The Star, January 14th, 2002 - MAJOR Malaysian ports are bullish about growth despite indications that the container a trade will face an even worse period this year.

They feel it is the appropriate time to expand berths, yard space, equipment and manpower to cater for an impending growth later this year and in 2003.

Reacting to claims made by the chief of Europe's busiest port, Rotterdam Municipal Port Management, Rotterdam Municipal Port Management chairman Willem Scholten, that this year would be a difficult one for the container trade, Westport executive chairman Tan Sri G.Gnanalingam said in view of the economic crisis in Japan and the United State, volume would drop and it would be a tough time for all ports.

"However, we are not at all pessimistic at West Port and continue to be bullish about growth.

"During the last four years, we saw average growth of 300,000 boxes a year and are confident we can maintain the trend this year," he said.

More importantly, he said was time for the port to expand facilities in terms of berth length, yard apace and equipment, and train manpower to cater for the growththat will occur late this year or next year.

Gnanalingam said that over the past 50 years, world trade has grown by an average of 10% despite many economic crises.

He said Port K1ang would grow from 3.7 million boxes this year to 4.2 million in 2003 because of: - GREATER number of local shippers using Port Klang; - THE momentum gained in transhipment; - INCREASING number of shipping Lines relocating to Port Klang and, - THE awareness of regional shippers of alternative opportunities in transhipment.

Gnanalingam said Westport would continue to help Port Klang achieve top 10 status by targeting at least two million boxes this year. He said Port Klang grew mainly because of the four reasons above and would continue to grow as long as it has the fol1owing scenario: - BE supply driven so to have the capacity to handle growth; - CONTINUE to be production ensuring sufficient berths and cranes on arriva1 of vessels for fast turnaround; - NOT to ignore employee satisfaction, training and skills to achieve any of the above while focusing on customer comfort and satisfaction,

On container trade for the region, Gnanalingam said that different regions had different reasons for growth or decline.

He said some regions were dependent purely on trade in singular markets.

"Malaysia has a good mix of exports based on commodities, petroleum, manufactured goods and value-added services.

"Most of all, 50% of our business is regional while the other 50% is hinterland. With this combination, we believe we can tide over any economic decline and prepare ourselves for the double-digit growth that comes after an economy crisis, which we believe will happen later this year."

He said that consumption was not based on economic success but on emotional rationale.

"Notwithstanding this, technology will make some products obsolete and this customers cannot avoid. Television sets will get bigger, air-conditioners and ovens and refrigerators will need replacement.

"As such, wear and tear plus better and newer products will revive consumption sooner than expected."

Port of Tanjung Pelepas(PTP) chief executive officer Mohd Sidik Shaik Osman, said the Sept 11 event had resulted in declining freight rates, rising insurance and declining world trade and consumer demand.

Prior to Sept 11th, he said that decline in growth was already the trend and the event only served to worsen the decline.

Despite this, he said the performance outlook of Malaysian ports was positive this year; demonstrating the local port section's resilience in facing difficult times.

"Growth will come from handling an increasing amount of transhipment cargo from new services. It will also come from new business and new markets." On local cargo, however, Sidik said a large portion of exports would go to the United States, Europe and the Far East.

"This will affect the percentage of local laden cargo through Malaysian ports.

"This is something local ports will find difficult to prevent this year. Malaysian ports must, however make up for this by maintaining good incentives for local cargo and finding new markets, including the setting up of foreign and local distribution warehouses in the free zone," he said.

Sidik said the incentives were vital to prevent and reduce leakage of local cargo through other regional ports while developing the port free zone and hinterland which would in turn boost local cargo throughput.

He said PTP's growth should not he compared to established port. "Established port will generally experience decline along with regional and world trade but new port. gain business from new customers.

"Our achievement of exceeding projections, however, can only be done with increasing market. and customers.

"PTP achieved this with aggressive effort in promoting its Distripark. A port's hinterland can sometimes be incentive enough for new liners and new services to call."

Sidik also said that volatile trade made predictions difficult for the Asian region and PTP in particular.

"We do see trends that declining growth will continue especially as lines are cutting capacity on customer vessels.

"While this year will definitely be difficult, we in Malaysia must take measures to ensure the worst goes past us.

"The Asian and Malaysian model succeeded in the past by its ability to respond quickly to new trends and grow by taking new measures.

"Our ability to succeed this year will depend on how well we take new measures," said Sidik.

Northport (M) Bhd managing director and chief executive officer Basheer Hassan Abdul Kader said Northport had emerged successfully as a port not just handling import and export containers from its captive hinterland, which happens to be the most industrla1ised area in the country, but as a sizeable transhipment port as well.

He said that 989,872 TEUs of transhipment containers were handled last year.

"This means that for continued growth of the port, regional transhipment is as import as domestic trades.

"Transhipment traffic has become an important market segment and may soon overtake inbound and outbound traffic.

"This reduced dependence on inbound and outbound traffic has helped offset the impact of current economic conditions."

He said North Port was handling transhipment containers to and from destinations as far as Australia and the Middle-East.

Basheer said the fact that Malaysia was a large trading nation and generated large quantities of container traffic was significant because this provided the base cargo load for shipping lines to make direct calls

With more direct calls, he said that feeder operator were able to offer alternative competitive transhipment connections.

"With the oversupply of container shipping tonnage combined with reduced cargo volumes due to depressed economic conditions, freight rates have fallen sharply.

"Therefore, there is tremendous pressure on shipping companies to keep costs down.

"The lines, in return, are looking for lower prices from ports to achieve this. The fact that ports are off~ low prices is increasingly becoming irrelevant given the mounting twin pressures of low freight and low volumes."

Basheer said that generating growth this year would depend on how shipping lines needs were met.

"The catch is that it must be achieved by not lowering service levels to lower costs but by offering better services compared to neighbouring ports at even lower prices.

This is obviously a rough call. But, understandably, shipping lines are saying they do not have a choice. This is the challenge in the coming years."

Container trade as a whole was liked to economic growth in regional economies, but some ports would do better than others if they were meet the service and price expectations of shipping lines, he said.

On Rotterdam port chairman Scholten's statement, Basheer said he could be referring to European conditions specifically.

"We understand that ports worldwide are being forced to look at operating their businesses in increasingly competitive environments.

There are fewer natural monopolies as far as ports are concerned.

Therefore, for this year, being innovative in confronting changing condition will feature as far more important than, say, the size of a port or its past leadership position in terms of market share or volumes handled," he said.

Penang Port Sdn Bhd managing director Datuk Ahmad Ibnihajar said growth in container traffic was ultimately driven by economic growth.

"It is my belief that, at least for the next few years, the parallel relationship between growth in container traffic and economic growth will remain unchanged.

"Throughout the 1990, container trade in the Asian region continued to increase at a rate far exceeding that of maritime trade as a whole.

"This strong growth in container can be attributed to several factors including liberalisation of international trade, globalisation, containerization and the emergence of China as a new container market."

Ahmad said none of these trends were yet run their course.

Malaysia would see positive economic growth this year and beyond, albeit at a slower rate compared to the phenomenal rate that characterised the 1990s, he said.

In Penang, he said the forecast container throughput for this year was 667,000 TEU-, an increment of 10% from last year. He said average growth for the second half of the year was expected to be slightly stronger than the first half.

"Unlike Port Klang and PTP, transhipment occupies a small percentage of our throughput, thus Penang did not enjoy as much growth as these ports in container volume last year.

"Asian container trade is expected to increase more rapidly than the world average.

"Rapid expansion of container traffic is expected as a result of further economic development across the region, particularly in China and in countries of Indo-China and the Indian subcontinent owing to the substantial potential for further containerisation of cargoes." he said.

He said, in recent years, there had been a growing trend towards carrier alliances on a global basis.

Ahmad said carriers entered into partnerships that covered their operation worldwide, rather than on a single trade lane.

"The industry consolidation has been accelerated by a rash of mergers and acquisition since the end of the 1990s. In parallel with the concentration of container shipping, throughputs are growing more quickly at hub ports and newly~ ports that can offer international standards of service, "he said.