Malaysia’s port dreams not dead yet, says economist

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PETALING JAYA: Recent reports of empty bays at Port Klang, shifting shipping alliances and China’s capital flight controls paint a bleak picture of Malaysia’s billion-dollar port projects.

But it is far from the end for the country’s port dreams, says a veteran economist.

Speaking to FMT, Hoo Ke Ping said it can’t be denied that Malaysia’s port dreams, which have been propelled by Chinese money, have been dented.

“We are increasing the capacity of our ports, like the expansion of the Kemaman and Kuantan ports, as well as the development of the Malacca Gateway project, and it’s going to be hard to sustain them.”

The Kemaman port expansion in Terengganu is expected to cost RM1 billion, while the expansion of the Kuantan port reportedly costs RM4 billion.

The Malacca Gateway project is slated to cost RM43 billion.

These port projects do not include the ambitious Carey Island project which is expected to cost some RM200 billion.

Hoo said it was likely that the combination of China’s capital flight controls and intense competition from Singapore’s Tuas mega port, will result in Malaysia’s port projects being scaled down or delayed.

The Malacca Gateway will feature a deep sea port which Hoo said would unlikely be able to challenge Singapore’s Tuas.

He also said with Chinese shipping companies, including its largest player, Cosco Shipping, moving to Singapore, the Kuantan port may struggle.

Change in strategies

However, Hoo said there was still hope to make the ports viable, by first boosting the efficiency of the port industry, which was far behind that of Singapore.

“We need to listen to the industry players. Our ports must become more efficient and competitive.

“Aside from that, we also need a change in strategies.”

Hoo said that for now, Putrajaya should focus more resources on developing and upgrading ports in Sabah’s east coast, which is a busy shipping line for cargo coming from Western Australia, New Zealand, Papua New Guinea and parts of Indonesia.

“There is less competition for Malaysian ports there, because the ports in Kalimantan and the Philippines aren’t well developed, whereas in peninsular Malaysia, the competition from Singapore is stiff.”

Hoo also said the government should consider giving more incentives to boost the heavy manufacturing industry, like the automotive and petrochemical sector, as goods from these industries were mostly transported by sea.

“Zhejiang Geely’s purchase of a 49.9% stake in Proton is perhaps one of the best things to happen to our ports, as Proton is expected to become a global manufacturing hub for Geely’s right-hand-drive vehicles.

“These are the kind of heavy manufacturing industries we need to have.

“Putrajaya should find ways to attract more such industries to set up here because they will pull shipping lines to come here directly.”

Alibaba ‘magic’, commodities ‘luck’

Hoo also said that the Alibaba group’s decision to set up a logistics hub in Malaysia will help drive some shipping traffic to Malaysia.

Previously, Alibaba, the world’s largest e-commerce platform operator, said the logistics hub will function as a centralised customs clearance, warehousing and fulfilment facility for Malaysia and neighbouring countries and would speed up clearance for imports and exports.

“That’s a big deal because Malaysia becomes the distribution point for the region.

“That’s over 600 million people, and the bulk of Alibaba goods will come through our airports and ports.

“So, even though the port alliances are shifting to Singapore, it doesn’t mean that all Chinese ships will go there.”

Hoo said if Alibaba’s volumes increased, then naturally more Chinese ships will come directly to Malaysia.

“But it’s hard to say whether this will be enough to make up for the shift in shipping lines, though based on Alibaba’s track record, the company grows very fast.”

Hoo also said that commodity prices, particularly oil, are starting to pick up and these could only be good for the ports.

He said that in the last four years, trade and the shipping industry along the One Belt One Road (Obor) route declined due to weak commodity prices and the slowdown of China’s economy.

“Once commodity prices increase, and China’s economy stabilises, the Obor route will recover.

“Perhaps this will happen in two to three years, when oil prices are expected to rise to US$60 per barrel.”

Last week, Singapore Straits Times reported a drop in business in Port Klang in past months, after major shipping firms moved to Singapore, including the Ocean Alliance, which comprises four shipping giants, namely China’s Cosco, France’s CMA CGM, Taiwan’s Evergreen, and Hong Kong’s OOCL.

The Ocean Alliance oversees more than 323 ships covering 40 destinations worldwide, and the shift made by some shipping companies to Singapore could result in Port Klang potentially losing up to two million TEUs annually.

TEU is a shipping term to measure a ship’s cargo carrying capacity, where one TEU is equal to that of a standard 20-foot shipping container.

Analysts have attributed the shift to factors such as port alliances, as well as Singapore’s more advanced technology, infrastructure and port services.

This has helped in terms of efficiency in support services like customs clearance, a critical part of the port industry.