Melaka Gateway project continues but questions remain on feasibility

Melaka Gateway is a RM42 billion harbour project in Malacca to be developed under a Malaysia-China joint venture. (Bernama pic)

PETALING JAYA: Work on the RM42 billion Melaka Gateway project which began in 2015 has restarted after a series of setbacks although questions remain over the feasibility of the China-backed initiative.

A research paper by Singapore’s ISEAS-Yusof Ishak Institute noted that land reclamation works are running behind schedule and the port, one of the key components of the project, will not be operational this year.

Billed as the “largest and most ambitious” of China’s Belt and Road initiatives in Malaysia, the Melaka Gateway is set to be Southeast Asia’s largest private marina, housing a maritime high-tech park and a free trade zone on four islands, two of which will be reclaimed land.

The paper said although the project suffered a delay from last October to May this year, the problems had started even before the change in government after the 14th general election (GE14).

Last October, the project’s developer, Melaka-based KAJ Development Sdn Bhd, had its licence to operate the port and terminal revoked by the transport ministry.

After filing a judicial review against Transport Minister Loke Siew Fook, the federal government and the Melaka Port Authority seeking RM139 billion in damages, the ministry allowed for an appeal and the licences were reinstated in May.

Land reclamation work then resumed, and while the paper said the “obvious argument” for the delays in the project was the new government, Melaka Gateway’s problems actually began in 2017, well before the polls.

“The new Pakatan Harapan-led state government has said that it has no issues with the project, but wants its goals and milestones to be met.

“Consequently, it is likely that the causes for this delay lie elsewhere. The most evident answer lies in the questionable economic feasibility of the project.”

Presently, it noted an over-capacity among Malaysian ports with the three largest ports – Port Klang, Port Tanjung Pelepas and Penang Port – only handling 70% of their capacity.

At the same time, it added, the growth of containerised traffic through the region has plateaued and existing ports would reach capacity in 2040.

It said the World Bank had also predicted that a new major hub in Peninsular Malaysia would cannibalise cargo at Port Klang and Port Tanjung Pelepas.

The paper said although the master developer for the project is a Melaka-based company, neither Putrajaya nor any of its government-linked companies are involved.

Key investors in the project are China’s state-owned State Power Investment Corporation and three provincial governments.

The paper also noted that some observers have portrayed the project as a “means for China to acquire and sustain military-strategic influence in the Strait of Melaka”.

The paper said KAJD and large international players still appeared committed to the project but that questions remained over its commercial viability and corporate structure.

“Barring a restructuring or a national-level GLC or conglomerate coming on board, it is likely that progress on the Gateway will be slow,” it said.