{"id":12670,"date":"2021-12-14T12:43:52","date_gmt":"2021-12-14T04:43:52","guid":{"rendered":"https:\/\/newmalaysiatimes.com\/?p=12670"},"modified":"2021-12-14T12:43:52","modified_gmt":"2021-12-14T04:43:52","slug":"maritime-industry-caught-between-the-devil-and-the-deep-blue-sea","status":"publish","type":"post","link":"https:\/\/newmalaysiatimes.com\/?p=12670","title":{"rendered":"Maritime industry caught between the devil and the deep blue sea"},"content":{"rendered":"\n

KUALA LUMPUR, Dec 14 — The maritime industry was in an awkward spot in 2021 as it was caught between the fallout of the pandemic and the threat of new variations weighing on global trade, causing changes in the global supply chain and entangling in a heated debate over cabotage policy.<\/p>\n\n\n\n

The government\u00a0imposed the\u00a0Movement Control Order (MCO) in the first quarter of the year and\u00a0again in mid-2021 to combat the spread of\u00a0COVID-19, putting\u00a0the maritime industry\u00a0in the doldrums due to uncertainty and disruptions in business operations.<\/p>\n\n\n\n

Factories, port operators, and logistics companies established standard operating procedure (SOPs) to safeguard their workforce from infection and to remain in operation.<\/p>\n\n\n\n

However, despite multiple SOPs and stringent measures imposed by the government, clusters of infections hit manufacturers across the board, namely chip manufacturing and the production of capacitors, resistors, and other key modules used in consumer electronics and automobiles, hence disrupting output.<\/p>\n\n\n\n

Malaysia\u2019s daily infection rate peaked at above 22,000 cases in September.<\/p>\n\n\n\n

Suez Canal and Yantian’s Port Crises<\/strong><\/p>\n\n\n\n

While the pandemic-induced\u00a0shocks have already exhausted the global shipping industry, resulting in global shipping delays, the closure of Shenzhen’s Yantian International Terminal and the Suez Canal blockage crisis had just added another layer of uncertainties\u00a0to an already strained supply chain.<\/p>\n\n\n\n

The scenario is evident\u00a0that the\u00a0globalized shipping industry is vulnerable not only to geopolitical tensions, natural disasters but also\u00a0man-made disasters wherever they occur on the planet.<\/p>\n\n\n\n

Fortunately for Malaysia, the impact of the Suez Canal crisis was minimal as the country’s ports are well equipped to handle more than a ship at a time, and Port Klang and Port of Tanjung Pelepas were the only Malaysian ports receiving calls from Europe and the Mediterranean.<\/p>\n\n\n\n

But it was not the same with\u00a0Yantian port backlogs, where\u00a0Malaysia was exposed to supply-chain disruptions due to backlogs of semiconductor goods, appliances, commodities, consumer goods, automobiles, plastics, textiles, and many other exported goods from China.<\/p>\n\n\n\n

\"maritime<\/figure><\/div>\n\n\n\n

Cabotage Policy<\/strong><\/p>\n\n\n\n

The policy\u00a0is\u00a0practiced in 91 countries worldwide and this includes neighboring\u00a0Indonesia and the Philippines\u00a0to protect their own shipping industry and\u00a0the growth of its\u00a0services.<\/p>\n\n\n\n

This topic has\u00a0been hotly debated in Parliament and\u00a0within the industry, this year and that local companies should be prioritized when it comes to works within national waters.<\/p>\n\n\n\n

It means that when it comes to transporting goods to East Malaysia, or even when Sabah and Sarawak deliver goods to each other, local vessels should be prioritized over foreign ones.<\/p>\n\n\n\n

The Malaysia Shipowners\u2019 Association and Malaysia Offshore Support Vessel Owners’ Association insisted that cabotage policy should remain to protect Malaysia’s economy, especially in the post-pandemic era as the country\u2019s economy and industries move into the recovery phase.<\/p>\n\n\n\n

However, it\u00a0somewhat contradicts Malaysia’s aspirations to go big in\u00a0data hub and artificial intelligence and big data analytics as outlined in MyDIGITAL, which is aimed\u00a0at\u00a0accelerating\u00a0Malaysia’s progress as a technologically-advanced economy\u00a0through Malaysia’s Digital Economy Blueprint.<\/p>\n\n\n\n

While that is being debated, it is also pertinent to note that the Malaysia Shipping Masterplan (MSMP), which was launched five years ago (2017-2022) is far from achieving its goals.<\/p>\n\n\n\n

A report on the progress of the maritime industry revealed that little emphasis was placed on preparing the maritime industry for the Industrial Revolution (IR) 4.0 in areas such as acquiring technologies and assets, building human capital, and undertaking R&D to move up the digital value chain.<\/p>\n\n\n\n

\u201cDespite acknowledging the importance of having skilled human capital to enhance competitiveness, the MSM 2017-2022 and the Malaysian Shipbuilding and Ship Repair Industry Strategic Plan 2020 did not set any specific and measurable targets towards IR 4.0 readiness and digital transformation,” the report said.<\/p>\n\n\n\n

Firdausi Suffian, a political economist from Universiti Teknologi MARA (UiTM) Sabah,\u00a0said Malaysia must once and for all make\u00a0its\u00a0stand\u00a0clear, whether it is pro-domestic and\u00a0focusing\u00a0on protecting\u00a0the interests of local\u00a0enterprises or emphasizing more on foreign direct investment (FDI).<\/p>\n\n\n\n

“If\u00a0you want to protect the interests of domestic enterprises, you need cabotage policy,\u201d he said, but warned that it could be\u00a0a deterrent to Malaysia’s economy\u00a0and trade liberalization.<\/p>\n\n\n\n

\u201cIf you ask a pure economist, (they would say) simply remove cabotage policy and open the market. However, if you consider the state’s interests, cabotage policy should remain,” he said.<\/p>\n\n\n\n

However,\u00a0regardless of the decision, the government\u00a0should ensure that\u00a0foreign-flagged vessels that are\u00a0allowed to repair undersea cables should also train Malaysian workers and emphasize knowledge-sharing to develop local talents, he added.<\/p>\n\n\n\n

Ports<\/strong><\/p>\n\n\n\n

Thought Partners Group Consulting founder and group managing partner Abi Sofian Abdul Hamid said the year’s challenges for port operators were to identify the optimal deployment of resources in the new normal following the initial setback caused by COVID-19 in the first quarter of 2020.<\/p>\n\n\n\n

“Local ports are doing reasonably good with no major issues encountered apart from congestion issues at certain peak periods. In fact, it will not be surprising if ports will report a good performance for the year with increased throughput handled.\u201d<\/p>\n\n\n\n

For instance, he said MMC’s Port of Tanjung Pelepas hit its milestone and handled their 10 millionth Twenty-Foot Equivalence (TEUs) container in early November.<\/p>\n\n\n\n

However, it is not always smooth sailing, he said.<\/p>\n\n\n\n

\u201cAs the lockdown eases,\u00a0businesses and products are making\u00a0up for lost time, resulting in\u00a0supply chain\u00a0regaining its momentum, but the ports are\u00a0struggling due to\u00a0manpower and equipment shortage, creating backlogs.<\/p>\n\n\n\n

\u201cWhile demands are increasing, the shipping capacity is being stretched to the extent that one has to make a booking for slots months in advance,\u201d he said.<\/p>\n\n\n\n

Outlook<\/strong><\/p>\n\n\n\n

Shipping lines and ports around\u00a0the world are expected to kick off in 2022 with a similar issue\u00a0faced this year —\u00a0queuing up\u00a0for berth outside the respective ports.<\/p>\n\n\n\n

“The overflow of backlogs from 2021 will continue until the middle of the year or even the third quarter of 2022, prompting industry players to be ready for the annual festivities rush.<\/p>\n\n\n\n

“It’ll (also) be interesting to observe how the nations react to this new variant (Omicron), even though the industry has so far shown resilience,\u201d Abi Sofian said.<\/p>\n\n\n\n

Moody’s Investors Service has changed the outlook for the global shipping industry to stable from positive for the next 12 to 18 months due to demand slightly outpacing supply.<\/p>\n\n\n\n

The credit rating agency said the change in outlook is driven by tough comparisons with the very strong cash flows generated this year rather than a deteriorating business environment.<\/p>\n\n\n\n

Abi Sofian said the other interesting development is that shipping companies such as Maersk Line are putting up their own freight-forwarding divisions as the booming e-commerce sector has created another business avenue.<\/p>\n\n\n\n

“Even if these changes eventually lead to a reduction in the supply chain’s costs and inefficiencies, it will take time for its effects to be seen,\u201d he noted.<\/p>\n\n\n\n

On other developments, Moody’s Investors Service senior analyst Daniel Harlid said earnings for container and dry bulk carriers were at record levels.<\/p>\n\n\n\n

\u201cWe expect earnings to fall from their 2021 peak but remain high, nonetheless, limited deliveries of new vessels in 2019 will help keep freight rates elevated.<\/p>\n\n\n\n

“Although demand for products and commodities is expected to continue strong in 2022, growth rates are likely to slow down next year, and record profits and cash flow have been used to pay down debt,\u201d he said.<\/p>\n\n\n\n

He said\u00a0capital expenditures would continue to rise as Moody expects orders for newer, more energy-efficient ships to be a common theme in 2022 as maritime companies prepare for harsher environmental requirements that will progressively be phased in from 2023 onwards.<\/p>\n\n\n\n

NMT<\/a> as reported by Bernama<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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