On Friday, oil trading and bunkering services provider Straits Energy Resources Bhd (KL:STRAITS) stated its intention to exit the port operations and management business by offloading its entire 51% stake in Megah Port Management Sdn Bhd (MPM), which operates the Labuan Liberty Port, for RM5 million cash as the venture had not been profitable for the group.

It noted that MPM had not shown much growth in its business revenue over the past three years, and posted a net loss of RM493,166 in the financial year ended Dec 31, 2023.

The decision comes four years after Straits Energy had bought into the entity in February 2020 for RM1.53 million.

While the divestment may be viewed as Straits Energy limiting its losses, one should be mindful that when investing in ports, one must have a long-term view for it to work. The world’s most successful ports were not created in a day and they are capital-intensive infrastructure. On its part, Labuan Liberty Port had undergone extensive upgrading works with an investment of more than RM10 million over the past three years to ensure the long-term sustainability of its operations.

Thus, Straits Energy’s proposed divestment of its MPM stake only goes to show that inadequate feasibility studies were done before it embarked on the venture.

Even Sabah Ports Sdn Bhd, which manages eight ports in the state, has teamed up with Dubai’s DP World to help boost Sapangar Bay Container Port and elevate Sabah’s logistics network.

Straits Energy also blamed the underperformance of MPM on the non-alignment of policies between the federal and state governments. In this aspect, the question arises as to whether Straits Energy was already aware of this issue before venturing into the port-operating business. Even so, for the country’s ports to be successful, it is important for the federal and state governments to work together and create a business-friendly environment.
Source: The Edge Malaysia