Wednesday, June 26, 2013

Maritime sector needs reallignment

THE New Economic Mode (NEM) envisions transforming Malaysia’s economy into a developed nation status by 2020.
Such an economy will be propelled not just by capital but by productivity and high technology, featuring high income, value adding, innovation driven and knowledge based activities.
The maritime industry is unfortunately not among the first that comes to the mind of many in terms of its potential to generate such activities and to help transform the nation’s economy. It is probably a reflection of its understated importance and contribution to the nation’s economy.
Admittedly the maritime industry – which includes activities such as shipping, port operations, shipbuilding/repairing and offshore oil and gas exploration and production, among many others – is not as high profile or glamorous compared to say the aviation, banking or legal profession. The industry is also arguably not the first career choice of most young people.
However, this does not mean that the industry does not offer exciting earnings and career development potential. There are many sectors within this vast industry that present high-income prospects for those who care to look carefully and set aside stereotypical perception of the industry as being unappealing and characterised by hardship and unattractive remuneration.
Among such services are specialised services in offshore oil and gas exploration and production, integrated logistics services, maritime financing, supply chain management, shipyard services, advisory and consultancy, maritime education and training, shipyard activities, and producing solutions to reduce emissions from shipping.
These value-adding activities not only are capable of generating high -income to meet the goal of NEM but also lead to realising Malaysia’s ambition of becoming a globally competitive maritime nation.
Local companies which can offer value-adding products and services will be able to enlarge their market shares and compete globally. Such activities tend to yield high earnings to their companies and offer high income to their personnel.
Take shipping for example, whose competitive nature has become even more so amid the global recession and slump in the major shipping trades. As demand for shipping services fell, banks tighten financing to shipping, huge new tonnage keeps on entering the major shipping trades and oil prices hovering at high levels, shipping companies have faced very challenging market conditions. Many have gone out of business and hanging by thread amid the tough operating environment.
Those which are still surviving and thriving have done so by offering value-added services to their customers. Being in a very competitive market, shipping lines which can offer more than just transportation services are the ones least likely to run aground amid choppy waters in the industry. Such value-added services include specialised cargo transportation, logistics, ship management, ship brokerage and automated shipping status update.
By promoting such high-income generating activities in the maritime industry, Malaysia can also move to the “blue-ocean” side of the maritime industry and differentiate itself amid the crowded field. This will enhance their prospect of offering their services to the international market, which is crucial given the global nature of shipping and the small domestic market in Malaysia.
The importance of providing high-income, value-adding maritime related services becomes clear when one takes into account that competition in the maritime industry is increasing and Malaysia cannot out-compete countries which have advantages such as cheaper labour cost and economies of scale. To have a truly world-class maritime industry, Malaysia must break away from just offering “plain vanilla”, low-cost maritime services and start investing in developing and nurturing the manpower to cater to high-end, specialised and high-revenue generating activities to remain competitive.
For that to happen, Malaysia needs to re-align its maritime sector to develop the soft-side of the maritime sector. There must be in place a well-defined strategy, infrastructures, conducive environment to promote research and development or R&D, innovation, entrepreneurship and risk-taking, and strong leadership and public-private partnership. Above all, there must be a mindset and attitude change among local players in the maritime sector from relying on cheap labour and cost advantage to a strong desire to serve bigger customers and to compete on an international and global marketplace.
Malaysia’s maritime industry can no longer depend on a low-cost structure to remain competitive internationally. It cannot continue on the common path that it has been practising and hope to keep clinging on to the advantage of low cost as this can easily be replicated by other aspiring maritime nations. Even regional countries like Vietnam and Thailand, which have invested heavily in maritime infrastructures such as trade and shipyards, are fast catching up. They might even overtake Malaysia in certain aspects of the maritime industry, for example attracting main line operators and enlarging market share in handling transshipment cargos and intra-Asean trade, if Malaysia’s maritime industry does not continue to make progress.
A plan of action is also recommended to facilitate the promotion value-adding, high-income activities in the maritime sector. This includes developing a set of strategies and plan of action to align the maritime sector with NEM’s aspirations, offering a comprehensive set of incentives to local companies providing maritime support services, investing in skills and talents, inculcating and promote a strong R&D culture, and consolidating certain sectors to attain economies of scale.
A comprehensive approach in promoting value-adding, high-income activities in the maritime industry can lead to the enhancement of Malaysia’s competitiveness in the maritime industry and put the maritime industry on course to fulfill the aspirations of NEM.
It is high time Malaysian maritime industry players wake up to the fact that taking a myopic worldview of their business environment and continue with the status quo in their respective sectors would lead to a dead-end tunnel. They cannot be depending on the small domestic market and on government contract alone. They must branch out and develop a keen sense of where the business is and where new opportunities will emerge. They cannot just follow the leaders if they want to really excel and make a mark for themselves on the global stage in this ultra competitive industry.
Realising the ambitious targets set by NEM requires nothing short of the highest level of commitment to excellence, strong resolve and hard work, and major mindset transformation.
Only by doing so can the nation make the quantum leap required to attain high-income status and to generate knowledge-based, innovative-driven economy, as envisioned by the NEM. The motto pencapaian diutamakan must be used as a mantra for maritime industry players to adapt to the dynamics that will be unleashed by the NEM and to enhance Malaysia’s maritime competitiveness on the global stage.
Source: StarBiz