Bright prospects for local ports

Today's CEO Outlook series features the country's four major port operators. They are Tan Sri G. Gnanalingam of Westport Malaysia, Basheer Hassan Abdul Kader of Northport (M) Bhd, Datuk Mohd Sidik Shaik Osman of Pelabuhan Tanjong Pelepas, and Datuk Ahmad Ibnihajar of Penang Port Sdn Bhd. 

Ports play an important role in the economic life of a country; more so for Malaysia which is such a big global trader. Malaysia's total trade is bigger than that of the Indian sub-continent countries combined. 

Malaysia's ports have grown rapidly over the past two decades and the outlook, according to our four port CEOs, is bright. According to Gnanalingam, growth in the logistics industry is normally 2.5 times that of GDP; so if the economy grows by 6% next year, ports can expect growth of between 12% and 15. 

TAN SRI G. GNANALINGAM Chairman, Federation of Malaysian Port Operating Companies Executive chairman, Westport Malaysia

Challenges and prospects for Malaysia's economy in 2004? 

The factors that attracted foreign direct investment (FDI) before the mid-1997 crisis, such as a competent and relatively cheap, English-speaking workforce and political stability, are no longer able to attract investors. 

Tan Sri G. Gnanalingam

This is due to several factors. For instance, the use of English language is growing at a frenetic pace in China, where the labour costs can't be matched. Other investment centres are also mushrooming. Once politically troubled nations such as Cambodia, Myanmar and Vietnam are now new players in the battle for investment dollars. 

What we need to do is to reinvent ourselves and be an integral part of the global manufacturing chain, producing something for the international economy. There is no fighting globalisation. 

What are the prospects and challenges for your sector/industry next year? 

The prospects for the logistics industry continue to be good as it normally grows at 2½ times the gross domestic product (GDP). As such, if the GDP improves to 6%, we can see 12%–15% growth. However, there are several challenges that we will have to face: 

·Ports must continue to be supply-driven, improve productivity and achieve a cost-efficient and fast turnaround for vessels; 

·Port infrastructure, in terms of civil works and equipment, needs two years to construct. As such, long-term planning is critical; 

·The pace of vertical and horizontal integration will have to be speeded up where the number of players in the logistics chain will have to be reduced; 

·Freight forwarders, forwarding agents and warehouse operators will need to pool their resources to become total logistics operators. This is very important in view of the Asean Free Trade Area and World Trade Organisation where international logistics operators will merge. We have already seen this in the presence of retail operators such as Tesco, Makro and Carrefour, which seem to be springing up in residential areas as one-stop centres; 

·To be the best employer, we need to attract the best employees and we need to make every effort to motivate them to achieve continuous improvement and a higher productivity level; and 

·Malaysia has done very well to achieve 10 million boxes this year, which is twice the amount in India and more than the whole of Africa's. There is every opportunity to double this volume in the next five years if we continue to invest in the development of our ports.  

What will be the focus of your company/group in 2004? 

Our focus will be to expand our facilities with a planned construction of another 2,400m berth with sufficient cranes to double our volume in the next five years. 

The key issues for us will be to improve the standard of living of our employees and their families and to achieve the Best Employer status with the best employees. 

The port industry is still beset with a lot of archaic practices and manual documentation. Hopefully, with the co-operation of the public sector we can eliminate such practices. 

Do you expect your company/group to do better or worse in 2004, compared with 2003? Why? 

Westport has grown from 20,000 boxes in 1996 to 2.4 million this year and handled 8.5 million tonnes of general cargo. We have targeted a 20% growth to reach three million 20ft equivalent units (TEUs) in container and 10 million tonnes of conventional cargo. The growth is expected to come equally from the hinterland and regional cargo. 

China's economy continues to power ahead. Is China an important factor in the management of your operation? 

Malaysia has overtaken Singapore as China's largest trading partner in Asean. Between 1996 and 2002, Malaysia's trade with China increased three-fold, from US$3.8bil to US$11.4bil, and according to reports, the trend is accelerating.  

In 2002, bilateral trade between the two countries rose by a significant 49%, from US$7.68bil in 2001 to US$11.4bil, making Malaysia China's seventh largest trading partner. 

With China becoming an economic powerhouse, Port Klang is set to play a big role in enhancing bilateral trade between the republic and Malaysia. In fact, China Shipping Container Lines, one of the leading main line operators with a fleet of 100 vessels and a total capacity of about 170,000 TEUs, has indicated that it is confident of exceeding its projected 280,000 TEUs this year at Westport. It plans to reach 350,000 TEUs next year, in line with the rising trade demands. As such, China will definitely be an important factor to be considered in Westport's operations.  

Datuk Seri Abdullah Ahmad Badawi has taken over as Malaysia's fifth Prime Minister. In your view, what should his priorities be for the country? 

The Prime Minister highlighted 10 key issues in a speech on Nov 3, which outlined his priorities for the country. They were also an indication of what needed to be done in the maritime industry. 

I believe Malaysia has already achieved Vision 2020 in terms of infrastructure, which in many ways is superior to those in some developed countries. What is required now is a National Vision Policy to ensure that the citizens of the country also share the fruits of a developed nation. 

Speaking for the maritime industry, I agree that the public sector needs to radically move beyond being mere regulators because we are in an era of globalisation, a borderless world and free trade agreements. I also agree that there is an urgent need to be transparent. This can only be achieved by removing archaic practices and licences. 

Most of all, tariffs in the maritime industry should be simplified and standardised, similar to the practice in the airline industry where the price of one ticket pays for all services at both ends of the airports. Currently, in the maritime trade, the shipper pays numerous charges imposed by different players, which in some cases are regulated but in many cases are not transparent. 

BASHEER HASSAN ABDUL KADER Managing director/chief executive officer Northport (Malaysia) Bhd

Challenges and prospects for Malaysia's economy in 2004? 

Basheer Hassan Abdul Kader

The outlook for the global economy looks very positive as forecast recently by the Organisation for Economic Co-operation and Development and the World Trade Organisation. This augurs well and offer some satisfaction for a positive prognosis for the growth and expansion of Malaysia's economy. 

Malaysia's economy has recorded satisfactory growth for the first three quarters of this year and is expected to record an overall growth of about 5% for the whole year. The growth is well reflected in the performance of ports, including Northport, which during the first 10 months this year recorded a satisfactory increase of 6.25% in the volume of local container trade handled. 

While the prospects for growth of the national economy remain somewhat undiminished, my impression is that increasing competition in the global marketplace and the globalisation of trade could pose serious challenges to our economy. 

The global manufacturing network that once picked Malaysia as among the “economic havens” in the region has now spread to other countries – China, Vietnam, and Thailand, among them. 

In my view, the key to sustainable economic growth will depend on our ability to compete in the global marketplace and move up the value chain. 

Prospects and challenges for your sector/ industry next year? 

The economy is undergoing a structural transformation. The contribution of the manufacturing sector to the economy is already one of the highest in the region. We must now foster the expansion of the services sector. In this regard the need for expansion of transport, storage, and distributive services is both necessary and bright. Quite naturally, the change has obvious implications for the port services sector. 

For ports (major gateway ports like Northport), their ability to sustain growth will be determined by their capacity to respond to the opportunities that are expected to be spawned by the expansion of shipping, transport and related service activities in the region. 

More specifically, this could be achieved through the ability to foster growth via greater value-adding services and the ability to attract third-country traffic, or cargo. 

In so far as Northport is concerned, I am happy to say that we are responding well to the challenges – our productivity is among the highest in the region and we offer more valued-added services than any other port in Malaysia. We have more mainline and feeder network services in the region – next only to Hong Kong and Singapore – and we have a broader cargo base than many ports in the region. 

Focus of your company/group in 2004? 

Given the emerging competitive environment and the need to respond to the structural shift in the economy, there will be continuous demand on greater competitiveness and higher productivity. 

We are, therefore, focusing our efforts on development of skills that contribute towards better shipside and landside productivity, as well as emphasising on an intelligent environment that will be driven by a pervasive application of information technology (IT) in totality. 

We are now the most IT integrated port in the country and one that offers users a community-based system. We intend to further deepen and widen our applications in this area as we remain committed to providing a capacity-driven environment, as reflected in the recent commissioning of Container Terminal 3, which is benchmarked against world ship/cargo handling standards. 

Do you expect your company/group to do better or worse in 2004, compared with 2003? 

The performance of the port is predicated on the performance of the economy. Based on prevailing economic fundamentals, we are expected to do just as well as the economy. However, we do see the driver of growth at Northport will increasingly come from our successful ascent into value-adding services and the ability to attract third-country cargo. On both counts we are better placed and endowed, and we have the necessary ingredients to improve on our performance. 

We have also opened new sources of growth as we position ourselves as an important transshipment hub for emerging markets in Sumatra, Java, South Thailand and also the Indian sub-continent, notably with inter-modal connections (via sea, air and rail links). 

We are also, financially, a very resilient firm, and are better placed to respond to the demand for quality services and meet the supply-side requirements via internal funds. 

What do you think should be the new Prime Minister's priorities for the country? 

In so far as the port services sector is concerned, perhaps we should be looking at re-aligning port development policies to the structural shift that is taking place in the economy. Priorities must now be set for major ports in the country to progress into the next phase through optimisation of existing resources. 

We have had a successful outcome from our emphasis on an 'import substituting' (re-directing national cargo to national ports) approach to port development in the last few years. Collectively, Malaysia's ports are now handling more national cargo, which in the past was largely shipped via foreign ports. 

We must now address the success of this achievement by progressing or advancing to a new phase that focuses on 'exporting' our port services (by handling third-country cargo). We must build on the success that we are now witnessing – the increasing volume of transhipment cargo handled by local ports. 

This may require the collaboration of Malaysia's ports, as combined container and cargo volumes and strategic approaches will be necessary for continued growth to stem the aggressive price competition from regional ports. 

DATUK MOHD SIDIK SHAIK OSMAN Chief executive officer Pelabuhan Tanjung Pelepas Sdn Bhd

Challenges and prospects for Malaysia's economy next year? 

Among the challenges that Malaysia's economy will face will be the increased competition that full implementation of the Asean Free Trade Area (Afta) will bring to domestic companies. Issues such as tariff reduction, globalisation and open markets in various sectors of the economy will need to be addressed. 

Datuk Mohd Sidik Shaik Osman

Malaysian companies need to adapt and innovate to remain competitive to survive in the new business climate post-Afta. They should also start to actively look beyond Malaysia's shores to seek new businesses opportunities that Afta will bring. They shouldn't just play a passive role, taking a wait-and-see attitude while new foreign players enter their home markets. 

The broadening of the local economic base should also be given priority to insulate the economy from external shocks such as SARS outbreak and the war in Iraq. Industries such as tourism, commercial-scale agri/aquaculture and logistics services should be actively promoted and supported. Increased domestic direct investment should be encouraged without neglecting foreign direct investment. 

Prospects and challenges for your sector/industry in 2004? 

We are taking notice of the emergence of new South-East Asian ports in Thailand and Indonesia, along with possibilities of mergers and joint ventures between regional terminal operators. Then there are the rapidly developing Chinese ports that are becoming more and more significant as centres for direct loading. 

In addition, the realignment and adoption of new strategies by neighbouring ports will lead to more intense competition within the industry. PTP will continue to strive for even better levels of service and quality to ensure that its position as a premier regional transhipment hub remains intact. 

Focus of your company/group next year? 

PTP will continue to actively seek new customers for its terminal, both main line operators and regional carriers. With over 1,000 acres available for lease, we will aggressively market the PTP Free Zone to attract premier tenants to locate there. 

We will also encourage value-added activities, including repackaging and consolidation, to be set up within the commercial free zone. PTP believes in working closely with its existing customers and tenants to further increase their volumes as a long-term growth strategy. 

Do you expect your company/group to do better or worse in 2004, compared with 2003? Why? 

We expect 2004 to be an excellent year for PTP. Most current economic indicators point to better growth compared with 2003; for example, the steady recovery of the US economy, improving growth rates for most South-East Asian economies and improving financial results of Malaysian companies. 

We also hope that in 2004 there will be no negative exogenous factors such as SARS and the Iraq war, which dampened global economic performance in 2003. However, PTP was fortunate not to suffer from these factors and actually registered 17% growth from the months before the peak of hostilities in Iraq.  

We also expect to see continued further improvements in terms of productivity and cost cuts in 2004. For example, the full implementation of the satellite-guided Smartrail system in our yard cranes should see significant gains in productivity and reductions in downtime. 

Is China an important factor in the management of your operations? 

Current trends point to China fast becoming the workshop of the world, producing not only cheap labour-intensive goods, but also high-tech, high value-added products for multinationals at very competitive prices and high levels of quality. 

We do not view the emergence of China as a threat but more of an opportunity, capitalising on the increasing volume of manufacturing output from China that needs to be exported globally. PTP is ideally located to facilitate the efficient, economical transhipment of cargo from China. The rise of new Chinese ports should also be noted, but PTP will always strive to provide the best service/value proposition for our customers. 

What do you think should be the new Prime Minister's priorities for the country? 

The past decade has seen investment in infrastructure such as roads, airports, seaports and the Multimedia Super Corridor, i.e. hardware. Equal focus should be placed on the development of human resources – i.e. software – which will be needed to fully maximise the existing infrastructure resources. 

For example, in the logistics industry, we need a large pool of local talent with the right knowledge and skill sets if we are to realise our plans to be a global player in logistics. We will need more qualified local engineers, technicians, machine operators, lawyers and accountants well versed in maritime/shipping law and countless other disciplines that support the industry. 

DATUK AHMAD IBNIHAJAR Managing director Penang Port Sdn Bhd

Challenges and prospects for Malaysia's economy in 2004? 

The potential upswing of the global economy is expected to lead to higher demand for goods and services. With free trade becoming an accepted practice, new markets may be explored and developed. The challenge for Malaysia's economy in this scenario will be to ensure that we remain competitive in domestic and foreign markets. 

Confidence building will continue to be a challenge for Malaysia's economy as certain nations within the South-East Asia region are still facing security and political issues. By virtue of our geographical location, we are subject to the misconception that Malaysia is also a security risk, and are therefore deemed less attractive to investors. 

Datuk Ahmad Ibhihajar

Prospects and challenges for your sector/industry next year? 

The development of existing ports and the emergence of new players have helped sustain the port industry’s position as one of the stronger industries in Malaysia. 

Borderless trade is an imminent reality and presents a host of opportunities for us. The port industry would do well to form strategic alliances with other parties within the transportation/logistics chain. Fine examples of this are the collaboration between rail and seaports, and the i-Port linking airports and seaports. This would result in smoother co-ordination and better performance of the port sector and the entire transport industry. 

A challenge for the industry would be to ensure sustainable growth and equal opportunities for all ports, big or small. It is vital for the transport ministry and Malaysian ports to ensure that all ports are granted equitable development assistance and competition is kept at a healthy level. 

Focus of your company/group in 2004? 

The broadening of trade boundaries presents an exciting opportunity for Penang Port to strengthen its position as a choice port of call. Therefore, emphasis will be placed on expanding our market base and also increasing our share of existing markets. 

Another core area of focus will be the implementation of expansion and development projects which would have considerable impact on our performance and profit generation. 

We will also continue to direct efforts towards optimum and productive utilisation of our resources, be it financial, human, equipment or facilities. By so doing, we will be able to best meet our customers' requirements and ensure sustainable growth of the company. 

Do you expect your company/group to do better or worse in 2004, compared with 2003? 

Barring unforeseen events, we expect to continue improving our performance. This confidence is based on global economic prospects, growth of Malaysia's port industry, and the implementation of some development projects planned for Penang Port. 

Is China an important factor in the management of your operations? 

At present, the company is not directly influenced by China's economy as that country is not the main market for Penang Port, although some of our customers are engaged in trade with China. However, we are aware of China’s potential as a major economic force, and remain open to viable opportunities for commercial ventures with China. 

What do you think should be the new Prime Minister's priorities for the country? 

Malaysia is a nation respected worldwide for its economic and political stability, infrastructure development, religious tolerance, and multi-racial harmony. It would be in the nation’s best interest to improve its standing in these areas. 

One way of doing this would be to inculcate a positive Malaysian attitude where values such as integrity, ethics, humanity and patriotism are strongly endorsed. It would be equally important to stress on productivity, pursuit of knowledge, and acquisition of new skills. 

Datuk Seri Abdullah Ahmad Badawi is recognised as a trustworthy leader, with humility and genuine concern for the well-being of less-privileged individuals. I believe that with his personal attributes and leadership style, the Prime Minister can create a positive impact on the fight against corruption and inefficiency. I am also confident that under him, Malaysia will continue to grow as a nation and the people will enjoy fair distribution of wealth and benefits. 

Views from scions of prominent families: Datuk Nazir Razak of CIMB, Datuk Lee Oi Han of Kuala Lumpur Kepong Bhd (KLK) and Carl Bek-Nielsen of United Plantations Bhd (UP

Views from property CEOs: Tan Sri Mustapha Kamal of MK Land Bhd, Datuk Seri Liew Kee Sin of S.P. Setia Bhd and Datuk Jeffrey Ng of Asia Pacific.

Views from banking CEOs: Tan Sri Teh Hong Piow, chairman of Public Bank Bhd, Datuk Amirsham A. Aziz, president and CEO of Maybank group, and Piyush Gupta, head of Citigroup in Malaysia.

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