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Port tycoon warns industry is no longer a numbers game

Port tycoon warns industry is no longer a numbers game

WHEN Westports Holdings Bhd burst onto the port scene in 1994, its founder had the rather unconventional idea of building a garden port — basically, a port surrounded by lush green gardens.

While the port community may well have been amused by such a concept, which is more common at airports, Tan Sri G Gnanalingam was not. Twenty-five years on, the concept has changed public perception of ports as dirty and dangerous to places that are pleasant to work and visit.

The 75-year-old executive chairman of Westports has a long history of making unconventional decisions and has proved to be right in many cases. Recall the time he played an instrumental role in bringing the 1986 World Cup to Malaysian homes by securing the broadcasting rights when he was the marketing director of Malayan Tobacco Co Bhd (now known as British American Tobacco [M] Bhd). It was this drive that saw Gnanalingam take a plunge into the growing port business that was still largely untapped by the private sector.

“I entered the port business when ports in the country were losing money,” Gnanalingam tells The Edge in an interview. “Today, with Westports, I have proved that ports do not have to be dirty and can be beautiful. [I have also demonstrated that] port operations are a profitable business, so much so that everyone now wants to own a port.”

According to the Port Klang Authority’s website, Port Klang, comprising Westports and Northport, handled 12.32 million TEUs (20-foot equivalent units) last year. Out of this, Westports handled 9.5 million TEUs, making it the country’s busiest terminal operator by volume with a market share of 38%.

Port of Tanjung Pelepas (PTP) in Johor came in second with 8.9 million TEUs and a market share of 36%.

Westports has also long overtaken its closest rival, Northport, to become the largest contributor to Port Klang’s container throughput, accounting for a 77% share last year from 75% in 2017. This implies that Northport’s volume has declined or remained stagnant over the years, and there is a feeling that it is struggling to keep pace in this era of mega ships.

To Gnanalingam, what this country needs is not new ports. Instead, existing container terminal operators need to step up to deal with a changing business environment, in which container ships are getting bigger in size and making fewer port calls.

“Shipping lines have been consolidating and forming alliances to reduce costs, and their choice of ports of call will depend on the ports having the necessary infrastructure to handle all of the new ultra-large container vessels,” the tycoon says.

“So, if you build a new port, who is going to go there? The game is over (for new players who want to compete by building more ports),” he adds, referring to reports on the proposed development of a third port in Port Klang, on Carey Island, as well as a deep-sea port, Melaka Gateway in Pulau Melaka.

Citing the world’s large container ports such as Shanghai, Singapore, Hong Kong, Dubai and Rotterdam, he points out that these ports are getting larger in response to the bigger vessels.

Afnan ‘Aqif Mohd Pidaus, research associate at EMIR Research, is of the view that Malaysia has an oversupply of ports.

“Currently, we have nine major ports — Port Klang, Johor, PTP, Kuantan, Penang, Bintulu, Kemaman, Melaka and Teluk Ewa.

“I don’t think it is a good idea to have a third port or terminal in Port Klang. Instead, all the aspects of the existing ports should be improved. Restructure human resources, go for lean management, improve and develop the infrastructure and fully utilise the service assets,” Afnan says in an email to The Edge.

Rain or shine, Westports beefs up capacity

In the 25 years since Westports’ founding, the terminal has continued to expand, and it seems there is just no stopping it in its pursuit to be the country’s leading gateway port as well as one of the main transshipment hubs in the region.

Since its inception, Westports’ container handling capacity has grown by almost half, from 9.5 million TEUs a year to 14 million. According to Gnanalingam, the expansion is in line with the group’s supply-driven strategy.

Westports has commenced Phase 1 of its Container Terminal 9 (CT9) expansion plan. This involves the construction of another 600m wharf, which will strengthen its total capacity to 16 million TEUs a year.

In August 2017, the group received approval-in-principle from the government to expand its container terminal facilities from CT10 to CT19, which will potentially increase Westports’ total handling capacity to 30 million TEUs a year by 2040. It recently completed the acquisition of a 154ha tract adjacent to CT9 in Pulau Indah, Selangor, from the Selangor State Development Corporation to facilitate this plan.

“We expect to start reclamation work (for CT10 to CT19) as soon as we get approval from the government by July and start construction in two years,” Gnanalingam says.

Asked how the current government has helped drive the port industry, Gnanalingam says it is unfair to judge the current administration after only a year since it came to power. “You had one government for 60 years and you want to judge a government in 12 months with the hundreds of problems we had? The people needed a new government.”

Gnanalingam has been gradually handing over more responsibility to his eldest son, Datuk Ruben Emir Gnanalingam, who is group managing director of Westports.

The father of three and grandfather of six now goes to Westports four days a week.

“I am still going to be active. I am only off on Wednesday, Saturday and Sunday.

“Fortunately, my son is interested in the port business and I have a good (management) team — six of them — who are dedicated and they take minimum instructions. They are also innovative, wanting to change things. One thing they know very well is what the cost of not building is.

“So, I spend more time with the young recruits. Every year we have about 20 executives joining us as management trainees and they like to talk to me as I love to make jokes,” Gnanalingam laughs.

He attributes the failure of Malaysian ports to recapture cargo volume from Port of Singapore over the years to the Singapore government’s single-minded approach to grow its port and airport.

“The Port of Singapore is wholly owned by the Singapore government. Land reclamation is done by the government. It is a free port,” he observes.

EMIR Research’s Afnan believes the main challenge Malaysian ports like PTP and Port Klang face in trying to recapture cargo volume from Singapore port is geographical.

“Singapore’s location at the mouth of the Malacca Strait makes it relatively cheaper for companies to operate, even though its strong currency makes terminal processing rates more expensive than Malaysia’s. Port Klang may be in the Malacca Strait, but geographically, it is not as strategic as Singapore since smaller feeder ships from ports from around the region need to travel roughly 600km further to Port Klang.

“The second challenge technological. Singapore has pumped a lot of money into research. They are exploring cutting-edge technology, such as driverless automated guided vehicles, or smart sensors to detect shipping anomalies like piracy,” he adds.