Melaka state govt scraps $14 billion port project

Developer calls termination unfair; govt says firm failed to complete reclamation works

An artist's impression of the Melaka Gateway project, which was first announced in 2014 by then Malaysian premier Najib Razak after a visit to Beijing. It was seen as part of a wider port alliance between Kuala Lumpur and Beijing, to increase bilater
An artist's impression of the Melaka Gateway project, which was first announced in 2014 by then Malaysian premier Najib Razak after a visit to Beijing. It was seen as part of a wider port alliance between Kuala Lumpur and Beijing, to increase bilateral trade and boost shipping and logistics along China's much-vaunted Maritime Silk Road. PHOTO: MELAKA GATEWAY

A controversial RM43 billion (S$14.1 billion) port project off the coast of Melaka that was touted as the largest in the region when ready - overtaking Singapore's - has been scrapped by the state government.

The Melaka government said in a letter dated last Monday that the developer of the Melaka Gateway project had failed to complete the reclamation works after three years as contracted.

The developer is calling the termination unfair and mulling over legal action.

"We want to settle this amicably. But if not, we are ready" for legal action, Melaka Gateway's chief executive Michelle Ong told The Sunday Times yesterday.

She said no reason was given for the "sudden termination".

The project was initially a venture between little-known Malaysian company KAJ Development - of which Datuk Ong is CEO - and China's PowerChina International. It involved the reclamation of three islands off Melaka, two of which would be man-made.

The Chinese partner has since left the venture.

Apart from the giant deep-sea port, Melaka Gateway was to include an international cruise terminal, bungalows with a private marina, condominiums, hotels and theme parks.

The state government terminated the sea reclamation agreement with KAJ Development, saying it had failed to complete the 246ha development - about half the size of Sentosa island - three years after signing a deal on Oct 4, 2017.

In a letter seen by The Sunday Times, the Chief Minister's Office said: "The company is also required to return the project site, effective upon the termination notice issued by the Melaka state government.

"Therefore, all matters arising regarding the Melaka Gateway project site should be directly communicated with the Melaka state government."

Melaka Gateway was planned with the ambition of overtaking Singapore as the largest port in the region. The project was first announced in 2014 by then premier Najib Razak after a visit to Beijing.

After Najib was ousted in the 2018 general election, the Pakatan Harapan (PH) government dropped or renegotiated several Chinese-backed mega infrastructure projects, including the East Coast Rail Line connecting Port Klang in Selangor to Kuantan on Malaysia's east coast.

  • About the project

  • • Melaka Gateway was one of several mega projects linked to Chinese investment deals signed by former premier Najib Razak's government, including the RM44 billion (S$14.4 billion) East Coast Rail Link which is ongoing.

    • Questions over Melaka Gateway were previously raised, about the need for added port capacity in Malaysia, and whether China's participation (in the early stage) had to do with its strategic interests in the Malacca Strait.

    • Melaka Gateway was in 2017 seen to be part of a wider port alliance between Kuala Lumpur and Beijing, to increase bilateral trade and boost shipping and logistics along China's Maritime Silk Road.

    • A World Bank study commissioned by the government in 2016 showed that a new port on Malaysia's west coast was not necessary, as existing facilities had yet to reach full capacity.

The Melaka Gateway project was among those scrapped, but the PH government later allowed it to continue.

Two of Malaysia's largest ports are along the Malacca Strait, but Melaka Gateway was seen as part of a wider port alliance between Kuala Lumpur and Beijing, to increase bilateral trade and boost shipping and logistics along China's much-vaunted Maritime Silk Road.

Port Klang, Malaysia's largest, is north of Melaka; and the Port of Tanjung Pelepas, Malaysia's second largest, is in Johor.

Ms Ong said the company has requested to meet the Melaka government, but to no avail.

She said RM700 million has been spent on the project so far.

"We have managed to bring in tens of billions in FDI," she said, referring to foreign direct investments.

"We have various investors," she said at a news conference in Kuala Lumpur yesterday, adding that agreements signed for one of the three islands brought in US$3 billion (S$1.34 billion) a year, and investments obtained for the deep sea port totalled RM3.8 billion, while the cruise jetty had brought in investments of RM1.4 billion.

Ongoing construction at the project site was halted in March owing to the Covid-19 pandemic, but work had resumed two weeks ago, Ms Ong told The Sunday Times.

A version of this article appeared in the print edition of The Sunday Times on November 22, 2020, with the headline 'Melaka state govt scraps $14 billion port project'. Print Edition | Subscribe