Malaysia: Year of slow steaming

By Harizah Hanim Mohamed, Bernama

The maritime industry, which sailed at low speed this year in order to survive and brave tough times, is expected to pick up steam as 2019 looks promising, as plans to revive the industry are waiting to be executed.
The first five months of the year saw maritime-related businesses, which are capital-intensive in nature, being more careful in making decisions related to major infrastructure and expansion plans, as the country was then busy preparing for the 14th general election.
The reason behind this was simply a possible change in government policies, which many later heaved a sigh of relief, when there was a dramatic change in regime.
A new government took power and the country welcomed new and fresh faces, including Anthony Loke Siew Fook, who is being tasked to lead the Transport Ministry.

Business as usual

As for maritime activities, things were running as usual, post-election.
It is, thus, safe to equate the industry’s growth rate to a ‘slow-steaming’ practise, being highly sensitive to global trade patterns, escalating Sino-US tensions, uncertainties in emerging markets and the list does not stop there.
Slow steaming refers to the practice of operating transoceanic cargo ships, especially container ships, at significantly less than their maximum speed.
The yet-to-end China and the US spat requires maritime industry players to pay extra attention as to whether the outcome would be benefiting or vice-versa.
Many investors and industry players were optimistic over the impact of the US-China feud, as it could ‘potentially change the pattern of goods traded and bring more business to this part of the world’.
However, at the same time business entities were also tiptoeing their business decisions as the global economic landscape became uncertain and unstable.
To recall, Singapore Shipping Association president Esben Poulsson said container shipping firms in the cabotage industry would find ways to work around trade tariffs, import restrictions and trade embargoes to sustain their business.
He proposed that Chinese manufacturers and players in the maritime sector use Malaysia or other Southeast Asian countries such as Vietnam to produce their goods, slap on a different label and have their goods shipped to the US, if they find direct export too expensive.
Taking Russia as an example, he said; although the country had imposed various restrictions, companies and other countries managed to work with them and around them.
Meanwhile, Westports Holdings Bhd claimed that the US-China trade war gave transshipment hubs a ‘headache’ as they planned ahead, causing market jitters and resulting trade slowdown.
Chief executive officer Datuk Ruben Emir Gnanalingam said businesses would stock-up and front-load cargoes before tariffs really went up which was deemed to be good business but thereafter, raised concerns over the possibility of trade and demand slowing down.

Shipments to China picking up strongly

Malaysia’s exports rose to a record high of RM96.4 billion in October 2018, growing at a higher-than-expected rate of 17.7 per cent from a year ago, powered by manufactured goods and on the back of shipments to China picking up strongly.
Many research houses cited front loading activities by the Chinese to continue and support local businesses until the Sino-US trade conflict is resolved.
Meanwhile, Loke took office when the Malaysia Shipping Master Plan (MSMP) 2017-2022 was ready for his purview, beckoning his urgent attention as the MSMP had made slow or little progress.

Efforts to revive maritime industry

Efforts to revive the maritime industry became more pronounced in the second half of the year when Loke announced, in August, the activation of the maritime council to oversee matters related to shipping and ports.
Subsequently, the National Shipping and Port Council (NSPC) had its first meeting on Dec 4.
The NSPC saw the establishment of six advisory councils tasked to look into MSMP’s focus areas.
They are being led by prominent figures in their fields, including Malaysia Shipowners’ Association (MASA) Chairman Datuk Abdul Hak Md Amin, Malaysia Marine Department Director-General Datuk Baharin Abdul Hamid, MISC Bhd President and Group Chief Executive Officer Yee Yang Chien and Port Klang Authority General Manager Captain Subramaniam Karuppiah.
Abdul Hak, who leads the NSPC’s advisory committee for promoting employment of Malaysian ships, told Bernama that the council would propose the reinstatement of the cabotage policy, deemed as the key driver in the MSMP, as well as, the maritime industry, However, the topic sparked a disagreement between several parties.
Sabah Health and People’s Wellbeing Minister Stephen Wong opined that cabotage policy reinstatement would trigger an imparity in the price of goods Sabah, Sarawak and Peninsular Malaysia.
On the other hand, the Maritime Strategic Association of Malaysia (Mastra) as well as Sarawak and Sabah Shipowners Association firmly supported the proposal to bring back the cabotage policy.
However, Abdul Hak said lifting the cabotage policy had resulted in loss of business for Malaysian vessels as local freight, worth between RM28 billion and RM30 billion, an increase from RM24 billion in 2017, was being transported by foreign vessels.
He firmly believed that it was a wrong move as it partly caused the national fleet tonnage to decline.
In response to the concerns, Loke confirmed that the government was studying the impact of suspending the policy and not reconsidering its implementation at all.
Simultaneously for the port segment, the minister also announced that state-owned China Ocean Shipping (Group) Co (Cosco) and CRRC Corp Ltd had been invited to explore the prospects of deepening collaboration with Malaysia and in making the country a major transshipment hub.
It is worth noting that in the 2019 Budget, the government allocated 153.781 hectares of land in Pulau Indah for the development of a free zone (FZ).
The FZ would growth for the port in terms of cargo generation, although Port Klang had attained tremendous growth with excellent port facilities.
In late October, Malaysia declared that it was expanding the maritime boundaries of Johor Baru to the east, towards Tuas to which Singapore immediately objected, asserting that the new limits encroached on Singaporean waters.
Cruising into 2019, Malaysia’s economic outlook is projected to remain resilient but moderate.
According to RAM Ratings, the country would record firmer economic growth next year, above those of other emerging markets.
It expects the country’s gross domestic product to grow 4.9 per cent this year while the International Monetary Fund (IMF), projected a global growth of 3.7 per cent and emerging markets to grow 4.7 per cent.
The World Bank has reassessed and lowered Malaysia’s economic forecast for the third time to 4.7 per cent this year from 4.9 per cent in October and before that, 5.4 per cent.
The lower projection by research houses, the World Bank and IMF, sends a signal that tougher economic environment awaits in 2019, mostly due to external factors, as recovery signs in trade relationship between US and China remained vague.
However, the industry can still rely on the government and corporate sector to achieve progress as they work hand-in-hand to revive the industry at a much faster rate.
Finally, the much-delayed uCustoms, which is a RM300-million single-window gateway system aimed at speeding up cargo clearance, is scheduled for implementation, in stages soon, in 15 ports.
Federation of Malaysian Freight Forwarders Deputy President Krishnan Chelliah said the federation was looking forward to the implementation of the uCustoms system as it would expedite the current customs clearance processes.
“Based on the briefing conducted by the Customs Department, they have assured us that everything should be good, based on the several pilot tests conducted with the participation of five companies.
“The first pilot test was conducted at Westports,” he said.
Though the implementation of uCustoms would help in easing forwarding agents’ concerns, they still claimed that the logistics sector remained less-regulated.
One of the key issue faced by local players was the exorbitant charges imposed by international shipping companies, which revised rates at their own free will.
Freight forwarders are currently required to put down a deposit of between RM1,000 and RM4,000 per container brought in by the shipping lines.
The federation is urging the government to look into the deposit collecting issue after attempts by the federation to kick start negotiations ended in a deadlock.
Shipping companies, naming China Ocean Shipping Company (COSCO), Hyundai Merchant Marine (M) Sdn Bhd, Newstar Shipping, Hapag Lloyd and Emirates Shipping, among others, are directly involved, and if the matter continues, it would jeopardise local companies and kill the business of local freight forwarders. — Bernama
Source: The Borneo Post

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