Mega port projects risk failure, say industry experts

Putrajaya not addressing right issues in quest to build new ports and upgrade existing ones, especially with decline in manufacturing industry, says source.

SUBANG JAYA: Putrajaya has lost its focus in its attempt to try and compete with Singapore in the business of running ports.

A source close to the industry said that as a result, several mega port projects are at a great risk of becoming failures.

The source told FMT that on-going port projects were focused on building capacity, but the real question was whether the ports would be able to attract the business of shipping companies, which are shifting to Singapore.

He said the success of Malaysian ports wouldn’t just depend on infrastructure but the larger economy as well.

“We read of retailers closing shops, multinational companies and factories moving to other countries in the region.”

The manufacturing industry, he said, was crucial to the shipping business, as it would help draw shipping companies to Malaysian ports.

The source added if more goods were manufactured here for export to the region and other parts of the world, shipping companies would have more incentive to come to Malaysia.

In recent times, big names such as British American Tobacco, JVC, Seagate and Western Digital have packed up and moved their operations to other countries in the region for several reasons, including lower operating costs.

“Outside of port handling and support services, many ships came here because we were one of the largest manufacturing hubs in the region. That’s why manufacturing is so vital to shipping and the economy,” the source said.

According to the statistics department, the services sector is now the main driver of the Malaysian economy, contributing 54.3% to the country’s gross domestic product (GDP) in 2016. This compares with the 23% contributed by the manufacturing sector.

The source said the government needed to look at why manufacturing activities were moving elsewhere, including its policies and how this could impact other industries like shipping.

Catalyst for economy

Recently, prominent economist Professor Jomo Kwame Sundaram said that Malaysia’s premature deindustrialisation is actually a sign of failure rather than success.

Jomo had said that Malaysia needed a catalyst for the economy, noting that the country had experienced two periods of economic growth in the past due to industrialisation.

The source said he was concerned about the viability of the mega port projects if there was insufficient business at the ports.

“Personally, I don’t think the East Coast Rail Link (ECRL) will be viable if our ports aren’t able to attract shipping companies,” said the source.

The RM55 billion ECRL is aimed at connecting both coasts in peninsula Malaysia, allowing cargo from the South China Sea to bypass Singapore to reach the Malacca Straits.

It’s all about the ports, says shipping group

Meanwhile, the Malaysian National Shippers Council (MNSC) said that even though there was mutual dependency between the manufacturing and port industry, the drop in business at Port Klang was primarily due to other factors.

MNSC secretary-general Nathan K Suppiah told FMT that Singapore, which had significantly lower export volumes than Malaysia was able to attract more ships to their ports.

“I believe the shipping companies’ shift to Singapore from Port Klang has to do with mergers, acquisitions and the consolidation in the shipping industry.

“Also, there is the issue of lesser efficiencies in our port industry as compared to Singapore.”

There is an urgent need to review our level of competitiveness to that of Singapore, and to improve the efficiency level within our industry.”

Nathan said that MNSC lauded Putrajaya’s efforts to expand Malaysian ports’ capacity to match international ports in the region like Singapore and Shanghai and it was crucial for the authorities, local manufacturing and logistic industries to review their levels of competency, efficiency, and cost competitiveness at the ports.

“There must be reasons as to why the major shipping lines have opted to switch from Port Klang to Singapore despite the cost of operation being higher there.

“Unless we can review and improve on our weaknesses, we will not be able to operate more effectively and efficiently than other foreign hub ports,” Nathan said.

He added that it will impact Malaysia’ ability to attract more shipping lines to come directly to local ports and this will have a heavy impact on local manufacturers, as it would inflate the costs of Malaysian exports and imports, if they had to go through Singapore.

It was recently reported that a drop in business at Port Klang is now causing some concern over the construction of new ports, expansion of existing ones and the ECRL.

Things were looking good in January when the Port Klang Authority (PKA) said the port registered positive growth of 10.8% in 2016 to 13.17 million 20-foot equivalent units (TEU) in container handling, compared with the year before.

But just last week, a Singapore Straits Times report noted a decline in business at Port Klang, with figures from Northport and Westports, the two operators at the country’s main shipping hub, showing cargo throughput was down a sharp 8.4% in the second quarter of this year to three million TEU. This followed a flat first quarter of 0.9% growth.

Those who have shifted to Singapore, include Ocean Alliance, which includes state-owned China Cosco Shipping, France’s CMA CGM and United Arab Shipping Company, resulting in Port Klang potentially losing out on up to two million TEU annually. -FMT