RMIT International University Vietnam

OMGT 2321 Global Trade Operations

A1

Subject Code:
OMGT 2321

Subject Name: Global Trade Operations

Location & Campus RMIT Vietnam, HCMC

Class Group Number: SG-G01

Student Name: Luong Vien Tai

Student Number: S3651323

Your Teacher: Avinash Shankaranarayanan

Word Count: 1275

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 Singapore’s ports domination
Executive Summary

Singapore port has ranked 2nd in the world container ports for many years and dominant in the
Southeast Asia market. This achievement is received from the leading of the Port of
Singapore Authority Corporation (PSAC) which is currently operating 5 terminals and the
capacity of 30 million TEUs. With the control of PSAC, Singapore port has gained
comparative and competitive advantages, Singapore port able to receive lower opportunity
costs in term of transporting goods than other countries ports and gain higher competitiveness
with advantage of location, technologies and operation strategy. Beside from advantage,
Singapore port also face challenges when have to compete with neighboring competitors. In
addition, Singapore upcoming Tuas-mega port is expected to double the container volume
and guarantee to become a leader in Southeast Asia.

Methodology

In order to collect information about Singapore port, RMIT library is needed as a tool to look
for journal articles, books and reports. Moreover, lots of newspapers are being analyzed
properly and many websites also used to find out the detail of Singapore port. Lecture
notes/slides also used to find information about theory that implemented in this study.

Historical evolution

Singapore port is located on the Malay Peninsula (Aldcroft 1966) and the port was controlled
by the Port of Singapore Authority (PSA). Since 1964, when PSA took over the Singapore
Harbour Board, it has opened more maritime gateways to the demand of terminal users. In
1965, PSA opened Jurong port and the Tanjong Pagar port was opened in 1972 (Chee 2019).
In Tanjong Pagar terminal, Singapore has accommodated a third-generation container vessel
which is never done by other ports in Southeast Asia. Until 1990, PSA has managed 5
maritime gateways and PSA has corporatized in 1997 to become PSA corporation (PSAC).
PSAC has made Singapore to become one of the busiest ports and ranked second in the world
and currently operates 5 container terminals with 52 berths in total (MPAS 2016).

Comparative advantage

Comparative advantage is introduced by David Ricardo in 1817 which mainly determines a

country opportunity cost. This theory states that ‘A country has comparative advantage in the
production of a good or service if its marginal opportunity costs are lower than another

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country’ (Health 2006). Since PSAC has controlled over the port of Singapore, it has opened
many more container terminals and has made lots of investments to develop the port in term
of new equipment and technology. In addition, access to latest port infrastructures along with
effective operation strategy has brought Singapore port to another level where the term traffic
congestion has never mentioned in the case of Singapore but instead happen in Hongkong,
Malaysia and other countries, not all, Singapore has connection with many mother ships and
feeders in the transshipment of containers which allows it to transport goods way more faster
than other countries in the same region (Slack and Wang 2002). Based on the theory,
Singapore has lower opportunity cost in transporting goods in comparison with other
countries due to operational efficiency. By receiving help from mother ships and feeders,
these factors in combination can show that Singapore is transporting goods faster than others
in the region. The following table is an example of assuming the duration to transport goods
between two countries.

Duration of transporting goods of two countries

Singapore Malaysia
Australia (10 days) Australia (11 days)
(Or) (Or)
Taiwan (1 day) Taiwan (2 days)

Competitive advantage

Competitive advantage can be defined as a strategy that organizations use to create value or
the natural resources that it can access to, not concurrently follow other competitors and it
should not be duplicated by others (Flint 2000). Singapore port is not engaged in price
competition when compared with nearby ports such as Port Klang and Tanjung Pelepas in
Malaysia but instead PSAC focuses more on service sectors. After many years operating,
PSAC has been opened much more container terminals such as Tanjong Pagar or Keppel
terminals, in term of technology, PSAC has invested to equip 118 quay cranes, 33 rail-
mounted and 306 rubber-tired gantries (Slack and Wang 2002). With large number of
terminals and new port facilities, PSAC able to transport goods faster and provide better
quality service for terminal users. Based on the Ministry of Transport, Singapore can handle
up to 1000 ships at one time and able to handle around 32.6 million tons annually (Forbes
2017). Since 1999, Singapore port has been dominant in twenty-foot equivalent unit (TEU)
handle in comparison with other 2 ports in Malaysia, this market share that PSAC has gained

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are mostly by providing services through developing human resource and technologies
(Jasmine and Lam 2006). Refer to the geographical aspect, Singapore is located in the area
where its terminals are able to hold the deepest draught container vessels and the strait of
Singapore is connected with Europe, Middle East and East Asia ports, these are benefits of
Singapore port in term of location (Slack and Wang 2002). Overall, PSAC can gain
competitive advantage with more terminals which able to avoid congestion and have
implemented new equipment to support transportation, but importantly is providing quality
services for users.

Operational challenges

Even though, Singapore port is one of the busiest ports in the world, it still faces competition
challenges in Southeast Asia and the top 3 ports in Southeast Asia are Singapore port, Port
Klang and Tanjung Pelepas. Since 1999, the market share of Singapore port is accounted for
over 50% but it has declined to 47% in 2002 and both Port Klang and Tanjung Pelepas ports
market share are increased from 1999 to 2002, the TEU handle of Singapore is around 16
million in 2002 while 2 Malaysia ports are around 2 million (Jasmine and Lam 2006). In year
2016, the TEU handle of Singapore has doubled to 30 million while Port Klang and Tanjung
Pelepas ports are experienced the increase of TEU handle by 5 times since 2006 (Salikha
2018). This statistic shows that the growth of both Malaysia ports are way more faster than
Singapore port and their market share are keep on increasing since 1999, the reason for this is
the price charged are cheaper than Singapore port and both Malaysia ports can have cost
advantage are due to the lower port tariffs and lower currency value (Jasmine and Lam 2006;
Ward 2017).

Business strategies

Because of high competition level, PSAC has reduced the transshipment fees by 10% to
increase the port competitiveness, however, it still not sufficient in a long-term run. Hence,
PSAC is keep on making new investments on infrastructure and technologies like CITOS
system in order to make the deliver more efficiency, not all, PSAC also planned to open
Tuas-mega port with support from drones in loading vessels, this would help to lower the
costs and avoid theft (Ward 2017).

Results: Future business prospects for Singapore port

In the future, Singapore port is likely to face even more competitors and more challenges
when current competitors improved their efficiency and productivity. However, based on the

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advantage in technologies, location and operational strategy, Singapore port will able to
maintain its position in the market place. PSAC always try to be innovative in building a
smart port for Singapore and focusing on port service quality to make terminal users satisfy
rather than aiming at lowering the costs, these aspects have gained both comparative and
competitive advantages for Singapore port. Once the Tuas-mega port completed, Singapore is
likely to replace Shanghai for the top container ports in the world and will be dominant in the
maritime industry. With Tuas terminal, the capacity of Singapore port is expected to be 65
million TEUs which is double from now (Low 2019).

Conclusion

In conclusion, Singapore has both comparative and competitive advantages because of

advanced technology and operation strategy. From my perspective, Singapore has advantage
over competitors in term of natural resources, technologies and human resource, these
advantages are outweighed disadvantages which makes Singapore port to maintain its
position in the market and can have further development with current strategies.

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References
Aldcroft, DH 1966, ‘Book Review: Home Port Singapore, a History of the Straits Steamship
Company Limited, 1890–1965’, The Journal of Transport History,  vol. fs-7, no. 4.

Chee, V 2019, ‘Port of Singapore Authority’, National Library Board Singapore, viewed 16
July 2019, <http://eresources.nlb.gov.sg/infopedia/articles/SIP_577_2005-01-27.html>

Flint, GD 2000, ‘What is the meaning of competitive advantage?’, Advances in

Competitiveness Research, vol. 8, no. 1, pp. 121-129.

Forbes, VL 2017, ‘Territorial Sea Limits in the Singapore Strait’, Journal of Territorial and
Maritime Studies, vol. 4, no. 2, pp. 119.

Heath, WC 2006, ‘TEACHING COMPARATIVE ADVANTAGE AND INTERNATIONAL

TRADE: PITFALLS AND OPPORTUNITIES’, Journal of Economics and Economic
Education Research, vol. 7, no. 1, pp. 29-39.

Jasmine, SL & Lam, W.Y.Y 2006, ‘A measurement and Comparison of Cost

Competitiveness of Container Ports in Southeast Asia’, Transportation, vol. 33, no. 6, pp.
641-654.

Low, J 2019, ‘Commentary: Tuas Mega Port strongly positions Singapore for a maritime
future’ Channelnewsasia, 7 July, viewed 13 July 2019,
<https://www.channelnewsasia.com/news/commentary/tuas-mega-port-singapore-maritime-
trade-shipping-impact-prospect-11579056>

Maritime and Port Authority of Singapore (MPAS) 2016, ‘Singapore terminals’, MPAS, 27
January, viewed 15 July 2019, <https://www.mpa.gov.sg/web/portal/home/port-of-
singapore/operations/port-infrastructure/terminals>

Salikha, A 2018, ‘Southeast Asia’s largest ports in container handling’, Seasia, blog post, 1
January, viewed 13 July 2019, <https://seasia.co/2018/01/01/southeast-asia-s-largest-ports-in-
container-handling>

Slack, B & Wang, JJ 2002, ‘The challenge of peripheral ports: an Asian

perspective’, GeoJournal, vol. 56, no. 2, pp. 159.

Ward, O 2017, ‘What will stop Singapore’s ports dominating in Southeast Asia’, ASEAN
Today, 12 October, viewed 14 July 2019, <https://www.aseantoday.com/2017/10/what-will-
stop-singapores-ports-dominating-in-southeast-asia/>