Malaysia: Moving ahead

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The establishment of a new school for logistics training has set the supply chain industry on course for a high-tech future, fulfilling one of the key goals of the long-term master plan for the sector and reinforcing several recent positive developments.

The agreement for a joint initiative to set up the Malaysia Institute for Supply Chain Innovation (MISI) with the Massachusetts Institute of Technology (MIT) was signed in March. MISI will provide a hands-on education, located outside of Kuala Lumpur in Shah Alam – home to Port Klang, the largest and busiest port in Malaysia.

The school is offering a master’s degree in logistics that is designed to educate future import/export professionals. Malaysia is already an important manufacturing and trading centre for South-east Asia and with the first class expected to graduate in 2012, the influx of expertise bodes well for a sector already seeing positive growth.

The research firm Frost & Sullivan predicted in February that Malaysia’s logistics revenue would increase 11.5% to RM121bn ($38.7bn) in 2011, compared to RM108.5bn ($34.7bn) in 2010. The firm forecast a compound annual growth rate of 12.6% for the industry, reaching RM196.5bn ($62.8bn) in 2015.

MISI is set to play a key role in reaching the national objective of positioning Malaysia as a global leader in logistics and supply chain management. The institute is to provide a source of skilled professionals for the growing number of international supply chain companies in South-east Asia. MISI will also be one of MIT’s international system of centres, known as the Global Supply Chain and Logistics Excellence Network.

The founding of MISI is one of a number of milestones set out in two long-term development plans: the Tenth Malaysia Plan (10MP) and the Third Industrial Master Plan (IMP3). Under the 10MP, a multimodal transport network is planned for improving trade efficiency and enhanced logistics systems. Approximately RM2.7bn ($863m) has been allocated for new roads and rail networks to key ports and airports. Meanwhile, improvements to logistics management are expected to increase the ease of cargo transport.

Working in tandem with the 10MP, the IMP3 aims to achieve long-term global competitiveness and enhance Malaysia’s position as a major trading nation. To develop and promote the manufacturing and services sectors, IMP3 outlines improvements to many areas, with logistics in particular playing a part by making the country a regional centre for products – including halal ones – and services.

Indeed, the deputy minister for international trade and industry, Jacob Dungau Sagan, recently called on firms to comply with the Halal Logistics Standard to tap into the growing demand for halal-related services.

“It is time for the Malaysian logistics service operators to strive to become reputable and trusted partners of the halal industry,” the minister said in an address at a seminar on halal logistics on June 16.

The minister said that although the halal logistics sector was set to become one of the fastest growing areas in the region, due to growing awareness and the need for halal products and services, only a few of the country’s approximately 31,000 logistics companies had adopted the Halal Logistics Standard.

However, transport and logistics operators are currently dealing with something of a sea change in operating costs that could temporarily take precedence over expanding into new areas such as halal. Part of the overall plan to normalise regulation in the sector involves some challenging measures, including the elimination of a “super subsidy” for diesel fuel. This move is expected to save the federal government RM659.3m ($210.7m) in 2011, but is expected to increase transportation expenses, which will in turn likely mean higher prices for consumers.

Transport operators, from lorry associations to shipping agencies, have recently lamented the government’s decision to abolish the subsidy. Since June 1, operators have been paying RM2.80 ($0.90) per litre for diesel, rather than the subsidised price of RM1.80 ($0.58). Operators have announced that to overcome the increased overhead, they will raise their fees by between 20% and 30%. These increases are expected to have a major impact on consumer prices, as end-users will bear part of increased transportation costs.

In light of the rising price of transport, some logistics firms are diversifying their storage procedures and reaching out to other companies. Increasingly, service providers in Malaysia are building high-tech green warehouses and looking at opportunities for regional cooperation.

One such company is the PKT Logistics Group, which recently opened a “concept” warehouse that incorporates environmentally friendly design with enhanced security features. The company also won the “Emerging Logistics Service Provider of the Year” award at Frost & Sullivan’s Malaysian Excellence Awards this year.

“Malaysia offers a very sound base for investment into logistics,” Michael Tio, the company’s managing director, told OBG. “Our infrastructure is very good and improving, our labour costs are on a par with places like Thailand, our rates are cheaper due to a more balanced import-to-export ratio and our land prices are very reasonable.”

Indeed, with such competitive advantages, Malaysia’s logistics industry looks set for significant and sustained future growth.

 

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