2024 has been a robust growth trajectory for GAC Malaysia, a shipping, logistics and marine services company. In April, GAC Malaysia signed a joint venture (JV) agreement with Syarikat Uminaca, which provides manpower and stevedoring services, to bolster logistics capabilities and enhance development projects east of the country in Sarawak and Sabah.
GAC’s expansion ventures go beyond its shores, stamping a presence in countries like New Zealand and South Korea over the past eight months. The rationale is simple: connectivity in the Asia-Pacific region is the key to survival, especially since the most commercially-viable ports are situated here. In an interview with Maritime Fairtrade, Herman Jorgensen, managing director at GAC Malaysia, analyzes how the shifting needs of the industry steer business objectives and strategies for regional growth.
Herman Jorgensen, managing director, GAC Malaysia.
How is maritime transportation for the offshore industry transforming and pivoting?
The Asia-Pacific oil and gas and renewables sectors have seen a significant surge in activity following the pandemic. It is particularly so in the upstream sector, which is booming. This unique shift presents challenges and opportunities that are distinct from those in other regions.
According to the International Energy Agency (IEA), the current oil demand in Asia Pacific is approximately 30.8 million barrels per day (mb/d) and is projected to increase to 38.5 mb/d by 2030. This means countries in the region are tapping into their local sources, much of which is offshore, in a bid to meet local demand and shore up their energy security.
Countries in the region are localizing these energy projects, working with local partners and suppliers to take more control of the production. We are seeing this in Malaysia, where there are regulatory requirements regarding local participation, and that means maritime players need to build strong relationships with the Malaysian market if they are to be involved.
This is different from what has been seen in Europe and the North Sea energy sector, in which I have worked for more than 15 years. Europe is much more open to foreign investment whereas in Malaysia, new entrants require extensive local support and expertise as regulations vary significantly across states and between East and West Malaysia. It is in response to that that GAC has expanded its operations across Malaysia in recent years, now with 17 offices covering 23 ports. We have also formed partnerships with local companies to offer comprehensive logistics support tailored to the needs of the energy sector.
Increased activity also means steady demand for supply vessels, drilling ships and floating production storage and offloading units (FPSOs). It is also for the region’s ports to accommodate projects with onshore space and facilities to support energy projects. Competition is fierce, particularly around effective mobilization and demobilization projects, but that is an area of expertise for which GAC is experienced in.
How is the maritime interconnectivity of Asia Pacific faring?
Intra-Asian shipping is one of the fastest rising areas of global commerce, witnessing a rise in vessel traffic at the region’s ports. Therefore, maritime and logistics service providers must be present in the biggest maritime centers like Singapore as well as up-and-coming hubs like Malaysia and Indonesia.
The UN Trade and Development Review of Maritime Transport 2023 reported that intraregional routes accounted for 27.6 percent of global trade in 2022, with a significant portion attributed to dynamic intra-Asian container shipping and the manufacturing supply chain in East Asia. That same report also highlighted the leading cargo handling performance of Asian countries. According to the Container Port Performance Index (CPPI) from the World Bank and S&P Global Market Intelligence, 18 of the top 25 ports globally are in Asia.
Furthermore, the S&P Global reports that APAC’s economic outlook for 2024 remains bright – stating that economic growth in the Asia-Pacific region strengthened in 2023, reaching an estimated pace of 4.5 percent year-over-year. This is significantly higher compared to the 3.3 percent seen in 2022, as a result of the eased Covid-related restrictions in the region.
The report also forecasts that the region’s economic outlook for 2024 will continue to show rapid expansion, driven by resilient domestic demand in several large emerging Asian markets, including Indonesia, Malaysia and the Philippines.
We are seeing the same level of increased demand for our services in the region, which is also being impacted by a lot of flux in the market. Players are jostling for position in this emerging market, with many turning to GAC teams who have the expertise and infrastructure to support them as vessel traffic increases in the area.
In parallel with increasing vessel traffic, we are seeing greater interest and activity to support energy projects throughout the region. Countries such as Taiwan, Vietnam, and Malaysia are in the early stages of developing their supply chain and logistics capabilities to meet growing demand.
Currently, there is a shortage of experience and infrastructure to handle large-scale energy projects, and it will take time to develop these capabilities fully. It is crucial that countries across the region work together to provide successful logistical and supply chain support in the short-to-medium-term.
Particularly with Singapore, how is GAC Malaysia working to strengthen business ties and partnerships?
While Malaysia is still developing its supply chain and logistics capabilities, Singapore is one of the biggest maritime hubs in the Asia-Pacific region.
GAC leverages its talents and expertise in both Singapore and Malaysia to encourage cross-collaboration, shared experiences and knowledge sharing to provide the best solutions for our customers.
For example, GAC customers may dock in Singapore to refuel as it is one of the world’s top bunkering ports, whilst their vessels may also need shipping spare parts and services from Malaysia. Some projects are multi-location or international. We could, for instance, be asked to provide support from Malaysia for a project in the Philippines. Being able to provide a one-stop shop, not just geographically but also in terms of all our services, helps us capitalize on opportunities driven by customer demand. GAC follows the customers wherever they go.
The synergetic working relationship between GAC Malaysia and GAC Singapore reflects our approach to customer support throughout the region. All of our offices in the Asia-Pacific region work in close coordination to ensure we can supply the most efficient and cost-effective maritime services possible.
GAC opened its first office in Seoul in Feb 2024. What were the strategic and commercial reasons?
Our office in Seoul was opened to strengthen our operations to serve the growing dynamic South Korean market.
GAC has been active in the Korean maritime sector since 1985. The opening of our first official office in Seoul ensures a stronger local presence to build better relationships with customers, address their needs more effectively, and further solidify our Group as a world-class provider of shipping services.
South Korea, Singapore, Malaysia and China remain the most connected economies in the world, with an average year-on-year increase in connectivity of up to five percent, according to the United Nations Review of Maritime Transport 2023.
South Korea’s shipping industry is thriving, accounting for over 10 percent of global maritime trade. Forecasts by the Korea International Trade Association predict that the country’s exports will increase by 7.9 percent in 2024, reaching US$680 billion, while imports are expected to grow by 3.3 percent during the same period.
As part of our strategic move to expand operations, GAC aims to support South Korea with its offshore renewable energy projects. By 2030, the country plans to install 14.3 GW of offshore wind capacity, which is expected to attract significant investment in South Korea’s supply chain to support its renewable energy efforts in the upcoming years.
By drawing on over three decades of experience in South Korea and our continued presence across the Asia-Pacific region, we are well-positioned to work with local partners on making South Korea’s offshore wind capacity one of the best in the region.
All photos credit: GAC Malaysia