Economist sees trouble for Malaysian ports

Hoo Ke Ping says signs of closer relations between China and Singapore is bad news for Malaysia.

Hoo noted that Singapore, in recent months, has been voicing support for China’s Obor initiative.

PETALING JAYA: Economist Hoo Ke Ping has warned of trouble for Malaysian ports, now that there are signs of closer relations between China and Singapore.

Speaking to FMT, he said there appeared to be a policy change in Beijing as indicated by the Ocean Alliance shipping network’s decision to shift operations from Port Klang to Singapore.

The Ocean Alliance, which includes China Cosco Shipping, the United Arab Shipping Company and France’s CMA CGM, was forged in Shanghai last year. Cosco is the world’s fourth largest player in shipping.

“It’s interesting that Cosco has gone to Singapore,” Hoo said. “Given that it is state-owned, this indicates a policy change in Beijing.”

He also noted that Singapore, in recent months, had been voicing support for China’s One Belt One Road (Obor) initiative.

“This is all bad news for our ports and possibly even the ECRL (East Coast Rail Link).”

The RM55 billion ECRL, which was launched in Kuantan last month, is expected to cater mostly to Chinese shipping companies. Prime Minister Najib Razak has lauded it as an “alternative trade route to Singapore” as the line will link Port Klang with Kuantan Port.

Hoo said Putrajaya should worry not only over closer Singapore-China ties, but also lower levels of efficiency at Malaysian ports compared to Singapore’s Tuas.

“If Singapore can provide port services and port support services which are more efficient, shipping players will head there,” he said. “This is why it’s crucial for our ports to have the most advanced equipment and infrastructure as well as efficient support services.”

The problem in Malaysia, he said, was that there were three main port players with different levels of efficiency and different rates of reinvestments into capacity building.

“It’s not just the ports, but also supporting services, including custom clearance and transportation, that need to be more efficient. In Malaysia, it can take a day or two for a container to leave the port, whereas in Singapore it can be just a few hours.”

He speculated that Singapore would ultimately become a transshipment hub. Because of this, he said, Malaysia needed to make its ports more attractive, and the first step should be consolidation.

“Our ports are competing with each other while Singapore is concentrating all efforts to make the Tuas port one of the best in the world. We need to consolidate or we will never be able to compete with Tuas.

“Without the Chinese ships, we will be in trouble because we will end up handling transshipment from Singapore.”

By securing new business alliances, Singapore is trying to lock in cargo traffic and make the Malaysian ports unviable, says Wong.

Kelana Jaya MP Wong Chen also spoke to FMT about the issue. He said it was clear that Singapore was responding to the threat of Chinese-backed ports in Malaysia.

“By securing new business alliances, Singapore is trying to lock in cargo traffic and make the Malaysian ports unviable,” he said. “Singapore’s port alliances may be offering better commercial terms and more efficient services.”

He said Malaysia must counter this with better commercial offers to shipping companies, adding that the relevant authorities must therefore improve on efficiency and professionalism while reducing wastage and corruption.

Wong, who heads PKR’s commerce and investment bureau, also said Malaysia needed a good business strategy supported by clearly defined government policies.

“Putrajaya needs to define which ports are most important and which port will handle what goods and at what volume. On the fiscal side, the government can consider tax relief and research grants.”

He also said ECRL would have little economic justification if Port Klang and the Melaka Port continued to underperform. “At the current port traffic, it is already hard to justify the high ECRL costs.” -FMT