MP SPEAKS | Whenever the Kuantan Industrial Park is mentioned in popular conversation, the discussion inevitably gets steered towards the so-called “Great Wall of China” that surrounds the massive Alliance Steel complex. Earlier today, I visited the Malaysia China Kuantan Industrial Park (MCKIP) and discovered that the masterplan for this area is much more than just the ‘great wall’. If done well, the investments in this industrial park have the potential to transform the whole of Kuantan into a thriving city of industry.
To recap, the MCKIP is a joint venture between a Malaysian consortium (51%) led by IJM and a Chinese consortium led by Guangxi Beibu, a state owned logistics company. There is a sister park called the China Malaysia Qinzhou Industrial Park (CMQIP) which is located in the autonomous region of Guangxi in China. Most Malaysians are probably not aware of the fact that Guangxi has been designated by the Chinese government as the gateway to Asean. Nanning, the capital of Guangxi, is the host city for the annual China-Asean Expo (CAEPXPO), which is taking place from the 12th to the 15th of September.
Since I will be visiting the CMQIP next week as part of my visit to Guangxi, I thought it would be necessary for me to visit its sister park, MCKIP, in Kuantan. Indeed, I need to be aware of the issues and challenges faced by both parks as I am one of the co-chairs of the joint cooperation council (JCC) together with the menteri besar of Pahang and the vice minister of commerce, China.
MCKIP covers more than 3,500 acres and is divided into 3 phases. The infrastructure for Phase 1 has been completed and Alliance Steel occupies 710 acres of our 1,200 acres. The land clearing for Phase 2 is almost completed and work on Phase 3 will be started soon.
Committed FDIs of over RM11 billion are in the approval process. More potential investments will come as MCKIP continues to grow and gain a credible reputation in China.
It is not possible to talk about MCKIP without linking it with the Kuantan Port. The Kuantan Port Consortium (KPC) is a 60% - 40% joint venture between IJM and Guangxi Beibu, the same drivers behind MCKIP. The rationale is simple – if more industries set up in MCKIP, this will inevitably lead to more traffic coming to and leaving from the Kuantan Port. Currently, Kuantan Port handles less than 150,000 TEUs (container units) compared to more than 9 million TEUs for Westport in Port Klang. With a proper strategy to attract the right investors to MCKIP as well as to Kuantan Port, the volume can easily exceed 1 million TEUs.
The development of a new deep water terminal in the Kuantan Port has allowed investors such as Alliance Steel to import its raw materials in the form of iron ore and coal (Phase 1A and Phase 1B).
The government footed the bill to build a breakwater, which allowed dredging to take place in the new expansion of the port. The dredging of the deepwater port was undertaken by the Kuantan Port Consortium. The result is a new 1km berth, comprising 400m for Phase 1A and another 600m for Phase 1B.
Facts about the wall
Now, on to the elephant in the room, which is the Alliance Steel plant. A few facts on this project:
1) This company is a joint venture between Guangxi Beibu, a state-owned enterprise, and Guangxi Shenglong Metallurgical Co Ltd
2) Thus far, this company has invested approximately US$1.4 billion in its complex in MCKIP
3) The infamous wall reaches a maximum height of 3m, but is closer to 2m in most parts. The wall only covers the compound of Alliance Steel, and not the entire MCKIP
The wall was built as a means to protect the assets in the compound, which are huge. The compound measures 4.2km long and almost 1km wide in some parts. When Prime Minister Dr Mahathir Mohamad visited the site of the plant in November 2017, the construction work had just started. With just the wall surrounding the compound, which is elevated when viewed from certain vantage points around the site, it is understandable why Dr Mahathir would have had some concerns over what was being built and what was going on within the compound. Now that the various sections within the plant are already built, the size of the wall is relatively low when compared to the massive buildings within the compound.
It is probably safe to say that there is no steel plant like this in the whole of Malaysia be it in terms of capacity (3.5 million tonnes capacity per year) or in terms of the level of automation (state of the art blast furnace with almost fully automated lines of production) or in terms of efficiency (zero wastewater target).
After the initial construction period where the workers were primarily from China, Alliance Steel is now employing 2,500 Malaysian workers, all of whom are given free meals and lodging while they are working at the plant. A significant proportion of the construction work was sub-contracted to Kuantan-based contractors to a tune of over RM1 billion in projects. A local supermarket chain, the Tunas Manja Group (TMG), has a store within the plant, which it does not pay rent for.
Shortly after the 14th general election, politicians who were previously not given access to the plant, including Teruntum assemblyperson Sim Chon Siang and MP Fuziah Salleh, were invited and given a tour of the facilities. I was joined by Fuziah and Sim during my visit today, and Minister of Foreign Affairs Saifuddin Abdullah will also be given a tour of the facility and a full briefing by MCKIP today (Sept 6).
Ironing out the issues
Some outstanding issues remain pertaining to Alliance Steel.
Because of the speed of construction (within 1 year), some of the calibration for its machinery have not been approved by the Department of Occupation Safety and Health (Dosh). Many of its manuals have to be translated from Chinese to English. The relevant agencies will continue to monitor this as the plant prepares for a ramp up to full operations.
Alliance Steel also has to submit regular reports to agencies such as the East Coast Economic Region Development Council (ECERDC) and Malaysian Investment Development Authority (Mida) on its production quantities and the percentage of each product that it exports. This is to ensure that the local steel market is not flooded with the excess capacity of Alliance Steel, which may have detrimental impact on the long term viability of some of our local steel players.
With regards to the infamous wall, during the meeting Alliance Steel has agreed to send in a proposal to the Majlis Perbandaran Kuantan (MPK) to lower the concrete portion of the wall to 1.8m and build the rest of the wall up to a height of 2.75m using regular fencing.
One of the main shortcomings of Alliance Steel is that it does not yet know how to communicate its objectives and aspirations to the larger Malaysian public. It very much wants to live up to its motto of “In Malaysia, for Malaysia” but is currently not PR savvy enough to do this effectively.
Recently, it celebrated Merdeka Day with its workers and also the local residents, and this event attracted close to 1,000 people.
I found the top management of Alliance Steel to be very willing to engage with the new government in order to solve some of the issues that were raised before and during my visit yesterday.
I will continue to work with the relevant stakeholders – MCKIP, ECERDC, Alliance Steel, Kuantan Port Consortium, MIDA, Majlis Perbandaran Kuanta (MPK) and the Pahang state governments in order to find long term solutions to the issues faced by MCKIP and its tenants (including Alliance Steel) so that the vision of building a dynamic Kuantan Port City comprising MCKIP and KPC can be realised to the benefit of the people of Kuantan, Pahang and the entire nation.
I will use the platform of the joint council for cooperation (JCC) to raise some of the more challenging issues to my counterpart from China as well as the menteri besar of Pahang.
ONG KIAN MING is deputy minister of trade and investment.