Neighbors Struggle to Become Competitors : Singapore Port Holds Its Edge
International Herald Tribune
December 24, 1996
Michael Richardson

As maritime trade becomes an increasingly important part of Southeast Asia's economic development, countries in the region are moving to improve their port services and challenge Singapore's position as the dominant shipping hub.

Singapore's port — the world's busiest in terms of shipping tonnage — handled just over 305 million metric tons of cargo in 1995, up 5.3 percent from 1994.

Its giant cranes and specialized terminals moved 11.8 million 20-foot equivalent units, or TEUs, of containers, not far behind the 12.5 million TEUs handled by Hong Kong, the world's most active container port.

Around 70 percent of the island state's port cargo traffic does not originate or terminate in Singapore, which has built its prosperity largely on being able to offer more cost-efficient services than its neighbors. Malaysia is one of Singapore's largest customers, with 22 percent of its imports and 26 percent of its exports passing through there instead of its own ports.

Other nearby nations — including Indonesia, Thailand and India — also depend to a significant degree on transshipment of their seaborne trade through Singapore.

As a result, economists estimate that port-related activities generate about 5 percent of Singapore's gross domestic product.

But Singapore's hold on the region's shipping trade is being challenged, especially by Malaysia, where Prime Minister Mahathir bin Mohamad has given port development a high priority.

Indonesia, Thailand, the Philippines and India also are building or upgrading ports to try to attract more direct-haul shipping, while in Sri Lanka the capital, Colombo, is vying with Singapore to handle a larger proportion of India's transshipment business.

Mr. Mahathir personally officiated at the opening in September of a third container terminal at Port Klang, the privatized port on the Straits of Malacca near Kuala Lumpur that serves as Malaysia's main port.

"The government has decided to develop Port Klang as a primary hub for Malaysian cargo and will make efforts to redirect the flow of cargo through Port Klang to create volume and attract direct ship calls," said M. Rajasingham, the port's chief executive and general manager.

Ling Liong Sik, Malaysia's transport minister, said the country had lost as much as 500 million ringgit ($198 million) in revenue each year because local shippers preferred to use Singapore.

"If we can bring back all Malaysian cargo to our port, the country will save a lot of foreign exchange and at the same time increase other port-related activities like banking, bunkering and insurance," he said.

But Port Klang has a long way to go to catch Singapore, which is building a 26-berth container terminal at Pasir Panjang on the southwest coast of the main island at an estimated cost of 1.1 billion Singapore dollars ($786.1 million)

Operations are expected to start in 1998 with five berths. When completed in the next century, the terminal will have a handling capacity of at least 18 million TEUs.

Port Klang moved only 1.1 million TEUs last year — about one-tenth of Singapore's throughput.

But while Singapore's container-shipped cargo volume has risen more than 9 percent so far this year, Port Klang's has risen roughly 50 percent. Malaysia's cargo rates, about one-third lower than Singapore's, have attracted more than 20 additional shipping lines to start direct calls.

On the other hand, Singapore's average turnaround time for a large container ship is 12 hours, substantially faster than what private terminal operators in Port Klang have been able to achieve so far; and for shippers, fast turnarounds mean cost savings.

Khoo Teng Chye, chief executive officer of the Port of Singapore Authority, a statutory authority due to be corporatized in 1997 so that it will operate like a private company, said customers and economics would decide which port gave the best value and moved goods most quickly, reliably and cost-effectively.

"As long as we are able to continuously find ways to improve our efficiency and maintain the gap, we will be able to maintain our position," he said.

Copyright © 2006 The International Herald Tribune