International Business Review


A Change of Course
The challenges of shipping opportunities

by IBR Malaysia
15 July 2015

Around the world, the shipping industry is one of the most crucial cogs that drive the wheels of global trade, with more than 90% of international transactions implemented by sea, and reaching almost 9.6 billion tonnes in 2013. In Malaysia, the sector contributed RM15b to the national GDP in 2014, but the industry can do better. According to the Maritime Institute of Malaysia (MIMA), one of the many challenges the industry faces is the decline of certain types of vessels – such as bulk carriers and oil tankers – which result in overall reduction in the total number of available ships in the country, and in essence, profit and turnover.

This is especially crucial, noting that the Malaysian government has set 2020 as the target date to achieve developed- and industrialised-nation status. To do so, the country will have to be able to, not only develop innovative and competitive products that the world wants, but also be able to deliver these goods in a cost-effective and efficient manner, as and when required.

Diamond in the Rough

Even more challenging is that the Asean region, particularly Malaysia- Singapore is part of the three primary liner routes (East-West Transpacific Trade serving North America – Far East, East-West Europe – Far East Trade and Intra-Regional Asia Trade) served by all of the world’s major shipping lines, connecting the region to more than 300 international ports. If the viewing angle on this seemingly massive predicament is changed however, it could also mean that Malaysia’s shipping industry has direct access to the international community, and in one word, opportunities.

To effectively and completely take advantage of this global market, the country will have to ensure that challenges that are currently plaguing the industry locally and around the world, including oversupply, high costs, dependence on international shippers, sustainability regulations, piracy and global economic trends, are minimised, or completely resolved.

Plan of Action

While some of the industry’s challenges – such as the declining prices of oil and the devalued ringgit – however are out of the hands of policy makers in the country, the Malaysian government plans to apply corrective measures to factors that it can help achieve change. Speaking at the opening of the Malaysian Shipowners Association’s (MASA) new office in Putrajaya in June, Minister of Transport Datuk Sri Liow Tiong Lai, pointed out that the government is fully aware of the challenges in the shipping sector and “the Ministry of Transport is in the midst of addressing issues and challenges faced by the industry and looking into ways and means to support and further assist the Malaysian ship-owners in these dire times.”

One of such efforts is the Malaysian Shipping Masterplan draft, which would be ready later in the year. Among the initiatives included in the plan are financing incentives and tax structure facilitation, strengthening of the cabotage policy, enhancing the Merchant Shipping Ordinance (MSO) 1952 and ship registration processes. Other planned policies include training and human resource development, developing more effective support services and business environment, and ensuring promotion initiatives by the Ministry of International Trade and Industry (MITI) and the Malaysian Investment Development Authority (MIDA).

Also in the works, are plans to expand the shipping industry into shipbuilding, repairs, and the manufacture of maritime tools, such as navigation, electrical and propulsion systems. According to Anuar Mohd Nor, Senior Principal Analyst of Malaysia Industry-Government Group of High Technology (MIGHT) in the Prime Minister’s Department, the Shipbuilding and Ship Repair Strategic Plan 2020 to be implemented through MIGHT aims to position Malaysia as a major player in the small to medium-sized shipbuilding market, with a target gross national income of RM6.35b and the creation of up to 55,500 jobs by 2020.

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