Ports plan tariff hike

A number of major ports in Malaysia plan to increase port tariffs or introduce new tariff items going forward.

This is because the revision of some of the tariff items has been long overdue. The move is also to match the investments that have been made to expand the ports.

Port Klang Authority acting general manager Capt David Padman toldStarBiz that some of the new rates should be applicable by the first quarter of 2012 pending the Transport Ministry’s approval.

“The revision of a number of tariff items including conventional cargo and marine services for Port Klang has been mooted since three years ago.

“This is because a large section of the conventional tariff has not been revised for 45 years since the days when Port Klang was administered by the Malayan Railways.

“Also, terminal operators have many times requested charges to be increased in line with the investments in the facilities and services including the construction of new berths, purchase of new cargo handling equipment and subsequent maintenance of the facilities.”

He said terminal operators had also requested an increase in marine service charges as fuel prices had increased substantially since 2008.

After extensive examination of the proposals by the operators and subsequent consultation with the industry and port users, charges for conventional cargo handling such as stevedorage, wharf handling and storage would be increased, Padman said.

“On the other hand, certain charges such as wharf labour and third-shift surcharge have been withdrawn as they are no longer justified given the scope of current port operations.

“Marine service tariffs will see a slight increase while container handling will see new charges for containers of more than 40 ft long,” he said.

It was reported in StarBiz last month that Penang Port Sdn Bhd also planned to introduce new tariffs in the middle of next year.

Chief operating officer Obaid Mansor was quoted as saying that the proposal to raise port tariffs, comprising largely cargo-handling and ship charges, had been submitted to the Penang Port Commission.

Penang Port tariffs were last revised in 2003 and implemented in 2007, which saw a 30% increase in handling charges for container cargo to the present rate of RM182 for a 20-ft container and RM273 for 40-ft container.

About 80% of the cargo handled at Penang Port’s North Butterworth Container Terminal comprises full container load cargo, which is expected to generate 75% of Penang Port’s revenue this year compared with about 65% in 2010.

Meanwhile, ports in Johor namely Johor Port and Port of Tanjung Pelepas, (PTP) are also expected to introduce new tariffs of some sort.

Chairman for both ports, Datuk Mohd Sidik Shaik Osman said Johor Port had recently received approval for a small revision of its port tariff only after 24 years.

“The new port tariff at the Johor Port has been effectively implemented since August 2011.

“The previous revision in Johor Port’s tariff was in 1987,” he said.

As for PTP, Mohd Sidik said it was currently exploring with the Johor Port Authority on the possibility of introducing new tariff items which were not currently prescribed.

“However, the expected impact on port users will be very minimal,” he said.

As of last year, Port Klang, which comprises Northport and Westports, were ranked at 13th place in the global container ranking by volume at 8.87 million twenty-foot equivalent units (TEUs).

PTP came in at 16th place last year with a volume of 6.54 million TEUs,

It was reported that for the first five months of this year, Malaysian ports handled a total of 8.2 million TEUs, up 10.9% from the same period last year.

Sourced from here.

Extreme shipping

Sourced from here-

I WRITE from the pilot’s cabin of one of the world’s largest container ships, the Eleonora Maersk, moving almost imperceptibly through the South China Sea off the Vietnamese coast. Eight storeys up from the deck, my windows just about clear the top of the thousands of containers that are stacked in 22 rows across the vessel. This allows me a view to the ship’s forward navigation mast, a full 250 or so metres away. But the rain is coming in now, and it will soon disappear from sight.

The accommodation section, and above it the bridge, is a bit aft of amidships, so the stern is another 150 metres or so behind me. Or, put another way, the whole is about four football pitches long and half of one wide. Or again: about two-fifths the height of Scafell Pike, the highest peak in England. This is “economy of scale” made steel…and the reason why the retailer Primark will be able to sell me a Chinese-made T-shirt for just a pound or two on my local high-street in Britain, just inside a month.

The vessel is specifically designed to ply the world’s most important trade route, the Asia-Europe run: this is now (euro-area debt crisis notwithstanding) the main artery of globalisation. Having started its homeward-bound voyage in South Korea and having picked up most of its cargo in Shanghai, the Eleonora is due to dock in Rotterdam in a couple of weeks’ time. I joined the vessel on October 26th at the container terminal of Yantian, the port of Shenzhen, just inside mainland China north of Hong Kong. I will disembark on October 30th when we reach another massive port, on the southern tip of Malaysia, just north of Singapore. Even if I wanted to stay on board for the next leg, non-stop to Europe, I wouldn’t get very far. As was explained to me in “the citadel”, a secure room in the bowels of the ship where everyone has to gather in the event of a boarding by pirates, no guests or even family are allowed on Maersk vessels past Sri Lanka, because of the threat from Somalia. In truth however, this ship is just too big (and fast) for pirates to grapple with.

So, what are we carrying? This boat will be fully loaded after Malaysia, with about 7,500 containers (or 100,000 tonnes) of European Christmas presents, mostly—and a New Year treat. For we must be shipping much of the continent’s New Year celebrations as well: 1,850 tonnes of fireworks, including 30 tonnes of gunpowder, probably from Hunan province, where most of these things are made. Oh, and about 28 containers (290 tonnes’ worth) of plastic cigarette-lighters, destined for the Danes, Swedes and Poles.

To make it worth one’s while to ship cigarette-lighters and sparklers most of the way round the world, it is best, of course, to have a ship as big as the Eleonora Maersk. Only with such behemoths can shippers and retailers achieve the economies of scale that are necessary to make the Asia-Europe trade pay. Maersk lines, the world’s biggest container-shipping company, has eight such E-Class ships—and has just ordered 20 even (slightly) bigger ships from Korean yards. High oil prices are now forcing all the main container-shipping firms to order ever bigger ships. They might be awesomely expensive (Maersk’s new ones will cost almost $200m each), but with fuel costs making up such a large part of their bills, all the shipping lines are looking to reduce the cost per mile per container on the Asia-Europe run. The only feasible way to do that is pile more containers on one ship.

So almost everything about the Eleonora, which was built in the mid-2000s, is quite simply—The Biggest in the World, Ever. It is not just the biggest kind of container ship, but the biggest ship of any sort in service. To move its load through the water, it boasts the largest combustion engine ever built—generating horse power equivalent to 1,000 family-sized cars. The 14-cylinder engine turns the longest propeller shaft (130 metres) ever built, at the end of which is the largest propeller, weighing in at 130 tonnes. Yet so efficient is the engine, says the Danish chief engineer, that cruising at an average of 17 knots the ship consumes just 3 grams of fuel per tonne per nautical mile—which certainly sounds low. This sort of calculation, above all, makes a sophisticated laptop or iPad made in China affordable in Copenhagen.

Alarmingly, at least for a container-ship neophyte like myself, the world’s biggest ship seems to have a crew of only 19. But that’s a few too few, surely? In fact, the Danish captain explains that, strictly speaking, the boat is designed to be run by just 13 people; but he likes to have some more on board, for maintenance and repairs…Sensible chap. Together with some cadets, that brings the full complement to a gangway-shoving 24.

But then the ship is so automated that the captain appears to exercise full mastery over everything in sight with only the slightest touch to a half-ball, the size of one hand’s palm, which protrudes from a control panel. I can see all the traditional signalling flags neatly stowed on shelves on the bridge—so neatly, in fact, that I suspect that, along with the sextant and the flares, they might never have been used.

MIDF research downgrades ports sector to negative

MIDF Research had downgraded the ports sector from neutral to negative in face of weaker exports to the faltering US economy and Europe's sovereign debt crisis.

It said on Monday, Oct 3 that Malaysia's export slowed down as it posted a 7.1% year-on-year (y-o-y) growth in July 2011 from 9.6% y-o-y increase in June 2011.

In terms of sequential month, July's export was 2.2% month-on-month (m-o-m), lower than 5.1% m-o-m posted in the previous month, it said.

"We believe that this had led to the decline in Electrical and Electronics exports where it continued to decline for the fifth consecutive month," it said.

The research house said the declining exports would add pressure to seaports, especially container based ports given that rates are fiercely competitive.

Meanwhile, port traffic is seeing signs of easing as well as NCB HOLDINGS BHD []'s faltering port twenty-foot equivalent units (TEU) growth.

The group posted a decline of 3.4%y-o-y in its 1H11 port TEU while port revenue fell by 1%y-o-y. Also, port profit before tax margin declined by 5.8 percentage points, which suggest the company was facing margin squeeze and rates pressure.

However, the research house maintained its Neutral rating on NCB citing its defensive qualities as its dividend policy would moderate weaken sentiments.

Source: Edge

MIDF Research maintains negative on shipping sector

MIDF Research maintained its stance on the shipping sector due to persistent problems that are caused by depressing rates or moderation of upside potential.

It said on Monday, Oct 3 that while Baltic Dry Index (BDI) had recovered in 3QFY11 and may stabilise in 4QFY11, it expect the pressure to the rates will remain given that the overcapacity issues are not being addressed.

In addition, it said the current uncertain economic condition, coupled with the volatile market will likely to continue next year, thus further dampening growth and erode demand.

However, the research house maintained its neutral call on both Maybulk and MISC.

MIDF Research said that based on the median of economists' estimates compiled by Bloomberg, China would expand 8.7% y-o-y in 2012, compared with 9.3% y-o-y expected in 2011.

The consensus forecast suggests that breakeven rates for ship owners will not come until 2015, it said.

It said the BDI which reflect the cost to ship bulk products such as iron ore, coal and grains rebound to about 1,920 on Sep 23, 2011, representing 84.1% increase since Feb 4, 2011.

“This was surprising given the hanging overcapacity problem in the industry is still unresolved.

“We understand that the rally is continuing because more ships are being sought by the three top iron-ore producers, Vale SA, Rio Tinto Group and BHP Billiton Ltd., to export cargoes," it said

Meanwhile, MIDF Research said the Baltic Dirty Tanker Index (BDTI), which tracks the shipping rates for tanker had not broken 700 points since Aug 2011 and had only reached above 1,000 points in March this year.

"According to Baltic Exchange, very large crude carriers, or VLCCs, are losing US$ 2,251 a day on the benchmark route of Saudi Arabia to Japan, extending a run that began Aug 26, 2011.

“Rates are coming under downward pressure given that there are more offers for one cargo," it said.

Source: Edge

Logistics roadmap will benefit the region

Malaysia’s Roadmap for Development of the Logistics Services Industry will see a flourish of trade opportunities in the Pan-Beibu Gulf Economic Cooperation (PBGEC) member countries, according to Deputy Transport Minister Jelaing Mersat.

He said the roadmap commissioned by the Malaysian Logistics Council and the EPU of the Prime Minister’s Department contained recommendations on improving performance of ports, shipping, land transport and freight transportation.

He said the Transport Ministry would play an active role in the roll-out of the plan which would include strategic initiatives to strengthen capital capacity and also to review and revamp regulatory and intuitional framework.

“The ministry will also look into legislations and international conventions involving shipping, liability regimes, air and surface transport to strengthen our governance, regulatory functions and ensure international compliance,” he told Bernama on Saturday.

“With the roadmap, the transportation networks will be connected within the Asean and PBG countries. This will further develop investment, trade and economic cooperation in the region and form cluster of industries, accelerate economic growth in the PBGEC.” – Bernama

Jelaing attended the 6th PBGEC Forum, which concluded here on Friday.

He said Malaysia would play its role in transportation infrastructure to improve the connectivity between Asean and China.

“We are doing everything that we can to speed up the connection, such as the Singapore-Kunming Rail Link.”

The roadmap for the Development of the Logistics Services Industry is an Asean economic blueprint signed by all Asean leader at the Asean Summit, which was attended by former prime minister Tun Abdullah Ahmad Badawi in 2007.

Meanwhile, Jelaing said the Transport Ministry would evaluate and implement relevant strategic initiatives under the roadmap which whould envision the development of world class freight logistics system, including strengthening the role of ports and shipping to support the country’s economic growth and development.

“We will liaise and consult with various stakeholders in the industry through the focus in moving the agenda on freight logistics forward,” he said.

On maritime cooperation, Jelaing said China-Asean Maritime Consultation Mechanism is in the midst of exploring cooperative opportunities.

Under the mechanism, he said both countries conducted numerous activities, including the meeting on Tide, Current, and Wind Measurement Project of Malacca and Singapore Straits (March and April) and the Workshop on Port Facility Security in July.

Source: BizStar

Economic fears deepen dry bulk shipping woes

Growing fears for the world economy signal more pain and even bankruptcies among dry bulk ship owners who are getting rock-bottom rates to carry cargoes like coal and now face a glut of new vessels ordered when times were good. 

The tougher climate has hit the sector hard this year and confidence is at a record low. Korea Line, South Korea's debt-stricken second largest dry bulk shipping line, is among the casualties. The firm, under court receivership, has filed a restructuring plan to the court. While cheaper rates could benefit buyers of commodities, the weak economic prospects are set to hit more ship owners. "Smaller companies tend to have less access to capital, especially in weak markets. High financial leverage and weak earnings could force covenant breaches or defaults in the sector," Deutsche Bank analyst Justin Yagerman said. 


The Baltic Exchange's main sea freight index, which track rates to ship raw materials, has already declined nearly 30 per cent since the start of the year as ship supply has outpaced demand to transport strategic commodities including coal, iron ore and grains. 


"A recession or recession like situation will actually prolong the period with poor freight markets," said Sverre Svenning, a director with broker Fearnley Consultants."In normal circumstances, governments - especially in Europe - would try and stimulate the economy through infrastructure and construction work but there is no government in Europe that has money for that now and the US government definitely does not have money." 


Investors worry that fiscal cutbacks due to Western credit softness and stagnating output are holding back global recovery.Weak US services sector data and poor manufacturing data this week have compounded the fragile outlook.


Former US Treasury Secretary Lawrence Summers wrote in a Reuters column this week that there is a one in three chance of a US recession. 


"If there were to be a double dip recession in both the US and Europe, then it would feel like the mother of all recessions for the dry bulk market," said Khalid Hashim, managing director of the Thai-listed group Precious Shipping . 


"It would probably take us to the bad old days of the mid 1980s when the BDI was barely above its all-time low of 557 points." Khalid said that in such tougher economic conditions, he would not be surprised to see the BDI fall below the 1,000 point level and remain depressed for four to six quarters. 


The index was seen by investors in 2008 as an indicator of the global contagion from the financial crisis, highlighting the fall-off in demand for raw materials. During the boom times, the index posted a record high in May 2008 of 11,793 points. 


The financial crisis drove it as low as 663 points in December 2008. It reached 1,268 points on Thursday, having hit its lowest in more than three months early this week. 


"A further a slowdown from here would be very bad news for the freight market," said Georgi Slavov, head of dry research and structured products at broker ICAP Shipping. "I really hope this is a short lived seasonal slowdown in the West."


Read more: Economic fears deepen dry bulk shipping woes http://www.btimes.com.my/Current_News/BTIMES/articles/brulk/Article/#ixzz1UQVnlIYi

Professional body CILTM recognises varsity’s logistics programme

A memorandum of agreement (MoA) signed between Chartered Institute of Logistics and Transport Malaysia (CILTM) and Universiti Utara Malaysia (UUM) recently will act as a springboard for the latter’s graduates in logistics studies to enter the industry.

CILTM president Datuk Abdul Radzak Abdul Malek said the MoA allowed for a greater and mutually beneficial cooperation between academia and the industry.

“Areas like exchange of knowledge from the industry to the academic through invited guest lectures by industry professionals can be made possible with this MoA.

“Others like joint research activities that has high application value to the industry, student-led out-of-classroom experiential learning activities and leadership camp for young professionals will add value to this MoA,” he said at the agreement singing.

The MoA entailed accreditation by CILTM to the Bachelor of Business Administration in Logistics and Transport (BBLT) programme currently offered by UUM.

“With this, the degree will not only be recognised globally but also has better marketability,” said Abdul Radzak.

The Chartered Institute of Logistics and Transport (CILT) is the international professional body for all sectors of the transport industry.

Founded in the United Kingdom in 1919 and granted a Royal Charter in 1926, it was formed to promote knowledge of the science and arts of logistics and transport and to provide a source of authoritative views for communication to government, industry and the community.

Abdul Radzak said the MoA was timely as Malaysia was now undertaking a huge step in the logistics and transport industry.

He said the formation of Land Public Transport Commission, the development of mass rapid transit system in the Klang Valley and the creation of Southern Logistics Hub in Iskandar Malaysia were just a few examples of the Government’s seriousness in developing the industry.

He said all these economic and infrastructure development activities spelt the need for qualified logistics and transportation professionals.

“The fact that UUM has its BBLT programme recognised by CILTM as a professional degree is just like a stamp of endorsement that the graduates of this degree from UUM are not only qualified academically but also equipped with skills that the industry needs.

“This endorsement is further amplified when the graduates are conferred the Member of The CILT (MILT) immediately upon their graduation. This will put them in a better position to compete in the job market,” he said.

UUM vice-chancellor Professor Datuk Dr Mohamed Mustafa Ishak said the university had been offering the BBLT since 1993 and so far, 431 graduates had completed their studies.

“At present, we have about 453 undergraduate students enrolled in the programme of which about 15% are from countries like Nigeria, Chad, Sudan, Somalia, Thailand, China, Indonesia and Saudi Arabia.

“Through this smart collaboration, our graduates are better positioned to face challenging careers as qualified professionals in logistics and transportation either in the Government or private sector,” he said.

Source: BizStar

Bright outlook for ports

Almost all Malaysian container ports are poised to record good growth this year, based on current statistics of containers throughput and stable economic activities.

But the rosy outlook is not without any pockets of concern, with the slowing down of the country’s economy due to external influence a worry.

The Malaysian economy grew 4.6% in the first quarter, marginally missing the 4.8% forecast by most economists.

The Transport Ministry reported last Tuesday that Malaysian ports had handled a total of 8.2 million TEUs (twenty-foot equivalent units) for the first five months this year, up 10.9% from the same period last year.

Transport Minister Datuk Seri Kong Cho Ha said among the notable ports that registered positive growth were Port Klang and Port of Tanjung Pelepas (PTP).

Port Klang and PTP retained its position as the world’s top 20 container ports last year at number 13 and 17 respectively.

The Maritime Institute of Malaysia senior fellow Nazery Khalid told StarBizthat the increase in throughput was not only a reflection of an improving global economy and rebound in international trade, but also stood as testimony to the efficiency and productivity of the ports in attracting cargoes even in leaner times.

“One can say Malaysia is blessed with strategic location, being at the heart of the world’s busiest shipping lanes. However, we also have to be mindful that there are many ports in these areas with equally good infrastructures and services like Malaysian ports, if not better.

“Competition to attract cargo is stiff, and for Malaysia to have recorded impressive throughput growth in the first five months of 2011 is a commendable performance that says much about the competitiveness,” he said.

Nazery partly attributed the growth to growing intra-Asean trade and transshipment trade, the latter thanks to the relentless momentum of China’s economic growth.

“At this rate, and if the global economy continues its slow but steady recovery, our ports should exceed the volumes handled in 2010.

“However, competition for cargo is ferocious. Our ports not only have to compete with one another for a not-too-large slice of domestic cargo but also with up-and-coming ports in Vietnam, Thailand and Indonesia.

“Then, there is also competition with other transport modes in vying for cargo. With the double-track railway in the picture, I foresee rail giving our local ports a run for their money,” he said.

An analyst from a local brokerage said ports in the country would most probably sustain or increase its growth momentum based on the export targets of RM700bil this year from RM639.4bil last year according to the International Trade and Industry Ministry.

Import value was at RM529.2bil last year, up 21.8% from 2009.

But the analyst also cautioned that despite the positive outlook, the momentum of economic growth was expected to slow down in the second quarter due to the impact of the devastating earthquake in Japan and social uprising in the Middle East and North Africa.

This positive development in the port industry contradicted the dilemma faced by most shipping companies as freight rates continue to be battered by an excess of supply.

According to CIMB Research, despite the gloomy rate environment, containership newbuilding orders have zoomed ahead, with over a million TEUs ordered year-to-date from about 700,000 TEUs last year.

“This has tilted the equilibrium negatively and supply is now expected to grow faster than demand in 2012 and 2013,” it said in a recent report.

Last year, according to axs-alphaliner.com, the worldwide reference in liner shipping, global container throughput hit a new record of 560 million TEUs.

“The highest growth was posted by Chinese ports which grew by 17.9% last year, followed by South American ports which grew by 17.6%

“Forty-eight of the top 50 ports registered volume gains in 2010, with only two suffering minor losses. An average growth of 15% was recorded by these main ports,” it said.

Going forward, axs-alphaliner.com said that for this year, growth was expected to moderate to 8.4% as volumes returned to more sustainable levels, with Chinese ports again expected to lead the gains this year.

Source; BizStar

Container freight continues to be battered by excess supply

Container shipping freight rates, which have shown signs of recovery at the beginning of the year, are now back sailing on choppy waters as rates continue to be battered by excess supply.

According to CIMB Research, despite the gloomy rate environment, containership newbuilding orders have zoomed ahead, with over a million twenty-foot equivalent units (TEUs) ordered year-to-date from about 700,000 TEUs last year.

“This has tilted the equilibrium negatively and supply is now expected to grow faster than demand in 2012 and 2013.” it said.

The research house said it was bullish on the sector at the start of the year based on a modest pace of newbuilding orders, but the dramatic surge of orders had taken it by surprise.

Excess supply: Maersk and MSC have already deferred proposed rate increases from June to July on weak ship utilisation.

“We are worried that liners are repeating the mistakes of the past,” it said in a recent sector report.

It said freight rates continued to be battered by excess supply, and base rates for Asia to Europe are probably close to zero.

“Rates between China and Europe have declined 60% to US$874 per TEU, from a peak of US$2,164 per TEU in March 2010, and are now close to zero after deducting the bunker adjustment factor of around US$750 per TEU.

“Spot rates have declined despite higher bunker prices, exacerbating the squeeze on margins,” said the research house.

CIMB Research expected rates could plummet below bunker costs over the next month or two.

“Maersk and MSC have already deferred proposed rate increases from June to July on weak ship utilisation, which could prevent a sustained rise in rates even during the coming peak season.

It said the present situation was much worse than its expectation at the start of the year.

According to Alphaliner, weekly Asia-Europe (AE) shipping capacity was 21% higher year-on-year (y-o-y) in May, substantially ahead of the 4% y-o-y rise in head-haul trade volume in April.

“Also, economic indicators in Europe appear to be weakening, with a flattish composite leading indicator for the big four European economies, weak retail sales, and rising retail stock levels.

The weekly expects carriers to begin cancelling services, redeploy capacity to other trades, or lay up ships if the situation continues.

Sharing the negative sentiment, according to CIMB Research, is Transpacific rates, which had resumed its downtrend after making tentative upward moves in April and early May.

“The Transpacific Stabilisation Agreement, a research and discussion group of 15 major container shipping lines had recommended US$400 per forty-foot-equivalent-unit increase in contract rates from May, but carriers likely lowered rates instead.

“According to Alphaliner, Transpacific capacity was 19% higher y-o-y in May against a 7% to 8% annual demand growth,” it said.

Source: BizStar

Kontena unveils logistics package for SMEs

Third party logistics provider Kontena Nasional Bhd will launch a warehouse and transportation package deal for small- and medium-sized enterprises (SMEs) today, which may make it viable for your favourite Penang halal "tao sah piah" manufacturer to bring it to a store near you.

The launch is in conjunction with Smidex Exhibition 2011.

SMEs have always been limited geographically due to high transportation costs. Starting out small, SMEs do not have the necessary volume to negotiate competitive rates with transportation providers.

"Our strategy is if we are able to cater, not to a single SME, but a group of SMEs in a single platform, in a single location, then we will be able to reduce the cost significantly, bearing in mind that once they grow they will be able to add volume to this produce of theirs," Kontena Nasional chief executive officer Hood Osman said in an interview here recently.

About 95 per cent of total businesses in Malaysia are SMEs.

Called 1 KN 1 Rate, Kontena Nasional's latest offering is customised to meet individual SMEs needs. It includes role consulting, planning, transport rates and warehouse rates.

Hood said the last six to eight months have been about bringing Kontena Nasional to a state of readiness to offer the services.

"We have applied halal certification and increased our fleet to multi-vehicle services. We used to be wholly in prime movers and hauliers, and have expanded our warehouses. These are all significant contributors to the whole infrastructure that will help facilitate the growth of SMEs," he said.

Kontena Nasional currently has about 15 warehouses nationwide, and is expected to add another three by the end of the year.

"We have used the past six months to make sure that we can cater to individual requirements, to do a bit of study, to see where SMEs are and how to go about servicing them," Hood said.

He said its studies have shown that SMEs generally do irregular deliveries, make sporadic requests and require too small a space in warehouses for retention.

Kontena Nasional expects to bring in between RM7 million and RM8 million in sales from the venture.

The second phase will be the introduction of its product to SMEs in Sabah and Sarawak.

Source: Business Times

More investments needed

Logistics sector should be able to meet expected increase in demand

SHAH ALAM: The logistics sector must further invest in technology, capacity and talent to offer more value-added services in line with the uptrend in trade volume.

SME Corp Malaysia chairman Datuk Dr Mohamed Al Amin Abdul Majid said the logistics sector capacity should meet the expected increase in demand in view of the growth of the global economy.

Datuk Dr Mohamed Al Amin

“This is the time where the logistics sector must take advantage because as trade grows, the services offered by the logistics sector are much needed to ensure seamless transportation, storing and distribution of goods.

“For Malaysia, the main challenges are to further improve the services offered towards total logistics services and multi-modal transportation.

“To date, there are about 31,168 companies involved in the logistics sector in the country with 30,766 belonging to the small and medium-size entreprises (SMEs) category,” he said in his speech to officiate the Bumiputra Logistics Entrepreneurs Association AGM last week.

Mohamed Al Amin said as the logistics sector remained as one of the strong pillars of the country’s trade growth and competitiveness while the Government had acted as an “enabler” via its support and various incentives.

The private sector specifically the transportation, storage, and communication industry contributed about 8% to the country’s gross national product last year.

“This year, there are about 219 programmes with financial commitment of RM5.9bil to be implemented via various ministries and agencies.

“For SME Corp, we have launched two programmes early this year namely Business Accelerator and Enrichment & Enhancement Programme to support the SME industry and players.

“PPLB members who are interested in this programme are welcome to join and application can be made online.

“We have also collaborated with a prominent logistics player, Kontena Nasional Bhd, to widen the scope of the logistics sector market via talks, site visits and business-to-business sessions,” he said.

Source: BizStar

In anti-trust law we trust

COMMENT

By NAZERY KHALID

IT was reported recently that the big boys in the container shipping industry were among the companies that were raided by the European Union (EU) anti-trust officials over a possible collusion. This has sparked an interest to re-visit the subject of EU anti-trust law in the liner shipping industry, which was implemented in October 2008.

Last week, Bloomberg reported that AP Moller-Maersk A/S, CMA CGM SA and Hapag-Lloyd AG were among companies raided by EU anti-trust officials. The companies were reported to give full cooperation to the officials to carry out the probe.

EU regulators said they had “reason to believe” that the companies might have breached EU cartel or monopoly-abuse rules. The raid doesn’t mean that the companies are guilty of anti-competitive behaviour, according to the European Commission.

The raid came in the midst of investigation into how container shipping freight rates rose in 2009, although demand dropped sharply amid the global recession and industry capacity swelled owing to delivery of huge new tonnage in the box trade.

Since the implementation of the anti-trust law, liner shipping companies have lost their privileged status under EU competition law with the withdrawal of the liner conference block exemption, which authorised horizontal price-fixing and similar agreements.

In areas where the liner consortia block exemption does not apply, all cooperative arrangements are carefully and individually vetted under the competition provisions of the European Council Treaty.

The competition regime, while lauded by importers and exporters, in the EU liner shipping context is not without problems, though.

Several legal questions have been raised over the introduction of the competition law in EU, in areas such as cooperation between liner shipping companies and the benefit of cooperative arrangement between liner shipping companies over the negative impact on competition. The strategies of these companies that may lead to an abuse of a dominant position have also been put under scrutiny.

Liner shipping companies have had to reconfigure their discussion agreements and business strategies to accommodate the abolishment of the block exemption so generously accorded to them before the enactment of the EU competition law.

This has led to greater competition among them in the EU trade, which is lauded by shippers.

It was reported that Hong Kong’s OOCL, a powerful player in the liner shipping trade, cautioned against implementing anti-trust laws that prevent shipping lines from developing solutions and rationalisation exercises to deal with capacity overhang. While stopping short at endorsing price-fixing conferences, OOCL lamented that anti-trust laws have restricted liner companies from collectively discussing issues affecting the liner trade.

That coming from the world’s 11th largest container shipping operator (based on 2010 ranking) is noteworthy. OOCL’s grouse echoes that of many other liner companies which fear that the onslaught of open competition will adversely affect their business.

This anxiety is echoed by the recent recommendation of Singapore Competition Commission for the Singapore government to extend the block exemption to allow liner conferences to continue their trade until December 2015, with minor changes. This was made on grounds that anti-trust exemptions remain the norm for the global liner trade and most of Singapore’s trading partners.

Also getting into the act are Australia and Japan, which are also looking to apply competition rules on liner shipping.

To this end, the recent announcement by the Joint Global Shippers Forum (JGSF) to promote anti-trust laws in Asia should make governments sit up and take note. Countries, especially trade dependent ones, which ignore the call by this powerful forum do so at their own peril and run the risk of being bypassed by shippers.

Best business behaviour

With the Competition Act slated for enforcement in Malaysia on Jan 1, 2012, companies in the maritime sector are expected to make a major leap forward in their business conduct and be at their “best business behaviours.”

Operating in a borderless theater and ultra-competitive environment, the local maritime sector, which facilitates 95% of the nation’s trade, is expected to take the front in realising the targets of the Act, in line with the aspiration to make Malaysia a regional shipping and logistics hub and a globally competitive maritime nation. Being an open but small economy, Malaysia must put in place an institutional framework that will not only lure investors and businesses but also to align local companies with international best practices to enable them to compete globally.

Even skeptics of anything good introduced by the Government would be hard-pressed to argue against the virtues of the Competition Act.

However, those who will be affected by the Act need to keep to the letter and the spirit of the Act, which must be strictly enforced without fear or favour, to ensure its optimal effectiveness and the attainment of its objectives.

The dynamism generated in the marketplace by the injection of greater competition and innovation through the Act can only be good for a country that is racing against time to become a fully developed nation by 2020. Sharp focus will be trained on the maritime sector to help fulfill this lofty ambition.

● Nazery Khalid is a senior fellow at Maritime Institute of Malaysia.

Source: BizStar