LOGISTICS DEVELOPMENT STUDY OF THE INDONESIAMALAYSIA-THAILAND GROWTH TRIANGLE (IMT-GT)

Draft

Ruth Banomyong Centre for Logistics Research Faculty of Commerce & Accountancy Thammasat University

EXECUTIVE SUMMARY Background 1. The development of logistics services and communication technologies has revolutionised production and distribution processes, and has created the global market. It is within this competitive environment that shippers and consignees require efficient logistics services that can move their goods at the right place, at the right time, in the right condition, and at the right price. 2. It is therefore of great importance that regional linkages among neighbouring countries are strengthened in the Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT) in order to facilitate trade, enhance regional economic integration and develop logistics for better access into the global market. Logistics is a relatively new development policy in the IMT-GT. It is acknowledged that having an efficient logistics system in the IMT-GT subregion can help support the existing corridors economic integration. 3. The IMT-GT Road Map identified five economic corridors as key to strengthening regional infrastructure to support increased intra- and extra-regional trade, investment and tourism. These are the (i) Extended Songkhla-Penang-Medan Economic Corridor; (ii) the Straits of Melaka Economic Corridor; (iii) the Banda Aceh-Medan-Pekanbaru-Palembang Economic Corridor; (iv) the Melaka-Dumai Economic Corridor; (v) and, the Ranong-Phuket-Bandah Aceh Economic Corridor. The economic corridor approach has been identified as a core strategy for accelerated development of the IMT-GT, and development of these economic corridors was declared a Flagship Project of IMT-GT at the 13th Ministerial Meeting of IMT-GT in Selangor in September 2006.1 4. A number of major infrastructure investments are already being undertaken by IMT-GT countries and more are planned. The physical connectivity between neighbouring countries will be significantly improved upon the completion of these infrastructural investments. The improving infrastructure, coupled with expanded cross-border cooperation among the IMT-GT countries, will accelerate the process of integrating the sub-regions economic corridors into the rest of the world and the global market. 5. The main purpose of this executive summary is to provide possible logistics development policy for the IMT-GT based on empirical data gathered and analysed in the field and to propose possible policy recommendations. The paper is separated into 3 sections. Section 1 is a summary of the existing trade patterns in the IMT; Section 2 is a short discussion on the utilised methodology and findings while the last section proposes possible logistics development policy based on the logistics analysis of the 5 IMT-GT economic corridors.

1 For IMT-GT, the corridor approach will (i) provide focus and serve as a catalyst to the development and growth
of ancillary activities and areas within and around the economic corridors, (ii) generate investment opportunities in terms of commercial activities and infrastructure support services, (iii) achieve synergy through clustering of projects within and around the economic corridors (IMT-GT Roadmap of Development, 2007)

Section 1: IMT-GT Trade Patterns 6. Within the IMT-GT countries, Malaysia has substantial trade with both Thailand and Sumatra. There is quite an important flow of goods between Thailand and Malaysia. This trade is bilateral, cross border and transit as well with a number of goods from southern Thailand utilising Penang Port as port of loading to other markets. There is also strong level trade between Malaysia and Sumatra with Port Klang playing an important role. However, trade between Thailand and Sumatra is not very developed as Thailand only plays a marginal role in Sumatras export and import trade. Trade linkage between southern Thailand and Sumatra must be further encouraged. 7. Malaysias plays a central role for trade flows in the IMT-GT. Thai exporters from the south of the country use Malaysia as a transit platform while Sumatra also sees Malaysia as a very important trading partner. However, Singapore is shown to compete up to a certain extent with Malaysia with regards to transit goods. 8. IMT-GT economic hubs can be determined based on their local economic activity as well as based on export/import trade value and volume. These preliminary criteria can help in the identification of potential IMT-GT economic hubs. In Thailand, potential economic hubs for the five IMT-GT corridors, based on these criteria, are: Hat Yai/Songkhla, Trang, and Phuket. In Malaysia, the potential economic hubs are: Penang, Port Klang and Malacca while in Sumatra the potential economic hubs are: Bandah Aceh, Medan, Dumai, and Palembang. Section 2: Methodology and Findings 9. The Methodology utilised for this study is similar to the one used for the NSEC logistics development study in 2007 and the EWEC logistics benchmarking study in 2008 by ADB. The methodology first assesses the IMT-GT macro logistics system capability based on four dimensions: (1) Infrastructure; (2) Institutional Framework; (3) Service Providers; and (4) Shippers/Consignees. Then a corridor snapshot methodology is used to analyse IMT-GT economic corridor logistics activities in terms of time and cost. The snapshot is then used as the basis for the corridor development level assessment. 10. In order to put IMT-GT economic corridors performance in perspective, the results are compared with the NSEC and EWEC economic corridors performance. These comparisons are only indicative as each corridor is subject to different characteristics in terms of time, cost and distance. 11. From the benchmark tables hereunder, preliminary investigation indicates that direct transport cost ratio in the IMT-GT are somewhat higher than the NSEC and the EWEC. The case of the Aceh-Palembang corridor is somewhat of an outlier as it is the only domestic corridor that is within the scope of the study. Comparatively speaking this means that formalities and other fees are less than in the other non IMT-GT corridors.

12. In terms of direct transport time, the IMT-GT corridors do not seem to be as efficient as the others. A lot more time is taken during loading/unloading, administrative and customs formalities. It must not be forgotten that one of the main characteristics of the IMT-GT corridors are that short sea shipping is also involved and thus require specialised equipment and facilities. Table 1: NSEC/EWEC/IMT-GT Cost Comparison Route Physical Transportation 42% NSEC: R3W 40% NSEC: R3E Road 32% River 15% NSEC: Mekong River 56% EWEC: Danang-Tak 67% IMT-GT: Hat Yai-Medan 74% IMT-GT: Trang-Malacca 57% IMT-GT: Malacca-Dumai 100% IMT-GT: Aceh-Palembang 82% IMT-GT: Ranong-Aceh Source: The Author Table 2: NSEC/EWEC/IMT-GT Time Comparison Route Physical Transportation 80% NSEC: R3W 85% NSEC: R3E Road 32% River 54% NSEC: Mekong River 57% EWEC: Danang-Tak 25% IMT-GT: Hat Yai-Medan 51% IMT-GT: Trang-Malacca 8% IMT-GT: Malacca-Dumai 100% IMT-GT: Aceh-Palembang 35% IMT-GT: Ranong-Aceh Source: The Author

Non transport activity 58% 60% 53% 44% 33% 26% 43% 0% 18%

Non transport activity 20% 15% 14% 43% 75% 49% 92% 0% 65%

13. It is therefore important for the IMT-GT to have increased and enhanced cooperation. This is particularly true at border crossings where delays are the norms. Trade and transport facilitation can play a role in supporting economic growth within the sub-region. However, it is important for all member countries to gain benefits from logistics integration and facilitation and not the other way around. 14. Physical infrastructure is not considered as a major issue, especially between Thailand and Malaysia as there are already numerous projects in place. Infrastructure rehabilitation within Sumatra is still an important component of improved logistics in Sumatra. The linkages between Sumatra and the other IMT-GT areas also need to be accelerated in order to gain the benefits from such as growth triangle. 15. Penang and Port Klang can play a crucial role in becoming the logistics platform for the IMT-GT region with its strong connection with southern Thailand and Sumatra. The overall impression from empirical evidence is that there are 2 distinct level of logistics integration in the

IMT-GT. The linkages between Southern Thailand and North Malaysia is quite well developed and the various corridors that links both countries can be considered as a logistics corridor, almost ready to be a full fledged economic corridor with the various industrial development projects that are currently being put into place. 16. However there are still some important issues that need to be resolved, in particular those issues that are related to the current existing institutional framework. Transport rules and regulations should be relaxed in order to promote efficient cross-border logistics and transportation. This can be carried out by abolishing transportation quota between Thailand and Malaysia, particularly on perishable goods, and eliminating required upload and download practices at the cross-border areas, through mutual recognition of road vehicle registration, transport operating license, vehicle inspection certificates as well as vehicle insurance across the border. 17. On the other hand the corridors linking Malaysia and Sumatra are more on the traditional 2 or archaic side as there seems to be only a multimodal transport corridor linking these 2 areas. This does not mean that there is no logistics linkage it only means that the type of logistics services available is a reflection of the type of trade between Malaysia and Sumatra. The specificity of barter trade in Penang for trade with Myanmar or Sumatra is a good illustration. Direct linkage between southern Thailand and Sumatra are non-existent or has to be done via Penang or Port Klang in Malaysia. 18. From a logistics development perspective the challenge will be on how to increase the logistics integration of Sumatra within the existing integrated logistics linkages between Thailand and Malaysia. This can only be done if intra IMT-GT trade is supported and facilitated. It is important not to forget that logistics is a derived demand that supports local, border, regional and international trade. 19. Activities within the IMT-GT should foster on closer public and private collaboration as well as advancing the role of provincial and state governments. Coordination and support among provincial and central agencies in the IMT-GT is critical as there are still gaps in the understanding and the implementation of related IMT-GT agreements. Maybe it is also a question of capacity building from governmental officials perspective. They need more support in order to better understand how to implement the various IMT-GT agreements. Provincial governors should not solely focus on provincial issues but must be able to have the vision of linking their provinces within the IMT-GT Sub-region. 20. From the corridor analysis, there should be more institutional support for the enhanced integration of Sumatra into the IMT-GT. This enhanced integration and cooperation is important for trade between Sumatra and Malaysia but even more for trade between Sumatra and Southern Thailand. There is great potential for trade and investment between the two countries but the flows are currently still minimal and need to transit via Malaysia.

Meaning more than one mode of transport

Section 3: Proposed IMT-GT Logistics Development Policy 21. Each proposed policy measure is based on specific findings and issues discovered in the IMT-GT logistics development study. Table 3 shows the relationship between the proposed support policies and the key IMT-GT logistics issues discovered during the study. Table 3: Proposed support policies relationship with IMT-GT logistics development issues IMT-GT logistics Proposed Projects issues Trade & Transport Pilot implementation of trade and transport facilitation measures Facilitation between Hat Yai and Medan Expansion of bilateral exchange of traffic rights arrangements between Thailand and Malaysia Promotion of inter-provincial & district cooperation and coordination mechanisms (logistics facilitation) Establishment of mechanisms to improve coordination between and among central, provincial and border area officials Infrastructure Improving road connections within Sumatra Development Infrastructure Provision of maintenance funds roads in Sumatra Maintenance Capacity Building Developing logistics capacity in the IMT-GT for public and private sector Further Study on the establishment of IMT-GT logistics platforms/centres Development within the IMT-GT Studies Study on the establishment of IMT-GT logistics standard information system 22. Even if all these policies are implemented, the challenge remains on how to transform these IMT-GT corridors into fully fledged economic corridors that can attract investment and generate economic activities in remote area of the corridor such as border crossings and certain remote areas located far from the sub-regional economic hubs.

1. INTRODUCTION....................................................................... 8 1.1 Background ......................................................................... 8 1.2 Purpose of the study.......................................................... 10 1.3 Some Definitions ............................................................... 10 2. IMT-GT Trade Statistics .......................................................... 12 2.1 Thailand-Malaysia ............................................................. 12 2.2 Malaysia-Indonesia (Sumatra)........................................... 12 2.3 Thailand-Indonesia (Sumatra) ........................................... 13 2.4 Section Summary .............................................................. 13 3. Research Framework.............................................................. 14 3.1 The Macro Logistics Scorecard ......................................... 14 3.2 The Logistics Corridor Snapshot Methodology ............... 15 3.3 Corridor Development Level Assessment Framework ...... 17 3.4 Section Summary .............................................................. 17 4. Findings................................................................................... 19 4.1 Macro logistics framework assessment............................. 19 4.1.1 Infrastructure............................................................... 19 4.1.2 Institutional Framework & Shippers/Consignees ........ 19 4.1.3 Logistics Service Providers......................................... 21 4.2 Logistics Corridor Analysis ................................................ 21 4.2.1 Songkhla-Penang-Medan corridor .............................. 22 4.2.2 Trang-Satun-Perlis-Penang-Port Klang-Malacca corridor ................................................................................. 27 4.2.3 Malacca-Dumai corridor.............................................. 30 4.2.4 Aceh-Medan-Dumai-Jambi-Palembang corridor......... 32 4.2.5 Ranong-Phuket-Aceh corridor .................................... 34 4.3 Section Summary: Comparing Trade Logistics Cost & Time ................................................................................................. 36 5. Conclusions and Recommendations....................................... 38 Annex A: Logistics Infrastructure characteristics of the IMT-GT . 42 Annex B: Trade Statistics in the IMT-GT..................................... 63

1. INTRODUCTION
1.1 Background
1. There has been a shift in the spatial structure of the global economy, from the West to the Pacific Rim. The global world economy is integrated in a particular international division of labour. The dynamic of uneven development is an area that needs to be taken into account, as developing countries have different level of growth and economic development. 2. It is therefore necessary to search for a development policy on how to sustain growth and maintain competitiveness. Sustainability and competitiveness can be achieved through the understanding of the dynamics of new spaces of productions, industrial organisation, restructuring and relationships with institutional and social regulatory forms. 3. The development of logistics services and communication technologies has revolutionised production and distribution processes, and has created the global market. It is within this competitive environment that shippers and consignees require efficient logistics services that can move their goods at the right place, at the right time, in the right condition, and at the right price. 4. It is therefore of great importance that regional linkages among neighbouring countries are strengthened in the Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT) in order to facilitate trade, enhance regional economic integration and develop logistics for better access into the global market. Figure 1.1 provides a graphic illustration of the IMT-GT and its economic corridors. 5. The IMT-GT Road Map identified five economic corridors as key to strengthening regional infrastructure to support increased intra- and extra-regional trade, investment and tourism. These are the (i) Extended Songkhla-Penang-Medan Economic Corridor; (ii) the Straits of Melaka Economic Corridor; (iii) the Banda Aceh-Medan-Pekanbaru-Palembang Economic Corridor; (iv) the Melaka-Dumai Economic Corridor; (v) and, the Ranong-Phuket-Bandah Aceh Economic Corridor. The economic corridor approach has been identified as a core strategy for accelerated development of the IMT-GT, and development of these economic corridors was declared a Flagship Project of IMT-GT at the 13th Ministerial Meeting of IMT-GT in Selangor in September 2006.3

3 For IMT-GT, the corridor approach will (i) provide focus and serve as a catalyst to the development and growth
of ancillary activities and areas within and around the economic corridors, (ii) generate investment opportunities in terms of commercial activities and infrastructure support services, (iii) achieve synergy through clustering of projects within and around the economic corridors (IMT-GT Roadmap of Development, 2007)

Figure 1.1: The IMT-GT

Source: Adapted from ADB

6. A number of major infrastructure investments are already being undertaken by IMT-GT countries and more are planned. The physical connectivity between neighbouring countries will be significantly improved upon the completion of these infrastructural investments. The improving infrastructure, coupled with expanded cross-border cooperation among the IMT-GT countries, will accelerate the process of integrating the sub-regions economic corridors into the rest of the world and the global market. 7. To reap the substantial potential benefits of integrated economic corridors, IMT-GT countries need to have a clearer understanding of the opportunities and challenges that will arise from this economic integration process. Adequate transport and communications facilities are considered major determinants of trade performance and of the costs and profitability of trading internationally. Efficient logistics corridors can play an important role in increasing the subregions trade competitiveness.

1.2 Purpose of the study

8. The main purpose of this paper is to provide a logistics analysis of the IMT-GT based on empirical data gathered in the field and to propose possible policy recommendations. The paper will cover 4 issues related to the logistics analysis of the IMT-GT: Trade statistics; The methodology used for logistics analysis; The logistics analysis of each corridor within the IMT-GT; and, Possible development policy recommendations.

1.3 Some Definitions

9. Logistics covers not only the physical movement of goods (e.g., procurement, transport, consolidation, trans-shipment, storage, and packaging) but also the facilitation of this movement through the processing of documents, coordination among participants, monitoring of activities, and financing of transactions4. Closely linked to this concept of logistics is the concept of supply chain management, which is the integration of key business processes from end user through original suppliers that provides products, services, and information that add value for customers and other stakeholders (Stock & Lambert, 2001).

4 Logistics Management is that part of Supply Chain Management that plans, implements, and controls the efficient, effective forward and the reverse flows and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers requirements Council of Supply Chain Management Professionals (2004)

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10. Logistics plays a key role in national and regional economies in two significant ways. First, logistics is one of the major expenditures for businesses, thereby affecting and being affected by other economic activities. Second, logistics supports the movement of multitude of economic transactions; it is an important aspect of facilitating the sale of all goods and services. 11. Logistics is not just confined to within national borders or markets as within each country or region as there are export and import firms that face specific logistics attributes that may be different from those experienced in the domestic market. In an international logistics system, many state agencies and in particular Customs play a very important role in facilitating the efficiency of the logistics system. There is also a heavy reliance on specialized service providers such as freight forwarders or customs brokers that can facilitate the flows of goods across borders. The biggest difference between domestic and international logistics is the environment in which the logistics system operates. 12. It is important to recognise that logistics adds value to businesses by placing goods and services where they are needed to make the business successful in meeting customer needs. In this sense logistics is a derived demand of trade. However, precaution must be taken when trying to formulate logistics related policies. Logistics is a firm level concept but is considered as an important factor in sustaining a countrys or a regions competitive advantage at the same time. In most countries there is still a lack of understanding of the concept of logistics and how a logistics policy can be developed. The most common mistake seems to be where a logistics development policy is nothing more than a transport investment infrastructure plan. 13. Logistics from a policy perspective is much more than just transport infrastructure development and a holistic approach that addresses the requirements of traders needs, service providers expertise, infrastructure capacity, and institutional framework is needed to develop national or regional logistics development policy. In order to formulate an adequate logistics development policy it is necessary to develop a working definition for logistics development policy for the purpose of the study. The proposed working definition is: Logistics development policy is the process of planning, facilitating, implementing, integrating and controlling the efficient, effective flow and storage of freight, people and information within and between logistics systems, for the purpose of enhancing traders competitiveness in order to increase national and/or regional competitive advantage.

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2. IMT-GT Trade Statistics

14. The following section provides a brief description of trade statistics and patterns in the IMT-GT. The biggest problem with the available trade statistics is that they mostly provide trade value and not trade volume. Another issue is the lack of specific IMT-GT trade data. During subsequent discussion with relevant stakeholders, it was discovered that trade volumes could be somewhat estimated based on in the field knowledge of local authorities but these estimations are still somewhat arbitrary. Sumatra was relatively less problematic as official statistics also provided import and export volume. However, with regards to IMT-GT trade statistics, it seemed that it was impossible to find actual trade statistics specifically for trade within the subregion. Main direction of trades can be found with relevant IMT-GT countries being included but none that could identify specific IMT-GT origin and destination. Nonetheless, the available data does provide some indication of trade patterns within the sub-region itself (please see Annex B for more details).

2.1 Thailand-Malaysia
15. Thailand mostly exports agricultural products while Malaysia exports industrial goods to Thailand. Thailand exports more than it imports via Malaysia with rubber products being the main commodity. The rubber products that are exported from Songkhla are loaded onto seagoing vessels in Penang for their final destination. Malaysia plays an important role as a transit country for Thai export goods from the South of Thailand. 16. In comparison to Thai exports, Malaysian exports to Thailand are quite small in terms of value with most of goods being heavy industrial equipment that are utilised locally in Southern Thailand. Among ASEAN countries, Malaysia is the 2nd biggest trading partner for Thailand behind Singapore and has the highest ratio of border trade in terms of value compared to other neighbouring countries such as Myanmar, Lao PDR or Cambodia.

2.2 Malaysia-Indonesia (Sumatra)

17. Malaysia is an important trading partner for Sumatra Island. This is particularly true for the import of consumer products and industrial goods to Sumatra. Malaysia is the top ASEAN exporter into Sumatra but not the top destination for Sumatras export. Barter trade between both countries is important but barter trade data is not easily available. Malaysia mostly exports general goods, some agricultural products and used goods while exports from Sumatra ranges 5 from seafood, agricultural products to timber .

Asia Survey & Services (2004) A Study to Identify Barter Trade Opportunities in the IMT Development Cooperation, Unpublished report.

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18. Exports from Sumatra are mostly destined to the Far East and North America. Sumatras exports are mostly composed of mineral fuel, oil products, chemicals, and fertilisers. Singapore does play a role as a transhipment platform for goods originating or destined for Sumatra. Sumatras export trade with other IMT-GT countries is minimal compared to its total export volume.

2.3 Thailand-Indonesia (Sumatra)

19. Direct trade between Southern Thailand and Sumatra is almost non existent. There are trade flows between Thailand and Sumatra with fertilisers being one of the main exports from Sumatra but the data does not show the precise destination location. Import from Thailand to Sumatra is again minimal. However, this lack of data and of volume may represent an opportunity for trade as there is demand for Thai products in Sumatra and southern Thailand does need Sumatras traditional export commodities such as mineral fuel and fertilisers.

2.4 Section Summary

20. In the IMT-GT countries Malaysia has substantial trade with both Thailand and Sumatra. There is quite an important flow of goods between Thailand and Malaysia. This trade is bilateral, cross border and transit as well with a number of goods from southern Thailand utilising Penang Port as port of loading to other markets. There is also strong level trade between Malaysia and Sumatra with Port Klang playing an important role. However, trade between Thailand and Sumatra is not very developed as Thailand only plays a marginal role in the Island export and import trade. This trade linkage between southern Thailand and Sumatra must be further encouraged. 21. It is interesting to note that Malaysias role in the IMT-GT is very central in the flow of trade within the sub-region. Thai exporters from the south of the country use Malaysia as a transit platform while Sumatra also sees Malaysia as a very important trading partner. However, Singapore is shown to compete up to a certain extent with Malaysia with regards to transit goods. 22. IMT-GT economic hubs can be determined based on their local economic activity as well as based on export/import trade value and volume. These preliminary criteria can help in the identification of potential IMT-GT economic hubs. 23. In Thailand, potential economic hubs for the 5 IMT-GT corridors, based on these criteria, are: Hat Yai/Songkhla, Trang, and Phuket. In Malaysia, the potential economic hubs are: Penang, Port Klang and Malacca while in Sumatra the potential economic hubs are: Bandah Aceh, Medan, Dumai, and Palembang.

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3. Research Framework
24. In order to formulate adequate and relevant IMT-GT logistics development policies, a specific methodology is needed. The purpose of the methodology is first to describe the current logistics situation also known as the AS IS situation within the IMT-GT and then explore possible development policies that may lead to the best TO BE situation.

3.1 The Macro Logistics Scorecard

25. A national or regional logistics system scorecard is based on the 4 dimensions of a logistics system. These 4 dimensions can be utilised as a starting point in terms of framework that is needed for macro evaluation purposes. The four components of a macro logistics system are: infrastructure, institutional framework, service providers and traders as represented in the figure hereunder. Figure 3.1: Macro Logistics Assessment Framework

Source: The Author 26. The macro assessment is based on empirical and secondary data for the 4 dimensions in the IMT-GT. A number of key performance indicators have been identified to compare and contrast the logistics capability of IMT-GT member countries. The assessment provides an overall picture of IMT-GT member countries logistics capability based on these 4 distinct dimensions.

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27. However, there is also a need to be able to analyse the logistics capability of the 5 identified economic corridors as the macro assessment cannot provide corridor level details. This is the rationale behind the development of the corridor snapshot methodology.

3.2 The Logistics Corridor Snapshot Methodology

28. A corridor snapshot methodology need be utilised in conjunction with the overall macro assessment in order to provide an indication of specific logistics system performance. This is particularly true when assessing the performance of a logistics corridor. 29. This snapshot methodology can be done through the use of a detailed logistical activity map of specific products moving within a given logistics corridor. The following table is a template for the data that is needed to draw the logistics cost and time model. This table is similar to a simplified process activity map. Table 3.1: Template for simplified process activity map Activity No. 1 2 3 Source: The Author 30. When the data is collected for a particular product along a particular corridor, the data can then be graphically illustrated in a logistics corridor cost and time model. This model will help describe the cost and time components of movement from origin to destination by each available route and mode as well as to illustrate the delays at borders or other inspection points up to the point of destination within a given logistics corridor. 31. The cost and time model, which is presented here, includes both transport (road, rail, inland waterway, sea) and intermodal transfer (ports, railfreight terminals, inland clearance depots) as cost components (See Figure 3.1). The model assumptions are based on the premise that unit costs of transport vary between modes, with the steepness of the cost curves reflecting the fact that, for volume movements, sea transport should be the cheapest per tonne-km, road transport should normally be the most expensive (at least over a certain distance), and waterway and rail costs should be intermediate. At ports and inland terminals, a freight handling charge is levied without any material progress being made along the supply chain; a vertical step in the cost curve therefore represents the costs incurred there. Average Time Range Of Time Average Cost Range Of Cost Actors Documents/ Operations Distance (cumulative)

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Figure 3.1: Cost-model for multimodal transport

Unloading Costs Transhipment to truck Road

Intermodal transfer, road to rail Sea Rail Road Origin ICD Sea Port Sea Port Port handling charge

Inland Waterway

Transhipment to barge

River Terminal

Destination Distance

Source: The Author 32. The height of the step is proportionate to the level of the charge or the time taken. Depending on the corridor chosen, the combination of modes, cost and time will be different. The data utilised when creating this graphical model can be based on cost/quotes or transit time components that are obtained during interviews with transit and transport service providers, traders and governmental officials. This data are not usually publicly available but they are of critical importance when assessing logistics corridor efficiency. 33. A unit of analysis must be agreed upon in order to better illustrate the situation in the corridor. Data on transit times offered for each transit route and the variation in delays at critical nodal links must also be obtained from the same group of respondents. The minimal amount of information needed to build the graphical model includes: The origin and destination of the cargo; The full routeing from origin to destination, with and indication of the places where the cargo is essentially stationary (such as border crossings and points of intermodal transfer); Mode of transport for each leg; Distances involved for each leg; Transit time for each leg (in hours or days); and Cost or quotes for each leg.

34. The cost and time data gathered is then plotted against the distance for each leg of the journey. In the case of costs or quotes, the figure will graphically show the relative cost of each leg (or mode, where applicable), as well as indicate the approximate proportion of non-transport costs in relation to transport costs. Further information, for example, a breakdown of costs at

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border crossings or ports, can highlight areas for action by policy makers. Similarly, by plotting time against distance, the relative speed of transit transport for each leg (or mode) can be compared, and the bottlenecks at transhipment points can be identified. As a rule of thumb; the higher the vertical step the more likely that the border crossing or the nodal link is a bottleneck in the logistics corridor.

3.3 Corridor Development Level Assessment Framework

35. After the chosen corridor has been assessed based on the cost and time dimension, it is then necessary to clarify the corridors developmental level. This clarification enables policy makers to better understand the corridor they are dealing with and what should be priorities in terms of development. The objective is to reach level 4 which is a full fledged economic corridor. Stage Level 1 Level 2 Corridor Transport Corridor Multimodal Transport Corridor Definition Corridor that physically links an area or region Corridor that physically links an area or region through the integration of various modes of transport. Corridor that not only physically links an area or a region but also harmonise the corridor institutional framework to facilitate the efficient movement and storage of freight, people and related information. Corridor that is able to attract investment and generate economic activities along the less developed area or region. Physical linkages and logistics facilitation must be in place in the corridor as a prerequisite.

Level3

Logistics Corridor

Level 4

Economic Corridor

Source: The author 36. This development level framework will be used in the assessment of the 5 main corridors in the IMT-GT. The assessment is based on the outcome of the corridor snapshot methodology. The different level of corridor development will provide the basis for classification of these corridors.

3.4 Section Summary

37. The purpose of this section was to propose an overall methodology to support the formulation of logistics development policies. The methodology is based on an in-depth understanding of the AS IS situation of the logistics system of a country or a region. This AS IS situation can be measured based on a macro logistics scorecards that is based on the

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performance of four logistics components: (1) Shippers & Consignees; (2) Logistics Service Providers; (3) Institutional Framework; and (4) Infrastructure. 38. However, the data for this logistics scorecard may not fully describe particular logistics corridors. It was therefore proposed to utilise a corridor snapshot methodology to graphically illustrate logistics corridors based on logistics corridor activity mapping. The proposed methodology can clearly illustrate where the strong and weak points within any logistics corridor. This would help in the formulation of logistics development policy that is suited to the logistics system of the country, the region or the corridor. A level assignment framework to represent corridor development level is also provided. The assignment is based on the corridor snapshot methodology output.

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4. Findings
39. The purpose of this section is twofold. The first objective is to provide an overview of the macro-logistics framework while the second objective relates to the in-depth analysis of the 5 IMT-GT corridors.

4.1 Macro logistics framework assessment

40. The macro logistics system can be assessed based on four dimensions. However, there are still some dimensions that overlaps such as the institutional framework and the cost as well as the time related to export and import procedures. Logistics service providers are the operators that operates based on the existing infrastructure (hardware) and institutional framework (software).

4.1.1 Infrastructure
41. The logistics infrastructure in the IMT-GT is considered adequate for the present volume of freight and vehicle moving along the main economic corridor with some reservation for the Sumatra domestic corridor. However, this does not mask the reality that infrastructure in certain segment of the IMT-GT is still lacking. Infrastructure will need to be harmonised to facilitate the movement of goods and people along the corridor (Please see Annex A for a more detailed description). Table 4.1 presents an overall assessment of the infrastructure in the IMT-GT based on existing infrastructure characteristics. Table 4.1 IMT-GT logistics infrastructure characteristics Road Port IWT Good Fair/Good Fair Malaysia Good/Fair Fair Fair Thailand Fair Fair Fair Indonesia Source: Compiled from industry data

Airport Good/Fair Good/Fair Fair

Railway Good Fair/Poor Fair/Poor

4.1.2 Institutional Framework & Shippers/Consignees

42. The 3 IMT-GT countries are part of ASEAN and the ASEAN Free Trade Agreement. It is expected that trade rules and procedures to and from the 3 countries should in theory not be so different. This is clearly not the case as illustrated in these comparative tables of export and import cost of the 3 IMT-GT countries. The described export and import cost does not include the cost of freight.

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43. The amount of time taken and cost involved are clearly important burden for the shippers/consignees. This directly affects their competitiveness, not only in connecting to regional IMT-GT market or ASEAN but also to the global market. 44. The cost and time represented in the tables hereunder are also a reflection of complicated and cumbersome procedures as well as in certain places weak infrastructure. Document preparation is the most time consuming activity as well as the most expensive. The longer it takes, the more expensive it becomes for the shipper/consignee. This in turn affects the competitiveness of countries in the IMT-GT as well that of the region. Table 4.2: IMT-GT export cost and time comparison per TEU Country Nature of export procedure Document Preparation Indonesia Customs clearance & technical control Port & terminal handling Indonesia Export Total Document Preparation Malaysia Customs clearance & technical control Port & terminal handling Malaysia Export Total Document Preparation Thailand Customs clearance & technical control Port & terminal handling Thailand Export Total Source: Adapted from www.doingbusiness.org

Days 14 2 2 18 10 2 3 15 9 1 4 14

Cost (US$) 210 169 165 544 120 40 107 267 270 50 75 359

45. Loading and unloading will usually take longer than crossing a land border per se. In fact the Thai-Malay land border crossing performance should be taken as an example of best practice in terms of efficiency and cost even though improvement is possible. Import into Indonesia is characterised by long lead time, exports are somewhat shorter and should reduce the strong imbalance between actual transport time and non transport activity if the study explored the traffic of the various IMT-GT corridors from an Indonesian export perspective. Countries in the IMT-GT subregion facilitate export more than import and that is reflected in their import procedures. Table 4.3: IMT-GT import cost comparison per TEU Country Nature of import procedure Document Preparation Indonesia Customs clearance & technical control Port & terminal handling Indonesia Import Total Document Preparation Malaysia Customs clearance & technical control Port & terminal handling Malaysia Import Total Document Preparation Thailand Customs clearance & technical control

Days 15 4 6 25 9 1 2 12 8 2

Cost (US$) 210 125 165 500 72 41 107 220 300 66

20

Port & terminal handling Thailand Import Total Source: Adapted from www.doingbusiness.org

2 12

200 566

46. These discrepancies in trading and customs procedures between IMT-GT countries are one of the major obstacles to the integration of the sub-region. Malaysia seems to be the most open economy followed by Thailand and Indonesia. This perception is also confirmed in the analysis on the specific IMT-GT corridors were the Malaysian context is the most facilitating for trade and logistics followed by Southern Thailand and Sumatra. Harmonisation and simplification is needed to enhance the integration of the subregion.

4.1.3 Logistics Service Providers

47. Local logistics service providers in the IMT-GT are SMEs with limited capital and knowhow. These local providers are under much competition from major courier companies as well as from local manufacturers who prefer to in-house their own logistics. Currently there are still gaps in logistical services provided within the IMT-GT. Table 4.4: Logistics services provided in IMT-GT countries Logistics Services Indonesia Malaysia Provision of Domestic Containers Yes Yes Track & Trace capability No Partial Distribution centers Partial Partial Cross docking facilities Yes Partial National booking centers Partial No Standard Service Contract Partial Partial House B/L Yes Yes Multimodal Transport Document Yes Yes Forwarding Industry concentration Partial No Concentration of foreign LSP Yes Partial Trucking industry concentration Yes Partial Truck leasing Yes Partial Source: Adapted from ASEAN logistics sector integration study (2006)

Thailand Yes Yes Partial Partial Partial Partial Partial Partial No Partial No No

48. It is interesting to note that if all the infrastructures as well as the regulatory framework is in place then there will be more entry opportunities for foreign global service providers as local firms do not have the capital nor the network to compete with these global companies. The strong trait of the local service provider industry is its flexibility capability on a localized scale

4.2 Logistics Corridor Analysis

49. The following section is a description of the 5 IMT-GT corridors based on a logistics perspective. The cost and time is based on quotes, estimate provided by local service providers

21

and shippers/consignees plying their trade within the IMT-GT. These numbers and figures are solely for illustrative purpose to support intellectual discussions on IMT-GT issues and to pinpoint where the bottlenecks are.

4.2.1 Songkhla-Penang-Medan corridor

50. The Songkhla to Penang is a very important corridor for Thai exporters located in the South of the kingdom. This is particularly true for those exporters who are exporting rubber related products as well as those in the agro-industry. Exporters and manufacturers are well served by numerous local logistics service providers. Many of their local shippers/consignees are traders located in Hat Yai that export rubber and para wood via Penang in Malaysia. Not only are Thai logistics companies providing services up to Penang port but they are also acting as shipping agents for certain shipping lines based in Penang. This enables them to get access to empty containers in Penang, move them to the south of Thailand for stuffing and re-export via Penang port. Their biggest complaint is currently the high price of fuel, especially compared to Malaysian prices as well as the lack of opportunities for Thai to invest and operate in Malaysia, especially in logistics related services. The Thai excise department also forbids Thai trucks to refuel in Malaysia. There are still some minor operational problems for border crossings but many issues have been resolved. Customs facilities may need to be expanded as during peak hours congestion is becoming an issue as delays become inevitable. 51. The local entrepreneurs are feeling that they are being left to their own device. This is particularly true when national leaders meet, then come up with grand statements and the implementation is left to permanent government officials and business leaders from the IMT-GT countries. 52. It takes around 1 to 1 hour to go from Hat Yai to Dan Nok. Both borders are used for the transit of freight but the most favoured route is currently the one via Dan Nok & Changloon while the more traditional border crossing is the one at Padang Besar. According to local sources, most Thai trucks arrive at the border in the morning in order to be cleared into Malaysia in the afternoon. 53. In Penang, it was confirmed that traditionally, the export of Thai rubber and para wood from the south of Thailand is done via Penang Port. However, their current biggest worry is competition from port Klang in attracting the said Thai cargo. There is a terminal, called the Prai terminal that is specifically dedicated for barter trade with cargo to and from Sumatra and Myanmar. 54. Wan Hai Line is currently one of the biggest movers of containers for Thai southern exporters. The demand from southern Thailand is so strong that there is a strong imbalance with many empty containers being carried from Penang port into Thailand for stuffing and re-export. The IMT-GT is not currently considered as a major driver of growth for local Thai businesses as the focus is solely on the Hat Yai to Penang linkage with third countries.

22

55. Cargo flows within the IMT-GT region are mostly concentrated between southern Thailand and North Malaysia while minimal with Sumatra. The estimate is that around 12% of Penang cargo throughput originates from or is destined for the Penang area but Penang port is still congested and not well managed from the perspective of some users. 56. In Belawan port one of the biggest concerns is the access road to and from the port as the infrastructure is in a poor state and cannot cope with the number of trucks. Another issue that is worrying is the number of overlapping agencies with jurisdiction over export and import cargo (which also depends on the type of commodity). It is not uncommon to find up to 12 overlapping agencies with jurisdiction over a particular commodity. The container terminal in Belawan caters both for domestic and international freight. The ratio is currently estimated at 50% for each. Most of the international freight is transport via Singapore while Port Klang only represents 2 to 5%. There is only one weekly feeder service between Belawan and Penang. It is interesting to note that the port operator in Belawan was unable to identify the feeder link with Penang. However, most of the direct traffic is done via small wooden boats that use the bulk (Prai) terminal. These small boats have a natural advantage as pilotage is not compulsory for them. 57. There use to be many wooden vessels providing such service but now the fleet has been greatly reduced only. Most of the commodities being moved are cabbages/coffee and animal feed from Belawan to Penang and from Penang to Belawan, mostly consumer products while there are some shallots from northern Thailand (seasonal products). There used to be a ro-ro operator between Belawan and Penang but now has moved to Aceh due to insufficient demand. On average, at Belawan, it takes 1 day to stuff or un-stuff a container at the container freight station (CFS). The trucking cost between Belawan and Medan has been quoted at USD 100 per TEU with an average transit time of 1 hour. 58. However, it is not unusual that the trucking time is often more than 2 hours between Belawan and Medan because of transportation problems such as traffic jams and the trucks own bad conditions. Export and import procedures from Belawan port are still expensive and complicated with missing documents creating delay in the process itself. The export process usually takes 2-3 days until the commodities can leave Belawan port and can be as expensive as US$ 170 per container (or US$ 250 if fumigation is needed). 59. The cost to actually transport a container between Belawan and Medan is less than the actual cost of processing the entry of the imported goods. The most important non transport related cost is the Customs license. If the goods need to be quarantined then non transport related cost can be a high as twice the transport cost. Speed money or tips do not seem so high compared to all the other related costs. Import cost is usually much more expensive than export cost at an average of US$ 250 to 300. 60. Table 4.5 provides a description of the cost and time increases within the Hat Yai to Medan corridor. Strangely enough the cost of transport by sea is higher than the cost of the transport by road. This is probably due to the limited number of sailing between Belawan and Penang port. There is only one weekly service. The cost between Penang and Belawan is even

23

higher by over 100 US$/TEU than the cost between Port Klang and Belawan. This does pose a dilemma as it seems that it would be preferable to utilise the Port Klang-Belawan link instead.

24

Table 4.5: Cost and time data on the Hat Yai-Medan corridor Location/Activity Transport Cost Mode ($/ton) Hat Yai to Sadao Road 2.25 Sadao 1.83 Export processing fee Bukit Hitam 2.22 Import processing fee 1.83 Transloading Bukit Hitam to Penang port 2.90 Local Malay toll fee 0.45 Penang-Prai terminal 0.46 General charge 1.16 Wharfage handling charge 0.15 Surcharge for loose cargo Penang to Belawan Sea 20.00 Belawan port 2.42 Unloading/Loading 4.63 Import processing fee Belawan port to Medan Road 5.55 TOTAL 45.85 Source: compiled from industry

Time (hrs) 1.5 0.5

Distance (km) 60 N/A N/A

0.5 3.5 N/A 6

150 N/A N/A

15 8 48 1 85

260

11 481

61. Figure 4.1 is a graphical illustration of the door to door cost on this particular corridor. It is interesting to note that the cost of border crossing represent almost 23% of the door to door cost while physical transport is at around 67%. Figure 4.2 is a description of the total door to door transit time. The longest delay is at the port of Belawan dues to relatively long import procedures. Border crossing time at the Thai-Malay border is seen as more seamless. Figure 4.1: Hat Yai to Medan Cost Model

Source: The Author

25

Figure 4.2: Hat Yai to Medan Time Model

Source: The Author 62. The overall impression from following the Songkhla-Penang-Medan corridor is that there are 2 distinct level of logistics integration. The linkages between Songkhla and Penang are quite well developed while on the other hand the links between Penang and Medan are more on a traditional basis or archaic. This does not mean that there is no logistics linkage it only means that the type of logistics services available is a reflection of the type of trade between Penang and Sumatra. The direct linkage between southern Thailand and Sumatra are almost non-existent or has to be done via Penang or Port Klang. Table 4.6 assesses the development level of the Hat Yai to Medan corridor and provides a description of the corridor level. This table is quite interesting as the overall assessment is only equivalent to a level 2 corridor which is a multimodal transport corridor. The weakest point in this corridor is the weak physical linkages between Penang and Belawan port. This seriously hinders the integration of this IMT-GT corridor, even though within each respective IMT-GT countries there are domestic corridors that are at a logistics and almost economic corridor development level. Table 4.6: Hat Yai to Medan Corridor Development Level From To Hat Yai Sadao Sadao Bukit Hitam Bukit Hitam Penang Penang Belawan Belawan Medan Overall level

Level 3 2/3 3/4 2 3 2

26

Source: Compiled from industry sources

4.2.2 Trang-Satun-Perlis-Penang-Port Klang-Malacca corridor

63. The building of physical connectivity has been the central means for promoting closer economic and social linkages in the IMT-GT. The efforts along this particular corridor have been multi-modal with land as well as coastal linkages. The development of road and bridge networks between Thailand and Malaysia has facilitated better movement of goods and people across the border. Furthermore, supporting infrastructures such as CIQs along Thailand and Malaysia border have also been upgraded to facilitate more movement of goods and passengers. 64. There has also been much progress in enhancing sea transport linkages between southern Thailand and northern Malaysia. Traffic growth between Kantang Port in Trang Province of Thailand and Penang Port of Malaysia averaged 37 percent per year since Trang Province became a member of IMT-GT in 2004. Plans for new port construction and expansion will help boost regional economic growth in the southern part of Thailand. 65. Cross-border trade and investment flow between Southern Thailand and Malaysia has been traditionally strong particularly in agriculture where joint ventures for commercial production have been set up to tap economic complementarities. Thailand has established an ad hoc special development zone enjoying tax holidays, freer labour mobility and nearly zero fees to enhance the investment climate in its three southernmost provinces. 66. Kantang port has played a key role is bridging the connection between Trang province and Penang, and in particular Penang port. This has offered a modal alternative for shippers based in Trang for access to mainline vessels in Penang. The Kantang express provides vessels of up to 160 TEU between Kantang and Penang on a twice weekly service basis. Table 4.7 describes in details the cost and time component of this particular corridor. Table 4.7: Cost and Time Data between Trang and Malacca Location/Activity Transport Cost Mode ($/ton) Trang to Kantang port Road 2.25 Kantang port unloading/loading N/A 1.50 Thai export processing fee N/A 1.83 Kantang to Penang Sea 12.00 Penang port loading/unloading N/A .20 General transshipment charge 1.00 Wharfage Import processing fee N/A 2.22 Penang to Malacca Road 5.40 26.40 TOTAL Source: Compiled from Industry Time (hrs) 1 24 0.5 24 Distance (km) 18 N/A 225 N/A

6 0.5 8 64

N/A 420 663

27

67. Figure 4.3 is a description of the door to door cost on this corridor. Transportation cost has a ratio of 74% of the total cost with sea transport between Kantang to Penang taking up to 45% of the total transport cost. Figure 4.3: Trang to Malacca Cost Model

Source: The Author 68. In terms of distances, sea transport cost is quite expensive but this is also a reflection of the limited traffic that exists between Kantang and Penang. It is true that there are more and more containers moving between both ports but there is no critical mass yet. Figure 4.4 describes the door to door transit time. The longest delay occurs at Kantang port in Thailand. The reasons behind the delays come from the fact that the port is not a fully containerized port with all the necessary equipments for the efficient loading/unloading of containers. Figure 6.4: Trang to Malacca Time Model

Source: The Author

28

69. The Malaysian part of this corridor mirrors the Malaysian Northern Corridor Economic Region (NCER) development project. The Malaysian Government will provide an environment conducive to economic development, by combining both physical infrastructure, such as irrigation, utilities and transportation, as well as soft infrastructure such as human capital, funding, incentives and an improved public service delivery system. The focus shall be on improving national and regional connectivity; strengthening the utilities infrastructure to support economic growth; providing targeted, competitive incentives that would encourage businesses to invest in the promoted areas; and establishing a dedicated organisation to drive and coordinate the implementation. 70. In Malaysia, the rates to be charged for the carriage of goods for hire and reward are fixed by the government as per the Fifth Schedule Fees, Fares and Rates. Trucking rates are based either on distance or on metric tons per hour whichever is the greater. The table 4.8 hereunder provides the fees guideline for haulage in Malaysia as published by the Malaysian government. Table 4.8: Malaysian Container Haulage Fee Container Haulage Rate Short haul (96 km from the port zone For the first 23 km or part thereof-0.05 US$ per for one TEU) metric ton-km laden For every km up to 32 km or part thereof-0.04 US$ per metric ton-km laden For every km or part thereof thereafter-0.02 US$ per metric ton-km laden Long Haul (exceeding 96 km from the For the first 60 km or part thereof-0.06 US$ per port zone for one TEU) metric ton-km laden For every km up to 60 km or part thereof-0.04 US$ per metric ton-km laden For every km or part thereof-0.02 US$ per metric ton-km laden Forty footer (FEU) container rate is twice the TEU container rate Other Haulage Rate For consignment exceeding 60.48 kg 0.05 US$ per metric ton-km or 1.6 US$ per metric ton-hour, whichever is greater. For consignment of less than 60.48 kg 0.04 US$ per metric ton-km or 1.6 US$ per metric ton-hour, whichever is greater For exclusive use of the vehicles 0.05 US$ per metric ton-km or 1.6 US$ per metric ton-hour based on full rate capacity regardless of actual load Source: Compiled from Industry 71. Container haulage fees in Malaysia is higher than in Thailand but the operating cost may be different as fuel price is subsidised in Malaysia while in Thailand, fuel is based on the market prices. It is interesting to note that Malaysian truckers consider that the Thai government supports the Thai trucking industry while the Thai truckers believe that the Malaysian

29

government is constantly helping the Malaysian trucking industry. There is a clear lack of information and understanding on both side of the border. 72. Table 4.9 is an analysis of the corridor development level on the Trang to Malacca corridor. There is high corridor development level in Southern Thailand and Northern Malaysia, however, the weakest link in this corridor is the Kantang to Penang sea link which could be improved in terms of frequency and efficiency. Table 4.9: Trang to Malacca Corridor Development Level From To Trang Kantang Kantang Penang Penang Malacca Overall level

Level 3 1 3/4 1

73. This does not mean that the Kantang to Penang is a bad or weak link. It only means that based on the existing freight volume between both ports, there is sufficient level of service but there is not yet enough integration to move to a higher corridor development level.

4.2.3 Malacca-Dumai corridor

74. This corridor is the shortest corridor within the IMT-GT. There are no regular cargo vessels plying their trade on this particular route. However, there are some small wooden boat operators that provide some freight services. Goods from Dumai are mostly vegetables or fishes while goods from Malacca are mostly sugar, flour and other consumer products. From a logistics perspective the integration is very limited for freight activities as there are no real major commodity flows between both locations. There is however, a constant flow of passenger traffic between both locations with at least daily ferries. Table 4.10 provides cost and time information between Malacca and Dumai. Table 4.10: Cost and Time Data between Malacca and Dumai Location/Activity Transport Cost Mode ($/ton) Malacca port N/A 0.46 General charge 1.16 Wharfage handling charge 0.15 Surcharge for loose cargo Malacca to Dumai port Sea 12 Lhokseumawe port N/A 2.42 Unloading/Loading 4.63 Import processing fee TOTAL 20.82

Time (hrs) 6

Distance (km) N/A

6 8 48 68

106 N/A

106

30

75. The major activity along this corridor is really the movement of people between Dumai and Malacca. Ferries operate from the following Port Klang, Port Dickson and Malacca in Malaysia. 76. Figure 4.5 and Figure 4.6 illustrate both port to port cost and time. The cost and time are theoretical as there is no real cargo movement between both ports. Figure 4.5: Malacca to Dumai Cost Model

Source: The Author Figure 4.6: Malacca to Dumai Time Model

Source: The Author

31

77. Table 4.11 is an analysis of the corridor development level between Malacca and Dumai. Currently there is just a physical sea linkage between both ports. There is no scheduled shipping line and the port of Malacca is not adequately equipped to handle with containers. Table 4.11: Malacca to Dumai Corridor Development Level From To Malacca Dumai Overall level

Level 1 1

4.2.4 Aceh-Medan-Dumai-Jambi-Palembang corridor

78. The Bandah Aceh to Palembang corridor is the only domestic corridor in the IMT-GT. However, this does not mean that there is actually freight moving between Bandah Aceh and Palembang. Freight flows are concentrated between Bandah Aceh and Medan. Medan is the main trading hub for the north Sumatra region. Most of the imported goods from foreign countries transit via the port of Belawan as ports in Aceh have limited capability for containerised freight. 79. This corridor is characterised by the poor conditions of the roads in certain areas and is in need of rehabilitation and upgrading. There is a plan to build a new highway between Aceh and Medan in 2009. Table 4.12: Cost and Time Data between Aceh and Palembang From To Mode Cost Time (hrs) (US$)/ton Aceh Medan Road 53 12 Medan Dumai Road 56 11 Dumai Jambi Road 41 9 Jambi Palembang Road 30 8 TOTAL 180 40 Source: Compiled from Industry

Distance (km) 627 595 438 317 1,977

80. The cost and time obtained were based on quotes provided by local freight forwarders. These forwarders acknowledged that cost and time may vary depending on the commodity carried as well as the volume. These service providers were also the first to explain that there are no traffic flow between Aceh and Palembang. They stated that traffic moved on shorter distances, Medan to Aceh, Dumai to Pekan Baru which is the provincial capital of Riau province. 81. Figure 4.7 and Figure 4.8 represents the cost and time increase from Aceh to Palembang. The points in the graphs are there to illustrate the location of the main cities in the Aceh to Palembang corridor. There are no vertical steps in the graphical models as it is assumed that the trucks have 2 drivers for the journey. In reality it may take longer than the 40 hour transit time between both locations. A journey of 2 days (48 hours) would be within the capability of one driver.

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Figure 4.7: Aceh to Palembang Cost Model

Source: The Author Figure 4.8: Aceh to Palembang Time Model

Source: The Author 82. Table 4.13 is an analysis of the corridor development level between Bandah Aceh and Palembang. Currently there is just a road link within this corridor. There is no railway connection and the road infrastructure in certain sections is lacking. However, since this is a domestic corridor, there is no issue related to import and export regulations. The development

33

level of the corridor is therefore higher than that of the other international corridors but this does not mean that this is the most advanced or developed corridor. It means that there is physical linkage within the corridor as well as a common institutional framework that regulates the movement of freight. Table 4.13: Aceh to Palembang Corridor Development Level From To Banda Aceh Medan Medan Dumai Dumai Jambi Jambi Palembang Overall level

Level 3 3 3 3 3

4.2.5 Ranong-Phuket-Aceh corridor

83. This corridor is the latest economic corridor identified within the IMT-GT. Currently there are no cargo movement linking Ranong province in Thailand to Aceh in Sumatra via Phuket. However, there is interest from the private sector to provide some maritime connections between Phuket and Aceh based on barges/lighters. The maritime links are not yet settled as Sabang port north of Aceh is positioning itself as a key transhipment hub with the support of Dublin port. 84. Trucking operators providing services between Ranong and Phuket are scarce as commodity flows between both provinces are limited. The current logistics cost and time details from Ranong to Phuket have been estimated in the table 4.14 hereunder. The figures are based on estimates provided by the industry. Theoretically it is possible for vessels to provide services between Phuket and Sabang port but since Sabang port is currently being earmarked as a deep sea port with investment coming in from Dublin port, it is preferable to consider the port of Lhokseumawe instead. The port of Lhokseumawe is more geared towards regional freight. Table 4.14: Cost and Time Data between Ranong and Aceh Location/Activity Transport Cost Mode ($/ton) Ranong to Phuket (via Takaopa-KaolakRoad 16 Tublom-Kokegloy) Phuket Port Charges N/A 2 Phuket export customs N/A 1.83 Phuket to Aceh Province (Lhokseumawe) Sea 14 Lhokseumawe port 2.42 Unloading/Loading 4.63 Import processing fee Lhokseumawe port to Banda Aceh Road 17.35 Total 58.23 Source: compiled from industry

Time (hrs) 4 6 0.5 26 8 48 4 96.5

Distance (km) 280 N/A N/A 315

205 800

34

85. Figure 4.9 and 4.10 are graphical illustrations of the door to door cost and transit time between Ranong and Bandah Aceh. Figure 4.9: Ranong to Bandah Aceh Cost Model

Source: The Author Figure 4.10: Ranong to Bandah Aceh Time Model

Source: The Author

35

86. It is shown in the figures hereover that border crossing is still one of the main bottlenecks to the integration of the Ranong to Bandah Aceh corridor. A common feature of all the international corridors is that export is easier and less time consuming than import. 87. Table 4.15 is an analysis of the corridor development level between Ranong and Bandah Aceh. Currently there is no traffic between both locations but it is hoped that in the future there will be a link. The missing link is the maritime link between Phuket and Bandah Aceh. If theres sufficient traffic then there might be operators. This is not the case at the present moment. Table 4.15: Ranong to Bandah Aceh Corridor Development Level From To Ranong Phuket Phuket Lhokseumawe Lhokseumawe Bandah Aceh Overall level

Level 3 1 3 1

88. Even if there is a physical sea link between Phuket and Lhokseumawe, there is no traffic between both ports. This corridor is only as strong as its weakest link and its weakest link is the maritime leg.

4.3 Section Summary: Comparing Trade Logistics Cost & Time

89. The North South Economic Corridor logistics development study in 2007 and the EWEC logistics benchmarking study in 2008 by ADB used a similar methodology to investigate corridor logistics activities in terms of time and cost. The snapshot model as well as the corridor development level assessment was also applied and thus can be used for comparison with the various IMT-GT corridors in terms of physical transportation activities versus the non direct transport activity (loading/unloading, border crossing and customs clearance) as presented hereunder. 90. These comparisons are only indicative as each corridor is subject to different characteristics in terms of time, cost and distance. It must be noted that the NSEC logistics study was conducted when the route was physically only 80% complete. The transit time for the NSEC is more than 70 hrs for the 1,800 km long journey. Therefore, the following benchmarking exercise is only preliminary.

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Table 4.16: NSEC/EWEC/IMT-GT Cost Comparison Route Physical Transportation 42% NSEC: R3W 40% NSEC: R3E Road 32% River 15% NSEC: Mekong River 56% EWEC: Danang-Tak 67% IMT-GT: Hat Yai-Medan 74% IMT-GT: Trang-Malacca 57% IMT-GT: Malacca-Dumai 100% IMT-GT: Aceh-Palembang 82% IMT-GT: Ranong-Aceh Source: The Author Table 4.17: NSEC/EWEC/IMT-GT Time Comparison Route Physical Transportation 80% NSEC: R3W 85% NSEC: R3E Road 32% River 54% NSEC: Mekong River 57% EWEC: Danang-Tak 25% IMT-GT: Hat Yai-Medan 51% IMT-GT: Trang-Malacca 8% IMT-GT: Malacca-Dumai 100% IMT-GT: Aceh-Palembang 35% IMT-GT: Ranong-Aceh Source: The Author

Non transport activity 58% 60% 53% 44% 33% 26% 43% 0% 18%

Non transport activity 20% 15% 14% 43% 75% 49% 92% 0% 65%

91. From the benchmark tables, preliminary investigation indicates that direct transport cost ratio in the IMT-GT are somewhat higher than the NSEC and the EWEC. The case of the AcehPalembang corridor is somewhat of an outlier as it is the only domestic corridor that is within the scope of the study. Comparatively speaking this means that formalities and other fees are less than in the other non IMT-GT corridors. 92. In terms of direct transport time, the IMT-GT corridors do not seem to be as efficient. A lot more time is taken during loading/unloading, administrative and customs formalities. It must not be forgotten that one of the main characteristics of the IMT-GT corridors are that short sea shipping is also involved. 93. It is important for the IMT-GT to have increased and enhanced cooperation. This is particularly true at border crossings when delays are the norms. Trade and transport facilitation can play a role in supporting economic growth within the sub-region. However, it is important for all member countries to gain benefits from logistics integration and facilitation and not the other way around.

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5. Conclusions and Recommendations

94. Logistics is a relatively new development policy in the IMT-GT. It is acknowledged that having an efficient logistics system in the IMT-GT subregion can help support the existing corridors economic integration. 95. Infrastructure is not considered as a major issue, especially between Thailand and Malaysia as there are already numerous projects in place. Infrastructure rehabilitation within Sumatra is still an important component of improved logistics in Sumatra. The linkages between Sumatra and the other IMT-GT areas also need to be accelerated in order to gain the benefits from such as growth triangle. 96. Penang and Port Klang can play a crucial role in becoming the logistics platform for the IMT-GT region with its strong connection with southern Thailand and North Sumatra. The overall impression from empirical evidence is that there are 2 distinct level of logistics integration in the IMT-GT. The linkages between Southern Thailand and North Malaysia is quite well developed and the various corridors that links both countries can be considered as a level 3 corridor, almost ready to be a level 4 corridor with the various industrial development projects that are currently being put into place. 97. However there are still some specific issues that need to be resolved, in particular those issues related to the current existing institutional framework. Transport Rules and Regulations should be relaxed in order to promote efficient cross-border logistics and transportation. This can be carried out by abolishing transportation quota between Thailand and Malaysia, particularly on perishable goods, and eliminating required upload and download practices at the cross-border areas, through mutual recognition of road vehicle registration, transport operating license, vehicle inspection certificates as well as vehicle insurance across the border. 98. On the other hand the corridors linking Malaysia and Sumatra are more on the traditional or archaic side as there seems to be only a level 2 corridor linking these 2 areas. This does not mean that there is no logistics linkage it only means that the type of logistics services available is a reflection of the type of trade between Malaysia and Sumatra. The specificity of barter trade in Penang for trade with Myanmar or Sumatra is a good illustration. Direct linkage between southern Thailand and Sumatra are non-existent or has to be done via Penang or Port Klang in Malaysia. 99. From a logistics development perspective the challenge will be on how to increase the logistics integration of Sumatra within the existing integrated logistics linkages between Thailand and Malaysia. This can only be done if intra IMT-GT trade is supported and facilitated. It is important not to forget that logistics is a derived demand that supports local, border, regional and international trade.

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100. The provision of reinforcing border trade as a mean to accelerate logistics integration in the IMT-GT, especially the various border areas should be explored. Special measures to facilitate border trade such as bilateral payment arrangement scheme should be intensively promoted as many local traders are relying upon less formalised means of payment. 101. More intra-regional investment should also be emphasized especially at the SME level. However, most local SMEs have limited funding to attend all the related IMT-GT events and this reduces their trading opportunities with other IMT-GT partners. In fact, there is a feeling that Thailand and Malaysia gains much more than Sumatra from the IMT-GT. This is because of the different level of integration between IMT-GT countries. 102. Activities within the IMT-GT should foster on closer public and private collaboration as well as advancing the role of provincial and state governments. Coordination and support among provincial and central agencies in the IMT-GT is critical as there are still gaps in the understanding and the implementation of related IMT-GT agreements. Maybe it is also a question of capacity building from governmental officials perspective. They need more support in order to better understand how to implement the various IMT-GT agreements. Provincial governors should not solely focus on provincial issues but must be able to have the vision of linking their provinces within the IMT-GT Sub-region. 103. The IMT-GT Joint Business Council (JBC) must increasingly play the important role of business creator in the IMT-GT areas. More business dialogues must be more held and business matching should be given high priority at all levels of meetings. The six working groups should welcome more participation of the private sector in their meetings. The meeting mechanism between the public sector and the JBC should be revised to some extent in order to bring them together in the same forum. They should have more opportunities to jointly look into the possibility of translating project ideas into real business projects. 104. From the corridor analysis, there should be more institutional support for the enhanced integration of Sumatra into the IMT-GT. This enhanced integration and cooperation is important for trade between Sumatra and Malaysia but even more for trade between Sumatra and Southern Thailand. There is great potential for trade and investment but the flows are minimal and need to transit via Malaysia. 105. Each proposed policy measure is based on specific findings and issues discovered in the IMT-GT logistics development study. Table 5.1 shows the relationship between the proposed support policies and the key IMT-GT logistics issues discovered during the study.

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Table 5.1: Proposed support policies relationship with IMT-GT logistics development issues IMT-GT logistics Proposed Projects issues Trade & Transport Pilot implementation of trade and transport facilitation measures Facilitation between Hat Yai and Medan Expansion of bilateral exchange of traffic rights arrangements between Thailand and Malaysia Promotion of inter-provincial & district cooperation and coordination mechanisms (logistics facilitation) Establishment of mechanisms to improve coordination between and among central, provincial and border area officials Infrastructure Improving road connections within Sumatra Development Infrastructure Provision of maintenance funds roads in Sumatra Maintenance Capacity Building Developing logistics capacity in the IMT-GT for public and private sector Further Study on the establishment of IMT-GT logistics platforms/centres Development within the IMT-GT Studies Study on the establishment of IMT-GT logistics standard information system 106. The lack of standardised and harmonised border and transit trade procedures in the IMTGT as well as weak infrastructure linkages, especially between Sumatra and the rest of the subregion is currently hindering the development of the IMT-GT logistic system. The purpose of any logistics system is to be able to satisfy customers while controlling or even lowering all the costs involved. This is not the case yet for the IMT-GT 107. Infrastructure linkages are the backbone of logistics development in the IMT-GT but this upgrade in infrastructure must be done in conjunction with the facilitation of trade, transit and transport services to create an effective and efficient integrated logistics system within the IMTGT itself. 108. An integrated approach is needed in order to solve these problems. This integrated approach should combine solutions to the hardware infrastructure aspect with the solutions to the software rules and regulation aspect. Most of the problems involved in the development of logistics system for cross-border and transit trade are mostly related to the import/export processes of countries in the IMT-GT. Infrastructure is considered a constraint, especially in Sumatra but the impact may seem less important due to the relatively low volumes involved as well as a commitment by member countries to physically and institutionally link the corridor within the year 2015. 109. This reality may be true for now but in the near future with the full implementation of the ASEAN Economic Community the situation may change and the emergence and implementation of logistics and economic corridors should be in place soon.

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110. Infrastructure is as critical in the facilitation of the movement of goods and people across borders as the harmonisation of border trade rules. There is a very strong potential for expansion trade after this sub-regional economic integration efforts are in place and this will probably reduce the need for contraband or informal trade as tariffs and non-tariffs barriers will be eliminated in the IMT-GT. 111. However the challenge remains on how to transform these future logistics corridors into fully fledged economic corridors that can attract investment and generate economic activities in remote area of the corridor such as border crossings and certain remote areas located far from the sub-regional economic hubs.

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Annex A: Logistics Infrastructure characteristics of the IMTGT6

INDONESIA Roads Road infrastructure is the dominant mode of transport on the Island of Sumatra, however, many roads on the island are in a poor state has they have been damaged by freight trucks. The damage to the road in several sections has been as a result of considerably overloaded trucks that are exceeding the legal axle load limits. As there is no enforcement of axle load limits the problem of overloaded trucks will persist and even if the road is improved, damage to it will continue. The average speed has been estimated at around 50 km/h (ADB, 2007). The high density of truck traffic is another factor contributing to the low average speed as there is very little opportunity to pass trucks in some sections. The other factor is that most of the traffic has to pass through the town centres, i.e. there is no bypass. This causes considerable congestion in town centres, especially with truck traffic. Parking alongside the road is common practice resulting in traffic jams and a general barrier to traffic flow. The volume of traffic also varies along the road. The annual average daily traffic (AADT)7 of various points of the highway is summarised in table 4.1. It is apparent from the traffic volumes provided by the Directorate of Spatial Planning, that traffic volumes gradually increase as one travels from the south of Sumatra to the north of Sumatra. The current level of increase in traffic in Sumatra is running at approximately 5% - 7% per annum.8 With this increasing growth the existing roads will come under more pressure in terms of capacity and damage from the volume of trucks. Table 1: Indonesia Road Statistics Road Section Jambi and Murlung-South of Sumatra Rengat, Riau Province Pekanbaru and Dumai, Riau Province Medan Outskirts-towards Binjai Langsa to Banda Aceh Source: ADB (2007)
6

Annual Average Daily Traffic (2006) 1,033-1,796 5,791 7,534-9,901 21,000 8,000-9,000

Adapted from: Expanding Horizons-A Study on the Development of the Indonesia, Malaysia, Thailand Growth Triangle Economic Connectivity Corridors (ADB, 2007) 7 AADT is measured on a yearly basis by the Directorate of Spatial Planning. 8 ADB Road Rehabilitation-II Project, August 2005.

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Unit freight rates are relatively high in Sumatra at around 2.5 USD per TEU/km on average, although economically they should be lower as trip distances are longer. The higher freight rates are also probably caused by the poor condition of many of the roads. Road transport also takes twice as long because of difficulties encountered in overtaking trucks on several sections of road due to their slow progress with excessive loads. Roads are basically not wide enough to accommodate the increasing demand on them. An improvement in road transport will enable larger volumes to be moved to the ports in Sumatra, namely Medan, Dumai, and Banda Aceh, for export to the rest of the subregion. Basically the main transport problem for products of Sumatra is transport from the point of production to the ports of Belawan, Dumai, and Banda Aceh. In 2006, the length of road in South Sumatra Province was 2,997.87 kilometres where 41.68 percent under state responsibility and 58.32 percent under government provincial responsibility. There are also other factors which must be considered in terms of the road network in Sumatra: (i) maintenance of existing infrastructure and (ii) enforcement of traffic regulations. The condition of roads is generally poor, which raises costs of transport both for inputs and for output. Part of the reason for the poor condition of roads is overweight freight vehicles, which caused heavy damage to roads and exacerbates the already poor road conditions. Thus budgetary planning for road maintenance is not sufficient for the actual maintenance needs when the roads deteriorate. Ports The ports located in Sumatra along the economic corridor from Banda Aceh to Palembang are located near Lhokseumawe (Aceh), Belawan (Medan), Dumai (Riau), Boom Baru (Palembang). Lhokseumawe port (Aceh) Lhokseumawe is currently one of the two most important ports in Aceh province9. Available facilities include two fork lift trucks, 2000 m2 of secure open storage. However, the port cannot handle containers. This port is not able to provide 24 hour service and is classified as a third class seaport. Pilotage is compulsory with the request for pilot needed at least 6 hours for arrival and 3 hours for departure. Water depth is between 9 to 10 metres. The port has 4 main wharves10: Asean Aceh Fertilizer (AAF) Berth A, dedicated to the loading of urea fertilizer in bulk through the use of one conveyor belt. The system loading rate is 400 MT/hour AAF Berth B is used for the loading and unloading of general cargo. The loading rate is 35 MT/Gang

Blang Lancang is the 2nd major port but only handles gas and fertilizers, no general cargo. 10 Adapted from http://indonesian.bizhosting.com/Lhokseu.htm

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Pupuk Iskandar Muda (PIM) Wharf dedicated to Urea fertilizer in bulk. Similar to AAF Berth A Public Harbour that is used to load and unload general cargo with similar capability as AAF Berth B. At the end of 200511, the main destination for export from the port of Lhokseumawe is Japan at 62% and Korea at 33%. Thailand and Malaysia only represented 1.2% and 1.6% respectively. Goods destined for both IMT-GT countries were fertilizers and inorganic chemicals. Belawan Port (Medan) Belawan is the main port in North Sumatra, near Medan. This is the main general port in Sumatra, and the second largest general port in Indonesia, after Tanjung Priok Port of Jakarta. The port is divided into several areas, namely, the conventional port, a container handling area, and a passenger terminal. The wharf for berthing ships in the conventional port area varies in depth at various points along the wharf. Table 4.2 present a summary of destinations served from Belawan port. The depth of the channel to the port at low water restricts mother vessels from entering the port and causes ships to be delayed until high tide. The container port is a newly acquired area. Containers in the yard have to be stacked 5 containers high due to overcapacity of the container facilities. According to port officials, the container yard needs to be expanded by about 2 hectares to cope with the rapid increase in the volume of twenty foot equivalent units (TEU) being handled. Also, there are two container freight stations which need to be demolished to expand the size of the area for storing containers. Another effect that the rapid increase in the number of TEUs that are being handled is that there is now insufficient time to maintain some of the equipment since more time is being devoted to offloading and on-loading TEUs. The equipment of the container port, including 4 gantry cranes is becoming outdated and is slow compared to modern equipment. Straddle carriers for handling containers are not available. These would considerably increase the speed and efficiency of the container port. Table 2: Belawan port shipping links From To Belawan Busan, South Korea Belawan Incheon, South Korea Belawan Jakarta, Indonesia Belawan Keelung, Taiwan Belawan KwanYang, South Korea Belawan Manila, Philippines Belawan Penang, Malaysia Belawan Port Klang, Malaysia Belawan Singapore Belawan Surabaya, East Java Source: Indonesia Shipping Gazette (2007)

Frequency weekly weekly Twice a week Weekly Weekly Twice a week weekly weekly 4 times a week daily

Transit time (days) 17 11 3 10 15 7/9 1 1 2/3 4

11

Adapted from www.humanitarianinfo.org/sumatra/BPS2005StatisticalReview-English.pdf

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Dumai (Riau) Dumai is the main port city in Riau province on the Indonesian island of Sumatra. It is a major ferry port with connections to the Malaysian cities of Port Klang, Port Dickson and Malacca as well as other Indonesian cities like Bengkalis and Batam. It is the main exporting point for petroleum and crude palm oil produced from the central Sumatra hinterland. Boom Baru (Palembang) Boom Baru, the river port of Palembang, is the load centre for both domestic and international cargo and passenger only for domestic in South Sumatra. The number of ships calling at Boom Baru in 2005 for international was 990 vessels and the numbers of calls increased to 1,266 in 2006 while domestic ship calling decreased from 2,614 to 2,424 units. In 2006, the volume of good loaded at the port was 2,114,216 tons and unloaded was 426,298 tons for international shipping. For domestic shipping it was 3,911,476 tons loaded and 2,147,672 ton unloaded. The role of inland waterways transport is relatively minor and is limited to certain areas of Eastern Sumatra and Kalimantan. Table 3: Palembang port shipping links From To Palembang Jakarta Palembang Singapore Source: Indonesia Shipping Gazette (2007)

Frequency Thrice weekly weekly

Transit time (days) 2 2

Railways The Sumatra railway systems are located in north, west, and south Sumatra. The north Sumatra system was built by the Dutch to provide transport for plantations and connects those areas with the harbour in Belawan. The west Sumatra and south Sumatra systems were also built by the Dutch to link coal mines with ocean ports. The south Sumatra system now also connects to the port of Bandar Lampung. North Sumatra Railway The north Sumatra railway stretches 1,052 km. from Besifang, near the Aceh border in the north, through Binjai and Tebing Tinggi in the centre, terminating at Rantau Prapat. A circle route connects from Binjai through Medan to Tebing Tinggi, with a spur to the Belawan Port. There is also a spur from Binjai to Pangkalan Susu (which is currently out of service) and other from Tebing Tinggi to Siantar in the interior. There are reported to be plans to extend the N. Sumatra system to serve the post-independence plantation areas. The average length of passenger journey in N. Sumatra was 140 km. and the average freight haul is presently around 200 km.

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ADB undertook a Sumatra Railway Master plan in 2000. This is very similar to the Sumatra Spatial Plan. One of the high priority routes from the plan is the stretch from Banda Aceh to Rantau Prapat. A rail line from Rantau Prapat to Duri line will extend the N Sumatra system to Murao and on to Dumai and would carry crude palm oil (CPO) into the port of Dumai. Overall the Banda Aceh Medan Dumai Pekanbaru Murao rail sections would also form part of the full trans-Sumatra railway. Due to lack of implementation and the changed circumstances, there is need for a study to update the previous plan.

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MALAYSIA Roads The road network in the Malaysian portion of the IMT-GT subregion is well developed. There are two major north-south links, namely (i) Federal Route 1, which is mainly a single carriageway highway, and (ii) the North-South Expressway (NSE) which is a controlled access, dual-carriageway highway from Bukit Kayu Hitam to Singapore. The total distance from Bukit Kayu Hitam to Johor Baru, on the border with Singapore, is 890 km. The road from Penang to the Thailand border at Sadao is also a dual-carriageway highway in very good condition with a speed limit of 110 km/h. Ports: Trends for Malaysian ports12 Major container ports in Malaysia are projecting healthy and sustainable growth for the year 2008 despite a weakening US economy. Given the fact that the bulk of businesses of local ports are regional-based and well supported by promising prospects from other countries, the US crisis is not likely to affect much the activities of major ports in Malaysia. Last year, Malaysian major ports have successfully surpassed their volume targets, registering a total of 14.04 million TEUs (twenty-foot equivalent units). Datuk Basheer Hassan Abdul Kader Northport (M) Bhd in Port Klang recorded 2.81 million TEUs last year, surpassing its target of 2.8 million TEUs. Managing director and chief executive officer Datuk Basheer Hassan Abdul Kader told the Star Maritime newspaper that the port was eyeing a moderate growth in the volume of containers handled this year. He believed that the growth will be driven by the ports matured cargo base and the prognosis of a stable economic growth. He expects the company's overall growth and the performance of other types of cargo to remain strong. Basheer expects the non-containerised trades at the port to continue registering positive growth. The port have identified new growth drivers, including the prospects at south point, a major conventional cargo hub in the country and services offered at Northport distripark. According to Basheer, it is possible that the weakening US economy may decrease transhipment traffic on a selected basis or trade routes. Fortunately, Northport is not totally dependent on transhipment for growth and Northports transhipment is also Asia centric where 63% of its total container throughput represents both local import and export cargoes. Another major port in Port Klang, Westport (M) Sdn Bhd, is expecting to hit five million TEUs by year-end against 4.31 million TEUs achieved last year. Of the 4.31 million TEUs, which were 18% higher than 2006 volume, 64% was from transhipment containers. Executive chairman Tan
12

Adapted from The Star Maritime February 12, 2008

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Sri G. Gnanalingam described that container business would continue to be the key revenue driver in 2008. The drive will come from main line customers that use Westport as their transhipment hub. Westport also hoped to grow the import and export volumes of its local boxes to 1.5 million TEUs this year. The growth of conventional cargo is assumed to be stable, especially with dry bulk and liquid bulk cargo. Westport is confident of meeting its volume target this year despite the weakening economy. Penang Port Sdn Bhd, meanwhile, aims to handle over one million TEUs this year against 925,991 TEUs last year. Last year's volume was 9% more than throughput achieved in 2006. North Butterworth container terminal strategic business unit general manager Obaid Mansor said growth this year would depend on the expansion in existing markets and the conversion of noncontainerised cargo to containerised cargo. This was achievable through increased operational effectiveness from extra equipment and infrastructures as well as a strategic focus for growth in the Intra-Asia and regional market. Penang Port Penang Port is strategically located along the Northwest coast of Peninsula Malaysia. It serves one of the busiest trade routes in the region and links Malaysia to more than 200 ports worldwide. Being a deepwater port and overlooking major shipping lanes in the Straits of Malacca, it is a choice port of call for traders within the IMT-GT and the Asia-Pacific region. Penang Port is accessible via two channels, the North Channel and the South Channel. The North-South Highway, spanning the west coast of Peninsular Malaysia from the MalaysiaThailand border to the Malaysia-Singapore border, places Penang Port within easy reach of all major economic regions in the country. Penang Port is also linked directly with the east coast of Peninsular Malaysia via the East-West Highway There are plans to expand the Penang port over the next 5 years (under the Ninth Development Plan) by acquiring more equipment, dredging, and increasing the number of berths (estimated expenditure of MYR1 billion). To expand the port further, land reclamation of around 25 hectares is presently being undertaken. Of the total traffic in Penang port, 15 to 20% is from Thailand.

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Table 3: Penang Port Facilities Storage Facilities Penang Port North Channel South Channel Butterworth Wharves There are 3 transit sheds with a total area of 9,615 sq m and 1 godown with an area of 1,672 sq m. Vegetable Oil Tanker 98 private tanks with total Pier (VOTP) capacity of 122,200 tons 10 godowns (55,000 sq.m.) 2 buffer godowns (11, 148 sq m) 5 private godowns (33 996 sq m) Stockpile area (4.7 hectares) North Butterworth Berth Capacity (660 TEUs Container Terminal per annum) Container Yard (4,400 TEU ground slots) Butterworth Wharf Container Yard (1,500 TEU Container Terminal ground slots 2 Container Freight Stations (11892 sq m) Container Freight Station (11,892 sq m) Source: Port authorities and http//:www.penangport.my Prai Bulk Cargo Terminal (PBCT)

Dimensions for Berthing 10.7 m deep 5.8 m or less Comprises 4 berths Approach Channel Depth (ACD) depth of 9 m Overall wharf length=715 m 1 dolphin berth ACD depth of 9 m 2nd VOTP (W2) has ACD of 10 m 3 berths totalling with 11 m ACD depth 1 inner berth is 7.5 m deep 1 dolphin berth for dangerous cargo vessels with 11 m depth

3 berths ACD of 12 meters

2 berths ACD of 9 m

Container traffic is handled at the Butterworth Container Terminal (BWCT) and North Butterworth Container Terminal (NBCT). At present, a portion of Penang Ports containerised cargo handling activities is conducted at BWCT, which has two berths at the Butterworth Wharves. Future plans for BWCT involve the consolidation of all container handling activities at the NBCT. The consolidation is expected to improve container handling activities and provide more berths for conventional cargo handling. NBCT is to be expanded with an estimated cost of MYR300 million. By completion of the NBCT Phase 2B Project the port will be able to handle 1 million TEUs. Penang Port Limited Company (PPSB) will continue to complete various components of the NBCT Phase 2B Project within the next two years. This also involves the reclamation of 25 hectares of land for the container yard and purchasing handling equipment which will cost about RM150 million. Reclamation works at the port commenced in February 2006. The wharves will be expanded by another 600 meters to accommodate 7 vessels at any one time. The depth at the port will also be increased by dredging to 13 m from the current depth of 12 m. PPSB is also planning a new back stacking area for export containers only and new

49

equipment including cranes. With these new enhancements, port productivity will be increased and it is estimated that approximately 35 TEUs will be able to be moved per hour. The conventional cargo handled in Penang Port comprises of break-bulk, dry bulk and liquid bulk. Installations dedicated to this activity are Butterworth Wharves, Vegetable Oil Tanker Pier (VOTP), and Prai Bulk Cargo Terminal (PBCT). PBCT has been designated as the main terminal for barter trade with Myanmar and Sumatra. Currently there is a twice weekly service between Penang and Belawan. This service is operated by Medan based entrepreneurs with wooden boats of less than 500 GRT. Conventional cargo handling efficiency has been improved with the application of a computerized cargo and marine system catering for berth planning, equipment scheduling, godown management, and billing functions. The Butterworth Wharves, at present, comprise four berths for handling a variety of break-bulk cargo such as palm oil in drums, refined sugar, bag rice, iron and steel products, and manufactured goods. Once container handling activities are consolidated at the NBCT, Penang Port will have an additional two berths at the Butterworth Wharves to cater for break-bulk cargo. Located south of the Butterworth Wharves is the Vegetable Oil Tanker Pier (VOTP). The VOTP is dedicated to meet the specialized requirements of vegetable oil handling. The VOTP is linked via overhead pipelines to facilitate direct loading and discharging of edible oils to privately-owned storage tank farms. Prai Bulk Cargo Terminal (PBCT) provides dedicated facilities for handling dry bulk, non-edible liquid bulk and dangerous liquid bulk cargo. The variety of cargo handled at PBCT includes grains, soybeans and raw sugar. Liquid bulk, such as Liquefied Petroleum Gas (LPG) and Vinyl Chloride Monomer (VCM), are conveyed via pipelines to private onshore installations beyond the terminals boundaries. Due to the nature of the cargo handled at PBCT, Penang Port ensures that international safety standards are applied strictly. In addition, state-of-the-art fire fighting/rescue/safety equipment is provided in adequate quantity. Westport, Port Klang 13 The Container Terminal - The main focus of operations at this port is container traffic. Container traffic at Westport increased by 600,000 TEUs from 3.7 millions TEUs in 2006 to 4.3 million TEUS in 2007.14 Projections for 2008 indicate that the magical mark of 5 million TEUs will be achieved.15 Port capacity is 6 million TEUs per annum. It has four container terminals. CT1 is spread over an area of 40 acres whilst CT2, 3 and 4 are 60 acres each. The port has 9 berths, totalling 2,600 metres. Standard equipment at this port include 26 Super Post Panamax Quay Cranes (6 of which are Twin Lift), 2 Mobile Harbour Cranes, 8 Reach Stackers, 11 Empty Stackers, 69 Rubber Tyre Gantry Cranes (RTGs), 208 Prime Movers, 237 Trailers and 12 Forklifts. Special features at this port include a 15 metres berth depth, thus enabling the port to
13 14
The source of information for Westport is the ports website which can be accessed at the following: <http://www.Westportmalaysia.com/about_us/abtus_fact_figure.html> (Accessed on 20 January 2008). See the remarks of Tan Sri Dato G. Gnanalingam, the Executive Chairman of Westport, Klang at <http://www.Westportmalaysia.com/about_us/abtus_chairman_remark.html>, Website of Westport, Klang (Accessed on 20 January 2008). Ibid.

15

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accommodate 6th generation container vessels. Operational features are up to Fastport standards with the port being able to achieve 35 moves per hour (mph) per crane, 100 mph on a main line vessel and 50 mph on feeder vessels.16 Fastport standards are achievable because of the use of the Container System from COSMOS, Belgium; an information technology system not only allows for real-time processing but also ensures automated tracking and assignment of equipment and manpower.17 The system compromises a container yard management system,18 vessel planning system,19 transporter flow control system,20 berth allocation system,21 container control terminal system,22 electronic data interchange23 and container freight station system (CFS).24 Conventional Port operations - Westport is also equipped to handle conventional port operations. It has a Liquid bulk Terminal, Dry Bulk Terminals and a Break Bulk Terminal. Westport is the first port in Malaysia to have a fully computerized and automated conventional terminal, its New Generation Conventional Cargo System (NGCCS).25 NGCCS is completely developed in-house and covers the full automation of all non-containerised cargo, right from wharf operations to billing. The system ensures speedier and more efficient control of vessel, cargo and warehouse
16

As a comparison, Fastport standards for are follows for other types of cargo: break bulk (300 tons), liquid bulk (600 tons) and dry bulk (800 tons), see Tan Sri Dato G. Gnanalingam, the Executive Chairman of Westport, Klang at the following website: <http://www.hrdnet.com.my/conference07/speaker_notes/dato_g_gnanalingam.pdf> (Accessed on 20 January 2008). All the information on this system was obtained from the website of Westport, Klang, Technology : <http://www.Westportmalaysia.com/technology.html> (Accessed on 20 January 2008). The system optimises the use of container yard space. Automatic planning calculates a free location according to container characteristics and the corresponding planning parameters. Yard definition is a graphic user interface assists the definition of the yard. This is a fully automatic planning system for container vessel, coasters and barges which minimizes the number of shifting moves in the yard. Bayplan overview is a graphical user interface that facilitates defining the structure of the vessel. There is also automatic planning which provides appropriate planning algorithms are available to support different cranes move, double cycling, etc. Work scenario Determines how the terminal operator will discharge and load the container vessel. By using a graphical representation of the bay, prestow information can be assigned to a specific slot or several range of slots. Fully automatic transporter flow control module for RTG, front loader, and tug chassis combinations. Allows planners to make effective berth allocation and gantry crane assignment so that freight congestion can be restrained. Consist of vessel management, order management, gate control, container logistics and reporting. Automatic system-to-system exchange of information. Also supports messages that are UN/EDIFACT complaint. Facilitates the packing and unpacking of containers goods. It has 200,000 square feet of covered area, 30,000 square feet of open yard and a 100,000 square feet staging area. It is equipped with 3 Reach Stackers, 10 Prime Movers/ Trailers (40 ft) and operates, 24/7, 365 days a year. The area is adjacent to rail siding and is well lit. Within 24 hours of request, there can be container positioning. On Dock Depot Empty Positioning is available at no additional cost. Reefer stuffing / unstuffing facilities are also available. For dangerous cargo, there are specially designated areas. All the information on this system was obtained from the website of Westport, Klang, Technology : <http://www.Westportmalaysia.com/technology.html> (Accessed on 20 January 2008).

17 18

19

20 21 22 23 24

25

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management for the benefit of its customers. The information technology system consists of conventional wharf operation,26 conveyor belt system,27 cargo storage system,28 Westport control centre29 and weighbridge system. The Liquid Bulk Terminal - It has 4 main jetties and 1 bunkering jetty, with a berth length totalling 1365 metres. It has the ability to handle 90 different types of liquid bulk cargo. The Dry Bulk Terminals - The port also has two dry bulk terminals, with 4 berths that are 935 metres long and 1 cement jetty. The port is equipped with 2 grab unloaders, 1 Continuous Ship Unloader, 1 grab discharger (affectionately known as T-Rex) and 10 000 meters of conveyer belt. This equipment enables Westport to handle dry such as sugar, grains, slag, fertilizer and cement. The Break Bulk Terminal This consists of 5 berths, totalling 1000 metres, enabling the port to handle steel and general cargo. Miscellaneous infrastructure Includes a vehicle transit centre,30 bunkering facilities,31 pilotage services and tug-boats for towage.
26

Direct and Indirect Gate pass authorises the consignee to take cargo out from the port. Ship service voucher provides automatic calculation of charges for all services rendered. Shift performance of loading/discharging activities based on ship outrun. Vessel performance per shift effectively shifts performance of loading/discharging activities based on ship outrun. Spillage / trimming / excavation enables calculation of trimming and excavation charges. Monitors movement of cargo on belt and automatically weighs it. Inter store transfer note monitors movement of cargo from the warehouse / yard / transit shed to the wharf for loading operations. Storage requirements measures the daily available and occupied storage capacity based on automatic calculation for current occupied storage capacity. Tally sheet capture tally sheet details for all direct and indirect deliveries. The berth allocation system schedules ships into berths in such a way as to reduce average waiting time and increase berth utilisation. The confirmation / postponement / cancellation of vessels system caters for unconfirmed ETA details, with rule based decision support system that enables cancellation, postponement or confirmation of vessels. Daily Vessel Schedule gives a detailed picture of all current and future vessel activities. Equipment And Gang Booking lists requirement of various resource like gang, forklift and tractor for loading / discharging. The conventional billing system is the first fully automated system in country. It generally covers the entire range of commercial charges according to the tariff. Details are extracted in order to raise charges for Wharfage, Stevedoring, Berthing/Unberthing, Mooring, Tug Charges, Ship Service Voucher and other relevant Conventional Charges. The system was built with expert system capabilities whereby, it can select the appropriate tariffs without human intervention. In line with providing our customers with accurate and fast billing information, the conventional Billing System is directly linked with the Financial Management System. Malaysias most advanced, smart car terminal, with the capacity for 100,000 vehicles. Equipped with Vehicle Logistics System, which is the latest in computerisation technology to process cars. It provides accurate on-the-spot information of vehicle's status to customer. Bunker fuel meets the international standard of ISO 8217. To facilitate bunkering, there are two barges with a capacity of 3,000 and 1,000 tonnes each. The barges supply three types of bunker products namely 380cst fuel oil, 180cst fuel oil and marine gas oil to customers around the region and we hope to sell 500,000 tonnes by the third year of operations, see Westport, Klangs website on available bunkering

27 28

29

30

31

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New developments at Westport - Include housing the Head Office of Selangors Royal Malaysian Customs Department, the setting up of a Port Klang Free Zone (PKFZ) consisting of distribution hub of 1000 acres, being the Halal Hub for Selangor, playing host to Malaysian International Shipping Corporations (MISC) Logistics Centre, setting up of a Distripark within the Free Commercial Zone (FCZ)32 and getting connected with a second link highway (Shah Alam Expressway link).33 In addition Westport has an E-Terminal system that is comprised of ten systems and services that provide optimum efficiency, faster turnaround and higher productivity.34 The port's ETerminal now consists of Electronic Data Interchange (EDI),35 E-Berthing,36 E-Submit,37 ESSR,38 E-Loading,39 E-Deliver Order,40 E-Gate Pass, E-TDR,41 E-Billing,42 E-Procure43 and E-

services at the following Internet address: <http://www.westportsmalaysia.com/our_services/ourservc_bunkering_descp.html> (Accessed on 20 January 2008).

32

There are two major distribution parks within the FCZ, with a total covered area of 470, 000 sq ft and open yard area of 283, 920 sq ft (7 acres). There are 2,000 pallet locations (13.5m high), shrink wrap machines, 2 units of sweeper and scrubber machines, and 48 dock levellers, 15 units of LPG / Battery Operated Forklift / Clamps, 3 units of Omin lifts and 1 cargo lift. See Tan Sri Dato G. Gnanalingam, the Executive Chairman of Westport, Klang at the following website: <http://www.hrdnet.com.my/conference07/speaker_notes/dato_g_gnanalingam.pdf> (Accessed on 20 January 2008). All information on the E-Terminal system in this paragraph is obtained from the website of Westport, Klang, see <http://www.Westportmalaysia.com/technology.html>, (Accessed on 20 January 2008). The exchange of documents in standardized electronic form, between organizations, in an automated manner, directly from a computer application in one organization to an application in another. EDI's saves unnecessary re-capture of data. This leads to faster transfer of data, far fewer errors, less time wasted on exception-handling, and hence a more stream-lined business process. Since the beginning, Westport, Klang has adopted UN/EDIFACT (United Nations Directories for Electronic Data Interchange for Administration, Commerce and Transport) as the standard for EDI. Enables shipping lines to view the real time and planned vessel-berthing status. With the transparency of enquiry of berthing, shipping lines can pre-plan their berth allocation with Westport. Allows for the submission of discharge and loading list electronically via the Internet. Due to the disparate formats, instead of standardizing and for shipping lines' convenience, E-Submit have a robust data-mapping engine that can be used to map any formats. Upon submission, extensive verifications and validations are done upfront and automatically, which enables for corrections of any discrepancies instantly. Provides shipping lines with the tool to manage changes to submitted information on-line therefore maintaining integrity and traceability of the changes as well as reducing the time taken for paper based SSR submission. Simplifies and eliminates the submission of loading list by automatically creating the loading list with the consensus of shipping lines. With the elimination of the submission process, vessel planning and yard planning can commence planning well in advance, thus leading to better efficiency and productive resource allocation. Enables the on-line issuance by shipping lines thus replacing the traditional paper Delivery Order (DO) and information is updated directly into the terminal's back-end system. Seamlessly integrated to Custom's Gate Control System (GCS), upon release and clearance from custom and other government agencies, the

33

34 35

36 37

38

39

40

53

Bidding.44 These systems and services are mostly developed in-house to offer customers a solution that is based on time efficient, cost reduction, and hassle free-environment. West port also plays an important in the linking Sumatra ports with mainline shipping connections. Table 4 provides the container volumes linking West port with Sumatra and Southern Thailand. Table 4: Container volumes via Westport within the IMT-GT (TEUs) Country Port Name Import Export Transit In Indonesia Belawan 1,389 2,626 16,862 Medan 21 Padang 106 Palembang 805 Thailand Hat Yai 10 790 Songkhla 36 TOTAL Source: West Port (2007) North Port, Port Klang45 Northport is situated at Port Klang in Malaysia. Northport comprises dedicated and modern multipurpose port facilities located at two locations, in Northport: Southpoint for conventional cargo handling and in Northport itself where state for the art container handling facilities is located. Northport logistics further add value to Northports business.

Transit Out 15,040

TOTAL 35,917 21 106 805 800 36 37,685

terminal release document (E-Gate Pass) will be distributed to the consignee and subsequently to the haulage company for container pickup from the terminal. Besides saving time, this streamlined and seamless process requires no paper DO, nor the presence of the forwarding agent at Westport.

41

Available for shipping lines to view and download upon vessel departure. This report, prepared from timesheets, comprises container vessel operation data and tabulation of productivity. Besides the quick dissemination of E-TDR, it is centralised repository for the computerised collection, organisation, and retrieval of TDRs. Enables customers to access their invoices, credit notes, payments and statement of accounts anywhere and anytime. It is designed and innovated in house to cater for the port's customers with the purpose to streamlining and improving the billing services. Electronic enablement of purchasing process, whereby every step of the process from identification of requirement to payment can be done electronically. Westport' E-Procure proves to be a solution for improved administration efficiency, reduction in costs and greater transparency. It has also given the port an electronic business-to-business platform for a speedier and reliable transaction. This system conducts bidding over the Internet in accordance with the government procurement procedures. The entire process from bids to acceptance is conducted over the Internet. Source: www.northport.com.my

42

43

44 45

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Northport has 3 dedicated container terminals. The three terminals offer a combined quay length close to 3 km and a depth alongside of 11.5 to 15 metres. The landside and container handling operations are or will be supported by 52 rubber-tyre gantry cranes by 2008, 15 container berth by 2009, an annual capacity of 5,000,000 TEUs by 2009 and 30 super-post Panamax cranes by 2010. Table 5 describes the fees charged at Northport for container handling services. Table 5: North Port Container Service Fees 1. Container Haulage charge (US$) 1.1 from Northport to CY and return empty back to Northport or vice versa 1.2 Laden from North to CY and transfer empty to CY or vice versa 1.3 Laden from Northport to CY and empty transfer to outside depot within Northport Outside FCZ area or vice versa 2 Lift-On/Lift-Off (US$) 2.1 LO-LO LADEN Lift off from chassis to container yard or lift on from container yard to chassis 2.2 LO-LO EMPTY Lift off from chassis to container yard or lift on from container yard to chassis 3 Container Yard Storage (US$) 3.1 Empty storage per day or part thereof 3.2 Laden storage per day or part thereof 3.3 Container sweeping 3.4 Container washing 4 Stuffing/Un-stuffing (US$) 4.1 Stuffing of cargo into containers or un-stuffing of cargo into warehouse 5 Full Container Load (FCL)/Empty (US$) 5.1 Import FCL 5.2 Import Empty 5.3 Export FCL 5.4 Export Empty 5.6 Import Transhipment 5.7 Export Transhipment 6 Land bridge Containers (US$) 6.1 Import FCL 6.2 Import Empty 6.3 Export FCL 6.4 Export Empty 6.5 Transhipment container Source: adapted from http://www.northport.com.my 20 21 15 33 40/45 41 28 63 90 Reefer 58

20 17

40/45 26

Reefer 26

13

13

20 0.5 1.8 1.3 4 20 21 20 75 75 75 75 110 110 20 45 45 45 45 45

40/45 1 3.7 2.6 8 40/45 40 40/45 110 110 110 110 190 190 40/45 68 68 68 68 68

Reefer 1.6 4.2 2.6 8 Reefer 42 Reefer

Reefer

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Non-containerised cargo are handled at 2 facilities in Northport, a dedicated conventional cargo terminal known as Southpoint (formerly Southport, the oldest section of Northport) and the conventional cargo terminals for break bulk, liquid and dry bulk cargo. There are in total 14 conventional berths. Southpoint also acts as a niche port to handle transhipment activity for the Indonesian barge traffic due to its proximity to the Sumatran ports of Tanjong Balai, Dumai, Pekan Baru, Buatan and Perawan. Located in the centre of Port Klang town, Southpoint which is aptly termed "portin-town has its advantages whereby hundreds of freight forwarders and shipping agencies, banks, and other government agencies such as the Customs, Immigration Department, Harbour Masters, are all located nearby. Currently, Southpoint has eight berths (from Berth 1 to Berth 7A). The first four have a depth between 9 m and 10.5 m to cater for ocean-going vessels up to 40,000 displacement tons whilst Berths 5 to 7A with depths of about 6m can accommodate coastal ships of up to 6,000 displacement tons. Other facilities include eight warehouses and a recently completed container and multipurpose yard with a total space of 35,000 sq.metres apart from other port equipment's including forklifts (ranging from 3 to 10 tons), towing tractors, mobile cranes (10 to 15 tons), trailers and container trailers. Northport is directly linked to the national Malaysian rail grid. It is the only port where trains have direct access in the port to enable straddle carriers to directly load and unload containers. Cross border direct connections are available up north to Bangkok and down south to Singapore. Services provided are based on the block-train concept. Connections to Inland Clearance Depots Prai ICD* Ipoh ICT (2 services a day)* Nilai (2 services a day) Pasir Gudang Bangkok ICD (Bangsue & Lat Krabang) * Recognised by Lines as an ICD Connections to Segamat Inland Port Prai ICD Ipoh ICT (2 services a day) Nilai (2 services a day) Pasir Gudang Bangkok ICD (Bangsue & Lat Krabang) Rail To/From Bangkok Faster transit time - (60 hours) Port Klang - Bangkok Rail (60 hours) Port Klang Singapore - Bangkok by sea (4-5 days)

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Direct service to Eastern side of Bangkok Lat Krabang via Klong Toey Port/Laem Chabang Frequency Port Klang/Bangkok - vice versa - 5 services a week

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Rail Link Schedule

Import TS Tranrail Sdn Bhd Bangkok - Bangsue /Lat Krabang i) Tuesday ii) Friday iii) Saturday

Export TS Tranrail Sdn Bhd Northport /KN ICD /Ipoh ICD / Prai ICD i)Wednesday ii) Thursday iii) Sunday Note: Closing Time @12.00hours ASEAN Rail Express (ARX) ASEAN Rail Express (ARX) Bangkok - Bangsue /Lat Krabang Northport /KN ICD /Ipoh ICD / Prai ICD i) Friday i) Tuesday ii) Sunday ii) Friday iii) Tuesday iii) Saturday -Pasir Gudang (1 service per week) TS Allied Trans Sdn Bhd TS Allied Trans Sdn Bhd Hat Yai Port Klang Tuesday Wednesday Thursday Sunday Saturday Wednesday Note: Closing Time at 19.00hours RCL LANDBRIDGE RCL LANDBRIDGE Bangkok/Prai/ Ipoh/ Port Klang Port Klang /Ipoh ICD /Prai ICD/ Bangsue Wednesday Sunday Friday Monday Saturday Tuesday Source: adapted from http://www.northport.com.my/container_rail.asp Airports and Railways There are international airports at Penang and Langkawi in the Malaysian subregion, and major domestic airports are located at Kepala Batas and Ipoh. The Ninth Malaysian Development Plan has made provisions for expansion of all airports to cater for the increase in demand. Similarly for railways the Ninth Plan has made provisions for rail improvements. For example track realignment and improvement works from Taiping to Padang Rengas are being undertaken. The completion of the double tracking of the rail line from Ipoh to Rawang is now scheduled to be completed by late 2007. Rail infrastructure upgrading and improvements include other double tracking at selected priority stretches, rehabilitation of tracks and stations as well as the refurbishment and procurement of rolling stock.

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THAILAND Southern Thailand is connected with Bangkok, the economic centre of Thailand, by railway as well as highway. There are also several regional airports which are located in the larger towns. The main transportation hub for southern Thailand is Hat Yai, which has developed from a small village to its current size within a few decades. Hat Yai is also a key logistics platform linking transportation network with Malaysia by both land (highway and railway) and maritime corridor. Roads Phetkasem highway is the longest road in Thailand, and runs from Bangkok along the Kra Isthmus and then to the western coast of the peninsula. From Trang province the highway crosses over to the eastern coast to Hat Yai, and then ends at the Malaysian border. Two Asian highways run through southern Thailand. Asian highway no. 2 runs mostly parallel to the railroad all the way from Bangkok. It crosses to Malaysia at Sadao, and continues on the western part of the peninsula. Asian highway no. 18 begins in Hat Yai and runs south along the eastern coast, crossing to Malaysia at Sungai Kolok. Moreover, highway No 4184 (or Sadao-Ban Wangprajan) is the highway that links Thailand and Malaysia, starting at Sato junction to the border at Ban Wangprajan for 22 km. In Malaysia side, it starts from the border at Ban Wangprajan to Padang Besar and then to Penang for 61 km, or from Ban Wangprajan to Ka-nga in Perlis state for 36 km and then to Penang for 130 km. Provincial roads in the Thailand part of the subregion are in good condition. Rural roads are however poor. Rural roads are poorly maintained and there is poor access to it. The road from the border of Thailand and Malaysia at Sadao going towards Hat Yai is in fair condition and heavily congested. The road passes through several small villages and due to the large volume of traffic, serious road accidents occur to both pedestrians and vehicles. It has been proposed that an expressway be instituted between Sadao and Hat Yai parallel to the existing road to avoid these large volumes of traffic flowing through rural villages. Ports Kantang Port and Si Kao Port In Trang Province the Kantang Port is presently undergoing improvements and the MD has received a budget of THB60 million for the port improvement/expansion. There is a proposed new port at Nakleua and a feasibility study on this is now almost complete. If the project appears feasible, the MD will continue with the detailed design and environmental study for the port. Trang Provincial Administration (TPA) is planning land acquisition for port construction which will be undertaken by the MD. It is expected that land acquisition will commence in late 2007. The TPA is also interested in investing in the port at Si Kao in order to promote roro ferry

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service to Langkawi, Penang and Aceh. Currently the TPA has obtained permission for port construction from MD. Pilotage is not compulsory. However, due to the shallow waters and the absence of charts it is recommended to take the services of the local pilot, though he can only speak Thai. Pilotage distance is about 15 miles up the river. Pilot will board at the anchorage and takes the vessel up to Kantang. Pilot can do the berthing, but it is recommended that the Master does this himself. Tammalung and Customs Port In Satun Province, the Tammalung Port and Customs Port were constructed to serve cargo vessels up to 400 deadweight tonnage (DWT). Due to limitations on channel depth of less than 4 m and the existing quay length, which is not suitable for accommodating roro ferry vessels, the Tammalung Port does not have much development potential for IMT-GT trade. The Customs Port nearby has more potential to serve IMT-GT sub-regional trade. Due to this Satun Province has allocated a budget of THB43 million for port improvement and expansion. Songkhla Deep Sea Port The Songkhla Deep-Sea Port can simultaneously accommodate 3 ships of 173 m in overall length. The port is equipped with modern equipment and staffed with personnel who are fully conversant with inter-modal container traffic systems. The port total area is 115,000 sq m, suitable for the working of large ocean-going cargo vessels. Access to the port is via an asphaltpaved concrete causeway from either Highway 408 from Nakhon Si Thammarat Province or Highway 407 from Hat Yai crossing over the Tinasulanonda Bridge. Access of vessels is by way of a 120 m wide channel dredged to a depth of 9 m and with a length of 4 km. There is a 300 m turning circle at the western end of the quay. The container yard, however, is now stacked up to 5 containers high due to limited space. A feasibility study which is expected to be completed by September 2007 has been conducted on a second port, designated as Songkhla Port (Phase II). A detailed design and environmental study will be conducted, after the feasibility studys completion. Thailand exports para-rubber and rice by going through Port Klang and Tanjung Pelapas in Malaysia as well as Singapore which adds transportation cost since both Malaysia and Singapore put a surcharge on Thai exports. To cut transport costs, the new deep sea port at Pak Bara (Lagoo district of Satun) would cost approximately THB5.6 billion. This will cut transportation costs by THB269 million a year. The advantage of Pak Bara over Phuket and Phang Nga deep sea port is that Pak Bara could accept larger ships (50,000 ton DWT). Pak Bara is 13 m deep which could be easily upgraded to 25 m deep, and Pak Bara is only 150 miles away from international routes inside the Straits of Melaka. The Pak Bara deep sea port requires a good rail connection and there are 3 choices for the route: (1) Trang - La Ngoo - Pak Bara (100 km)46 (2) Hat Yai - Satun -

Advantage: this is the shortest route, linking with Thung Song Junction, good for those who live in the Northern part of Southern region; Disadvantage: no link with the deep south and Hat Yai;

46

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Pak Bara (130 km)47 (3) Kuan Nian - La Ngoo - Pak Bara (110 km).48 The proposal for a land bridge to run between Songkhla Pak Bara (a distance of around 130 km) by a dedicated rail or road link would enable transhipment of containers from Songkhla to Pak Bara for further movement (to Indonesia to Medan or Banda Aceh, Europe, Middle East etc.). Table 5: Thailand Port Facilities Storage Facilities Songkhla Port The container yard has a stacking capacity of 5,400 TEUs

Port at Si Kao Tammalung Port in Satun Province Railway Transport

Dimensions for Berthing 8.23 m at 3 berths with a total length of 510 m and a 30 m wide apron and can simultaneously accommodate 3 ships of 173 m in overall length 8-10 m deep 4 m deep

The southern railway connects Bangkok to Hat Yai, and continues from there to Sungai Kolok. There is a branch from Ban Thung Phoe Junction to Kirirat Nikhom, and two smaller branches of the railway run from Thung Song to Trang and Nakhon Si Thammarat, and from Hat Yai Junction to Malaysia and Singapore. Two linked railways between Thailand and Malaysia are Sungai Kolok Station and Padang Besar station to the east and west side of Malaysia, respectively. Freight transport of import/export goods by the rail is more convenient than by road because goods can directly pass through between Thailand and Malaysia without changing trains. Padang Besar station has more service provided than Sungai Kolok Station has, since it is located near larger Malaysian cities, such as Butterworth (Penang), Ipoh, and Kuala Lumpur. Moreover, there are transit goods from Padang Besar station directly to Singapore. Rail transport provides both passenger and freight services but priority is for passenger. At Padang Besar station, all customs procedures can be done with the support of government officers of the railway and Customs House of both Thailand and Malaysia. Logistics service providers Songkhla Province: There are 77 local companies that have been registered in Songkhla. Services provided include goods transportation by road, rail, and sea, as well as passengers or

Advantage: connecting with Hat Yai, Satun and three Deep South provinces - good political movement since it will support the Halal Food Industry in Pattani. It will also force the Port Authority to upgrade Songkhla Deep Sea Port to have a rail link, creating a land bridge; Disadvantage : the longest route; 48 Advantage: a compromise since Kuan Nian is the station on the main route between Hat Yai and Thung Song Disadvantage: investment required to upgrade Kuan Nian station into the same standard as Thung Song and Hat Yai.

47

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tourists. The services related to the packaging of commodity and goods as well as truck rental are also included in this business sector. Nakhon Si Thammarat Province: There are 16 local companies involved in the logistics business with the paid-up capital between 1,000,00030,000,000 baht. Logistics service includes the provision of multimodal transport services. Satun Province: There are 6 local companies with their paid up capital ranging from 1,000,000 to 20,000,000 baht respectively. Yala Province: There are 25 local companies with their paid up capital ranging from 200,000 to 5,000,000 baht for the logistics business. Road and rail are the main transportation mode in this province. Pattani Province: There are 16 local companies providing logistics services. Service providers in this area also provide the transportation of petroleum products. Most of the local logistics service providers in Southern Thailand are mostly small and medium enterprises and family owned. The majority of these service providers only provide specific logistics activities such as transportation, customs brokerage or packaging services. There are no real local 3rd party logistics providers in southern Thailand. Interestingly enough there are no local association of service providers. Summary The logistics infrastructure in the IMT-GT is considered adequate for the present volume of freight and vehicle moving along the main economic corridor with some reservation for the Sumatra domestic corridor. However, this does not mask the reality that infrastructure in certain segment of the IMT-GT is still lacking. Infrastructure will need to be harmonised to facilitate the movement of goods and people along the corridor. Table 4.5 presents an overall assessment of the infrastructure in the IMT-GT based on existing infrastructure characteristics. Table 6: IMT-GT logistics infrastructure characteristics Road Port IWT Good Fair/Good Fair Malaysia Good/Fair Fair Fair Thailand Fair Fair Fair Indonesia Source: Compiled from industry data

Airport Good/Fair Good/Fair Fair

Railway Good Fair/Poor Fair/Poor

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Annex B: Trade Statistics in the IMT-GT

The following annex provides a brief description of trade statistics in the IMT-GT as well as a list of cross border trade numbers. However, the biggest problem with the available trade statistics is that they mostly provide trade value and not trade volume. During subsequent discussion with relevant stakeholders, it was discovered that trade volumes could be somewhat estimated based on in the field knowledge of local authorities but these estimations are still somewhat arbitrary. Sumatra was less problematic as official statistics also provided import and export volume. However, with regards to IMT-GT trade statistics, it seemed that it was impossible to find actual trade statistics specifically for trade within the sub-region. Main direction of trades can be found with IMT-GT countries being included but none that could identify IMT-GT origin and destination. Nonetheless, the available data does provide some indication of trade patterns within the sub-region. Border trade between Thailand and Malaysia Border trade, in the IMT-GT, is generally undertaken in two forms: formal and informal. Formal border trade refers to trade transactions conducted through appropriate Customs procedures at the border in accordance with rules, regulations and agreements of the Governments involved. Where applicable, Customs tariffs are collected. Informal cross border trade involves transactions that bypass or evade appropriate customs procedures. This type of informal border trade is relatively significant in this sub-region. Therefore, consistent regional trade statistics in terms of weight and volume remain an unachievable goal. As in some parts of the world, trade data is preserved only in value terms. However some Customs departments in this region do tabulate trans-border flows at individual crossing points in terms of both value and volume. This does provide some indication of the volume of regional trans-border movement by land, especially between Thailand and Malaysia. Harmonised trade statistics providing not only value but also volume of goods flowing within the IMT-GT are necessary in order to provide policy makers with the necessary trade information to develop adequate policies that will enhance trade. This section hereunder will try to provide some indications existing trade flows between IMT-GT areas in their respective countries. The first two tables illustrate the border trade to and from Songkhla province in Thailand with Malaysias neighbouring states. However, it must be stressed that this trade data is not geographically limited to 1 Thai province and 2 Malaysian states as many of the goods that are crossing the border comes from third countries. Table 1 and Table 2 are a description of the top five commodities crossing the borders between Thailand (Songkhla) and Malaysia (Perlis and Kedah). It is noticed that Thailand mostly exports agricultural products while Malaysia export industrial goods in to Thailand. Thailand exports more than it imports via Malaysia with rubber products being the main commodity. The rubber products that are exported from Songkhla are loaded onto seagoing vessels in Penang for their

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final destination. Malaysia plays an important role as a transit country for Thai export goods from the South of Thailand. In comparison to Thai exports, Malaysian exports to Thailand are quite small in terms of value with most of goods being heavy industrial equipment that are utilised locally in Southern Thailand. Among ASEAN countries, Malaysia is the 2nd biggest trading partner for Thailand behind Singapore and has the highest ratio of border trade in terms of value compared to other neighbouring countries such as Myanmar, Lao PDR or Cambodia. Table 1: Top 5 export commodity from Songkhla (2006) Unit: million of baht Rank Commodity Value Destination 1 Rubber sheets 118,763.91 China, USA, India 2 Machinery and spare parts 29,271.62 China, Japan, Malaysia 3 Rubber gloves 17,038.07 Argentina, Belgium 4 Fishery and frozen seafood 16,697.48 USA, China, Belgium 5 Canned food 13,292.96 Argentina, USA Source: Songkhla, Sadao, Padang Besar Customs, compiled by provincial commerce authority Table 2: Top import commodity for Songkhla (2006) Unit: million of baht Rank Commodity Value Origin 1 Machinery & Spare parts 18,011.64 China, Japan, Malaysia 2 Construction equipment 15,134.82 China, Germany, Japan 3 Recording devices 13,072.05 China, Japan Malaysia 4 IC board 11,127.64 China, Canada 5 Fishery and frozen seafood 8,309.98 Indonesia, Japan Source: Songkhla, Sadao, Padang Besar Customs, compiled by provincial commerce authority Within ASEAN, Singapore is Malaysias largest trading partner.49 More importantly, Malaysias second and third largest trading partners are Thailand and Indonesia respectively. From statistics made available in 2006, Malaysia has a trade surplus of around US$ 1,531 million with Thailand, with exports of US$ 9,742 million and imports of US$ 8,211 million.50 By contrast, Malaysia has a trade deficit of US$ 1,015 with Indonesia exports amounting to US$ 4,661 million are not sufficient to off-set imports totalling US$ 5,676 million. Sumatra Trade Statistics The island of Sumatra in Indonesia can be divided into many provinces. There will be a short description of trade statistics in Sumatras 4 major IMT-GT provinces. These 4 provinces are:
49 50

Based on statistics available from 2006, exports to Singapore amounted to RM 90,751 million and imports totalled RM 56,188 million. This is a balance of trade of RM 34,563 in favour of Malaysia. See <http://www.epu.jpm.my/New%20Folder/Figures2007/chapt10.pdf>, EPU (Accessed on 20 January 2008).

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North Sumatra, South Sumatra, Riau and Nanggroe Aceh Darussalam. Sumatra is an island that is very rich in natural resources and is trading actively on the global market. North Sumatra The export of goods from North Sumatra province has increased in value by 10.85% from US$ 4,563,075,000 in 2005 to US$ 5,058,394,000 in 2006 (Provincial Industry and Trade Office or North Sumatera, 2007) Import value also increased by 12.09% compared to 2005. Overall, there is a strong trade surplus for North Sumatra. Table 3 and Table 4 describe the top 10 major countries for export to and from North Sumatra. It is noticed that Thailand is not ranked in terms of export destination country while Malaysia is only ranked at no. 8 while for import Thailand is ranked no. 10 and Malaysia is the third most important country for north Sumatra imports. Table 3: North Sumatra export by 10 major destination countries Rank Destination Net Weight (Ton) 1 Japan 533,323 2 China 346,410 3 USA 401,028 4 India 306,828 5 Netherland 306,917 6 Singapore 187,667 7 Germany 133,226 8 Malaysia 106,555 9 Pakistan 175,541 10 South Africa 84,084 Source: Provincial Industry and Trade Office or North Sumatera, 2007 Table 4: North Sumatra import by 10 major origin countries Rank Destination Net Weight (Ton) 1 China 650,606 2 Australia 466,784 3 Malaysia 937,025 4 Singapore 177,169 5 USA 167,609 6 India 380,658 7 Japan 64,677 8 Germany 134,051 9 South Korea 67,581 10 Thailand 75,524 Provincial Industry and Trade Office or North Sumatera, 2007

FOB value (000US$) 832,702 508,873 425,496 364,126 294,533 210,603 203,532 171,699 121,223 102,387

FOB value (000US$) 260,949 178,928 105,450 105,324 86,104 83,769 48,950 44,858 40,557 35,734

It is interesting to note that IMT-GT member countries such as Thailand and Malaysia are not the most important trade partners of North Sumatra (except for Malaysia in terms of import). This

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shows that North Sumatras trade is more with third countries. Singapore plays a relatively important role as a transhipment hub for North Sumatra. South Sumatra The flow of export from South Sumatra is mostly destined for Singapore but Singapore in itself is not the real destination. Singapore acts as a transhipment hub to third countries. Malaysia plays an important role for the flow of trade to and from South Sumatra. However, it is believed that these numbers, especially with Malaysia do not reflect the full extent of trade with south Sumatra as the numbers are only based on official trade statistics. Informal and/or barter trade plays an important unofficial role between both countries. Table 5: South Sumatra export to neighbouring ASEAN countries (2006) Rank Destination Net Weight (Ton) Value (US$) 1 Singapore 1,055,436,681 451,377,992 2 Malaysia 536,252,170 72,098,258 3 Thailand 240,970,703 17,705,498 Source: Adapted from BPS-Statistics of Sumatera Selatan Province (2007) Table 6: South Sumatra import from neighbouring ASEAN countries (2006) Rank Destination Net Weight (Ton) Value (US$) 1 Malaysia 29,572,706 23,835,379 2 Singapore 14,847,659 18,661,143 3 Thailand 26,028,742 5,991,621 Source: Adapted from BPS-Statistics of Sumatera Selatan Province (2007) Number of established company in Palembang was 2,500 in 2006 which is distributed into 326 PTs, 62 corporations, 903 CVs and 1,208 PDs. PT is a limited company where its share owned by limited owners while CV is owned personally and PD means trading company. The balance of payment in 2006 was 1,996,616.60 US Dollar increase compared to 922.966.7 US Dollar in 2005. The main river port in South Sumatra is Boom Baru which contributed to the highest export value of up to US$ 1,186,323,980 in 2006 or 49.63 percent of the total export of South Sumatra from other main ports. Rubber and articles export values was US$ 1,238,277,810 or 51.80 percent of total export where crude oils was US$ 703.814,898 or 24.44 percent. Export to China had the highest rank in value at US$ 475,240,677 followed by Singapore at US$ 451,377,992 and to the United States of America at US$ 450,942,447. Import commodities are dominated by chemical material for industries and capital goods such as machineries and vehicles. Boom Baru also has achieved the highest value for import US $216,325,805 or 76.18 percent of total import in South Sumatra.

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Origin and value of import at Boom Baru was the United States at US$ 62,816,770, India US$ 50,473,696, China US$ 44,429,651, Malaysia US 23,835,379 and Singapore US $ 18,661,143 respectively. Inter-island goods loaded from Boom Baru in 2006 were estimated at 3,774,439 tons and data indicated that mineral fuel and fertilizer decreased by 24.92 percent compared to 2005. The number of goods unloaded from Boom Baru in 2006 was 2,143,558 tons, a decrease by 12.06 percent compared to 2005. The unloaded goods were mostly food products, industry materials and mineral fuels. Riau province Riau province lies between North Sumatra province in the North, Jambi Province in the South and West Sumatra in the West. Pekanbaru is the provincial capital and Dumai is its main port. The province is self sustainable from an agricultural point of view with some minor excess for export purposes but the oil and mining industry are currently the most important sector. This is reflected in the relatively high trade surplus gained by the province as illustrated in table 7 hereunder Table 7: Trade Value of Riau province (2004-2006) Year Export (FOB-US$) 2004 5,680,225.46 2005 7,024,774.09 2006 8,694,706.37

Import (CIF-US$) 245,532.11 644,793.72 661,977.24

There has been a gradual increase in both export and import but import growth seems to have stagnated to less than 10% of the export value. Oil and mining plays a key role in the economy of Riau. In 2006, the total export value was estimated at over 8 billion US$. The Asian market is the most important market with a total value of more than 7 billion US$. Japan, Korea, China and India are the major customers with more than half of the total export value to Asian countries. In ASEAN, the top 3 importing countries are Malaysia, Singapore and Thailand but the volume and value are still relatively limited compared the total Asian value as described in Table 8. Table 8: Main Country of destination Country Volume (kg) Malaysia 1,129,523,435 Singapore 699,996,466 Thailand 162,891,705 Total for Asia 18,685,405,285

Value (FOB-US$) 352,016,151 333,686,408 39,350,915 7,256,392,470

In terms of export, the most import port in Riau province is Dumai port with a share of 72% of the total provincial export freight volume and 75% of the provincial export value. In terms of provincial import, around half comes from Asia with Singapore playing a leading role in terms of value. However, Malaysia is the highest on a volume basis. Thailand is not a major exporter to the province. Thailand only contributes up to 3% of total import value from the Asia region.

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China is now playing an increasing role with more Chinese goods being imported into Riau. Chinese goods now represent up to 23% of the total volume of imported goods from Asia but they only represent 18% of the total Asian import value. Table 9: Main country of origin (import) Country Volume (kg) Malaysia 154,483,060 Singapore 142,069,644 Thailand 32,826,293 Total for Asia 560,442,690

Value (CIF-US$) 67,772,098 103,913,926 10,998,797 303,514,750

Dumai port is again the most prominent provincial port with a 66% share of the total import volume and a 46% share of the total import value of the province. The Asian trade represents around half of the total import volume and value of the province.

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Nanggroe Aceh Darussalam The province of Nanggroe Aceh Darussalam is located at the northernmost tip of Sumatra Island. Its provincial capital is Banda Aceh. Mineral fuel and mineral oil products are its most important export commodity both in terms of value and volume. This commodity represents up to 99% of the total provincial export value and volume as illustrated in table 10. The direction of trade is exclusively Asian with South Korea and Japan the biggest importer of mineral fuels and mineral oil products from the province. Malaysia and Thailand play a minor role in importing products from the province with Thailand importing around 1.3 million US$ worth of goods. This value is almost insignificant compared to the Korean import value 1.6 billion US$ in 2006. Table 3.11 provides an indication of the export destination from the province. Singapore is ranked 3rd but there role is more as a transit facilitator. Table 11 provides more information on the destination of provincial export. Table 10: Export volume by main commodities (2006) Rank Commodity Mineral fuels, mineral oil products 1 Inorganic chemicals 2 Cocoa & cocoa preparation 3 Fertilisers 4 Ships, Boats & Floating structures 5 Fish, Crust, Molluses, etc. 6 Edible fruit & nuts 7 Wood, Lumber & Cork 8 Straw Basket ware 9 TOTAL Source: BPS-Statistik of Nanggroe Aceh Darussalam (2006)

Volume (kg) 4,199,470,444 18,830,000 4,450,000 670,000 440,000 135,090 60,500 12,600 6,274 4,224,074,908

Value (US$) 2,021,753,438 5,027,850 5,249,800 151,928 349,092 98,702 9,092 120,240 30,405 2,032,790,547

In the province there are 2 major ports, the port of Lhokseumawe and the port of Blang Lancang. The port of Blang Lancang is the major gas and fertilizer port with a total share of around 60% of the export volume and value of the province. The second port is the port of Lhokseumawe which has a share of 39% of the provincial export volume and value. This port is managed by Pelindo and also caters for general cargo while Blang Lacang port has been designed exclusively for gas and fertilizers. Table 11: Export volume & value by country of destination (2006) Rank Country of Destination Volume (kg) South Korea 3,123,494,634 1 Japan 841,762,174 2 Singapore 195,428,000 3 Taiwan 38,927,000 4 Malaysia 15,624,700 5 Thailand 5,210,000 6

Value (US$) 1,601,782,323 302,110,727 97,631,284 20,358,211 8,419,452 1,388,170

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Vietnam 2,800,000 837,200 Philippines 828,400 263,180 TOTAL 4,224,074,908 2,032,790,547 Source: BPS-Statistik of Nanggroe Aceh Darussalam (2006) 7 8 Provincial import volume and value are again very low compared to export volume and value. It is interesting to note that cereals are the 2nd most imported commodity in the province with a value that is very close to the most important imported commodity. Table 12: Import volume by main commodities (2006) Rank Commodity Volume (kg) Salt, sulphur, earth & stone 246,501,150 1 Cereals 29,950,000 2 Mineral fuels, mineral oil products 12,832,819 3 Ships, boats floating structure 421,520 4 Articles of iron & steel 388,292 5 Others 946,577 6 TOTAL 291,040,358 Source: Adapted from BPS-Statistik of Nanggroe Aceh Darussalam (2006) Table 13: Import volume & value by country of destination (2006) Rank Country of Destination Volume (kg) Malaysia 244,619,567 1 Vietnam 29,950,000 2 Singapore 12,834,477 3 Indonesia (domestic coastal) 2,715,101 4 USA 491,431 5 Others 429,782 6 TOTAL 291,040,358 Source: BPS-Statistik of Nanggroe Aceh Darussalam (2006)

Value (US$) 9,013,084 8,786,900 7,091,729 421,227 5,447,269 5,460,909 36,212,118

Value (US$) 14,815,400 8,786,900 7,180,868 159,806 4,217,075 1,052,069 36,212,118

Malaysia is the biggest exporter to the province with a share of around 84% of the import volume and 40% of the import value. Table 12 and Table 13 hereover provide further details. The main import port is Lhokseumawe with a share of 85% of the provincial import volume & 46% of provincial import value.

IMT-GT Trade Statistics Summary In the IMT-GT countries Malaysia has substantial trade with Thailand and Sumatra. There is quite an important flow of goods between Thailand and Malaysia. This trade is bilateral, cross border and transit as well with a number of goods from southern Thailand utilising Penang Port as port of loading to other markets. There is also strong level trade between Malaysia and Sumatra with Port Klang playing an important role. However, trade between Thailand and Sumatra is not very developed as Thailand only plays a marginal role in the Island export and

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import trade. encouraged.

This trade linkage between southern Thailand and Sumatra must be further

It is interesting to note that Malaysias role in the IMT-GT is very central in the flow of trade within the sub-region. Thai exporters from the south of the country use Malaysia as a transit platform while Sumatra also sees Malaysia as a very important trading partner. However, Singapore is shown to compete up to a certain extent with Malaysia with regards to transit goods.

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