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|Malaysia: A maritime player of considerable clout|
|Thursday, 18 June 2009 12:40|
The tremendous growth of port and shipping activities in Malaysia over the years underlines the value of the maritime sector to its economic well-being and the importance of the seas to the lives of its people.
Ports and shipping are recognised as essential contributors in facilitating Malaysia’s trade, hence crucial to its economic prosperity. Given this, it is appropriate that Malaysia, a nation surrounded by a sea area much larger than its land mass, is acknowledged as a leading maritime nation.
In a matter of a few decades, Malaysia has transformed its economy from one that was agricultural and commodities-dependent to one which is based on manufacturing and trade.
In 2008, the country’s total trade was valued at US$335 billion, an increase of 6.8 percent from 2007. Exports rose by 9.6 percent to US$187 billion, while imports increased by 3.3 percent to US$147 billion, resulting in a trade surplus of US$40 billion. Malaysia is now among the top 20 largest trading nations in the world, with a share of approximately 1.4 percent of global trade.
The phenomenal growth in global trade has had a huge impact in the development of the ports and shipping in Malaysia. In Malaysia, this has spurred investment and the development of various infrastructure to support increasing trade with the world’s nations.
The development of maritime infrastructure especially has benefited tremendously from this trade and investment boom. This is underlined by the estimate that 95 percent of Malaysia’s international trade, the lifeblood of its economy, is being carried through the oceans via its international seaports.
The evolution of ports in Malaysia
The dramatic transformation and rapid industrialisation of Malaysia’s economy over the last few decades has made it into one of the world’s major trading nations. Ports went through intensive growth and tremendous development during the period of rapid economic development in the country and the South East Asian region in the 1980s and 1990s.
This, and the well thought-out infrastructure development policies of the government, has brought about well-developed transportation infrastructure and facilities such as highways, railways, airports and especially ports.
In Malaysia, ports have evolved beyond places where ships load and unload cargos and passengers. The country’s ports, have assumed a critical role in the overall pattern of trade and transport, providing a link between the shipping service and the inland transport system.
Realising the need to meet the challenge of matching its transport sector’s efficiency with its rapidly growing industrialised economy, Malaysia has put in place an infrastructure development plan focusing on inter-connectivity among various transport modes. This reflects the acknowledgement of the need to come up with an integrated, comprehensive approach to address the unevenness in the development of its transport modes and to link them in an efficient, seamless multimodal interface.
Malaysia’s ports today, featuring world-class facilities, act as crucial points of interface with other transport modes such as road, rail, river and air. Port operations in Malaysia, as is the case worldwide, have entered into a phase of sophisticated development with computerisation of container terminal operations. There are dynamic and revolutionary changes that are taking place in the various aspects of container sizes, ship sizes, equipment, intermodal transport, IT, data exchange and communication.Tanjung Pelepas Port, Malaysia
There is keen competition between ports in the region to attract cargos and service their users. All these exert demand on our ports to keep pace with the speed of technology advancement in operations and to provide excellent services to enhance their attractiveness and boost their competitiveness.
The country’s major seaports in Penang, Port Klang and Tanjung Pelepas are located along the coast of the Straits of Malacca featuring excellent facilities and connectivity. This is not coincidental as the west coast of peninsular Malaysia is where the majority of the population resides and most economic activities take place, hence enjoying better transportation and connections compared to other areas of the country.
Sustained high levels of economic growth have resulted in increasing complexities in the functions and operations of ports, inland transport networks linking ports and the related institutional framework.
Malaysia has taken an approach of emphasising the expansion of capacity to provide a supply-driven environment and upgrading the equipment and facilities of its ports to ensure efficiency.
In addition, niche ports have been established in the form of Port Klang as the national load centre and Port of Tanjung Pelepas as the transshipment hub, which have aggressively spread their wings to enhance their global connectivity. All these bear testimony to Malaysia’s tremendous rise and growing clout as a maritime nation.
The tremendous growth in cargo throughput in Malaysian ports and in commercial shipping activities in the country over the years can be attributed to the relentless efforts made by the Malaysian Government and its agencies. All these are done without undermining the need for the nation’s ports and carriers to develop competency, competitiveness and economic efficiency.
The government spares no efforts to develop Malaysia as a maritime nation capable of enhancing shipping and ports capacity, optimising human resource, ensuring the safety of ships and navigation, and providing efficient ancillary services. It is active in promoting local ports actively overseas, highlighting the facilities available and providing capable management and high level of services.
Through the maritime division of Ministry of Transport, the government is committed to build a modern, efficient and a safe maritime sector and carry out inter-sectoral activities towards making Malaysia a successful maritime country. These are achieved via the fulfillment of the roles of the maritime division to:
To achieve the objective of enhancing the competitiveness and attraction of Malaysian ports, the government has undertaken the following:
In addition to port development, efforts have also been undertaken to facilitate and promote trade. Free commercial zones have been created at ports to simplify documentation processing and procedures for cargo consolidation and to attract value-added services.
Several ports use community-based EDI systems and a nationwide electronic trade declaration system allowing users to link to the custom’s information system is in place and is continuously enhanced to facilitate more efficient trade.
Merchant shipping in Malaysia
Shipping is the lifeline of the economy, playing an important role in moving our exports and imports, serving a crucial link in the entire national transport system, and providing employment to many. In its pursuit to become a global, competitive maritime nation, the rapid expansion and increasing complexity of the Malaysian maritime industry has resulted in an ever-growing demand for capital and ancillary financial products and services.
Malaysia embarked on the journey towards setting up its own commercial shipping line in the late 1960s to serve its own exports and to address the problem of balance of payments as a result of the absence of a national carrier. The impetus also came from the unhappiness of local shippers over the rates charged by shipping conferences handling most of Malaysian cargos.
The establishment of the national carrier, MISC in 1968 with government equity participation marked a milestone in the development of modern commercial shipping in Malaysia.
Petronas purchased a 29 percent stake in MISC and took over its management in 1997, marking another momentous progress in the company’s transformation into a leading liner. Its growth was further enhanced by the acquisition of Konsortium Perkapalan and PNSL in 1998. MISC’s merger with Petronas Tankers in the same year boosted Petronas’ stake in the company to 62 percent.
Today, MISC has grown into one of the world’s largest shipping operators with over 100 vessels. MISC has a modern and well-diversified relatively young fleet of 27 LNG tankers, making it the world's single largest owner operator of LNG tankers.
Besides MISC, major commercial shipping companies such as Malaysian Merchant Marine, Halim Mazmin, Nepline, Gagasan Carriers, Global Carriers, Malaysia Bulk Carrier, Wawasan Shipping also have modern and well-diversified fleet, plying the world’s oceans carrying all types of cargos and loads. Some are listed on Bursa Malaysia and most are members of Malaysian Shipowners’ Association (MASA).
As of 1 January 2008, Malaysia had 392 vessels of 1,000 GT and above with a combined tonnage of 11.17 million DWT, making it the 20th largest controlled merchant fleet in the world.
The local shipping sector has benefited from substantial rise in the country's foreign trade and the rising demand for shipping services. The cargos carried by Malaysian ships consist mainly of its export products, heading mainly to our largest trading partners which include the US, Singapore, Japan, China, Taiwan, Korea, Germany and UK.
Malaysia has also made great strides in ship financing to support the growth of the shipping sector. The establishment of Bank Industri in 1979 was testimony to its intent to develop the shipping sector.
The bank earmarked shipping as a prime sector to benefit from its loans provided at special rates and terms. The creation of a shipping fund in 1992 was another show of support by the government towards shipping. From the fund, US$2250 million was set aside for the ship financing facility, directly managed by Bank Industri, and US$140 million for the Shipping Venture Fund.
In 1994, another US$84 million was added to the fund aimed at financing expansion of shipyard capacity to build larger vessels. In the 2000 budget, the government announced another US$280 million to replenish the fund.
These funds were made available to shipping players at further to this, a shipping venture capital company, Global Maritime Venture (GMV) was formed in 1994 to act as a catalyst to the maritime sector by forming strategic alliances with Malaysian partners involved in the maritime sector.
In addition to shipping activities, Malaysia also has several shipyards of international class, albeit limited in their building capacity. Generally, they have a maximum building capacity of around one million DWT and a majority of them is dedicated to ship repair. This inadequacy continues to force local shipping companies to purchase vessels and commission major reparation works from foreign shipyards. The biggest shipyard, Malaysian Marine & Heavy Engineering became a subsidiary of MISC in 2004, marking a huge leap forward in taking the industry to greater heights.
Malaysia can rightfully boast of having a shipping sector which is internationally competitive and capable of leveraging on the strengths that the country has in maritime transport shipping and other supporting activities. But despite the steady growth of its national fleet and the shipping sector over the years, Malaysia still has some way to go towards achieving self-sufficiency in shipping.
The government’s commitment in promoting commercial shipping in Malaysia is underlined by the many fiscal, financial, administrative and legislative efforts it has taken. In promoting local commercial shipping, the government offers attractive financial incentives to shipping players which include:
The government also encourages activities in the country that provide training for maritime personnel. Departments teaching marine technology and marine science have been set up at public universities. The government also lends its support to many local and international training programmes, seminars and conferences held in the country. It actively promotes seafaring as a profession to Malaysian youths through promotional activities, financial incentives and institutional support to reduce our dependence on foreign seafarers.
Maritime support services
There is a wide variety of maritime support services in Malaysia focusing on providing support to ports and shipping companies and facilitating maritime trade. A number of companies are involved in these activities, as shown in Table 1.
Table 1: Number of companies offering ancillary services
Malaysia’s resolve to attract foreign participation is clearly evident in the maritime sector. Although the Malaysian Government is committed to developing the maritime industry and encourage local participation, Malaysia very much welcomes the involvement of foreign players in the sector. Aware of the fact that the maritime sector is one of the most international of activities, Malaysia acknowledges the need to welcome the participation of foreign companies, many of which have greater capacity, experience, skills and knowledge than local players, in the maritime sector.
The presence of foreign companies in activities such as logistics, shipping, ship classification and ship management underlines Malaysia’s openness to foreign investment, resources and talents to help develop its maritime industry.
Malaysia’s openness is also evidenced by the privatisation of federal ports, and by allowing foreign companies to hold equity stake in local ports and by granting foreign shipping lines permission to provide services in the domestic shipping under certain conditions. These mark Malaysia’s commitment to liberalise its economy and integrate it with the global economy in order to enlarge its share of the global trade.
The General Agreement on Trade in Services (GATS) under the aegis of World Trade Organisation (WTO) has delineated six main support services in the maritime industry. These activities, also termed as maritime ancillary services, are as follows:
Although many local players are involved in these activities, the development of the maritime support services sector is neither backed by a coherent strategy nor by a structured, long-term development approach. This results in non-linkage between the activities with one another and also between the maritime sector and other production sectors of the economy.
Although Malaysia can be proud of its achievements in the maritime sector thus far, it still has its work cut out to become a true maritime nation. More needs to be done especially in the area of ports and shipping for the country to fully exploit its maritime resources, infrastructure and expertise to enhance its socio-economic standing.
Indeed, Malaysia has many criteria to become a maritime powerhouse – glorious maritime heritage, strategic location, excellent ports and shipping facilities – but much more can be achieved in optimizing these attributes.
For a trading nation like Malaysia whose economic prosperity depends a lot on the efficiency of its maritime industry, it is critical to adjust and respond to fast-changing market conditions.
This is important in the light of increasing competition in the maritime sector, especially in ports and shipping, and the increasing demand for efficiency by the benefactors, industry players and other stakeholders in the maritime industry. The competition for ports to attract cargo and the never-ending pursuit of shipping liners for operational efficiency and economies of scale exert tremendous pressure on maritime players to provide the best, most effective services at all times.
Malaysia’s dependence on and demand for maritime transportation system will continue to grow in tandem with these developments. The maritime industry is an extremely dynamic field, and will continue to be so. This is evidenced in the growing emphasis on logistics and supply chain management that offers fresh approaches to business processes, techniques and technology to manage the transportation sector more efficiently.
With the concept of multimodalism fast becoming a reality, and with the maritime sector being at the forefront of this concept, it is paramount that port and shipping players stay abreast of its development. They must give careful thought to enhance their respective sector’s efficiency and subsequently integrating it into the rest of the transport chain.
Port development will continue to be a priority as Malaysian ports prepare to increase their share of the rapidly expanding transhipment business. This is emphasisaed by the bullish forecast of container throughput in the country’s ports which is expected to reach 36 million TEU by 2020.
The government has privatised several ports to enhance the management and boost development of port facilities, with positive results. The investments of Maersk-Sealand in Port of Tanjung Pelepas and Hutchinson in Westport have boosted operational efficiency, competitiveness and cargo volumes at these ports.
Investment opportunities also exist in the free zones of several local ports, which have been developed with distripark infrastructure and facilities, and have the potential of enhancing further Malaysia’s role as a regional distribution centre. The onus is on ports to be able to present a strong case and a package of attractive investment opportunities and growth plans to attract private investments for their expansion plans, in the wake of declining public funds.
With regards to the commercial shipping link in the chain of maritime transportation in Malaysia, it is necessary to put in perspective the rationale for the shipping policies in place as they have certainly contributed tremendously to address the balance of payments (BOP) problem.
Alas, decades after the national shipping line policy was initiated, only a small fraction of containerised goods is carried by Malaysian-flagged vessels. This is largely due to the shift in Malaysian exports from primary commodities to manufactured goods. As a consequence of the mismatch between the national fleet growth and the boom in export volume, containerised exports continue to “leak out”, aggravating the BOP problem. Foreign shipping lines continue to dominate the local shipping scene, causing Malaysia to incur huge outflow of payments of freight.
Although many local shipping companies have gone on from strength to strength over the years, our fleet expansion has not been able to meet the rapid growth and demand in the shipping services sector. The size of the Malaysian merchant fleet is still small by global standards. It is estimated that only ten percent of the country’s trade is carried by the national shipping lines.
As shipping, an essential segment of the maritime transport sector, continues to face intense competition from other modes of transportation, the sector must position itself to integrate seamlessly in the bigger picture of the transportation network. This should be achieved in a manner that meets challenge of carrying and handling cargos in a speedy, efficient and cost-competitive manner.
Ports and shipping, at the forefront of the transport sector and trade facilitators, must enhance their competitiveness and efficiency to contribute to enhance Malaysia’s export competitiveness in a viciously competitive global market.
The two sectors need to face the challenges and realities of the environment they operate in determinedly, and overcome obstacles hindering their competitiveness decisively. It is imperative that port and shipping operators provide more efficient and cost-competitive services, leveraging on the support and incentives already extended by the government.
The government has steadfastly affirmed its commitment to provide a conducive regulatory framework, policy direction and administrative support to ensure that Malaysian ports and shipping strategies continue to be responsive to market developments and customer needs. While Malaysia can be rightfully proud of the performance of its ports and shipping services, the onus is on the stakeholders not to rest on their laurels. Amidst keen competition in the maritime industry and international trade, and the current global economic downturn, they must continue to improve their services and pursue greater efficiency.
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