Malaysia positioned as the preferred logistics gateway to Asia

Last Thursday (1 October 2015) the Transport Minister YB Dato’ Sri Liow Tiong Lai opened the Asean Transport & Logistics Show 2015 at the Mines International Exhibition Centre. This event hosted both a one-day conference as well as a three day logistics exhibition, showcasing key players in the logistics industry, the latest trucks and trucking technologies, logistics innovations, universities offering logistics education, and many more.

In his opening speech Liow stressed the importance of the logistics industry as the backbone of the country’s supply chain. Logistics is the building block of trade, facilitates business efficiencies and economic growth, and is vital to the connectivity of Malaysia to the rest of the world while strengthening the competiveness of the country. The Malaysian logistics and transportation sector has grown with considerable double-digit growth of 10-15% over the past decade. In his opening address Liow shared that the Logistics and Trade Masterplan, which was launched in April this year, will be implemented in three phases. In the first phase, which began earlier this year, bottlenecks will be addressed in the logistics sector. In the second phase, initiatives will be introduced to promote domestic growth of the sector. In the third phase there will be an emphasis on creating a regional footprint. To execute the masterplan successfully a national logistics taskforce has been established led by the Ministry of Transport.  The strategic shifts and actions in the masterplan are focused on strengthening Malaysia’s position as the preferred logistics gateway to Asia.

Tan Sri Dato’ Sri Haji Mohd Khamil bin Jamil, Group Managing Director of DRB-Hicom Berhad, argued during a panel discussion at the conference the need for the Malaysian logistics sector to prepare themselves for the Asean Economic Community (AEC) to ensure readiness at level playing field with our neighbouring countries.

How can the Malaysia logistics players better prepare themselves for AEC? Preparedness means next to investment in hardware (trucks, warehouses) also investments in software by logistics companies. The software of the logistics industry, key components such as business strategy – people – ICT, is at least as important or even more important than the hardware. Business strategies that are both achievable and authentic are not easy. This requires solid market and industry intelligence, direction setting, knowing your limits and developing your execution capabilities. People skills need to be continuously upgraded in order to increase efficiency of logistics staff, enhance service levels and stimulate innovation in your company. ICT is a highly neglected area in the logistics sector, often spending less than 2.5% of the annual revenue. This results in high inefficiencies in the logistics sector as well as mistakes in day-to-day operations. Instead, ICT spending should be more in the range of 3.5 – 5% of the business revenue.

The logistics month in the Malaysian calendar continues this week with the global logistics and supply chain symposium LogiSYM, which is being held today and tomorrow at the Empire Hotel in Subang. LogiSYM with the theme ‘future supply chain excellence’ will cover various topics over the coming days, such as future directions for global supply chains, Asean integration, business transformation, logistics 3.0 and halal logistics.

I hope this logistics month will give you new inspiration in jointly building Malaysia as the preferred logistics gateway to Asia. See you at LogiSYM.

Opportunities for Port Klang under AEC

Port Klang, strategically positioned and equipped with state of the art modern infrastructure, plays a very important role in the facilitation of imports, exports and transhipments for the Asian region. Under the ASEAN Economic Community (AEC), which envisions a free flow of goods among ASEAN member countries, an increase in competition among ASEAN ports is expected. As a result, cargo flow configuration might change in ASEAN.

Mr. Igwe Kingsley Onyekachi, from Malaysia University of Science and Technology (MUST), investigated the impact of AEC on cargo flows through Port Klang for his Master thesis. He presented his findings during his VIVA this month at MUST. The coming 10 years Port Klang will most likely maintain its rank as the second transhipment hub port (after Singapore) in ASEAN. However, according to Mr. Kingsley, intensive competition can be expected from emerging ports that are being developed in ASEAN, eating away from its contestable hinterland.

In particular, Pak Bara deep-sea port in Thailand is a port to watch due to its close proximity to Port Klang. The deep-sea port in Pak Bara is part of the landbridge project in southern Thailand to connect the eastern and western coasts of Thailand so that freighters from Europe can unload cargo in Pak Bara port (saving over 3,000 kilometres) without going to round the Strait of Malacca to arrive at ports in the Gulf and the South China Sea. It shares the same contestable hinterland on the northern peninsular Malaysia with southern Thailand and has a more competitive strategic location for ocean freight from/to India, Middle-east, Europe and Africa especially transhipment cargo which can be ferried by rail to/from China and the greater Mekong region. Other new port developments in planning are Dawei deep-sea port (Myanmar) and various new port developments and extensions in Indonesia (in particular Sumatra). These ports could become significant players in the transhipment business as well. 

Mr. Kingsley proposes to strengthen the control of Port Klang’s hinterland through improving intermodal and multimodal connectivity: rail-sea, road-sea and feedering services with Sumatra, Thailand, Brunei and India. Second, he proposes the development of mega distribution centres located in Port Klang, hereby locking in value added logistics activities in the port as well as its position as a key node in the trans ASEAN transport network.

Amongst others, the following policy recommendations were made in order to strengthen the competitive advantage of Port Klang:

§  Enhance investment policies for local and foreign investors in its port cluster;

§  Stimulate the development of a strong and complete industrial and logistics clusters in Port Klang;

§  Develop a comprehensive range of maritime ancillary services to strengthen its maritime supporting industry;

§  Stimulate innovations in and modernisation of the Malaysian transportation sector: trucking, rail and (short)sea;

§  Improve intermodal and multimodal connections with Southern Thailand, Myanmar and Sumatra. 

In order to strengthen Port Klang in AEC over the coming year, it needs a continuous investment in and innovation of its port and its logistics cluster. This requires an intensive collaboration between Port Klang, its users, the logistics industry, government, universities and research institutes. This does not mean that the ball is in the court of the government. Both the government and private sector are each fully responsible in enhancing the competitive advantage and business for Port Klang as a hub port in ASEAN.