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| September 2, 2000 | atimes.com | ||
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Southeast Asia
A new era in Asian shipping CHAPTER 2: RIPPLE EFFECTS Why PTP? "The move to PTP represents a quantum leap for Maersk Sealand to master its own destiny and yet another step to remain in the forefront in the industry," said Flemming Ipsen, chief executive officer, Asia, Maersk Sealand. Maersk Sealand said coverage of Singapore would remain on selected vessels and it would also introduce a feeder shuttle service between Singapore and PTP with at least 11 dedicated connections weekly. "Whereas there are distinct benefits in the direct Singapore calls, I am confident that the high frequency shuttle feeder service will be equally, if not more, attractive. A big benefit would be the flexibility that the multiple closing/delivery will offer. In addition, we will be implementing a two hour express haulage service to provide direct and fast linkage between your door-step and PTP. This attractive option will eliminate the current inconveniences associated with closing/T.T. times," Ipsen said. He continued: "Many in the industry have speculated that it must be the cost which has driven us to move and whilst there is some truth to it, there are more compelling, strategic and long-term reasons in doing so. Amongst these, PTP offers Maersk Sealand the possibilities of fully accommodating our growth aspirations. The recent acquisitions of SafMarine and Sealand have propelled us to a size where we need to have more control and influence over the operation. "The vast number of vessel calls demands much more nimbleness and flexibility. There are also increasing pleas from our customers to customize and individualize. As a greenfield site, PTP offers us the opportunity to do all these and more - in short, a move to master our own destiny." Analysts have been less diplomatic. They point out that PTP's "early bird" tariffs are 30 percent lower than Singapore's. Other savings in terms of lower land costs and operating costs and free storage for transshipment containers are are also a factor. PTP also offers lower warehousing costs, office space rates, and incentives for priority or dedicated berthing arrangements. This latter point is particularly important, as it was something Maersk could not squeeze from the Port of Singapore Authority (PSA). PTP is a multi-user terminal, it does not belong to any one line, and as such individual lines have the opportunity to strike deals and have a measure of control over their business. It should be noted, however, that PTP's tariffs are at least 20 percent to 30 percent more than other Malaysian ports. Malaysia also has the advantage of a weaker exchange rate. PTP offers flexibility in its services - such as dedicated berthing arrangements - and the 30 percent stake Maersk has will allow it to participate in the management of terminal operations. Maersk Sealand has opted for such arrangements at ports in the Middle East, Europe and the United States. Maersk will retain its Asian headquarters in Singapore where it still has strong ties, not least because parent company A P Moller's wholly-owned subsidiary, A P Moller Singapore, is the largest shipowner on the Singapore Registry. Singapore's response The Port of Singapore Authority (PSA) initially reacted with caution to the news of Maersk's move to Malaysia. PSA vice-president for corporate development, Wong Fong Tze, said the PSA was not overly concerned by the loss. "The move may slow our growth rates by a couple of percentage points or so, but will not significantly impact PSA's profitability." He added: "We are not uncomfortable and will take on all competition as it comes. We do not compete on price along but on added value. PSA's customers make their own decisions on the ports of call. We know our rates are lower than those in many other ports in the world. Our customers continue to give us increasing volumes, clearly showing that they value our quality services." The figures bear out his statement. In July PSA announced that it had achieved 12.8 percent year-on-year growth in throughput for the first half of 2000, amounting to 8.6 million teu. "In politics people vote with their feet. In the shipping business people vote with their ships and their boxes," the company said. The PSA this year has seen 10 new services calling at Singapore and the reputation for efficiency at the port remains high. Nevertheless, the loss of nearly 11 percent of total container trade is not something that can be lightly dismissed. The concern among analysts is that of a ripple effect. Now that PTP has overnight obtained a critical mass to allow for improved economies of scale, and of benefitting from Maersk's proven expertise in port operations, the chances of other lines following Maersk increase markedly. And in an era where there is excess capacity in the region, such an event could be critical. It is estimated the current capacity of ports in the region, including PTP, Singapore, Port Klang and Johor Port, exceeds 26 million teus - against a demand for about 19 million teus. The completion of Phase One at PTP in 2002 and expansion of capacity now under way at Port Klang, as well as the expansion of Singapore port, is expected to raise the total capacity in the region to well over 30 million teus. While PTP is understandably upbeat about its future, people have warned that knowing what is needed and delivering it consistently over a long period are two quite different matters. And in this regard, Singapore is well ahead. Benefits to Malaysia Maersk Sealand's move to Malaysia will help the country finally move to the forefront of the transshipment business in Southeast Asia after living in the shadow of Singapore for the past three decades. Domestically, it will provide a boon for exporters from Johor state, who previously had only a limited market reach within the region due to the lack of shipping connectivity. They can now make direct calls to Europe, the United States and the Far East. According to Malaysia's central bank, the country's GDP is predicted to increase by 6.1 percent in 2000 and the critical mass of the three major lines that PTP has secured will allow the port to begin much needed local cargo growth, including marketing to shippers, forwarders and warehouse operators. The port's 800 hectares of land will be used to attract high-tech industries which promote clean technologies and produce high value cargo. PTP has also placed emphasis on the critical area of research and development by including the establishment of a center of excellence for manufacturing, design and development. The port has also given local employement a boost. At present, nearly 70 per cent of PTP's employment of 450 is drawn from the people from Johor. PTP is expected to have a workforce of about 1,600 when Phase One is completed towards the end of the year or early next year. In the words of Malaysian Prime Minister Mahathir Mohamad, speaking at a recent conference: "The government is confident that the port sector's further growth will thrust the national economy into a new era of globalization, which is presently engulfing the international trade sector. "Increasingly, companies are out-sourcing their needs to achieve the lowest possible cost and highest quality to remain stable," Mahathir said, adding that shipping lines and ports had gained as a result in dealing with third party logistics providers able to network a diverse chain of players within the global logistics chain. "The most efficient and cheapest method of moving goods is still by sea," Mahathir said. "For this reason, a well-developed infrastructure is therefore a vital part of an efficient trading system and network. In Asia, successful and prosperous economies have actually been built simply by providing first-class port services." The statement underlines Malaysia's policy on major port development. With more operators, there is likely to be period of consolidation and competition. But in the end, one or two of the larger ports, such as PTP and Westport, could emerge as the region's transshipment hubs with the rest of the ports in peninsular Malaysia, Sarawak and Sabah operating largely feeder services. Beyond the ports Missing rail link: A US$120 million 31.5 kilometer rail link being built between Kempas and the Port of Tanjung Pelepas is ahead of schedule and should be completed before the end of 2001. PTP sees the link as a viable option to road networks and feeder connections. The link will connect the port with the country's main railway system. The project, based on the design and build concept, will link PTP to Kempas with essential infrastructure, including station buildings, staff quarters, signalling, communication and other related works. Construction is being undertaken by Ircon International. The plan calls for a single track with provision for future expansion to a double track and an electrified track. Ircon International was formerly known as Indian Railway Construction Co Ltd. It is headquartered in New Delhi. The company's profit before tax in 1999 was US$9.6 million. Ircon mainly executes projects for Indian Railways, which holds an undisclosed stake in the company. Ircon has successfully leveraged the experience gained from providing turnkey services for the Indian Railways in securing overseas contracts. East coast connection: The KTM Bhd, Malaysia's state railway, plans to develop an east coast rail landbridge from PTP to Bangkok, Thailand, as the west coast network is congested with 50 freight train services daily. In contrast, there are only two goods train services daily on the east coast line. The KTM plans to link the PTP with Bangkok once the 31.5 kilometer rail link to the port and national rail grid is completed. The eastern link would pass from the PTP to Gemas, Pasir Mas, Rantau Panjang, Sungai Golok, Haad Yai and Bangkok. The KTM predicts that out of every 10 containers from the PTP going to Bangkok, six will go by rail as the transit time is the same as the west coast link. The KTM was corporatized on August 1, 1992, following the passing of two Railway Bills. Although still wholly-owned by the Malaysian government, KTM Berhad currently operates as a private sector organization, responsible for its revenue and some of its development activities. The KTM handled approximately 170,000 teus in 1999, up from 138,000 the previous year. The increase is attributed to the increase in traffic from Port Klang, Nilai Inland Port, Ipoh Container Terminal, Southern Thailand, Penang, Singapore, Pasir Gudang and the landbridge services between Port Klang and Bangkok. The KTM has a fleet of 500 low-bed wagons (with total carrying capacity of 1,000 teu) specially designed for long distance and speed of 100 km/hour They plan to order another 250 units of such wagons in anticipation of increased demand. Landbridge to Bangkok: Landbridge services between Port Klang and Bangkok in Thailand are operated by TS Transrail, Freight Management and TS Allied Trans at an average of 30 teus per trip. The service offers a 60 hours transit time from port to port and each operator has committed to a load capacity of 30 teus per trip. The first landbridge service operated by Transrail took off on 16 June 1999. A sea trip would take three or four days. The service provides customers with door-to-door network, fast transit time and better service and an alternative to sea route. Two shipping companies, P&O Nedlloyd and Hong Kong's Orient Overseas Container Line (OOCL), in November began using the landbridge services. Port Klang-based freight forwarder, Freight Management (M) Sdn Bhd operates the Asean Rail Express (ARX), connecting Port Klang and Bangkok. In 1999 it secured a major international customer when P&O Nedlloyd transshipped its Hamburg-originated containers at Port Klang to be sent via the ARX service to Bangkok. The service represents a saving of approximately three days in terms of transit time compared with transshipment via Singapore, and a saving of up to 10 percent of Nedlloyd's Europe-Bangkok cargo handling costs. TS Transrail's chartered landbridge service connects Kontena Nasional's Inland Clearance Depots (ICD) in Sungai Way in Petaling Jaya, Prai in Penang, the Ipoh Cargo Terminal and Bangsue ICD in Bangkok. TS Transrail is a 51 percent owned by TS Freight Services Sdn. Bhd. (a member of the integrated logistics provider, Tuck Sun Logistics Group of Malaysia) and Taksin Siam Import & Export of Thailand which holds 49 percent equity. Shippers receive door-to-door deliveries, no congestion, one-stop facilities, no transloading at the border, and safer mode of transportation. Although the service is half a day slower than by road, the rates are about 30 percent cheaper than the road service. The TS Transrail service is the first step towards realizing the much larger rail network connecting Bangkok and Kunming in southern China via Phnom Penh in Cambodia and Ho Chi Minh City and Hanoi in Vietnam - the Trans Asia Railway link. The Trans-Asia Railway: Strong, viable southern ports will enable Malaysian Prime Minister Mahathir to fulfil his dream of the Trans-Asia Railway, a proposed 5,513 kilometers of line that will link Singapore, Malaysia, Thailand, Cambodia, Burma, Laos, Vietnam and Kunming. The US$400 million rail link project was mooted by Mahathir during the fifth Association of Southeast Asian Nations (Asean) summit in Bangkok in 1995. The proposal received enthusiastic backing, especially from the Chinese, who even suggested it should be extended as far as Beijing. Once complete, the project will help promote economic development, transport and communication, tourism and trade among countries in the Mekong sub-region. Among the project options considered at the meeting, four contain a section passing through Vietnam. Asean countries have mapped out the following working schedule: Malaysia, one of the countries through which the railway is expected to pass, and which has been given a coordinating role in the project, has donated about US$800,000 since 1996 to developing the project's feasibility study. A technical study on the railway was recently completed by Malaysian consultants KL Consult and Zaaba. (C) Asia Times Online CHAPTER 3: PORTS OF CALL |
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