKA was to dredge the north channel but Lim said the move would have to be relooked as it will not improve throughput.

“It would be better to expand the width of the south channel by 500m from the current 365m to enable two big vessels to use instead of having to anchor outside the channel,” he added.

Lim, who is on a two-year contract, is also determined that the port authority improve the overall efficiency of Port Klang in terms of services, infrastructure and haulage companies to woo shipping lines which have shied away before.

To achieve this, PKA has submitted several initiatives to the Transport Ministry for approval.

PKA has only two operators, but foreign ports like Yokohama has over 100 and Osaka has 268 operators.

“They have dedicated port operators, which is one of the areas I will explore in opening up Port Klang.”

He has suggested to the Economic Planning Unit that Northport and Westports contribute a portion of their revenue or net profits to enable it to undertake the promotion of the port, as is being done in Yokohama and Osaka in Japan and Hong Kong.

“PKA should be promoting the port (and the country) to the world as we have facilities, rail, road system and expansion plans for the next 15 years.”

Lim, who visited Osaka and Yokohama port cities while accompanying International Trade and Industry Minister Tan Sri Muhyiddin Mohd Yassin on a trade and investment mission last week, said PKFZ can do the same with a free trade zone.

It is still talking to the highway authority on a two-year plan to build another road to Pulau Indah to enable the port to be a supportive feeder for air cargo.

LIM Thean Shiang is tipped to become the new general manager of Port Klang Authority (PKA), replacing Datin Paduka O.C. Phang who has not been offered an extension to her contract, which runs out in June.

Lim is slated to take over the helm of PKA, the regulator of Northport and Westports, from June 6 2008.

Little is known of the man, except that he is currently a board member of PKA.

“It is understood that the Transport Minister is positioning Lim as general manager designate for a year or so to assist in realigning the management and directions of PKA,” Century Logistics Holdings Bhd deputy managing director Dr Mohamed Amin Kassim told Business Times.

Another industry source said PKA assistant general manager (regulatory) Captain David Rajan Padman is emerging as a favourite to succeed Lim, given his experience at PKA.

“Captain David is considered most promising to succeed Lim, as the former is most qualified and capable,” said the source, who declined to be named.

Lim’s appointment comes on the heels of former Subang Jaya assemblyman Datuk Lee Hwa Beng’s appointment as chairman of PKA from April 1 2008 by the Yang Di-Pertuan Agong.

Phang has been general manager of PKA since September 1997.

She was also the first vice-president of the International Association of Ports and Harbors (IAPH) between 2005 and 2007, the first Malaysian and first woman to attain such a position in the association.

Her election as first vice-president paved the way for the first Malaysian to be elected as IAPH president in mid-2007.

She was also a past chairman of the Asean Ports Association at the regional level and the Asean Ports Association, Malaysian chapter.

Phang was appointed chairman of Port Klang Free Zone (PKFZ) by the Minister of Transport last year, shortly after Jebel Ali Free Zone, a Dubai-based free zone operator, withdrew from the management concession for the 405ha facility in Pulau Indah, Selangor.

The project is the biggest investment undertaken by PKA since it completed the privatization of all its port services in the 1990s.

However, it has drawn criticism from the public over its ballooning development cost overruns, which amounted to RM4.6 billion from an initial cost of RM1.3 billion.

THE Port Klang Free Zone (PKFZ) in Pulau Indah, a project that had drawn criticism from the public over its ballooning cost overruns, has made significant progress in the last four months, having attracted 39 companies into the zone with total investments of RM729 million.

“The pace of investments into PKFZ has accelerated in the past four months.

“We believe the pick-up rate will be faster from the second year of operations,” Port Klang Free Zone Sdn Bhd (PKFZSB) general manager of business development, Chia Kon Leong, said last Friday.

Chia is part of a new management team of locals appointed by the Port Klang Authority (PKA), which owns PKFZ, to manage and market the RM4.6 billion free zone, following the pull-out of Dubai-based Jafza International from the project in July this year.

It was reported that the fallout between PKA and Jafza was partly due to the latter’s slow progress in attracting investments into PKFZ since the project’s soft launch in November last year.

Asked when PKFZ can expect to recoup its RM4.6 billion project costs, Chia said it is considered a national project.

“The prospects of getting RM5 billion to RM6 billion worth of investments coming, creating 25,000 to 30,000 employment opportunities (upon full development) and sustaining the competitiveness of Port Klang so that main line operators will continue to call and shippers do not have to pay higher freight charges …. how do you quantify all these to equate it with the RM4.6 billion (spent to develop PKFZ)?” he asked.

He likened the project to the KL International Airport (KLIA) in Sepang.

“Who built KLIA? Who runs KLIA today? Is Malaysia Airports Holdings Bhd going to pay back what the Government spent to build the airport? So can we be given the same condition? It should be looked at in the same way,” he said.

Covering 405ha, PKFZ offers 298.4ha of open land for long-term, 512 pre-built light industrial units and 4,628sq ft of office space in its business complex.

Chia said so far 12 companies have agreed to take up 31.19ha, representing 12 per cent of the open land in the zone. They have an option to lease another 37.67ha, or 15 per cent of the open land within the next 12 months.

“Aker Kvaerner from Norway is now the biggest investor in PKFZ, investing about RM400 million and leasing 28ha of the open land to build its factory.

“As for the light industrial units, 20 tenants have taken up 25 units for trading, light manufacturing and logistics businesses,” he added.

The types of investments PKFZ is looking at are in the fields of trading, manufacturing and logistics in all sectors including automotive, heavy industries, oil and gas, electronics, food, among others.

Talks are being held with 55 other potential investors with investments worth RM610 million, including three logistics companies.

“We are talking to three companies which have plans to set up a logistics hub within the free zone to do warehousing, distribution, container storage and full container loads (FCLs) or less than container loads (LCLs) activities.

“They comprise an international shipping line, a regional shipping line and a full service logistics provider,” he said.

To facilitate and fast-track the development of logistics services, PKFZ has set up a common user container freight station (CFS) in the zone similar to that of Northport and Westports.

“This CFS is not intended to compete with Northport or Westports for business but rather to facilitate trade. We look at Port Klang as a seamless environment, consisting of Northport, Westports and PKFZ.

“We will be working closely together to complement each other in order to grow the cake,” said Chia.

He also allayed fears of a price war among free trade zone operators in the country.

“In terms of rates offered among free zones in Port Klang, we have not dropped one sen from what they (Westports and Northport) are offering. If there’s any competition, let’s compete on service,” he said.

Meanwhile, Chia said PKFZ remains unfazed over the recent negative media coverage of the project; although he admits that it faces an uphill battle to get people to see that it will not be a white elephant.

PKFZ aims to be self-sustaining in 2010 when it is targeted to generate a revenue of RM40 million and an operating surplus of RM22 million.

Operator of hotel, expo centre identified.

PORT Klang Free Zone Sdn Bhd (PKFZSB), the manager and marketer of the RM4.6 billion free zone in Pulau Indah, said it has identified a local hotel group to manage and operate the four-star hotel and exhibition centre in the zone.

The 135-room hotel and exhibition centre is expected to be completed by the end of next month and open for business before the end of the first quarter next year.

“The company is a local but reputable hotel operator.

“We should be announcing its name soon,” Port Klang Free Zone Sdn Bhd general manager of business development Chia Kon Leong said.

Apart from the hotel and exhibition centre, PKFZ offers 298.4ha of open land for long-term, 512 pre-built light industrial units and 4,628sq ft of office space in its business complex.

Chia said the PKFZ project will be fully completed by the end of this year to coincide with the completion of the main access road into the zone.

The flyover bridge to neighbouring Westports, meanwhile, will be completed by the first quarter of next year.

Among them are tax exemption on statutory income and capital expenditure, double deduction on certain export and research and development expenses, as well as investment tax allowances.

Other incentives from the Malaysian Industrial Development Authority include 100 per cent foreign equity and 100 per cent profit repatriation of capital and profits.

Additional benefits are also offered for the setting up of Regional Distribution Centres, International Procurement Centres & Operational Headquarters.

PKFZ, which has been operational since November last year, also provides paperless transactions to reduce costly paperwork, faster documentation, shorter cargo clearance time and faster information on cargo status.

Another plus point of PKFZ is its good road and rail infrastructure and linkages, providing convenient and easy access to the Kuala Lumpur International Airport, KL City Centre and Putrajaya, the nation’s administrative centre.

Being adjacent to Westports and close to Northport, companies located in PKFZ also have wide market access readily available to them as the ports have established trade links with 120 countries and are directly connected to over 500 ports in the world by an extensive shipping network.

THE RM4.6 billion Port Klang Free Zone (PKFZ) project is facing criticism, with players in the logistics sector saying that the 405ha facility in Pulau Indah risks becoming a white elephant.

PKFZ is owned by the Port Klang Authority (PKA).

Port Klang Free Zone Sdn Bhd’s (PKFZSB) newly-appointed general manager of business development, Chia Kon Leong, said as manager and marketeer of PKFZ, the company was working overtime to make sure that the free zone is a success.

“PKFZ will not be a white elephant as has been said of Westports and Port of Tanjung Pelepas (PTP) in the past (when they were newly set up). Jafza International (Jafza) took about 10 years to get its (Jebel Ali) free zone going, and today investors are queuing to get in. With our free zone better positioned, our journey (to success) will be shorter,” said Chia via the short message service.

Jafza is operator of the Jebel Ali Free Zone but the company recently pulled out of a 15-year contract to manage PKFZ, citing a change in business strategy.

Critics of the project, however, have raised numerous issues, with some saying that it is overly ambitious. It comprises building 512 warehouses of 5,487 sq ft each, 2,000 covered parking bays, four eight-storey office buildings, a three-storey exhibition centre and a four-star hotel.

They also questioned the project’s development cost which has ballooned from an original estimate of RM100 million to RM3.6 billion.

“How did they (PKA) decide to invest that amount (RM3.6 billion)? Why 512 warehouses? Did PKA conduct a feasibility study to determine what type of infrastructure would be required before starting construction? As it is, the take-up rate for space at PKFZ remains low,” an industry source told Business Times.

The source pointed out that other free trade zone operators in the country usually build their facilities based on demand to reduce risk.

“For example, PTP will only develop the land in its Pelepas Free Zone when there is investment.

“To date, the port has spent some RM300 million to develop infrastructure in Pelepas Free Zone which is similar in size to PKFZ,” the source added.

Eyebrows were first raised when PKA bought the land in 2002 for RM1.05 billion or RM25 per sq ft from Kuala Dimensi Sdn Bhd, a subsidiary of Wijaya Baru Global Bhd, as many said the land was over-priced.

It has been reported that Kuala Dimensi bought the land in 1999 from the Pulau Indah Malay Fishermen Cooperatives for RM95 million or RM3 per sq ft.

Concerns were also raised over the government body’s move into property
development and free zone operations.

PKA further infuriated the industry with its decision to appoint Kuala Dimensi as a turnkey contractor to develop the PKFZ.

According to sources, Kuala Dimensi had issued bonds to finance the development costs, but is now having difficulty repaying its first bond payment totalling some RM570 million, which is due this year.

“The Government initially approved a cost of RM100 million to develop PKFZ, after which any additional cost had to be approved first by the Ministry of Finance. However, Kuala Dimensi has flagged a RM3.6 billion in cost overruns since starting the project in 2003,” said a source close to the matter.

“About one-and-a-half months ago, the company had asked the Government for a soft loan amounting to RM3.6 billion, being the sum spent to develop PKFZ.

“It is understood that the Government has approved it, which brings the total project cost to RM4.6 billion, including for land acquisition,” the source added.

Since its soft launch in November last year, PKFZ has attracted 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.

Norway’s Aker Kvaerner, Salarium Argentum Inc and Pantech Group Holdings Bhd are among the companies that have or are setting up their base there.

However, industry executives are still not so optimistic.

“Even if they get the investors, how are they going to recover the RM4.6 billion spent? Now they (PKFZ) are probably giving very low lease rates just to fill up space, sparking a price war among free trade zone operators in the country,” said one industry source.

Northport (Malaysia) Bhd managing director and chief executive officer Datuk Basheer Hassan Abdul Kader said so far, Northport has yet to get much benefit out of the development of PKFZ, which is situated in close proximity to Westports.

He said instead, the project might pose a threat to Northport’s own free commercial zone.

“So far, we are competitive (in terms of rates offered among free zones), but we are watching (with the entry of PKFZ),” he said at a media workshop on Thursday.

Promoted as the country’s first fully-integrated free commercial and industrial zone, PKFZ is expected to offer investors more flexibility in terms of their business operations, especially when factories and logistics firms can be located in the same zone for easier co-ordination and smoother supply chain management.

The 404ha PKFZ is intended to complement Port Klang’s existing free commercial zones (FCZ) in Northport and Westports, which provide commercial activities, such as trade, repacking, relabelling and minor assembly work.

One of PKFZ’s main plus points is its strategic location in Pulau Indah, Port Klang, which has established trade links with 120 countries and is connected by major shipping lines to over 500 ports around the globe.

The geographical location of Port Klang makes it an ideal first port of call for ships on the East bound leg and the last port of call on the West bound leg of the Far East-Europe trade route.

PKFZ is also connected to the Malaysian national railway grid, which reaches out to Thailand in the north, and Singapore in the south. By road, it is directly connected to the mainland’s highway networks through the North Klang Valley Expressway (NKVE).

When completed within the next five years, PKFZ should include four eight-storey office complexes, 512 pre-constructed terrace and semi-detached light industrial units, and 258ha of prepared industrial land. There will also be a three-storey exhibition centre with 9,000 sq m of display space.

Incentives available to investors include tax exemptions, export incentives, research and development incentives, 100 per cent foreign equity and 100 per cent repatriation of capital and profits, as well as intellectual property protection, among others.

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.

FREE trade zones – nearly every country in the world has several of these areas where tariffs and quotas are eliminated, bureaucratic requirements lowered and incentives offered to attract companies to do business there. PRESENNA NAMBIAR finds out how the Port Klang Free Zone seeks to set itself apart from competitors.

THE Port Klang Free Zone (PKFZ) is set to emulate the achievements of Dubai’s Jebel Ali Free Zone, reputedly the world’s most successful free zone.

Jafza International, which has been awarded a management contract to operate and market PKFZ, plans to make it South-East Asia’s trading and logistics hub and is taking on multiple roles to make this happen.

Instead of being only the authority in the free zone, Jafza sees itself as its facility planner and manager, business facilitator, operations manager, security manager, supervisor and enforcer.

“At Jafza-run free zones we see our role very very differently. All of the elements are brought together, and this way we control the activity, quality of business and the impact on local and regional economies,” said PKFZ managing director Noel Gulliver, an Australian logistics executive with 14 years experience in Asia.

“That is really the way Jafza brings serious value to what it has done in the past,” Gulliver said.

Jafza will be managing PKFZ for 15 years for the Port Klang Authority which wholly owns it. The job is expected to be later handed over to locals.

PKFZ is a 400-hectare area adjacent to Westports and located near Northport. It is the only free zone in Malaysia that combines commercial and manufacturing facilities under one roof.

PKFZ had a soft launch early this month to mark the completion of phase one of its development with basic amenities like water and electricity in place.

Its first major tenant is Norway’s Aker Kvaerner, which makes subsea equipment used to pump oil and gas.

The investor chose PKFZ to be the home of its manufacturing centre after 18 years of operating in Malaysia.

“Malaysia’s well-developed infrastructure and the support extended by the authorities for such high-technology developments in the country were other important factors,” Aker Kvaerner vice-president Raymond Carlsen said recently.

PKFZ is targetting logistics companies to take up 50 per cent of available facilities, manufacturing 25 per cent, value-added activities 15 per cent and commercial activities 10 per cent.

The free zone is to officially open in the first quarter of next year. PKFZ is a strategic national project designed to generate cargo throughput for Port Klang.

Selangor Freight Forwarders Association president Tan Ah Beng said that PKFZ is a good beginning to boost activity at Port Klang.

He said the frequency of vessels in Port Klang makes it the perfect choice for such an integrated zone, as importance is given to how many countries investors can ship out to.

“A general view on PKFZ is that it has to be successful, but how soon depends on the players,” Tan said.

The success of PKFZ as a global logistics centre will be dependent on both Westports and Northport terminals, as its logistics connects mainly to sea transport and others such as rail and air.

For Northport and Westports, meanwhile, the PKFZ development will also help spur the growth of their own distribution parks or Distriparks.

Westports executive chairman Tan Sri G. Gnanalingam told Business Times that he hopes the PKFZ will emulate the Jebel Ali Free Zone which has around 3,500 Distriparks.

A spokesperson from Northport also said it plans to capitalise on PKFZ by creating a seamless environment within Port Klang for the establishment of a cargo distribution hub by global logistics operators.

“We plan to make the PKFZ an extension of our Northport Distripark in the near future,” the spokesperson said.

He said Northport, PKFZ and Westports are important entities in Port Klang which have a role in ensuring the success of the port.

“Each entity to a certain extent will be inter-dependent,” the spokesperson said, adding that in creating a seamless environment within the free zone, the Government’s support in taking away bureaucratic procedures is vital.

“Besides facilitating hassle-free documentation, there is also a need to facilitate easy and free flow of cargo and container movements between PKFZ and the two terminals.

“PKFZ on its own will not be able to do it, not only due to lack of resources, but also the ability to execute the plans independently. The Government, therefore, has a key role to play in trade facilitation,” the spokesperson said.

INVESTMENT CATALYST
* Port Klang Free Zone operated by Jafza International
* A 400-hectare site adjacent to Westports and located near Northport
* Only free zone in Malaysia that combines commercial and manufacturing facilities under one roof
* First major tenant is Norway’s Aker Kvaerner
* Targets logistics, manufacturing companies and aims to attract value-added and commercial activities
* To officially open in first quarter of 2007
* Strategic national project designed to generate cargo throughput for Port Klang