23-11-2023 (KUALA LUMPUR) Malaysian ports face potential disruptions in shipping if Thailand’s ambitious plan to bypass the Straits of Malacca and establish a US$28 billion alternative route to the US becomes a reality. However, industry analysts assert that this situation presents an opportunity for strategic improvements in Malaysia’s port infrastructure and operational efficiency.
Dr Shankaran Nambiar, an economist at the Malaysian Institute of Economic Research, highlighted the critical challenge posed to Malaysian ports by the proposed Thai shipping line. Uncertainties remain regarding which vessels will opt for the new route and which will continue to utilize Malaysian ports. While specific details about the vessels remain unclear, it is evident that there will be a decrease in traffic through the straits, Nambiar noted.
Nambiar emphasized the urgency of upgrading Malaysia’s port infrastructure and operational efficiency amidst potential transformations in the global shipping landscape. Robust trade facilitation measures and streamlined customs procedures are essential for Malaysian ports to maintain their competitiveness. Additionally, enhancing supporting services and fostering a more business-friendly regulatory environment are imperative.
Abi Sofian Abdul Hamid, the group managing partner of Thought Partners Group and former CEO of Northport (Malaysia) Bhd, pointed out that Malaysia would potentially face competition from two new ports in Thailand—one on the east coast and the other on the west coast. Sofian stressed the importance of creating an attractive proposition for customers in terms of products and services. Retaining existing customers and focusing on the growth market are crucial initial steps. Sofian also highlighted the need for collaboration among Malaysian ports, industry players, and stakeholders in the logistics and supply chain to offer comprehensive value to customers, particularly by ensuring seamless movement of goods from ports to end users.
While acknowledging potential benefits, Sofian stated that significant data regarding savings has yet to be seen. He explained that the transit market would entail additional handling activities at the two ports, but the main advantages would be for goods bound for Thailand and neighboring countries. He called for a detailed study on current and future trends as a starting point for Malaysian ports.
Dr Yeah Kim Leng, a professor of economics at Sunway University, raised concerns about potential downsides, including the loss of logistics, refueling, and supply services at Malaysian ports due to shifts in shipping patterns resulting from the bypassing of the Straits of Malacca. However, he reassured that despite these challenges, Malaysian ports would continue to play a crucial role in serving the country’s maritime cargo trade. Yeah emphasized that the canal would help decongest the Straits of Malacca, leading to more efficient, faster, and cost-effective transportation of cargo between the Indian and Pacific Oceans. Asean countries such as Vietnam and the Philippines, along with Far East countries like Japan, Korea, Taiwan, and China, would benefit from the shorter route.
Yeah echoed the views of other analysts, emphasizing the need for Malaysian ports to focus on increasing cargo handling, logistics efficiency, and competitiveness. This aligns with Malaysia’s goal of becoming one of the world’s top 15 trading nations. He added that a more efficient port sector would enhance the competitiveness of the country’s manufacturing sector, resulting in increased seaborne cargo volume and expanded trade with the rest of the world.
Thailand has proposed a multibillion-dollar Landbridge project to reduce shipping times between the Indian and Pacific Oceans by bypassing the crowded Melaka Strait, a major sea route. Thai Prime Minister Srettha Thavisin stated that the project could decrease travel time by approximately four days and reduce shipping costs by 15 percent. With traffic volumes projected to surpass the capacity of the Straits of Malacca by 2030, the Landbridge project aims to ensure the smooth flow of goods. Estimated to cost around one trillion baht (US$28 billion), the project involves constructing seaports on both sides of Thailand’s southern peninsula and connecting them through an extensive network of highways and railways. This alternative route would serve as an alternative to the long-standing proposal of dredging a canal through the Kra Isthmus.
The Straits of Malacca, situated between Malaysia and Singapore, currently serves as the shortest sea route connecting the Asia-Pacific region to India and the Middle East. Approximately 25 percent of the world’s traded goods pass through this strait, and the increasing traffic is expected to lead to rising shipping costs.
