Belt And Road Initiative Hits A Snag With Termination of Melaka Gateway

The Melaka State government has terminated the land reclamation agreement for the Melaka Gateway Development after the developer failed to complete the project. The Melaka Gateway is a large mixed development to construct artificial islands serving both commercial and tourist functions, in addition to a new deep seaport. It was considered part of the Belt and Road Initiative (BRI), with a consortium of Chinese State-Owned Enterprises, led by PowerChina International, and local Malaysian company KAJ Development Sdn Bhd.

As with many large infrastructure projects, The development has faced a number of challenges. From the onset the project has attracted criticism from the local community, who have complained about the impact on their way of life. To date construction activities have been limited, but concerns have been raised about the impact on the local environment. The economic feasibility of the project had also been questioned – particularly the demand for additional port capacity, when Malaysia’s current ports, including nearby Klang, continue to operate below capacity. Government support for the project has also been mixed. Originally backed by the federal government under Barisan Nasional, however negotiations over the port license became strained with the Pakatan Harapan government, suggesting a policy discontinuity between the two administrations. The Melaka state government initially granted the developer freehold land status on the islands but subsequently sought to move to a leasehold arrangement.  Now, due to failure to progress the project, the Melaka State government has terminated the land reclamation agreement.

These issues partly reflect inadequate infrastructure project planning. Infrastructure on this scale requires rigorous planning, specifically: social and environmental impact assessments to secure local buy-in and protect the local ecosystem; and economic and financial feasibility assessments to ensure there is an underlying need for the new infrastructure and the project implementers have the capacity to deliver. The Melaka Gateway was primarily a privately driven initiative, but the Malaysian government should take this opportunity to ensure that infrastructure planning is strengthened both for public and private-led projects. Without these processes in place, the projects themselves are placed at significant risk of being left unfinished.

Commenting on these developments, IDEAS Research Director Laurence Todd said: “The Belt and Road initiative has the potential to deliver significant economic benefits to Malaysia and the wider region, through much need infrastructure. However, delivering large scale infrastructure is not straightforward and without proper planning can result in white elephants. This may now be the fate for the Melaka Gateway. We should learn from this and ensure that all future infrastructure projects are subject to thorough economic and financial feasibility assessments and social impact assessments, made publicly available.”

This article was first published by IDEAS.


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