Westports has been a success story in the Malaysian port industry. Turning a mangrove swamp into one of the most efficient ports in the world, Tan Sri G. Gnanalingam has charted the success of the port since its inception. He shares his thoughts on the future of Westports with StarBizWeek in an interview. Below are excerpts of the interview:
Westports has recorded on average double-digit growth in throughput traffic previously. With the world economy not recovering as fast as what many had anticipated, what are the chances of Westports continuing this performance?
Westports had enjoyed a double-digit growth for the last 20 quarters. Our volume will continue to grow, notwithstanding world economy growth due to the following:
> Growth of population
The world population growth is around 3% annually and most importantly, a higher percentage is going to the middle-income group, especially in China and India for the last 20 years, while Africa would be in the next 20 years.
> New technology
In the last 50 years, technology has improved tremendously compared to the last 5,000 years. Previously, we only had one television set at home and now, each household has at least three TV sets, with improvement in sizes ranging from 16 inches to 32 inches.
We also had one telephone in the house previously, but today we would change almost two handphones a year. More amazingly is that almost every kid below the age of 5 has an iPad. Technology are changing so rapidly it has led to higher consumption, and higher frequency of change.
This used to be something that we measure in terms of five to 10 years but today; obsolescence has been reduced to two to three years, which is encouraging a higher consumption pattern.
> Improvement in education
In the last 50 years, more graduates were produced than in the last 5,000 years. In the 1960s, there are only 2,000 graduates a year, and today there are 200,000 of them a year. All graduates will want home, air-cond, fridge among others.
Twenty years ago, Europe and the United States contributed 40% of the world’s containers. Today, these countries only contribute 20%. Inter-Asia alone contributes about 60% of the world’s containers, while the Middle East, Africa and South America are growing markets.
Many businesses have their cycles. For example, the property and commody sectors can go up and down, but the port handles liquid bulk, dry bulk, containers and as such, we can see through the ups and downs of many businesses.
Of utmost importance are the port’s capacity, capability, efficiency and cost. We have to be supply driven because if we do not build, customers won’t come. Westports is blessed because we have depth of water to cater for larger vessels.
When I first started, a 6,000 TEU vessel was the largest and it became 8,000 TEUs, 12,000 TEUs, 16,000 TEUs and we are looking forward to the 18,000 TEU vessel, which will probably be followed by the 22,000 TEU vessel soon.
Westports is known for its efficiency. But critics say there is not much more efficiency that can be extracted from the operations. What are your comments?
We are noted for our fast turnaround and efficient operations. Our biggest worry is not to be more efficient but to maintain the efficiency as we believe complacency is our only enemy.
Are you looking for any merger and acquisition (M&A) activities? It has been previously reported that you are looking for opportunities in India. What is your update on this?
We have no plans for M&A in the near future. We were in the port business in the 1990s, at that time nobody wants to be in the port business because it was perceived as a store-yard industry. For the past 20 years, port business became profitable, and now everyone wants to be in the industry. We had submitted a tender in India, along with 26 other competitors.
You are expanding at a time when global trade is in a period of uncertainty. Is there a danger in having over-capacity?
Westports had expanded its capacity built up to 600,000 TEUs every year and we achieve about 500,000 TEUs in terms of growth. Our trigger point is when we achieve 70% capacity, we have to build for the next berth length, which requires a 1.5 year gap.
Ports in general have managed their capacities quite well, unlike the shipping lines which had 30% excess capacity when the world volume declined by 20% in the 2009 crisis.
What is the biggest challenge that Westports faces in achieving this growth path?
To sustain, we have to expand our capacity, recruit and continually train our staff and ensure our workforce are always fit, both in mind and body to embrace challenges ahead. The strength of the company comes from our skilled workforce. We are a 100% Malaysian workforce with 75% bumiputras, and are known to be among the top operators in the world.
Your son (Ruben) is now taking an active role. Please explain how the succession works?
Right now he runs the place. He started from the ground up. For three years, he worked with people on the ground before going up.
He has been running the business for four to five years. People find him better than me, He socialises, he plays golf, he loves great dinners, and he is not so intimidating, and most of them are in his age group.
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