Malaysia Aims to Become a Key Southeast Asian Shipping Hub : Singapore Faces a Rival Next Door
International Herald Tribune
February 1, 2002
Michael Richardson 

Almost within sight of Singapore's newest container terminal, Malaysia has built a similar facility offering cheaper rates — hoping to win business away from one of the world's busiest ports.

The competition between Singapore's PSA Corp., which operates four container terminals in the city-state, and the Port of Tanjung Pelepas, on the southern tip of the Malay Peninsula, just to the west of Singapore's harbor and container complex, is emblematic of a wider commercial rivalry between two neighboring countries.

A sustained spurt of rapid economic growth and a reputation for greater efficiency helped Singapore maintain a lead over Malaysia in many sectors, including transport and logistics.

But with Singapore mired in its deepest recession since it left Malaysia and became independent, the competitive challenge from Malaysia has suddenly become more serious.

Malaysia added weight to its challenge to Singapore recently when Seaport Terminal Sdn., which owns 70 percent of Tanjung Pelepas, announced plans to build a petrochemical plant and refueling facilities for ships close to the port — which, like Singapore, faces the Strait of Malacca, one of the world's main international shipping channels.

Seaport Terminal is controlled by Syed Mokthar Al-Bukhary, a Malaysian businessman with close ties to the government of Prime Minister Mahathir bin Mohamad.

The Malaysian government has announced various tax and other incentives to encourage the development of a leading transportation hub in Southeast Asia — and win back from Singapore the estimated 30 percent of Malaysian container traffic that passes through Singapore rather than Malaysia.

"We want to expand all our ports," Mr. Mahathir said. "We are as strategic as Singapore. So there is no reason why we cannot be a hub for trade and shipping in the region."

Malaysia recently abolished customs duties on ship fuel, established Singapore-style duty-free commercial zones in all ports, and said that Tanjung Pelepas would be connected to the country's railway grid by March.

"The government is committed to making Malaysia's maritime industry an international industry and will stop at nothing to ensure that the necessary actions are taken," said Ling Liong Sik, the Malaysian transport minister.

Even so, Malaysia still has a long way to go to catch Singapore. For example, Malaysian ports in 2001 handled 7.3 million twenty-foot equivalent units, or TEUs, a standard container size worldwide, compared with Singapore's 15.6 million TEUs.

But Taiwan's biggest shipping company, Evergreen Marine Corp., said last month that it planned to transfer its container operations from Singapore to Tanjung Pelepas when its contract with PSA Corp. expired in August.

Evergreen's announcement was intended to give it leverage in negotiations for a better deal with PSA Corp. but also had to be taken as serious threat, analysts said.

"Negotiations are still in progress, but there is clearly a large gap in costs between the two locations," said Nieh Kuo-wei, an Evergreen group spokesman in Taipei. "Malaysia has new, more efficient facilities and very attractive prices."

If Evergreen decides to leave Singapore, it will be the port's second major loss to Tanjung Pelepas. Maersk Sealand, a unit of Denmark's A.P. Moeller, moved to Tanjung Pelepas about 18 months ago, lured by cheaper rates and the opportunity to manage its own container terminal operations. Maersk took a 30 percent stake in the Malaysian port.

Maersk contributed 1.8 million TEUs to Tanjung Pelepas' total throughput of just over 2 million TEUs in 2001. If Evergreen's annual 1.2 million TEUs in Singapore are added to this total, it would amount to nearly one fifth of the 15.5 million TEUs handled by the PSA Corp. last year.

Some 250 shipping lines connect the PSA container terminals to about 600 ports in over 120 countries.

Song Seng Wun, regional economist at GK Goh Securities Ltd., said that the scale of this business was a major advantage. But he warned that if Evergreen followed Maersk to Tanjung Pelepas, it could encourage other shipping companies to leave.

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