MALAYSIA : A MARITIME PLAYER OF CONSIDERABLE CLOUT

Nazery Khalid
Senior Fello! Mari"i#e In$"i"%"e o& Malay$ia
Por"$ and $hi''in( a$ )r%)ial &a)ili"a"or$ o& "rade
The tremendous growth of ports 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 recognized as essential
contributors in facilitating Malaysias 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 acnowledged as a leading maritime nation.
!n a matter of a few decades, Malaysia has successfully transformed its economy from
one that was agricultural and commodities-dependent to a manufacturing and trade-based
one. !n "##$, the countrys total trade was valued at %M&.&$' trillion, an increase of
(.$) from "##*. +,ports rose by -.() to %M((..'& billion, while imports increased by
...) to %M'"&.' billion, resulting in a trade surplus of %M&/".#& billion. Malaysia is
now among the "#
th
largest trading nation in the world, with a share of appro,imately
&./) of global trade.
The phenomenal growth in global trade has had a huge impact in the development of the
ports and shipping in Malaysia. !n Malaysia, this has spurred investment and
development of various infrastructures to support the e,plosion in its increasing trade
with the worlds nations. The development of maritime infrastructure especially has
benefited tremendously from this trade and investment boom. This is underlined by the
estimation that -') of Malaysias international trade, the lifeblood of its economy, is
being carried through the oceans via its international seaports.
&
The e*ol%"ion o& 'or"$ in Malay$ia
The dramatic transformation and rapid industrialization of Malaysias economy over the
last few decades has made it into one of the worlds ma0or trading nations. Ports
went through intensive growth and tremendous development during the period of
rapid economic development in the country and the 1outh +ast 2sian region in
the &-$#s and &--#s. 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.
!n Malaysia, ports have evolved beyond places where ships load and unload cargos and
passengers. The countrys ports, have assumed a critical role in the overall pattern of
trade and transport, providing a lin between the shipping service and the inland transport
system. %ealizing the need to meet the challenge of matching its transport sectors
efficiency with its rapidly growing industrialized economy, Malaysia has put in place an
infrastructure development plan focusing on inter-connectivity among various transport
modes. This reflects the acnowledgement of the need to come up with an integrated,
comprehensive approach to address the unevenness in the development of its transport
modes and to lin them in an efficient, seamless multimodal interface. Malaysias 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 computerization of container terminal operations. There
are dynamic and revolutionary changes that are taing place in the various aspects of
container sizes, ship sizes, e3uipment, intermodal transport, !T, data e,change and
communication. There is een competition between ports in the region to attract cargos
and service their users. 2ll these e,ert demand on our ports to eep pace with the speed
of technology advancement in operations and to provide e,cellent services to enhance
their attractiveness and boost their competitiveness.
The countrys ma0or seaports in Penang, Port 4lang and Tan0ung Pelepas are located
along the coast of the 1traits of Malacca featuring e,cellent facilities and connectivity.
This is not coincidental as the west coast of Peninsular Malaysia is where the ma0ority of
the population resides and most economic activities tae place, hence en0oying better
transportation and connections compared to other areas of the country.
1ustained high levels of economic growth have resulted in increasing comple,ities in the
functions and operations of ports, inland transport networs lining ports and the related
institutional framewor. Malaysia has taen an approach of emphasizing the e,pansion
of capacity to provide a supply-driven environment and upgrading the e3uipment and
facilities of its ports to ensure efficiency. !n addition, niche ports have been established
in the form of Port 4lang as the national load center and Port of Tan0ung Pelepas as the
transshipment hub, which have aggressively spread their wings to enhance their global
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connectivity. 2ll these bear testimony to Malaysias 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. 2ll these are done without
undermining the need for the nations 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, optimizing human resource, ensuring the safety of
ships and navigation, and providing efficient ancillary services. !t is active in promoting
local ports actively overseas, highlighting the facilities available and providing capable
management and high level of services.
Through the Maritime 5ivision 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 maing Malaysia a successful maritime country. These are achieved
via the fulfillment of the roles of the Maritime 5ivision to 6
7ormulate policies relating to shipping and maritime safety, as well as
development and operation of sea transportation, ports and shipping.
Plan, co-ordinate and monitor pro0ects relating to ports and also pro0ects under
Marine 5epartment.
1tudy, review and prepare new laws relating to ports and shipping and to
ratify international conventions under the !nternational Maritime
8rganization.
Process domestic shipping license.
To achieve the ob0ective of enhancing the competitiveness and attraction of Malaysian
ports, the Government has undertaen the following 6
+nsuring a supply-driven environment by providing ample capacity in ports to
mitigate congestion and reduce waiting time.
5eveloping services such as feedering and bunering at local ports, and other
ancillary services such as baning, insurance and legal.
7acilitating supply of ade3uate facilities to accommodate large vessels and
increasingly larger types of ships.
9reating a commercially competitive environment to provide value-added
logistics services and infrastructure to encourage transshipment traffic.
9reating a conducive environment to attract Main :ine 8perators such as
offering shipping lines to buy into e3uity of ports.
Promoting ship financing by setting up financial institutions to assist the
maritime community via competitive financing.
5esignating Port 4lang as the national load center in &--. to serve a
hinterland with large cargo base.
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5esignating Port of Tan0ung Pelepas as a transshipment hub port.
!n addition to port development, efforts have also been undertaen to facilitate and
promote trade. 7ree commercial zones have been created at ports to simplify
documentation processing and procedures for cargo consolidation and to attract value-
added services. 1everal ports use community-based +5! systems and a nationwide
electronic trade declaration system allowing users to lin to the 9ustoms information
system is in place and is continuously enhanced to facilitate more efficient trade.
Mer)han" $hi''in( in Malay$ia
1hipping is the lifeline of the economy, playing an important role in moving our e,ports
and imports, serving a crucial lin in the entire national transport system, and providing
employment to many. !n its pursuit to become a global, competitive maritime nation, the
rapid e,pansion and increasing comple,ity of the Malaysian maritime industry has
resulted in an ever-growing demand for capital and ancillary financial products and
services.
8cean shipping, undertaen mainly by M!19 and other local companies with
international shipping services. The ma0ority of the vessels are :;G carriers,
bul carriers, chemical taners and container ships.
5omestic or coastal shipping, which falls within the 0urisdiction of the 5omestic
1hipping :icensing <oard =51:<>, the authority responsible for
issuing shipping licenses. +ntry into this sector is governed by the 9abotage
Policy, introduced in &-$# to restrict the transportation of cargo and passengers
by sea between local ports to locally owned and registered ships only. 5omestic
shipping involves large number of local operators and vessels, mostly single-
vessel operators from the private sector.
Malaysia embared on the 0ourney towards setting up its own commercial shipping line
in the late &-(#s to serve its own e,ports and to address the problem of balance of
payments as a result of the absence of a national carrier. The impetus also came from the
unhappiness of local shippers over the rates charged by shipping conferences handling
most of Malaysian cargos. The establishment of the national carrier, M!19 in &-($ with
government e3uity participation mared a milestone in the development of modern
commercial shipping in Malaysia. Petronas purchased a "-) stae in M!19 and too
over its management in &--*, maring another momentous progress in the companys
transformation into a leading liner. !ts growth was further enhanced by the ac3uisition of
4onsortium Perapalan <hd and P;1: :td. in &--$. M!19s merger with Petronas
Taners 1dn <hd in the same year boosted Petronas stae in the company to (").
Today, M!19 has grown into one of the worlds largest shipping operators with over &##
vessels. M!19 has a modern and well-diversified relatively young fleet of "* :;G
taners, maing it the world?s single largest owner operator of :;G taners.
/
<esides M!19, ma0or commercial shipping companies such as Malaysian Merchant
Marine, @alim Mazmin, ;epline, Gagasan 9arriers, Global 9arriers, Malaysia <ul
9arrier, Aawasan 1hipping also have modern and well-diversified fleet, plying the
worlds oceans carrying all types of cargos and loads. 1ome are listed on <ursa Malaysia
and most are members of Malaysian 1hipowners 2ssociation =M212>. 2s of & Banuary
"##$, Malaysia had .-" vessels of &,### G%T and above with a combined tonnage of
&&.&* 5AT, maing it the "#th 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 e,port products, heading mainly to our largest trading partners
which include the C1, 1ingapore, Bapan, 9hina, Taiwan, 4orea, Germany and C4.
Malaysia has also made great strides in ship financing to support the growth of the
shipping sector. The establishment of <an !ndustri in &-*- was testimony to its intent to
develop the shipping sector. The ban earmared shipping as a prime sector to benefit
from its loans provided at special rates and terms. The creation of a 1hipping 7und in
&--" was another show of support by the government towards shipping. 7rom the fund,
%M$## million was set aside for 1hip 7inancing 7acility directly managed by <an
!ndustri, and %M'## million for the 1hipping Denture 7und. !n &--/, another %M.##
million was added to the fund aimed at financing e,pansion of shipyard capacity to build
larger vessels. !n the "### <udget, the government announced another %M&.# billion to
replenish the fund. These funds were made available to shipping players at 7urther to
this, a shipping venture capital company, Global Maritime Denture =GMD> was formed
in &--/ to act as a catalyst to the maritime sector by forming strategic alliances with
Malaysian partners involved in the maritime sector.
!n addition to shipping activities, Malaysia also has several shipyards of international
class, albeit limited in their building capacity. Generally, they have a ma,imum building
capacity of around & million 5AT and a ma0ority of them is dedicated to ship repair.
This inade3uacy continues to force local shipping companies to purchase vessels and
commission ma0or reparation wors from foreign shipyards. The biggest shipyard,
Malaysian Marine E @eavy +ngineering became a subsidiary of M!19 in "##/, maring
a huge leap forward in taing 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. <ut 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 Governments commitment in promoting commercial shipping in Malaysia is
underlined by the many fiscal, financial, administrative and legislative efforts it has
taen. !n promoting local commercial shipping, the Government offers attractive
financial incentives to shipping players which include 6

'
Ta, e,emption on income derived from activities involving Malaysian ships,
applicable only to Malaysian residents.
Ta, e,emption on income of any person employed on board a Malaysian ship.
9ompetitive financing in the form of 1hipping :oan and venture funds.
The Government also encourages activities in the country that provide training for
maritime personnel. 5epartments teaching Marine Technology and Marine 1cience have
been set up at public universities. The Government also lends its support to many local
and international training programs, seminars and conferences held in the country. !t
actively promotes seafaring as a profession to Malaysian youths through promotional
activities, financial incentives and institutional support to reduce our dependence on
foreign seafarers.
Mari"i#e $%''or" $er*i)e$
There is a wide variety of maritime support services in Malaysia focusing on providing
support to ports and shipping companies and facilitating maritime trade. 2 number of
companies are involved in these activities, as shown in Ta+le ,.
Ta+le ,
N%#+er o& )o#'anie$ o&&erin( an)illary $er*i)e$
Ser*i)e No- o& lo)al
)o#'anie$
in*ol*ed
9argo handling
7right broer
9argo clearance
:ogistics management
1hipping agencies
1tevedoring contractors
1torage
7reight forwarding
9ustoms clearance
Aarehouses
&('
&.
'"
'#
*..
"/
"$
&,#$/
*&
"""
Source : www.eguideglobal.com.my (Retrieved on 2/6/2009)
Malaysias resolve to attract foreign participation is clearly evident in the maritime
sector. 2lthough the Malaysian government is committed to develop the maritime
industry and encourage local participation, Malaysia very much welcomes the
involvement of foreign players in the sector. 2ware of the fact that the maritime sector is
one of the most international of activities, Malaysia acnowledges the need to welcome
(
the participation of foreign companies, many of which have greater capacity, e,perience,
sills and nowledge than local players, in the maritime sector.
The presence of foreign companies in activities such as logistics, shipping, ship
classification and ship management underlines Malaysias openness to foreign
investment, resources and talents to help develop its maritime industry. Malaysias
openness is also evidenced by the privatization of 7ederal ports, and by allowing foreign
companies to hold e3uity stae in local ports and by granting foreign shipping lines
permission to provide services in the domestic shipping under certain conditions. These
mar Malaysias commitment to liberalize its economy and integrate it with the global
economy in order to enlarge its share of the global trade.
The General 2greement on Trade in 1ervices =G2T1> under the aegis of Aorld Trade
8rganization =AT8> has delineated si, main support services in the maritime industry.
These activities, also termed as maritime ancillary services, are as follows 6
cargo handling
storage and warehouse
9ustoms clearance
container station and depot
maritime agencies
maritime freight forwarding
2lthough many local players are involved in these activities, the development of the
maritime support services sector is neither baced by a coherent strategy nor by a
structured, long-term development approach. This results in non-linage between the
activities with one another and also between the maritime sector and other production
sectors of the economy.
F%"%re )hallen(e$
2lthough Malaysia can be proud of its achievements in the maritime sector thus far, it
still has its wor 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 e,ploit its maritime
resources, infrastructure and e,pertise to enhance its socio-economic standing. !ndeed,
Malaysia has many criteria to become a maritime powerhouse F glorious maritime
heritage, strategic location, e,cellent ports and shipping facilities F but much more can be
achieved in optimizing these attributes.
7or a trading nation lie Malaysia whose economic prosperity depends a lot on the
efficiency of its maritime industry, it is critical to ad0ust and respond to fast-changing
maret 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 staeholders 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 e,ert tremendous
pressure on maritime players to provide the best, most effective services at all times.
Malaysias dependence on and demand for maritime transportation system will continue
to grow in tandem with these developments. The maritime industry is an e,tremely
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, techni3ues and technology to manage the transportation sector more
efficiently. Aith 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 sectors efficiency and subse3uently 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 e,panding transhipment business. This is emphasized by the
bullish forecast of container throughput in the countrys ports which is e,pected to reach
.( million T+Cs by "#"#. The Government has privatized several ports to enhance the
management and boost development of port facilities, with positive results. The
investments of Maers-1ealand in Port of Tan0ung Pelepas and @utchinson in Aestport
have boosted operational efficiency, competitiveness and cargo volumes at these ports.
!nvestment opportunities also e,ist in the 7ree Gones of several local ports, which have
been developed with distripar infrastructure and facilities, and have the potential of
enhancing further Malaysias role as a regional distribution centre. The onus is on ports
to be able to present a strong case and a pacage of attractive investment opportunities
and growth plans to attract private investments for their e,pansion plans, in the wae of
declining public funds.
Aith regards to the commercial shipping lin 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 <alance of Payments
=<8P> problem. <ut alas, decades after the national shipping line policy was initiated,
only a small fraction of containerized goods is carried by Malaysian-flagged vessels.
This is largely due to the shift in Malaysian e,ports from primary commodities to
manufactured goods. 2s a conse3uence of the mismatch between the national fleet
growth and the boom in e,port volume, containerized e,ports continue to Hlea out,
aggravating the <8P problem. 7oreign shipping lines continue to dominate the local
shipping scene, causing Malaysia to incur huge outflow of payments of freight.
2lthough many local shipping companies have gone on from strength to strength over the
years, our fleet e,pansion 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. !t is estimated that only &#) of the countrys trade is carried by the national
shipping lines.
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2s 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 networ. 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 Malaysias e,port
competitiveness in a viciously competitive global maret. The two sectors need to face
the challenges and realities of the environment they operate in determinedly, and
overcome obstacles hindering their competitiveness decisively. !t is imperative that port
and shipping operators provide more efficient and cost-competitive services, leveraging
on the support and incentives already e,tended by the government.
The government has steadfastly affirmed its commitment to provide a conducive
regulatory framewor, policy direction and administrative support to ensure that
Malaysian ports and shipping strategies continue to be responsive to maret
developments and customer needs. Ahile Malaysia can be rightfully proud of the
performance of its ports and shipping services, the onus is on the staeholders not to rest
on their laurels. 2midst een 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.
This article was published by Ships and Shipping, August 2009.
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