ABSTRACT Malaysia's maritime economy can be defined as the productionand manner of use of the range of goods and services

that arelinked to the maritime sector. The strategies for growth asenunciated in the Seventh Malaysia Plan (7MP) have majorimplications for the management of Malaysia's maritime sectorand indirectly, the maritime economy. Amongst others, thestrategies include adopting a global approach toindustrialization, maintaining and enhancing (global)competitiveness and the development of an outward orientedservices sector. Such a vision is commendable but its achievement requires thatthe resources of the maritime economy be utilized in anoptimal manner. The onset of the Asian economic crisis hasserved to emphasize the important role of the maritime economyas a facilitator of the growth process. The slowdown hasresulted in lower domestic consumption and investment; growth it is hoped will be forthcoming from the external sector, mainly export growth. Over the past few decades, the Malaysian economy has been transformed from one based on the production and export ofagricultural and mining products to one that is manufacturing driven. The future of Malaysia's maritime economy is mainly concerned with the future of Malaysian trade, since thenation's foreign and even domestic trade are almost completely dependent on maritime transport facilities. Beginning with the shipping and port industry and thenextending over the entire transport chain, Malaysia's ultimategoal should be the building of competitive advantage by minimizing transportation costs to the Malaysian exporter and importer. Malaysian shipping, for example, should continue tobuild its competitive advantage and outreach in the oil and gas industries through strategic partnerships that can provide the sector with marketing leverage. In the marine resource sector, the extraction of oil and gasis carried out as an offshore industry. Natural gas willreplace oil as a major foreign exchange earner as natural gas is widely favoured to be the engine of growth to drive theindusrialization process in the Asian countries. Marinefisheries have always been important to Malaysia, both as a source of high quality protein and in the provision ofemployment opportunities for coastal fishermen. The challengehere is to sustain the level of fisheries output through careful monitoring and conservation measures. The contributions of the marine tourism sector similarly arepotentially significant. It is opportune that the governmentrecognized the need to develop Malaysia's marine assets asmarine tourism has gained popularity both domestically andinter-nationally, especially with the growth of the cruise shipping industry. With the growing significance of Malaysia's trade sector,which in turn is inextricably tied up with the industrialgrowth policies, the future of Malaysia's maritime economy isgood. What is needed is the realization that the achievementof a developed nation status will materialize faster if theconcepts of constant and never-ending improvement are fully comprehended and even more important, believed in andpractised by all concerned. INTRODUCTION

8%.3%. the sea has always been important to Malaysia. dynamic and outward-oriented services sector to become a major catalyst for growth and a potential for the export of services in international trade. which has contributed significantly to Malaysia's economic growth. marine biotechnology and those that are service based such as shipping ports. mainly exports. Three of the challenges facing the nation which have implications in the management of the maritime sector are: A global approach to industrialization allowing firms to venture into large-scale operations to gain scale economies by exporting to world markets.From centuries past. The challenges to sustain economic growth for the Malaysian economy are clearly laid out in the Seventh Malaysia Plan (1996-2000). Before we focus on the future of Malaysia's maritime economy. then we need to focus on improving the linkages between each of the maritime sectors. In 1997. the fundamentals of Malaysia continued to remain strong as real GDP growth moderated and the external balance narrowed. will be forthcoming from the external sector. From there. let us first broadly define the meaning of maritime economy. shipbuilding and repair and the myriad range of ancillary maritime services. Maintaining and enhancing competitiveness in the face of changing market preferences which require reinforcing the nation's competitive foundation and strengthening infrastructure. maintain and enhance competitiveness and develop an outward-oriented services sector. with the financial turmoil in the region. If Malaysia wants to adopt a global approach to industrialization.all coordinated and keeping pace with developments both on a national and global basis. it is hoped. I will discuss in turn the sectors that comprise Malaysia's maritime economy and their role in economic development. growth. In this paper. oil and gas. the economy expanded at 7. . the full impact of these developments on the Malaysian economy will only unfold in 1998 and 1999. together with the oil and gas sector. Ports and shipping cannot be developed in isolationbut have to be linked with policies for industrial development and infrastructure development . The Straits of Malacca is the gateway to the Indian Ocean and Western Europe to the West while the passageway to Asia through the South China Sea lies to the East. including fisheries. Developing a modern. Growth of the Malaysian economy in 1998 is expected to slow down to 2 . The priority areas of Malaysia's maritime sector are the port and shipping sectors. I will outline proposals for enhancing the potential contributions of the maritime sector. Malaysia's maritime economy refers to the production and use of the range of goods and services based on the maritime sector. Economic activities have blossomed based on the maritime sector. In early 1997. The Government strategy for the medium term was export oriented and directed at improving productivity. With the slowdown leading to lower domestic consumption and investment. However. Economic circumstances can change drastically over a short period of time. It would thus cover the activities that are resource based.

1% of GDP in 1970 it grew to take up 28.3 billion and moderated to RM3. In 1997. The prospects for export-led recovery for the Malaysian economy appear to be reasonably good. Manufacturing has grown in significance as a foreign exchange earner in line with the government's intention of reducing Malaysia's dependence on primary exports. 1998). import reduction and review of projects with high import content. In 1994. before import growth resumed (WTO. the sector's contribution amounted to around 8% only. The study found that the maritime sector contributed 13% of the total value of output to the economy in 1990 (Abdul Aziz. registering rapid growth in the 1970s and 1980s. In 1996. MALAYSIA'S MARITIME ECONOMY AND ITS ROLE A study on the contribution of the maritime sector to the Malaysian economy was carried out by the Maritime Institute of Malaysia (MIMA) in 1994.4 billion. About 5% of this was contributed by the petroleum refineries and other petroleum and coal products and inland marine related industries. and the Swedish and Italian devaluations in the early to mid-1990s featured rapid export growth for the three years following the devaluations and import contraction in the first year after devaluation. Malaysia has a good track record as a successful exporter. the deficit still remained at 5. 1998).8% in 1992. The Malaysian manufacturing sector has be-come increasingly important since 1957. much higher than the world average (Economic Report 1997/98). which is higher than the deficit recorded in 1996. From a share of 13.8% in 1992 (Jomo. Excluding these. The Balance of Payments services account also did not improve in 1997 as had been expected.9% share of exports in 1970 it grew to 69. the Malaysian Balance of Payments current account deficit increased to RM13. Such a scenario may or may not repeat itself in the Asian scene. From a producer and exporter of raw materials for the . In 1995 it was 7. the CFA-Franc devaluations in West Africa. lumpy imports amounted to RM7. 1998). An effective way would be the reduction or postponement of lumpy imports.1% (BNM. Its export growth rate for the period 1992-1996 averaged 16%.9 billion in 1996 (Vijayaledchumy. Management of the current account deficit requires a combination of measures including export promotion.1 billion. But as a proportion of GNP. From 11. 1994) and to about 80% in 1997.Previous episodes of large devaluations such as the Mexico crisis. Jamli and Wong. however. 1997). the share amounted to 34%.

and ports and shipping are vital links in the trade-shipping-inland transport-port-supporting services network. It forms part of the network of three major liner routes. of which electrical and electronic items are particularly important. all at competitive costs. 1996). The Malaysia-Singapore region is served by almost every major shipping line connecting this pivotal area to more than 300 ports worldwide. The East-West Europe . It would not be an exaggeration to say that perhaps around 90% of the total value of the country's external trade is shipped by way of maritime transport. minimum waiting time and high productivity.industrial economies. The future of Malaysia's maritime economy is mainly a function of the future of Malaysian trade. In terms of volume. America . SHIPPING AND PORTS The shipping industry plays an essential role in the maritime economy because most of Malaysian exports are manufactured goods. The Intra-Regional Asia Trade with 18% of world trade (Stopford. especially the liner shipping industry cannot be seen in isolation as a cog in the wheel but as the indispensable part of an integrated system. A country with such a high dependence on manufacturing and trade for its economic prosperity has to manage its transport system with the ultimate goal of . since the nation's foreign trade and even domestic trade between Peninsular Malaysia and East Malaysia are almost completely dependent on the availability of maritime transport facilities. The focus is not just to emphasize creating efficient ports or efficient shipping but to see the entire system as a chain. therefore. has the potential to share in the benefits of high trade growth both on an intra regional and interregional basis. namely: The East-West Transpacific Trade serving N. The aspiration to become a global exporter with the advantage of economies of scale requires that Malaysia develops port and shipping services that ensure fast turnaround for ships. This region.Far East making up 20% of world trade in 1996. an even higher proportion would be dependent on maritime transport (Othman. But the contribution of the shipping industry. Malaysia now exports mainly manufactured goods. 1997).Far East Trade with 13% share of world trade.

The only liner service to show positive returns was the Australia service. stiff competition and overcapacity. Rate increases for tolled highways must be kept minimal by using construction materials and maintenance systems that lead to predictable increases over any given time period. manufacturing and trade can become the effective engine of growth for the Malaysian economy. And even this sector has attracted new players. Then. warehousing and storage. this is especially so as Malaysian ports and Singapore are constantly weighed as possible alternatives by liner companies. it is estimated that 35% of all containers moving Westbound are empty. the export trade from Asia to Europe and North America remains good but the import trade has excess capacity. But in a world of constant change.minimizing transport costs to exporters and importers. emphasized direct shipments and expansion of the Malaysian fleet. In the medium to longer term. Even more necessary is consistency and service quality rather than uneven record-breaking performances. That the liner trades are facing a cyclical downturn can be shown from MISC's 1997 annual report. LINER SHIPPING Liner trades in 1997 continued to suffer from declining freight rates. streamlined regulations and introduced technical innovations.1 to 5. we have to bear in mind that the Intra-Asia trade forms the second largest trade in the world with 5. Thus transport planning should emphasize infrastructural facilities that lead to cost minimization for exporters and importers such as transport cities where manufacturers have ease of access to suppliers. and rail and road access is both convenient and cost effective. Depending on the pace of . The government has made commendable efforts to improve port infrastructure. MISC continues to add new container-ships.3 million TEU per year. The government should focus on policies that will create competitive advantage to shippers. For example. Efficiency levels of Malaysian service providers have to be monitored constantly and compared with regional competitors. Due to the effects of the currency depreciation. there is a need to keep pace with competition in the region. taking delivery of four new containerships ranging from 350 to 700 TEU in 1997. The maritime economy is an indispensable part of the entire economic system. These are steps in the right direction. in the transpacific arena. creating an overcapacity situation. One of the major difficulties that the trades face is imbalance in the cargo utilization levels in the liner trades.

there has been a major shift in trading strategy from serving the traditional domestic markets to serving the international spot markets. they will recover in the medium term. Malaysian liner shipping should consider strategic alliances with established regional operators to offer joint services to reduce operational risks offering point to point shipping services linking the Malaysia-Singapore region to growth areas in ASEAN and Asia with the goal of becoming a low cost operator. as these goods will be cheaper to purchase. Although these volumes have slowed. The Asian economic crisis brought down rates even further and Asian countries have seen oil demand fall substantially from pre-crisis levels. From events that have been taking place in the major East-West trades. Through the operation of a profitable service. For MISC. This trade is even larger than the transpacific trade. Shipping is a cyclical business and no doubt the major East-West trades will see recovery with trade growth and regional economic recovery. it would appear that the overcapacity situation in the trades would continue in the current year. The timing of vessel purchases is another important consideration for competitive advantage as low cost purchases would confer a head start. the Intra Asian trades offer Malaysian liner operators the possibility of incremental involvement. TANKER AND BULK SHIPPING The Malaysian tanker sector began experiencing the slowdown in 1996 and 1997. Malaysian shipping should be encouraged to establish itself in this important trade. Of the two major trades. Malaysian liner shipping should resist any temptation to invest heavily in this area as returns on investment are not known to be attractive under current conditions. . However. Consumers in Asia predominantly source their finished goods from other Asian countries. This would eventually establish its competitiveness in the trade. as can be seen from Table 1. this would assist in the reduction of freight and services payments. locally rather than overseas where tariffs are often fixed in US dollars and or other hard currencies. In the Intra-Asia trades. this trade could well become the largest liner trade in the world in the next five to seven years.economic recovery for the Asian region. the major petroleum tanker operator in Malaysia. the transpacific and the Intra Asian trades.

1998). has indicated that 65% of its earnings are in US dollars and the remaining 35% in ringgit (Zety. HalimMazmin. Tapping the corporate sector to . the company has deployed a fleet of six ships carrying some 400. More likely. Industry sources estimate a drop in revenue by 30% since the middle of last year till the present time (April 1998). Although the value of the ringgit has depreciated.575 billion for the five Petronas LNG tankers and US$55 million for the thirty PNSL bulk carriers (Sidhu. It is clear that the bulk business requires deep pockets to ensure continued operations at this time. The export unit price for LNG is forecast to stay firm at RM650 per tonne in 1998.3% due to the weaker ringgit. The potential in this sector exists especially for cruises that can cater to the more discerning tastes of Japanese. Innovative marketing systems such as the time-share type of membership could be one way to increase the load factor on cruise vessels. The cruise shipping industry has the potential to earn foreign exchange for the country because it serves people of many nationalities. however. The Malaysian Institute for Economic Research (MIER) said that in January February 1998. There is also the rising middle class of South-east Asian countries who are beginning to enjoy short regional cruises as an alternative to the longer overseas trips.The smaller Malaysian shipping companies operating tankers may be more adversely affected if all their earnings are in ringgit and if they have to meet certain obligations in US dollars. Now.000 passengers annually. Japan entered this sector in the 1980s when the major Japanese shipping companies such as NYK operated cruise services. earnings of Malaysian companies are in a mixture of currencies. Malaysia's Star Cruise is rapidly becoming an important operator in the international sector. Since 1993. In Malaysia. CRUISE SHIPPING The leisure sector of the shipping industry is well developed in Malaysia. Another commodity that is expected to perform well this year is LNG. oil companies are unlikely to agree to any upward revision of tanker charter rates. 1998). moderating to RM560 per tonne in 1999 (Banoo. Taiwanese and Hong Kong markets. for example.2% compared with the same period last year. revenues from LNG exports surged 50. export volumes for palm oil for January to February 1998 grew by 27. The bulk carrier business of Malaysian shipping is expected to be difficult for 1998.1% while export unit price increased by 65. 1998). It is understood that MISC would be paying US$1.

1997).1 million tons in 1995 (7MP). Under the Sixth Malaysia Plan. 68% or 540.5 million tonnes in 1990 to 174.000. THE PORT SECTOR IN MALAYSIA The concerns that are often voiced over Malaysian ports are whether we have too many ports and whether Malaysian ports are competitive. Singapore. then that activity contributes to the maritime economy. Modern technologies using faster and cheaper construction . Indeed. Every state wants to build its own port.301 cruise ship calls in 1996. 69% of which or 910 calls were multi-destination calls compared with 42% in 1995.hold more of their conferences on board cruise ships could be another. cargo should be transhipped through a Malaysian port that offers such services as far as is practicable. Recognizing the growing prevalence of multi-modalism. the government is adopting an integrated planning approach to promote multimodalism and developing a comprehensive range of landside facilities and services (7MP). The question really is whether the ports allow shippers to be competitive in export-import activities. Third country ports can be used if they offer competitive advantage to shippers. port development will continue to focus on expanding capacity. for example. Of the total passenger throughput of some 794. Table 2 projects the berths. Apparently. some want to build two. But if direct services are not available. short duration cruises have grown in popularity over the years although the cruise operators who hope to succeed must be prepared to provide good on-board sports and entertainment facilities for the entire family. For the Seventh Malaysia Plan. they can come up with the justification. port capacity and throughput at Malaysian ports up to the year 2000. upgrading and increasing equipment as well as enhancing efficiency of port and port-related services. has registered a total of 1. major expansion projects at the main ports increased port capacity from 120. quality food and a high steward to passenger ratio. the cruise industry is one that is more suited to companies with strong financial positions as they are expensive to maintain and require comprehensive planning of on-board activities to sustain the level of bookings. Throughput at Port Klang is expected to more than triple over ten years. If shipping direct provides firms the competitive advantage.000 passengers went on such multi-destination cruises compared with 47% in 1995 (Shipping Times. Again.

development of an additional three berths at West Port as well as Phase II of the NBCT project (7MP). More than 30-operators/consortia offer mainline services directly to/from the port. Analysts expect the Peninsular Malaysia ports of Port Klang. of encouraging terminal operating companies to be more customer oriented. Malaysian ports handled 461. However. at 18. Malaysian ports have met with success in recent years. and to 2.methods are being used to accelerate expansion of port capacities and to contain project costs. These are in the area of quality of services. supporting port services play a crucial role in port competitiveness. 1998). complexity of port legislation and ancillary services. as a study initiated by the Ministry of Transport (Coopers and Lybrand.5 million TEU in 1996 (+442% over 1987) (Fossey. business services.956 TEU.Table 4 also projects that container cargo is expected to overtake every other kind of cargo. In a MIMA study. These include the construction of the new port at Ranca-Ranca. come from having efficient services and marketing leverage. The Internet should be used as a tool for marketing leverage to turn Malaysia into an exporter of much higher profile than what it is today. By 1990 the figure had risen to 881.132 (+90. Johor and Kuantan. it was pointed out that cargo represents the tangible element of trade. Table 3 shows growth of container traffic at major Malaysian ports. For container traffic the fastest growing ports are Port Klang. including port business. Johor and Penang to move well over 5 million TEUs in the year 2000. Labuan. Malaysian port policies need to focus not just on the hardware of building port capacity but also the software. as it were. the third LNG terminal in Bintulu Port. Port Klang has attracted new business particularly from mainline operators serving the European and US trades. a dangerous cargo jetty in Kemaman Port. looking to making arrangements for . In an era of global competition. for example. For example.8% growth per annum over the 7MP. This requires the nation to employ the resources of the electronic super highway to link up manufacturing establishments with foreign buyers and providers of shipping and port services. Empowering Malaysian ports means increasing the volume of trade through the ports.7%). although this projection may now be too optimistic in the light of the current downturn. Its costs all in are said to be 30% lower than Singapore and Malaysia's load centring policy has borne fruit. In 1987. five berths at the privatized TanjungPelepas Port. It is in the area of containerization that the future of the Malaysian port sector is especially bright. 1996) has pointed out.

The power sector has been the major contributor to the consumption of natural gas accounting for more than half the total.759 million from an export volume of 8. The gas and quarrying subsectors. Without the discovery of major new outfields the medium-term prognosis for crude oil production and exports will remain stagnant at best.1 million from earnings of RM7.6% to RM3.9 million from 10. (See Table 5).810.6 million tonnes (1996: 13. the picture for earnings from gas exports appears much more attractive.3 million) with an export volume of 9. For 1997. OIL AND GAS SECTOR Extraction of oil and gas is carried out as an offshore industry. Korea and Taiwan.211.3% per annum. During January to July 1997 receipts from LNG rose by 49. export earnings are expected to decline by 1.545.2 million (January .47 million tonnes) (Economic R eport 1997/98). at RM7. On the other hand. the mining sector is expected to grow at 2.6 billion.July 1996: RM4. For 1997 as a whole. Indeed. the value of LNG exports is expected to be much higher.110. Countries representing major importers of Malaysia's LNG in the first seven months were Japan.090.11 million tonnes. will continue their momentum in the 7MP period.8 million in 1996 (Economic Report 1997/98).8 billion (7MP).July 1996: RM2. By the year 2000. export volumes of LNG are expected to increase by 18. which expanded significantly in the 6MP.exclusive/dedicated terminal services with operators of large scale liner services. .83 million tonnes (January .8% in 1997 to 15. The future of this sector of Malaysia's maritime economy has been good since the pioneering days in the 1970's with the incorporation of Petronas. Under the 7MP. natural gas is widely favoured to be the engine of growth to drive the industrialization process in Asian countries. as gas fired generation is free from ash and sulphur compounds and has lower levels of carbon dioxide emissions. There are two good reasons for this: The growing pressure for a cleaner burning and environmentally friendly fuel.7% to RM3. Export earnings from crude oil for the first seven months of 1997 declined by 8. compared with oil exports of RM5.13 million tonnes) (Economic Report 1997/98). Oil prices appear to be on a down trend and domestic consumption is increasing so the sale and exports of crude oil is decreasing.7% to RM7.

the development of Malaysia's marine assets (e. The net surplus in the travel account declined by almost RM1 billion to RM3. Nevertheless. the first such decline since 1991 (Bank Negara Malaysia. which provides greater thermal efficiency and shorter installation time frame (A Rahim). oil consumption is expected to rise by 2% per year. Oil companies are exploring the feasibility of deep-water wells.g. islands. Malaysia is uniquely positioned to take advantage of the oil and gas transportation requirements. 1997). Other possible technologies and advances can be transferred to Malaysian oil exploration and development. Petronas and MISC are in a strategic position to cater to the needs of the Asian region when industrial growth recovers. generates employment opportunities. 1997). and brings foreign shoppers to Malaysia. a total of RM1. MIDA reported that in 1993. MARINE TOURISM INDUSTRY Tourism became the third largest foreign exchange earner for Malaysia in 1990. tourism continues to contribute to government revenue. the coastline. and ecotourism have all grown in importance. Last year in 1997. has pursued this possibility and has brought its fourthdeepwater field into production in 890 metres in the Gulf of Mexico (Kang. and coral reefs) has subsequently been given priority by both the government and the private sectors in the country (MohdNizam. Shell. boating and sailing and scuba driving. The challenge to Malaysia is to find ways to keep pro-duction and distribution costs at competitive levels.5 billion. The immediate challenge for the oil and gas sector is to manage its way successfully through a period of excess capacity and to cope with international pressures for a cleaner environment. On a global basis. the performance of the tourism industry was affected by the prolonged haze in the Southeast Asian region. Malaysian oil demand on the other hand is expected to grow at 8% per year (Kang. 1994).The development of the combined cycles gas turbine (CCGT) technology. As one of the world's largest producers of natural gas with ownership of a large LNG fleet. Most if not all countries in Asia are involved in or plan to import natural gas. In more recent times.6 billion was invested in hotel and tourism . Activities such as sports fishing. Tapping Malaysia's oil reserves means keeping up with the advances in technology in oil exploitation. for example. 1998). Offshore islands are becoming increasingly important as tourist destinations.

1992 identified six Primary Tourism development zones with four having facilities for marine tourism (MohdNizam.245 mt with a value of RM3. Marine fish landings have shown an increasing trend from 1988 to 1992 with an annual growth rate of 5. with a substantial increase in the fisheries resources. But to play its role effectively.000 to 160. 1994). there is a need for: Significant improvement to the availability of data on the industry as it is difficult to assess the contribution of marine tourism to the economy.projects. MARINE FISHERIES Marine fisheries can be classified into inshore and deep-sea fisheries.7%. The landing of marine fisheries in 1995 was 1. the declaration of the Exclusive Economic Zone (EEZ) has enlarged the waters under Malaysian jurisdiction from 47.47% of GDP (Tan. In 1992. The marine tourism industry has much to contribute to national economic growth. Preservation of the condition of natural assets for the industry to be sustained. with nearly 80% of the projects located in coastal areas and islands. nautical miles. deep-sea fisheries contributing the remainder (Hashim. With value added projected to increase in the 1991 . The National Tourism Policy Study. Inshore fisheries operate within 12 miles from the coastline. While inshore fisheries have reached a state of saturation in terms of exploitation. THE FUTURE OF MALAYSIA'S MARITIME ECONOMY: FUTURE DIRECTIONS AND PERSPECTIVES Malaysia's maritime economy is an indispensable sector of the .15 billion constituting about 1.5% p. especially for activities such as recreational boating and sailing.a. inshore fisheries contributed 86% of the total marine fish landing.2010 period at the rate of 5. 1998). the industry would surpass the contribution to GDP from rubber and sawn logs (Hashim. the annual growth rate is much higher for the same period at 14. In terms of value. The exploitation rate of inland and inshore fishing has to be carefully monitored and conservation measures undertaken to sustain fisheries resources. Adherence to regulations.000 sq. 1994). 1994).5% per annum. Sustaining the level of fisheries output will be a challenge.

In the maritime sector the "tradable" services would include port. it needs to start with the policies for maritime sector administration. If Malaysia is serious about implementing productivity-driven growth and reaping the rewards of economies of scale from global manufacturing. What is the outlook for Malaysian shipping? The short-term priorities for the industry should focus on the preservation of Malaysian shipping.entire economic system. Global competition in trade and services will intensify as growth slows. The profitability of shipping at this time would depend on the percentage of revenues received in US dollars and whether the company is basically an international or domestic operator. A segmented and uncoordinated approach towards the administration of the maritime sector will result in wastage of time and resources and duplication of the services of agencies administering the sector. . The desired objective of making Malaysia a maritime nation can be accelerated if the linkages of each subsector of the maritime economy can be seen as essentially inter-related and systems thinking be universally adopted in formulating programmes for the advancement of the sector. with the latter being relatively worse off. shipping companies not only earn revenues mainly in US dollars but also have to meet many operating expenses in US dollars. Results reported by the smaller Malaysian shipping companies show that they have been adversely affected by the Asian crisis. especially for export oriented industries has become more crucial. Its macroeconomic performance is largely influenced by external developments and the capacity of the economy to quickly adapt and adjust to these developments. Having invested so much in developing the shipping sector.4% in 1998 (cf. 1998). Malaysia should not allow the present austere economic circumstances to decimate the industry. 2. Shipping companies should be given every encouragement to merge in the same manner as the banking sector to build up financial strength and resilience. shipping and ancillary services. The GDP of the industrial countries as a group is projected to grow more moderately by 4. the performance of the Malaysian export sector.8% in 1997) reflecting slower economic expansion in the United States and the United Kingdom as well as continued weak growth in Japan (Bank Negara Malaysia. With the economic prospects for the Malaysian economy and the region being in such a lacklustre state. Shipping being an international industry. One of the areas that has been identified as having potential for development into a new engine of growth is the services sector. Cash flow rather than profitability per se is the concern of many companies.

there is the need for effective policies that will result in increasing the size of Malaysian tonnage and the use of this tonnage both by Malaysian exporters and importers and for cross trading purposes. Measures should be taken to reduce the operating costs for Malaysian shipping. must place priority on becoming customer focussed and cater to the schedules and logistics requirements of manufacturing companies. marketing and distribution of LNG. and the authorities in tax administration should support these developments. The government should institute measures to support Malaysian shipping under the current conditions. Beginning with the public sector bodies. But it cannot stop there.Combining the resources of Petronas and MISC in production.o. the freight forwarders. 1997). Malaysian shipowners. this has to be linked with policies that will provide incentives for private sector consolidators and controllers of cargo. Due to the fact that shipowners need to join alliances due to the high cost of maintaining scheduled liner services.i. Spares and any equipment imported for use on Malaysian ships should be exempted from duties. The existing circumstances in the liner-shipping sector require both innovativeness and flexibility in vessel operations. Although exporting c. crude petroleum and products is a step in the right direction. As a premier producer of gas coupled with an efficient distribution (shipping) network. Malaysian importers have more control over cargo and should be encouraged to nominate Malaysian vessels for carriage of imports wherever possible. the aspirations to become a maritime nation are linked to the task of planning the nation's economy (Abdul Samad. and importing f. Instead of purchasing new buildings at this time. freight earnings from slot exchange should be exempted for Malaysian shipowners.f. In the words of a prominent port operator.b. Malaysian owners should be encouraged to avail themselves of the . such as Just-in-Time manufacturing systems. too. the warehouse operators and the manufacturers to opt for the use of Malaysian vessels. is a good beginning to change trading practices among the community. To be effective. Malaysia should aim to be the most cost effective gas supplier to the ASEAN and Asian regions. a policy of exporting c. LPG. Thus. may be more difficult to implement. A high capacity gas carrier fleet would confer economies of scale with the reputation of being a specialist in this field and thereby setting the stage for even greater marketing successes to other parts of the world.i. Bunkers traded in Malaysia should be made available by Petronas and other oil majors in ringgit terms.f.

By so doing. Malaysia needs to institute much more precise monitoring of the foreign exchange implications of shipping investments. together with aircraft are highly expensive investments. As it is at the moment. the foreign exchange gains from one sub sector of the shipping industry may be negated by leakages in the form of losses made by other sectors of the industry. In managing the balance of payments. as the charter rates for new and secondhand vessels have substantially declined. operational expenses and capital gains and losses is needed. the government recognizes that a major priority is in building the port's capacity to concentrate on cargo. enabling policy makers to channel resources towards the most successful shipping sectors. With the currency realignments taking place. What is the unique selling proposition (USP) of Malaysian ports? Malaysian ports have cheaper tariff structures when compared to regional competitors such as Singapore and Hong Kong. earning valuable foreign exchange for the country. the question of service reliability. which have greater potential for contributing to the economy. With such comprehensive information it would also be possible to determine the rates of return on investment for each sub sector over any time period. the major Malaysian ports have great potential for developing their role as exporters of port services.opportunities available to charter in vessels if they have cargoes to be moved. it would be possible to structure policies to provide appropriate incentives to those sectors. and therefore. but just as important. so essential to all exporters and importers. Shipping consists of different sub sectors and as such proper and timely monitoring of the inflows and outflows which have foreign exchange implications in the form of vessel earnings. speed of operations. In the port sector. This requires the combined efforts of shipping companies. the port authority and the shipping . In trying to build Port Klang into a regional hub. yet do not fall far behind in terms of their performance standards. There is a window of opportunity for Port Klang to achieve its vision of becoming a regional hub even in the regional crisis. shipping operators in ASEAN will be more inclined to shift to Port Klang if strong efforts are made to expound the advantages of using Port Klang as a transhipment centre for the ASEAN and Indian sub continent regions. safety of cargo and consistent quality service. as ships. the port terminal operating companies. Port users from the shipping lines to the trading community will seek new ways to save costs and Port Klang has to rise to the occasion by addressing not just the issue of cost competitiveness.

But marketing to be effective has to be on going. 1997). The frequency of direct services at Singapore is much higher than at Malaysian ports and this frequency level is important for Just-in-Time shippers. Singapore also offers a wider range of shipping destinations. ports. The second important policy is to build cargo volumes at Port Klang which will have the effect of developing economies of scale for the port leading to lower per unit costs of shiphandling and cargo costs. Terminal operators have also been encouraged to carry out marketing activities in their regional niches. The government has already taken an important step in establishing the Multimedia Super Corridor (MSC). there is a critical need for Malaysian ports and especially Port Klang terminal operators to wholeheartedly embrace the powerful dynamics of marketing leverage. Malaysian shippers should be given the most cost effective options for shipping their cargo. operations and administrative systems. Malaysian shipping companies should be encouraged to pool their resources to set up a network of feedering services to and from Port Klang. as this is an essential requirement if the calls of mainline vessels are to be sustained. Indications are that the shipper bears no extra cost to feeder cargo via the port of Singapore. Being in the forefront of software and systems development. as otherwise the particular transaction may not have materialized. thus in specific cases cargo transhipped through Singapore should be seen as a plus to the Malaysian economy.community. shipping companies and the trade sector to modernize marketing. direct shipping services between these ports and East Asia are well established. The Minister of Transport took an important step by personally leading road shows and discussions at Penang and Kuching with shippers to feeder their containers through Port Klang. . and shippers are afforded a competitive advantage by shipping direct. A study made on the Malaysian port policy has shown that there is a need to induce a cost advantage for the shipper for direct shipment of cargo via Port Klang (Robinson and Everett. By including some cost advantage in shipping direct this would induce a relative cost disadvantage to the shipper in feedering to Singapore. the government should encourage the interface between MSC companies. The focus should be on building up the regional hub status of Port Klang but the requirements of trade and the competitive status of the trading community should come before the interests of port operators. thus making the port even more attractive to shipping lines and shippers. In the case of Penang and PasirGudang. For the hub port strategy to succeed.

There is a need to upgrade legislation pertaining to the maritime sector in view of the changes that have taken place in ports and shipping over the last thirty years. In managing the development of intermodalism in Malaysia. there were less than 5 million Internet users. from production to distribution for the benefit of the maritime economy. Ancillary services such as bunkering. there are likely to be 300 million users. This is an industry that can provide Malaysian shippers a competitive edge in world export markets. Toll charges on road users including container haulage operators must not be so high as to reduce the competitiveness of Malaysian exports. vessel repair and spare part supplies need to be available at economical cost and speed in order to make calls at Malaysian ports attractive to international shipping lines and to maintain their degree of satisfaction with Malaysian service providers. 1998). Malaysia has the infrastructure to maximize the gains on all fronts. In 1991. But nationwide EDI systems are still being developed. Road systems need to be operational when the ports are operational. It is heartening to note that legislation to cover new activities in the sector such as marine tourism.A study by the WTO on electronic commerce has examined the potential trade gains from the rapidly increasing use of the Internet for commercial purposes. Although problems of electronic commerce still need to be solved. much will depend on how the maritime sector is managed. The maritime sector has a major role to play in enhancing productivity-driven growth. fresh water supplies. productivity-driven growth and enhancing competitiveness. And the value of electronic commerce is predicted to reach US$300 billion by that time (World Trade Organization. CONCLUSION If Malaysia is to achieve the goals of industrialization. By the turn of the century. An important element that will . Ports require to constantly upgrade their cargo handling equipment. an illustration of the need for inter agency coordination and cooperation can be seen. Malaysia needs to keep track of international developments and provide facilities that meet international standards in the maritime sector. The ships that provide container services grow ever larger and require more efficient services at ports. offshore industry and the industry's impact on the environment is being examined and drafted.

A good start has been made with the MSC. Abdul Samad Mohamed (1997). Kuala Lumpur. No. The Maritime Economy of Malaysia. new technology and investment can raise the total factor productivity of manufacturing.Annual Report 1997. "Bumper Year for Commodities Seen". Malaysia was ranked 37 out of 43 countries by the World Competitiveness Report in terms of research and development. 29 September. Hashim Ahmad. JamliJanib and Wong Hin Wei (1997). "The Contribution of the Marine Fishery . Undoubtedly. John (1998). April.affect efforts to sustain international competitiveness is productivity. p. REFERENCES A Rahim Bakar. (1994). Abdul Aziz Abdul Rahman. "Rising Stars". The Star. Pelanduk Publications. Coopers and Lybrand (1996). What is needed is the political will to effect a change to systems-centred thinking in planning the future of the maritime economy. including the maritime sector. Containerisation International. Study on Export Containers and Feeder Services. Bank Negara Malaysia (1998). Not only is product research lacking but also research on trade competitiveness. Resource. Economic Report 1997/98. the correct incentives and policies can be introduced in managing the maritime sector. 2 (undated). Vol. Sreerema (1998). Fossey. services and other sectors of the economy. Business Times. 22 May. 77. "Prospects for Natural Gas in Asia". transport sector management and the meeting of global marketing challenges. Final Report. 4. As quoted in "Law Being Streamlined". Banoo. Through establishing the proper management information systems for the contributions from the transport sector and using this information to guide external sector management. February. which will help in the transformation of the economy from an "input-driven" mode to a "productivity-driven" mode.

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