Malaysia: Cargo congestion

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Malaysia’s growing foreign trade is putting a strain on main ports, with delays in cargo handling being reported despite an increasing in throughput volume. This has prompted shipping firms and freight forwarders to call for greater investment in infrastructure.

Minister in the Prime Minister’s Department Tan Sri Nor Mohamed Yakcop said on December 16 that the government was confident the economy would sustain its growth momentum to the end of the year, with GDP to expand by 7%. This would beat earlier projections of around 6% growth for 2010 issued by the government, with the improved forecast partly due to a solid increase in foreign trade.

Figures released by the International Trade and Industry Ministry in early December show a surge in overseas trade continuing, with the 10-month import-export total up until the end of October up by 17.35%. Exports climbed by more than 15% to $168bn while imports rose by 19.8% to $139bn.

With the majority of Malaysia’s foreign trade moved by sea, as well as much of its domestic cargo transfer, delays in clearing the ports can have a direct impact on the economy. Bottlenecks add to the costs of both shipping firms and to their clients, especially those with perishable freight or cargoes being transported on a tight deadline.

Though there has been an increase in the number of twenty-footer container units (TEU) being handled by Malaysia’s ports this year, some of the main cargo facilities are being stretched, with complaints coming from representatives of the shipping industry and producers.

In mid-November, a number of shipping companies operating through Johor Port announced they would be imposing a surcharge on exporters using the port due to the high levels of congestion and delays being experienced at the facility. In particular, this will hit industries in the Pasir Gudang, with manufacturers having to fork out $25 or more per container in extra levies.

Michael Cheah, the secretary of the Johor Port Shipping and Forwarding Association, says the move was not unexpected as shipping companies sought to offset losses stemming from the delays, including the costs of operating vessels, charter fees and charges resulting from missed connections.

“Johor Port cannot stop the shipping companies from imposing the surcharge and manufacturers also cannot blame them for doing so,’’ Cheah said in an interview with daily the Malaysian Star on November 15

According to the association, delays at the port were slowing the flow of imported raw materials, disrupting production, while export deadlines were also being missed, potentially harming Malaysia’s reputation as a supplier. The main problem is that Johor has little opportunity or room for further expansion, having been designed to handle a maximum of 800,000 TEUs a year, a limit it has now reached.

Port operators are trying to improve the situation, but there are no quick-fix solutions. MMC Corp Bhd, which operates both Johor Port and the Port of Tanjung Pelepas some 80 km to the west, recently floated a proposal to shift all container handling activity to the latter facility, with Johor to deal with other cargoes.

However, the move to consolidate port activities was rejected by the government, with International Trade and Industry Minister Datuk Seri Mustapa Mohamed saying the decision had been taken after considering views and concerns from companies and industries operating in Pasir Gudang.

Donovan Niap, the general manager of Geodis Wilson Freight Management, believes the government should reconsider, given the continuing congestion at Johor Port. “The government should look at the bigger picture and the benefits to the economy, instead of entertaining or listening to a small group of people with their own personal interest,” he told local media at the end of November.

Johor Port’s operators have announced plans to improve cargo handling capacity, with plans to acquire more cranes and replace ageing equipment, though the space constraints will mean there is only so much improvement that can be wrung out of the upgrades.

The operators of Penang Port are taking a different tack, hoping a $100m dredging project to deepen the main channel leading to the port’s container facility will allow it to attract more trade and handle larger vessels.

Datuk Ahmad Ibnihajar, the managing director and chief executive officer of Penang Port Sdn Bhd told media on December 3 that the project had the potential to turn its North Butterworth Container Terminal into a major facility capable of handling up to 2m TEUs a year.

The expansion of the port is timed to coincide with work to electrify and lay duel track on the Ipoh to Padang Besar railway, which should be completed by 2013.

“We expect the number of twenty-foot equivalent units to surge as the double-track project will help facilitate the movement of containers from Ipoh and southern Thailand via Padang Besar in Perlis,” Ahmad said.

With both private enterprise and the state looking to increase investments to improve port facilities and the transport infrastructure serving them the bottlenecks currently pressuring the country’s maritime trade should be cleared, though such projects will take time, meaning that freighting delays will continue to pose problems for Malaysia’s economy.

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