THE STAR, Tuesday, December 17th, 2002- Malaysian ports are making waves - thanks to a new breed of aggressive managers running our ports and the strong support of the government, in particular the Prime Minister.

For decades, Malaysian ports have been playing second fiddle to the Port of Singapore - but not anymore.

Under a new breed of managers, Malaysian ports are going all out to win business. They have shown that not only are Malaysian ports able to match the world's leading ports in efficiency, they also offer cheaper rates.

But that's not all. Malaysian ports also compete fiercely among themselves for business.

Today's CEO Outlook 2003 features three of the new breed of Malaysian port operators- Tan Sri G.Gnanalingam of Westport, Mohd Sidik Shaik Osman of Port of Tanjong Pelepas (PTP), and Basheer Hassan Abdul Kader of Northport.

Gnanalingam spent many years heading the marketing division of Malaysian Tobacco Co ( now part of BAT Malaysia) and used his expertise networking to build up Westport. Under him, Westport has grown up leaps and bounds.

Gnanalingam is very much into ancient Indian ayurveda way to health, and started the Ayur centres in Petaling Jaya and Tambun, Ipoh. He is also the president of the Malaysian branch of The Indus Entreprenurs (TiE) organization, which seeks to promote networking between Malaysian and Indian business worldwide.

Tan Sri G. Gnanalingam, Executive Chairman of Westport Malaysia's Interview with The Star.

The year 2003 looks like a year of uncertainty for the world economy. In your view, what are the challenges and prospects for Malaysia's economy?

This year may look uncertain but will perhaps be not as bad as the last three years from the year 2000. During this period, Malaysia's economy has recovered quite well, and giant steps have been taken with regard to corporate governance, accounting standards and the restructuring of financial institutions. All these, I believe, will help Malaysia's economy, besides the strong growth of the export economy.

It looks like Malaysia's stock market was 50% fuelled by foreign funds, which are now avoiding it for qualitative reasons, such as the fear of terrorism.

The government (in the budget in September) has projected a growth rate of between 6% and 6.5% for the national economy in 2003. Do you feel that this growth rate can be achieved ?

If the economy grows by 6% net year, the port industry will grow by 12%. However, we expect a growth of 15%-20%, which indicates the government's forecast is achievable.

What do you see are the challenges and opportunities for your company in 2003 ?

There are three challenges for us in 2003.

First, our port tariffs are one of the lowest in the world - we operate virtually on the 1996 Tariff Structure - but the cost of utilities, manpower, equipment and infrastructure are continually on the rise. To sustain development we need to increase our revenue by a higher margin than our cost. However, shipping lines are also facing problems and we need to work together to sustain growth.

Second, Freight rates out of Malaysia are also one of the worst, with international shipping lines preferring to allocate more slots for ports such as Singapore Jakarta and Bangkok. This issue is compounded by the fact that Malaysian shippers buy fob (free on board) and sell via cif (cost, freight, insurance), while the rest demand a lot of price cutting, which reduces slot availability.

Third, There is a lack of transparency in the cot for the logistics chain in Malaysia. While the port and haulier tariff is regulated, the charges of freight forwarders and shipping agents are not. Shippers will declare that local logistics costs are high, but it is quite obvious that these service providers-the shipping lines, hauliers, forwarders and the ports - are today in a non-viable situation.

As such, we need to decipher the true scenario. There are opportunities for shippers and service providers to work together so that the best service can be provided for the 8th largest trading nation in the world.

It is no use for hauliers to undertake price cutting, nor the ports to have the lowest tariff or the shipping lines to obtain the lowest freight rates - because these will not allow anybody to provide the best service for shippers to remain competitive, demand Just In Time services, nor reduce their inventory.

We have seen the Chinese economy powering ahead with successively high growth rates. China is also the favoured destination for foreign direct investments. Do you see China's emergence as an economic powerhouse providing opportunities for your company, or do you see China as a competitor ?

China's growth in foreign direct investment is a result of its massive improvement in quality standards and infrastructure facilities, and increased per capita income of the Chinese population. Chinese ports have seen the best growth rates. China's trade with Malaysia has grown from RM15bil to RM20bil in the last two year.

We also have experienced 100% growth rates with China Shipping Line for the last three years. We believe we could grow further to our benefit.

Next year is the start of the Asean Free Trade Area (Afta), under which tariffs on a wide range of products will be drastically reduced. How will your company be affected by the implementation of Afta ?

With Afta, we see greater growth within the intra-Afta areas. Also there will be great opportunities for value-added services hubs, which the port corridor of Westport and the KL International Airport are well positioned to attract.

Do you expect your company to do better or worse in 2003 compared with 2002 ?

We have done well to grow from 100,000 TEUs (20ft equivalent units) in 1997 to two million boxes in the year 2002 despite the economic crisis, economic currency crisis and the slowdown in the economies of Japan and the US, coupled with the Sept 11 incident and the US West Coast ports strike.

In the next five years, we remain confident of doubling our volume based on the fact that world consumption will grow over the long term, though there may be hiccups in inventory levels over the short term. You have seen how families have needed three television sets instead of one - and now twice the size for each one of them.

This type of growth is what has made containers grow from 20 million in 1980 to 230 million in 2000. This is expected to grow to 300 million by 2005, and even 700 million by 2020. To be part of this growth, we need to have the capacity and the viability to be supply driven.