3.

0 PIPC COMPETITORS AND COMPETITORS TRACKING

3.1 CONCEPTS OF FREE TRADE ZONES AND SPECIAL ECONOMIC ZONES

Economic geography attempts to solve the limitation of development resources with

agglomeration and spatial concentration economies concepts (Amiti and Cameron, 2007). The

defining issue of the new economic geography theory is explaining the formation of a large

variety of economic agglomeration in geographical space. Marshall identified three reasons for

concentrations, i.e. pool market for workers and firms, specialized supplier and

knowledge/technological spill over (Krugman, 1991a, 1991b).

The neoclassical approach views that economic growth is the increase of productivities to

generate and accumulate resources and argues that output growth is a result of three factors of

production (Pike et al, 2006). In regional growth, neoclassical assumption has two main

impacts, (i) as the stock of capital increase, regional growth become slow and halt and (ii) the

first impact leads to convergence among regions since diminishing return of investment occurs

in rich regions and poor regions has the resources to develop (Cricelli and La Bella, 1999).

However, this view was challenged by the cumulative causation theory that emphasizes that

growth tends to fees itself to circular and cumulative way that leads to uneven development

between regions (Myrdal, 1957). This theory’s argument was that increasing return is the result

of agglomeration external economic and historical path of localities. Furthermore, the

development of prosper regions have effects to other regions through labor and resources

linkages, known as “spread effect” (Hirschman, 1958). The theory was further developed by

Fujita and Krugman (1991, 2004) that argues that the increasing returns to scale of spatial

concentration explains both concentration and dispersion. The vertical structure of firm
relations used as a model of upstream and downstream sectors to describe backward and

forward linkages that tend to concentrate the producers in a single location (Krugman, 1991a).

In addition, the authors argue that the decline of transport costs also contributed to the increase

of supplier producers networks and integration.

Following this path, policy makers and economic experts established free trade zones as a

revival of world’s major ports for transhipment, storage, and re-export of goods without

customs formalities (Wong and Chu, 1984). The first concept to adopt these was the export

processing zones (EPZ) that is defined as establishment of modern manufacturing offering

incentives and suitable packages for both domestic and foreign firms. The second concept is

the Free Trade Zone (FTZ) refers to EPZs that have free port, commerce and finance facilities.

The most complete concept is the special economic zones (SEZ) that have much larger spatial

size and economic capacities. The SEZ is a comprehensive area with various sectors besides

manufacturing such as real estate development, tourism, agriculture, and financial centres

(Wong and Chu, 1984)

The free economic zones in general refer to central government’s intensive investments in a

potential region with wide opportunity to develop and promote by a set of policies that are not

applicable to other regions (Ge, 1999). The areas usually are areas with comprehensive natural

endowments, already established market access and integrated infrastructure.

3.2 BACKGROUND OF PENGERANG INTEGRATED PETROLEUM COMPLEX

Pengerang Integrated Petroleum Complex (PIPC) is a project development in Pengerang, Kota

Tinggi District, Johor, Malaysia. Strategically located at the south-east tip of

Peninsular Malaysia, it offers access to existing major international shipping lanes.The PIPC

megaprojects spans 20,000 acres and will house oil refineries, naphtha crackers, petrochemical

plants as well as a liquefied natural gas (LNG) import terminals and a regasification plant upon

completion. Once materialized, PIPC is estimated to generate RM18.3 billion Gross National

Income (GNI) by the year 2020 and help to create 8,600 high-income and high-skilled jobs.

PIPC aims to become a regional downstream oil storage and trading hub by leveraging on its

strategic port location on major shipping routes for crude oil and refined products, its proximity

to Singapore (Asia’s largest oil-trading hub), land availability and deepwater marine

accessibility.A major strength of this hub will be its ability to complement Singapore's oil and

gas storage capabilities to create a regional centre for oil and gas services. The project also

aims to increase Malaysia’s petrochemical output by building a petrochemical complex in the

identified strategic area. The development of PIPC, which received full support from both the

state government and federal government, also benefits the local community by creating

greater access to economic opportunities other than the provision of public infrastructure in

Pengerang.To ensure the successful development of PIPC, a dedicated Malaysian Federal

Government agency known as Johor Petroleum Development Corporation Berhad (JPDC) was

established. JPDC was created as a subsidiary to Malaysia Petroleum Resources Corporation

(MPRC)
3.2.1 MAJOR COMPONENTS OF PIPC

The component of this mammoth project (PIPC) was first initiated with the development of the

Pengerang Deepwater Terminal or PDT, a joint-venture between Dialog Group, Royal Vopak

of the Netherlands and the State of Johor. Serving as a centralised storage facility for trading,

refining and petrochemical industry, the Deepwater Terminal is envisioned to have a storage

capacity of 5 million cubic meters. The USD3 billion facility includes an independent terminal

for trading, a dedicated industrial terminal for investors within PIPC, and a Liquefied Natural

Gas Terminal. The construction of a deepwater jetty facility with natural water depth would

enable the berthing of both ultra large crude carriers and very large crude carriers. PDT

received its first shipment of oil in the first quarter of 2014 and continues to cater to the growing

demand for its services.

The other component of PIPC is the Petronas Pengerang Integrated Complex (PIC) which is

touted to be PETRONAS’ largest downstream investment in a single location to date. The

development includes the USD16 billion Refinery and Petrochemical Integrated Development

Project or RAPID. This also involves the USD11 billion associated facilities: Air Separation

Unit, Raw Water Supply, Cogeneration Plant, Regasification Terminal, Deepwater Terminal

and Utilities and Facilities. Upon its completion in 2019, ………. Pls whatsapp me at

0173346402 for further details .