SHANGHAI PORT KEEPS ON ROLLING

Shanghai throughput up for third straight month
                
Shanghai Port, the world's busiest container port, saw its container volume rise 7.6 percent in November from a year earlier, the third straight month of gains, data issued by the port's operator showed, reported Reuters.Container throughput reached 2.82 million TEUs, up from 2.72 million in October. The year-on-year increase for the month compared with a rise of 1.4 percent in October.Economists polled by Reuters expect annual export growth to slow to nine percent from a rise of 11.6 percent in October, while annual imports growth are seen easing to two percent last month from October's 2.4 percent increase.

THE RISE OF SHENZEN PORT

Shenzhen port tipped to overtake HK in 2012 


Shenzhen port is forecast to handle 25 million TEUs this year while 
Hong Kong throughput is likely to be around 23.5 million TEUs



Shenzhen is set to overtake Hong Kong as the world's third-busiest container port this year for the first time ever on an annual basis. 

This comes as total box volumes through Shenzhen's four main facilities have continued to climb despite the downturn in global trade, reported the South China Morning Post. 

By comparison, volumes through Hong Kong have dropped, especially from river trade and barge business. 

Hong Kong is set to handle about 23.2 million TEUs this year, according to Post estimates based on throughput figures between January and October. The full-year estimates take into account the expected slack trade season in November and December. 

Industry observers supported the estimates. Jon Windham, head of the Asian industrials equity research at Barclays in Hong Kong, forecast the port would handle 23.5 million TEUs in 2012. By comparison he thought Shenzhen would pull pass Hong Kong to handle 25 million TEUs. 

Sunny Ho Lap-kee, executive director of the Hong Kong Shippers' Council, added: "Your calculation might be right. [The] forecast is far from good." 

Alan Lee Yiu-kwong, head of the Hong Kong Container Terminal Operators Association, said: "Yes, we are losing out". He said Shenzhen would certainly overtake Hong Kong next year if it failed to do so this year. 

Lee pointed out that Hong Kong had technically lost the No 3 spot for several years because 60 per cent of Hong Kong's container volumes is transhipment cargo. As a result each container is counted twice. 

He said container traffic through Shenzhen, Guangzhou and other south China ports are "practically all direct shipments". This meant each container is only counted once. 

Latest figures from the Port Development Council show Hong Kong handled 19.4 million TEUs in the first 10 months of 2012, down 4.4 per cent compared with the same period last year. 

While container volumes grew by a marginal 0.8 per cent to 14.6 million TEUs at the nine Kwai Chung container terminals between January and October, throughput slumped 17.2 per cent to 4.8 million TEUs at facilities outside Kwai Chung. 

Windham forecast that Shanghai would remain the world's top container port this year, handling 34.9 million TEUs. Singapore would be in the No 2 spot with 31.6 million TEUs. 

A MAJOR PORT LOSING GROUND

Hong Kong losing ground as major port


“The government is now talking about a 2030 master plan. Will this be useful when the 2020 plan is in the rubbish can?" asked Alan Lee Yiu-kwong, head of the Hong Kong Container Terminal Operators Association


A raft of issues ranging from a lack of government support to a lack of facilities and new height restrictions in Kwai Chung are eroding Hong Kong's competitiveness as a top global port, a leading terminal executive said.

Alan Lee Yiu-kwong, head of the Hong Kong Container Terminal Operators Association, outlined seven factors that not only hindered development of the port but were responsible for Hong Kong losing ground to neighbouring Shenzhen, reported the South China Morning Post.

Hong Kong is likely be overtaken this year by Shenzhen as the world's third-busiest container port. Estimates indicate Hong Kong will handle 23.2 million TEUs compared with Shenzhen, which is set to handle 25 million TEUs.

"We are losing competitiveness because of the seven issues I mentioned," said Lee, who represents the five terminal operators at Kwai Chung port, including Hongkong International Terminals, DP World and Modern Terminals.

Explaining the problems, Lee said there was a shortage of back-up land and berths for barges, which caused congestion and disrupted port operations last year.

These shortages are exacerbated by new height restrictions in Kwai Chung that prevent terminal operators from developing the existing container yards, either by building over the yards or clearing the yards of containers to build new logistics facilities.

The restrictions are contained in amendments to the draft Kwai Chung outline zoning plan, which were hotly contested in a Town Planning Board meeting on October 12, although the board rejected making any change to the amendments.

Lee said the government's failure to implement any of the recommendations outlined in the 2020 port master plan that was completed in 2004 was also a part of the problem.

The plan included five initiatives to improve port-operating efficiencies and cross-border connectivity. Lee said the government "is now talking about a 2030 master plan. I ask the question, will this be useful when the 2020 plan is in the rubbish can?"

STATUS OF AMPANG LRT

KUALA LUMPUR (July 11, 2012): Syarikat Prasarana Negara Bhd (Prasarana) has yet to make a final decision on the awarding of contracts for the Ampang Light Rail Transit (LRT) extension project work.

“We have yet to make a final decision on the work contracts. It is unethical for us to comment at the moment. We will provide all the details after the Finance Ministry announces its decision,” Prasarana’s media affairs manager Azhar Ghazali told theSun today.

NEW CEO AT NORTHPORT

Monday June 25, 2012

Abi Sofian takes on challenge

Northport (M) Bhd CEO Abi Sofian Abdul Hamid is set to prove that he is not just the seasoned operations guy at Northport but also someone who can take care of the dollars and cents, and a be good employer. In his first ever media interview, the port’s new top brass shares with StarBiz reporter Sharidan M. Ali his thoughts, vision and business direction of the company.

PETALING JAYA: Lenggong-born Abi Sofian is not a new face in the port industry especially in Northport where he started his career back in 1991.

He was part of the team led by Northport former managing director (MD) and chief executive officer (CEO) Datuk Basheer Hassan Abdul Kader, which navigated the the merger of Klang Container Terminal (KCT) and Klang Multi Terminal into Northport.

When he was younger, Abi Sofian, 50, did not think that he would end up in the port industry until it was time for him to settle down.

“I came to Port Klang as a civil engineer with an Australian consultancy firm which was involved in the upgrading of facilities at KCT.

Abi Sofian: ‘There are still areas with good potential to be realised. Developing a s trategic human capital is one area.’

“At the end of the project in 1993, I was asked whether I was interested in joining KCT.

“Having spent about two and a half years working literally above water, I thought it was a good opportunity for me to finally settle down at one place and learn more about marine engineering from civil engineering practices,” he said.

Soon after, KCT set up a facilities department to look after all engineering related works other than those involving terminal equipment. “I was re-designated as facilities engineer. My involvement later expanded to include corporate matters such as looking at lease terms on infrastructure, facilities aspects, contracts for civil works and corporate branding. I took my new responsibilities quite seriously and I decided to study law in 1996.”

As Northport was established, Abi Sofian found the issues in the port operations very challenging and exciting.

“I began to interact with other departments especially the business units as they needed my involvement in their capacity planning.

“With further exposures in the port industry like government agencies, regulators, business groups, I supposed I was then embedded in the port industry,” he said.

Northport, which is owned by NCB Holdings Bhd, appointed Abi Sofian CEO in April. “I was totally surprised when I was offered the job. I did not have the slightest idea that the person would be me.”

Rather than feeling pleased, he considers the job a challenge.

“I intend to take the port to greater heights by continuing what Datuk Basheer had left behind and introduce some new things to further improve the operations,” he said.

The affable and ever-smiling Abi Sofian said years of involvement in the operations of the terminal was an advantage. He can now focus on sharpening his skills in corporate and financial aspects.

According to Abi Sofian, Basheer placed a good working structure in defining the business profiles of Northport as well as the harmonious working relationship between employees and management team.

This conducive environment would be retained, he said.

“In spite of this, I believed there are still areas with good potential to be realised. Developing a strategic human capital is one area.

“I believe a fully developed employee will not only able to positively contribute to the company but the nation as well.

“I am also a true believer in key performance index but we have to spend some time to come out with the right and realistic target and benchmarks.

“Of course as a trained engineer, I subscribe to the importance of systems and processes as well,” he said.

Focusing on the port business, Abi Sofian is an ardent believer in bottom line performance.

“Although I admit that the volume growth is important, we do not deliver the containers to the shareholders, we deliver profit,” he said adding that Northport was targeteting to handle 3.2 to 3.3 million twenty-foot equivalent units (TEUs) this year from about 3.11 million TEUs in 2011.

Abi Sofian said the port would continue to improve its revenue but it would also be looking at cost management to continue get better margins.

“And as a service provider we also must not forget about the quality of service. In a nutshell, all these criteria are the keys to business sustainability,” he said adding that high value boxes also bring better margins to the port.

To a question about whether Northport had been conservative in its annual volume target, Abi Sofian said it was just being realistic. “As the main gateway of import and export, our volume growth is in line with the gross domestic product growth.”

“As of last year, 60% of our volume were import and export boxes while the remainder were transshipments Again, the most important matter is the profit per box that we can achieved rather than how many boxes we can do,” he said.

CANADA MANUFACTURING AND BRITISH MANUFACTURING COMPARED

Canada Creates Manufacturing Jobs

By Martin Murray, About.com GuideJune 15, 2012

As British manufacturing slumps, the factories in Canada are busier than ever, according to Statistics Canada, as almost 115,000 manufacturing jobs over the past six months, the most over any similar period on record. This puts Canada on top of the top 34 richest nations in the world. So how does a country that has high wages, low productivity, and a strong currency, create more jobs than Germany, USA, Japan, and every other developed nation?

Many economists believe that Canadian manufacturers are concentrating on the local market rather than exports due to the strong value of the Canadian Dollar. Another sign of the strength of the manufacturing sector is the new PMI figure which has now reached 54.7 for May, up from 53.3 in April. The PMI is now at its highest level since September 2011. As far as orders, the numbers were also up in May, to the highest level in five months. 

British Manufacturing Declines

The manufacturing sector in the UK is suffering according to the latest figures from the government's Office for National Statistics. Economists were expecting an increase in April's figures and an overall half percent increase since the beginning of the year. However, the actual figures were disappointing with April's figures falling 0.7 percent, which means a 0.3 percent decline for the year.

Economists are predicting a slower second quarter for British manufacturing due to extra public holidays due to Jubilee celebrations, the summer Olympics and the weakness in the economies of other European nations.

Not all manufacturing sectors saw a decline in April; the transport equipment and electronics sector posted the highest increases in manufacturing output. In total, seven manufacturing sectors fell with six managing an increase. 

SHIPPING - back in the black?

Maersk CEO says container rates back in the black 

Container shipping freight rates are profitable again and could rise further if trade picks up over the summer, the head of A P Moller-Maersk, the Danish shipping and oil group, said, reported Reuters.

The recovery in rates could signal a brighter outlook for the global shipping industry, which has struggled to emerge from a four-year slump caused by oversupply of vessels and weak demand due to the sluggish world economy.

"At the moment, freight rates are at a level where container transport is earning money," chief executive Nils Smedegaard Andersen said in a presentation to the Danish Society of Financial Analysts.

"We are still working to get higher rates," Andersen said. "We hope there will be a pick-up in world trade after the summer."
Last month, Andersen had said recent rate increases meant most container shipping lines were probably operating at breakeven levels.

This contrasts with last year when rates plunged towards the middle of the year, which took A P Moller-Maersk's Maersk Line into the red for the year.

Results this year for Maersk Line, the world's biggest container shipping group and a barometer of world trade, are expected to stay negative or "up to neutral," assuming that a rate recovery since March continues, the group has said.

Andersen said last month in the company's first-quarter results presentation that he hoped Maersk Line would get into positive territory this year, but that would require higher freight rates.
But he said on Thursday that the oversupply of ships weighing down the industry would persist for several more years.

"We think there will be overcapacity in container shipping until 2016-17," he said.

Andersen said Maersk Line had the fleet capacity it needed to maintain its market share and did not plan to buy more vessels.
Maersk Line has said its global container shipping market share was 15.5 percent in 2011 and it had 17.8 percent of the market on Asia-Europe routes.

"With the capacity we have, we are well equipped for the next years," Andersen said. At some point, we will go out and order containers, but we have no plans to go out and buy ships."

"We have roughly the ship capacity that's needed to maintain our market share in the next five years," he said.

SHIPPING - restructuring causes job losses

Maersk to restructure, terminate 400 jobs

Danish oil and shipping group A P Moller-Maersk said it would slash about 400 jobs as part of a restructuring of its struggling container shipping division Maersk Line.

The group said in a statement that a key objective of the reorganisation was faster decision-making and that about 250 of the job cuts would be at its Copenhagen headquarters, reported Reuters.

The shipping industry has been hit hard during the global economic downturn as weak demand and excess capacity knocked freight rates to loss-making levels.

Maersk said last month it expected 2012 results "slightly lower" than in 2011, a modest improvement on previous guidance, but below analysts' hopes.

Maersk Line reported a loss of US$599 million in the first quarter. In a stark illustration of the damage caused by excess tonnage in a poor rate environment, Maersk Line’s volume increased by 18 percent while the average freight rate declined by nine percent compared to the first quarter last year.

PORT PERFORMANCE

CMIT sets productivity record for Vietnam

Cai Mep International Terminal (CMIT) this month set two important new productivity benchmarks for container terminals in Vietnam.

While handling Maersk Line’s vessel, the 9,038 TEU Mette Maersk, CMIT moved 2,100 containers during an 11 hour, 30 minute port stay.

Gross crane productivity was 43 container moves per hour, resulting in berth productivity of 183 moves per hour.

“This is certainly the first time CMIT has crossed the important benchmark of 40 crane moves per hour, and we believe we are the first container terminal in Vietnam to have done so”, said Steen Davidsen, CMIT’s general director.

“We also believe our berth productivity of 183 moves per hour using just 5 Ship-To-Shore cranes sets a new benchmark for Vietnam” he added.

CMIT measures berth productivity based on the total time the vessel is available for work on the berth starting from the time the gangway is secured and ending upon time of vessel sailing or half an hour after operational completion should the vessel not sail immediately upon completion.

Time is never deducted from this berth productivity calculation so CMIT’s berth productivity is a true reflection of the time the vessel spends working at the terminal.

“Terminal berth productivity is a critical cost driver for all shipping lines, and high berth productivity translates directly into significant bunker cost savings for us,” said Peter Smidt-Nielsen, general director of Maersk Line, Vietnam.

“Achieving the levels of productivity being delivered to Maersk Line by CMIT is quite remarkable – and particularly so for a terminal that has been operational for just 14 months.”

CMIT handled its first vessel on March 30, 2011, and since then has welcomed 151 vessel calls, handling over 351,000 TEU of export and import containers to and from Vietnam’s major trading partners in Europe, North America and Asia.

PURCHASING

Ethics In Purchasing

By Martin Murray

Every day the media has reports of cases of bribery and unethical business practices that involves the purchasing of materials or services in almost every country in the world. Although we like to think that the people who determine contracts and purchasing agreements are fair and ethical, there are some that will accept coercion that may affect the award of contracts that are worth thousands of dollars to those that are worth millions of dollars.

Purchasing Standards

Every company will hold their employees to a purchasing standard that is put in place with processes, methods and rules to ensure that the procurement process is as fair as possible. However, the purchasing of materials and services is a process that involves the interaction of purchasing staff and potential vendors, which leads to personal relationships and contacts. A purchasingprofessional will naturally call a vendor they have personal knowledge of before they cold call other potential suppliers. The relationship between a company and their suppliers is one that is developed over a period of time and based on personal relationships.

However, the purchasing professional is duty bound to their employer to ascertain the best product or service at the best cost, in the timeliest fashion. Purchasing standards are in place to ensure that the needs of the company are foremost in any negotiations with potential suppliers. The first ethical standards for purchasing professionals were published by the Association of Purchasing Management in 1929.

Actions of Suppliers

Although we expect purchasing professionals to be as ethical as humanly possible, most companies have a sales department whose job is sell your product and that can means having contact with employees of potential clients, which could be purchasing or non-purchasing staff. These sales teams will have budgets to promote products with advertisingsouvenirs, such as pens, calendars, diaries, etc., or more tangible gifts such as lunches. In a number of studies on purchasing it has been found that almost all purchasing professionals accepts something from vendors, even if it as small as an item of stationary.

Although the majority of companies will require purchasing and non-purchasing employees to sign and abide by an ethics policy, smaller companies are less likely to either have or indeed abide by a code of ethics. Small business failure is high and it is vital for companies to win business, and that can come at the expense of ethics.

Non-Purchasing Employees

Although large companies insist on purchasing professionals strictly adhering to ethics codes, the same is not necessarily true for non-purchasing staff. In many companies purchasing is allowed by department heads or even line staff which by-passes the purchasing department all together. This means suppliers sales departments can target non-purchasing staff to gain sales where perhaps they have been rejected by the purchasing department. Much of this rogue procurement is never seen by the purchasing department as it either is paid for a department’s cost center or checks cut by the accounting department.

Rogue purchasing has two major drawbacks for a company. Firstly the spending is never funneled through the purchasing department so there is no way to know if the purchaser obtained the best price for the item. Secondly, the purchaser may have been unduly influenced to make the purchase; perhaps by gifts, personal relationship or even a conflict of interest. Rogue purchases can make up as much fifty percent of a company’s overall spending for a year. If non-purchasing employees are restricted to minor or even zero purchasing, the company would be confident that the purchases were made in an ethical manner and the best product was selected based on price, quality and delivery time.

Summary

Purchasing professionals are an asset to any company. They can save a company thousands if not millions of dollars a year. The way in which they purchase items is vital to the success of a company and a strict code of ethics ensures that all potential vendors are treated equally.

CONTAINER DEPOT GATE CHARGES ISSUE

Hauliers' strike raises fee issue between shippers, shipping lines

Posted on 15 May 2012 - 03:41pm

Kang Siew Li
sunbiz@thesundaily.com

PETALING JAYA (May 14, 2012): The recent three-day protest by haulage drivers in Port Klang has offered a compelling reason for the government to regulate the set-up and operation of container depot operators across the country, but it also gave rise to another long-standing conflict between manufacturers and shipping players over who should pay for charges at the depots.

The Federation of Malaysian Manufacturers (FMM) reckons that the depot gate charge (DGC) or any other claim by the container depot operators should be borne and absorbed by the shipping lines.

That's because shipping lines are the depot operators' principals and therefore, should be fully responsible for depot operations, it said in a statement recently.

However, the Shipping Association of Malaysia said the DGC is a matter entirely between the depot operators and the shippers (importers and exporters).

Currently, the DGC is paid upfront in cash by haulage drivers for deposit and withdrawal of empty boxes at the depots, but will be reimbursed by their employers (haulage companies) several days later who will then bill the shippers. Depot operators also get paid by shipping lines to store their containers.

"Hauliers do not have any legal standing to pay the depot operators on behalf of shippers and thereafter collect the charges from shippers. Shippers and hauliers are not a party to any agreement for services provided by container depot operators. Shippers merely adhere to the requirement by shipping lines to collect and return empty containers to and from the respective container depots," said FMM.

The federation said it has, through the various channels, raised this issue and concerns with the relevant authorities including the Ministry of International Trade and Industry, Ministry of Transport, Ministry of Domestic Trade, Cooperatives and Consumerism, and recently, with the Malaysian Competition Commission.

"We have highlighted that shippers have consistently been subjected to numerous unfair charges and fees by the logistics service providers that have contributed to increasing the cost of doing business. While the authorities have studied specific aspects of the issues over the years, a resolution has not been so readily forthcoming as these ancillary charges fall within the purview of several agencies. A holistic approach to the matter is urgently required," it added.

The federation believes that the move by the government to regulate the depot operators is a step in the right direction to avoid a recurrence of the recent protest.

"Strikes by haulage drivers (that started on May 2) as a result of unilateral demands made by the depot operators affect not just manufacturers, but the economy as a whole given the significance of exports in driving the growth of the economy," it added.

Container depot operators, a vital component in the logistics chain, now fall under the purview of the Klang Municipal Council, which is mainly for licensing purposes. There are no proper authority to monitor their performance, like what the Commercial Vehicles Licensing Board is doing for container haulage operations.

CUSTOMS PROCEDURE - Simplification of processes

Chongqing Customs to ease cargo flows
By Raymond Duan
Chongqing 

Customs officers at Chongqing municipality have been simplifying procedures and creating convenient channels for cargo flows in anticipation of ballooning traffic in the coming years.
Ma Zhongyuan, director-general of the Chongqing Customs District and a deputy to the National People’s Congress, said during a recent NPC session that Chongqing has adopted measures to streamline Customs clearance for the convenience of supply chain operators so as to help them cut costs and speed up the flow of cargo, capital and Customs documents.
The measures include advanced clearance and Customs-to-Customs transfer, localised declaration but coastal port release, and one-time declaration, one-time inspection and one-time release of cargo.
According to officers with the Chongqing Customs District by introducing this mode of advanced clearance and transfer between Customs offices, it enables inland enterprises to shorten their clearance and taxation period by 20-25 days.
Once the overseas-bound cargoes enter the Customs zone at the Lianglu Cuntan Free Trade Port Area, officers go through all the local Customs formalities and forward the cargoe to Customs offices along the coast, where the cross-border procedures are finalised before the cargo heads overseas.
Localised declaration but coastal port release became a reality because of cooperation among the 23 Customs ports across the mainland to provide a convenient service to enterprises.
For qualified enterprises under the Chongqing Customs administration, once their shipments go through Customs declaration procedures at Chongqing, the cargo is released upon inspection to the offices at coastal ports. Exporters do not have to provide any downpayment for taxes weeks earlier to coastal port agencies as was done before. And the cargo can be directly forwarded toward destination upon double checking of documents on computers by the coastal Customs ports.
Enterprises in Customs areas, namely the Lianglu Cuntan Free Trade Port Area and the Xiyong Comprehensive Bonded Zone, can apply for one-time declaration, one-time inspection and one-time release. Such procedures include declaration, initial check, acceptance, inspection, release and transfer to another Customs office.
The major benefit for foreign trade companies under this new system is a saving in costs, said Yan Zhu, general manager of Chongqing Tianzhuhang Import and Export Trade. “Importers could store the cargo in the warehouses in the free trade port area and pay the charges upon leaving, which would lower capital costs and ease the burden of credit loans.’’
Customs officials at Lianglu Cuntan area say the move has encouraged businesses from neighboring provinces to relocate at the Chongqing free trade zone. More than 30 percent of foreign trade goods handled at the Lianglu Cuntan Customs office are from outside Chongqing municipality; the percentage was one digit before the office officially went into operation a year ago.
Moreover, Chongqing Customs has been agile in applying information technology to speed up cargo flow. Each container entering and leaving the yard at designated zones will automatically form a basic account in the computer system to be matched at checkpoints with related information.
Exporters and importers do not need to get their cargo checked during Customs eight-hour working hours. The loading of exports, launch of shipping and unloading of imports are allowed to go through approval procedures via the Customs automation system at the free trade areas. This means that cargo owners and shippers, forwarders and carriers can decide what time they want their cargo checked instead of waiting for Customs officers. Once out of the Customs area, the cargoes are monitored by satellite tracking systems on their way to the vessels.
With the deployment of more information technology products, the Customs at Lianglu Cuntan area are extending their services to paperless declaration and bar code checks. Last year, the Customs office at Lianglu Cuntan area handled 45,000 sets of documents and enjoyed a 100 percent rate of container matching.
Chongqing has also been promoting its coordination not only with the districts, but also with coastal ports as well as European counterparts. Thanks to cooperation with Belgium and other European Customs, Chongqing has been designated as the first trial port in inland China for the China-Europe trade to make the route more cost-efficient and transparent.

INDIA _ EFFECT OF PORT TARIFF CUT

Two of India's private terminals post losses after tariff cuts 

Two of India's earliest private container terminal projects at Jawaharlal Nehru port near Mumbai and Tuticorin port in Tamil Nadu, both owned by the Union government, have started making losses on the back of tariff cuts, reported The Mint.

On 1 March, the Tariff Authority for Major Ports (TAMP) asked Nhava Sheva International Container Terminal (NSICT) to pare rates by 27.85 percent when the firm asked for a 30 percent raise.

NSICT is owned by Dubai-based global port operator DP World. It is one of the three container-loading facilities at JN port, India's busiest container gateway.

PSA-Sical Terminals, a firm running a container terminal at V.O. Chidambaranar at Tuticorin, is 62.5 percent owned by PSA International, the world's second biggest container port operator. It has also been hit by rate cuts.

The two terminal operators say the tariff cuts would reduce their revenue earning capability and position them as loss-making units.

The royalties these firms are contractually-mandated to pay the government-owned ports on each container handled at their respective terminals have exceeded the revenue they earn from each container.

Both these contracts followed the royalty model that was in vogue when the government flagged off a port privatisation programme in 1997. The terminal operator had to pay a certain royalty, specified in the contract on each container handled at the terminal, to the government-owned port.

Both PSA and DP World were done in by the peculiar nature of the contract-royalty rates, which were low in the first 10 years of the contract and then rose rapidly over the remaining period of 20 years, making it difficult to run the terminals profitably in the face of rate cuts.

The union government-owned ports now follow a revenue-sharing model for port privatisation contracts.

The bidder willing to share the most from its annual revenue with the port wins the contract.

According to the terms of PSA's contract at Tuticorin port, the royalty per loaded standard container was US$1.9 in the first year of operations. In the 30th year of operations, in 2028, it would reach $96.37 for a loaded standard container. PSA-Sical currently charges its customers around $39.08 for handling a loaded container.

PSA pays $42.13 as royalty to Tuticorin port on each loaded container handled at the terminal. This will rise to $46.34 from 15 July this year.

In the 14 years since starting operations, PSA made three attempts to raise rates for the services provided at the terminal; but, each time, the tariff regulator slashed rates-by 15 percent in 2002, 54 percent in 2006 and 34 percent in 2008 which PSA did not implement by securing stay orders from the Chennai high court.

It is operating the 450,000 standard container capacity-a-year terminal at rates approved in 1999, when it started out on a 30-year contract.

NSICT has been a little luckier. It managed to win some tariff increases from TAMP in the first 15 years of operations.
DP World handles some 1.4 million containers at NSICT every year, more than double the original designed capacity of 6,00,000 containers.

Its royalty increases progressively from 89.09 US ents for one loaded standard container in the first year of operations in 1998 to $104.41 per container by the 30th year, in 2027, according to contract terms.

NSICT was earning $46.62 on each container handled at the terminal.

But, after the 1 March rate cut, it can charge customers only $33.63 per container.

It pays a royalty of $41.28 per container to JN port. This will rise to $43.94 per container from 3 July this year.

Between 2005 and 2006, TAMP cut rates at NSICT cumulatively by 25 percent. The latest blow came on 1 March.

Besides, the port policy that prevailed in 1998 allowed the royalty fully paid by the firms to the port as an item of cost while setting rates.

But, in July 2003, the shipping ministry altered this policy and allowed only a partial pass-through of royalty into tariffs, limiting the extent of pass-through of royalty to the maximum quoted by the second highest bidder in the auction.

Both DP World and PSA declined to comment.

"Global firms are keen to participate in India's port projects by bringing new generation technology and much wanted capital," said Samir Kanabar, partner, tax and regulatory services at Ernst and Young. "So it's important to have a consistent and sustainable policy framework that scales up to international standards."

Agility Logistics Expansion in Malaysia

Agility sees trucking, warehouse operations driving growth

By DAVID TAN
davidtan@thestar.com.my

GEORGE TOWN: Agility, a public-listed logistic company in the Kuwait Stock Exchange and Dubai Financial Market, expects its overland trucking and warehouse operations in the Malaysia to spearhead the growth of its subsidiary, Agility Logistic Sdn Bhd, this year.

Agility chief executive officer Morten Damgaard (South-East Asia/Malaysia) said this was due to the improvements made in the highways and land routes connecting Indochina, Thailand, Singapore, and the rising cost of fuel, which made air and ocean transportation expensive.

Agility's trucking and warehouse business in Malaysia generate more than 40% of the subsidiary's 2011 revenue.

“Besides better connecting infrastructure, there is also improvements in the customs services at the borders,” he told a press conference on the launch of Agility's new 60,000 sq ft warehouse in Bayan Lepas by Penang Chief Minister Lim Guan Eng.

Agility CEO (SEA/Malaysia) Morten Damgaard(left) and Agility Penang Branch manager Ali Ahmad at the press conference

Agility also has three warehouses in Kuala Lumpur, two in Johor, and one in Malacca, comprising about 600,000 sq ft of warehouse space.

“We are getting a lot more interest from our customers to transport their goods by land, which is one of the reasons why we moved to a larger warehouse,” Damgaard said, adding that Indonesia, Malaysia, Thailand and Vietnam were the key markets in the Asean region driving growth for the logistics industry.

“In Asia, China and India are still the top two drivers of growth for the logistics business.

“The commissioning of the facility in Penang underpins Agility's emerging markets growth strategy and is a testament to the successful expansion of our contract logistics business in Malaysia and the Asia-Pacific region,” he said.

Meanwhile, Lim said according to Frost Sullivan, the logistics industry in Malaysia was expected to experience a year-on-year growth of 10.3% to reach RM129.9bil in 2012.

“The logistics industry in the country is projected to grow at a compounded annual growth rate of 11.6% to touch RM203.7bil in 2016,” he said.

Agility Logistic Sdn Bhd's new warehouse in Bayan Lepas.

Employing more than 22,000 employees in 550 offices across 100 countries, Agility's annual revenue is around US$6bil.

Air Turbulence

Published: Friday May 11, 2012 MYT 4:28:00 PM

Rafidah: AirAsia, AirAsia X, MAS collaboration crucial

PETALING JAYA(Bernama): All airlines in the country must be able to face challenges when the Asean open sky policy comes into force in 2015 and therefore, collaboration efforts between AirAsia, AirAsia X andMalaysia Airlines (MAS) is important, said AirAsia X chairman Tan Sri Rafidah Aziz.

"If airlines do not strengthen now, through what ever way, there will be problems. This is why AirAsia and AirAsia X is willing to continue looking at possible collaboration with MAS," she said on Friday.

She emphasised that the collaboration had nothing to do with the share-swap.

"It is about cutting cost so that we can pass the efficiencies to consumers. We have agreed at the board level to sign a memorandum of understanding (MOU) to continue pursuing this collaboration as long as it does not violate any anti-trust law globally and bring benefits to us," she told a press conference after the Malaysian National Co-operative Movement (Angkasa)'s 41st celebration.

Following the reversal of the share swap deal, AirAsia, AirAsia X Sdn Bhd and MAS, have entered into a supplemental collaboration agreement (SA) to explore areas of mutual-need to realise savings and boost efficiencies.

The SA would focus on specific areas of collaboration while continue to comply with all relevant anti-trust laws.

Under the SA, the airlines have identified key areas for collaboration, which would result in efficiencies and cost savings, which among others, includes procurement, aircraft component repairs, training initiatives and technical and operational efficiency.

Additionally, the airlines will also continue working to further identify and evaluate opportunities to collaborate on a broad range of areas both at operational and strategic levels.

To push forward with the collaboration initiative, the three parties also signed a MOU to cooperate on two initial areas, joint procurement and aircraft component maintenance, support and repair services.

Of Malaysia's Fiscal Control

Malaysia's Lack of Fiscal Self-Control KUALA LUMPUR, May 10 — Malaysia’s lack of fiscal self-control could push up its borrowing costs and limit its ability to respond to a global economic crisis, said the former chief of one of Asia’s top economic think tanks. Prof Datuk Mohd Ariff Abdul Kareem, who formerly headed the Malaysian Institute of Economic Research (MIER) and is now with the Global University of Islamic Finance, said there were signs the country’s credit ratings were under pressure, and without a budget surplus, Malaysia could find itself short of options during times of crisis. He also noted that the country has grown accustomed to debt, and reported budget deficits in 47 years but surpluses in only seven. “Malaysia lacks fiscal discipline,” said Mohd Ariff at the launch of an economic report by the United Nations Economic and Social Commission for Asia and the Pacific (UN Escap). “It (Malaysia) is so used to having fiscal deficits. If there is a global crisis, Malaysia is not equipped to handle it. There is no space. If there is a surplus, there is a large space.” He said that part of the problem was that the government’s operational expenditure was “over the roof”. “The government needs to raise tax revenue and reign in expenditure,” he said. “There are already signs the country’s credit ratings are under pressure.” A drop in Malaysia’s sovereign grade by credit ratings agencies would make it more expensive for the country to raise money. Mohd Ariff said, however, that the country was not on the verge of bankruptcy although its debt-to-GDP ratio of nearly 54 per cent was just under its 55 per cent limit. “The debt is largely domestic and less vulnerable to external shocks,” he said. He warned, however, that the ratio could shoot up to 100 per cent by 2020 if present overspending is not reversed. The Najib administration had pledged to trim the chronic federal budget deficit as part of fiscal reforms to make the country more competitive. The Budget deficit was cut from seven per cent in 2009 to five per cent last year. The government aims to reduce the deficit further, to 4.7 per cent this year. UN Escap said today that Malaysia is looking at slower growth as regional economies take a hit from the deterioration of the global economic environment, particularly in Europe. It added that the world was in the second stage of the global financial crisis, with a sharp deterioration in the economic conditions largely due to the euro zone debt crisis and uncertain US economy. The commission estimated that a sovereign debt default in Europe or the breakup of the euro zone monetary union would result in a new world crisis that could lead to a total export loss of US$390 billion over 2012-2013 and reduce Asia-Pacific growth by 1.3 per cent. The agency projected a growth rate of 4.5 per cent for Malaysia this year, compared to 5.1 per cent last year and 7.2 per cent in 2010.