Waterfront wars - Brief Article - Statistical Data Included

Business Asia, July, 2000

Rising trade, political upheavals, the internet, and the emergence of powerful new players across the region makes for a fascinating future within Asia's ports and shipping industry

THE BATTLE for supremacy among Asian ports is taking a twist as geo-political forces undergo a transformation in North Asia and rivals emerge to take on South East Asian port powers such as Singapore and Hong Kong.

The stakes are high: cargo volumes are generally on the rise throughout the region as Asian nations rebound from economic crisis.

While perennial stronghold Singapore continues to innovate and lead, it faces the prospect of a dent to growth because of the expansion of ports such as Tanjung Pelepas in Johor, Malaysia.

And the full implications have yet to be seen of political and social developments between the two Koreas and the China-Hong Kong-Taiwan triangle.

Amid the myriad possibilities, Singapore is expected to maintain its role as the main port of call n South East Asia.

Industry leader, the PSA Corporation, one of the world's most successful and efficient port operators, refuses to stand still.

PSA hopes to list on the Singapore stock exchange within the next 12 months.

Chairman Yeo Ning Hong says the company is ready to list any time it gets the go-ahead from its shareholder, government-owned Temasek Holdings.

The highly-profitable port operator -- corporatised from a statutory board two years ago -- made a net profit of S$750.3 million (about US$450 million) last year. PSA is also preparing to issue bonds to raise S$3 billion to optimise its capital structure ahead of the eventual listing.

However, many analysts suggest the key question for PSA is how competition from ambitious neighbours such as Tanjung Pelepas Port (PTP) in Malaysia will affect earnings at the four main terminals in Singapore.

Last month, the extent of that competition became clear when APL, the container shipping arm of Singapore's national shipping line, NOL Group, decided to use PTP.

Flemming Jacobs, chief executive of NOL, has defended the move. In an interview with Malaysia's Business Times, Jacobs brushed aside the notion that NOL's move could trigger an exodus from the Singapore port.

"It was a commercial decision to berth our WAX (West Asia Express) service at PTP based on the opportunity to position equipment for local and other markets more economically, and take advantage of a more direct route," Jacobs told the Business Times.

"PTP is well constructed, with ample space and good layout, and with excellent equipment. We expect it to be efficient and cost-effective. You are no doubt aware that other major carriers as well as terminal operators have also been looking at PTP.

"Whoever gets into Phase 1 of the Pelepas development will, of course, take business away from Singapore, particularly trans-shipment volume."

The move has surprised many and has raised questions as to whether other shipping lines currently using Singapore will follow NOL's lead.

What this shift could mean for PSA -- and, for instance, Hong Kong's Hutchison Port Holdings -- has yet to be seen.

There is a strong argument that the respective port leaders in Singapore and Hong Kong will continue to dominate high-quality cargo for reasons of efficiency and banking infrastructure.

PSA and Hutchison have the money, size and technology to pursue geographical diversification -- and indeed they are already.

Among other locations, PSA has targeted China, India and southern Europe, while Hutchison is staking out China, northern Europe, South East Asia and also the Panama/Caribbean region.

So, regardless, of developments in Malaysia, there seems to be enough business to keep these major centres growing.

Across other parts of Asia, significant port initiatives are occurring.

The rise of Indian ports seems inevitable. The Chennai facility is already a substantial player in the region, while big hopes are held for Port Klang.

India's transport ministry parliamentary secretary Donald Lim believes Port Klang can be one of the world's top 10 ports by 2003 and says the increase in container traffic over the past 10 years bodes well for this goal.

Container traffic at Port Klang jumped five-fold from 496,526 twenty-foot equivalent units (TEUs) in 1990 to 1.82 million in 1998.

"(And) the port's performance in container cargo last year posted an impressive growth of 40.1 per cent over 1998 when it handled 2.55 million TEUs," Lim told reporters recently at the annual general meeting of the Association of Forwarding Agents Port Klang.

The port has also seen trans-shipment cargo soar, posting growth of 121.7 per cent from 435,854 TEUs in 1998 to 966,090 TEUs last year.

The portents across India are strong.

Eleven major ports have registered a 14 per cent increase in traffic to 25.21 million tonnes during May this year compared to 22.05 million tonnes during the corresponding period the previous year.

The target for the current year's throughput has been fixed at 287 million tonnes as against 271.87 million tonnes handled by the ports in 1999-2000, Visakhapatnam Port handled a record traffic of 4.44 million tonnes of cargo during May 2000, surpassing the previous record of 4.09 million tonnes handled by Kandla Port.