Market Insights Report: Malaysia & the ASEAN

THE PROJECT CARGO INDUSTRY IN MALAYSIA & THE ASEAN ECONOMIC COMMUNITY:

Transporting the Region to New Heights A Market Insights report from Breakbulk Events & Media April 2017

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Contents

Contents An introduction to Malaysia and the ASEAN Economic Community .......................................... 4 Section 1. Malaysia at a Glance ............................................. 5 Section 1.1: Malaysia’s Economy in Focus................ 6 Section 2. Major Projects requiring breakbulk transport services in Malaysia .............................................. 15 Johor Industrial Development ................................. 17 Pengerang Integrated Petroleum Complex .............. 19 Jimah East Power (JEP) plant project...................... 21 Malacca Strait Deep Sea Port ................................. 23 Kuala Lumpur-Singapore High Speed Railway ........ 24 Pan-Borneo Highway .............................................. 26 Sapangar Bay Container Port expansion ................. 27 Section 3. The Rest of the ASEAN .......................................... 28 Section 3.1: ASEAN Economic Community Introduction & Overview.......................................... 29 Section 3.2: Map of ASEAN Member States ............ 30 Section 3.3 Main Industries

by ASEAN Member States ....................................... 31 Section 3.4: ASEAN Logistics Roadmap .................. 32 Section 4: Major Projects in the ASEAN ................................. 33 Section 4.1 – Trans-Sumatra Toll Road – Indonesia ................................................................ 34 Section 4.2: Tuas Terminal – Singapore ................... 36

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Contents

Section 5: The Factfile – Logistics Performance in Malaysia & the ASEAN ....................................................... 38 Section 5.1: Logistics Performance Rankings .......... 39 Section 5.2: Domestic Logistics Performance ......... 41 Section 5.3: Logistics costs by ASEAN State ........... 43 Section 6: Doing Business in Malaysia & the ASEAN.............. 44 Section 6.1: ASEAN Member States

by Competitiveness ................................................ 45 Section 6.2: Ease of Doing Business ....................... 47 Section 6.3: Economic freedom............................... 49 Section 6.4: Government Transparency ................... 50 Section 6.5: ASEAN Member States Credit Ratings .............................................. 51 Section 6.6: Other key business stats ..................... 52 Section 6.7: Opportunities & Challenges ................. 53 Breakbulk Events & Media .................................................... 54

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AN INTRODUCTION TO MALAYSIA AND THE ASEAN ECONOMIC COMMUNITY Malaysia is emblematic of Southeast Asia as a whole: vibrant, exciting and rich in opportunities. A combination of economic growth, expanding industrial output and government-led infrastructure programmes are all powering the country towards a bigger, bolder future.

What does this mean for the breakbulk and project cargo sector? A nationwide system of infrastructure updates, growing manufacturing sites and ongoing oil and gas projects is pointing towards a higher demand for project cargo services in Malaysia, as out-of-gauge or super heavy cargoes increase in number.

The economic performance of Malaysia is reflected across the ASEAN Economic Community. Several nations, such as Singapore, Indonesia and Thailand, already have GDPs in the hundreds of billions of dollars, and others such as Laos and Myanmar are developing rapidly.

Each of the Association’s member states is investing huge sums into its economic and industrial sectors that are crying out for oversized freight shipments, paving the way for heavy lift and breakbulk services providers to expand in the area.

Breakbulk Media and Events is pleased to bring you this report detailing the project cargo environment in Malaysia and Southeast Asia. Read on to discover the opportunities this region of the world holds for specialised transport firms.

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Section 1.

Malaysia at a Glance

GDP (estimated): $296.2 billion Population: 31,164,177 Annual GDP growth: 5.0% Industrial production growth rate: 5.5% FDI inflows: $11.1 billion

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Section 1. Malaysia at a Glance

SECTION 1.1: MALAYSIA’S ECONOMY IN FOCUS Malaysia, with its population of just over 31 million people, is one of Southeast Asia’s economic success stories. Since gaining independence from Great Britain in the late Fifties, the nation has experienced several economic shifts – primarily by moving away from a reliance on agriculture towards manufacturing, heavy industry and oil and gas production.

Now, the country has the third largest economy in Southeast Asia. Only Indonesia and Thailand have larger GDPs. Malaysia has also enjoyed stable growth across the last decade.

The government launched a new economic development model in 2010 with the hopes of raising the nation to OECD High Income status by 2020, and it appears to be paying off.

Malaysia has experienced an average growth rate of around 5% across the last decade, thanks to an impressive range of government-led investments.

The Economic Transformation Programme (ETF), launched in 2010, is the foundation for Malaysia’s ongoing economic development. It is a nationwide

effort to attract massive levels of private investment in twelve key areas of the economy, including oil, gas and energy, palm oil and rubber production, electronics manufacturing, and communications infrastructure.1 92% of all projects under the ETF will be funded by the private sector. The government is hoping to attract $444 billion worth of investment in order to enable all the projects under the ETF to reach completion.2 A number of large scale projects, necessitating specialised project cargoes, are currently underway or planned in Malaysia. Please see the “Major Projects in Malaysia” section of this report for further information.

The Malaysian ringgit has been unstable in the past few years, falling 20% against the dollar in 20143. The currency reached a 22-year low in 20154, although it performed better throughout the following year.5 Malaysia’s Ministry of Finance has predicted that the ringgit will reach RM4.10 against the US dollar by the third quarter of 2017.6 Malaysia’s GDP, in terms of sector composition, is dominated by services and industry. Agriculture, despite being an area identified for development under the ETF, takes a back seat compared with higher value manufacturing or service-based sections of the economy.

http://etp.pemandu.gov.my/About_ETP-@-Overview_of_ETP.aspx http://etp.pemandu.gov.my/About_ETP-@-Overview_of_ETP.aspx 3 http://themarketmogul.com/whats-wrong-with-malaysias-economy/ 4 http://themarketmogul.com/whats-wrong-with-malaysias-economy/ 5 http://www.thestar.com.my/business/business-news/2016/04/11/malaysias-ringgit-has-done-a-stunning-aboutface-this-year/ 6

http://www.nst.com.my/news/2017/01/203323/higher-exports-bank-negara-measures-will-boost-ringgit-recovery-mof 1 2

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Section 1. Malaysia at a Glance

Malaysian GDP by Sector (CIA World Factbook, 20157)

Sector

GDP contribution

Agriculture

8.5%

Industry

37.7%

Services

53.8%

It is the industrial side of Malaysia’s economic makeup that holds the best opportunities for breakbulk cargo service providers.

KEY INDUSTRIAL SECTORS OF MALAYSIA Malaysia’s key industries, in terms of GDP contribution and driving economic growth, are:

Manufacturing

Oil & gas production

https://www.cia.gov/library/publications/the-world-factbook/geos/my.html

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Mining

Section 1. Malaysia at a Glance

MANUFACTURING Malaysia manufactures a wide variety of goods throughout the country, including automotive vehicles and components and the nation is moving into the aerospace sector too8.

Electrical products are also mass produced in Malaysia.

Manufacturing is the highest value GDP industry, in terms of individual sectors, in the country, contributing 22.7% of domestic product in 2015 – roughly $68 billion in monetary terms.9 2015 saw the sector experience 5% year-on-year growth10.

Malaysia itself has been ranked as the top manufacturing location by real estate industry observers Cushman & Wakefield11 , suggesting growth will remain promising as the

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sector diversifies and attracts a greater degree of foreign business interests.

Palm oil production is another massive contributor to the manufacturing sector in Malaysia. The nation is one of the world’s largest palm oil producers, accounting for 39% of global supplies and 44% of exports.12 Palm oil production, alongside associated products, is the fourth largest individual contributor to Malaysia’s GDP.13 Production of semiconductors is also a major industry in Malaysia, forming the cornerstone of its electronics manufacturing activity.

According to a report by the United States Department

of Commerce, Malaysia is the world’s sixth largest manufacturer and exporter of semiconductors, ahead of neighbouring Thailand, which ranks 9th, but slightly behind Singapore which ranks 4th overall.14 2013 saw exports of semiconductors and associated technologies account for 44% of Malaysia’s exports, with a valuation of close to $22 billion.15 This manufacturing activity is a major opportunity for international carriers to get involved in constructing new plants, as Malaysia’s manufacturing base will often require installation of large and bulky machinery. 16

https://www.oxfordbusinessgroup.com/analysis/aero-dynamic-aerospace-sector-has-seen-surge-investment https://www.oxfordbusinessgroup.com/overview/growth-leader-manufacturing-sector-expanding-faces-challenges https://www.oxfordbusinessgroup.com/overview/growth-leader-manufacturing-sector-expanding-faces-challenges http://www.cushmanwakefield.co.uk/en-gb/news/2014/03/global-manufacturing-index-2014/ http://www.mpoc.org.my/Malaysian_Palm_Oil_Industry.aspx http://theoilpalm.org/economic-contribution/ http://trade.gov/topmarkets/pdf/semiconductors_top_markets_report.pdf https://www.linkedin.com/pulse/electrical-electronics-industry-malaysia-present-state-ranen-das https://www.linkedin.com/pulse/electrical-electronics-industry-malaysia-present-state-ranen-das

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Section 1. Malaysia at a Glance

As a nation located on both the island of Borneo and the Malaysian Peninsula, Malaysia is surrounded by seas so is also involved in shipbuilding. There are 100 registered shipyards nationwide. 39 are located in West Malaysia, on the Malaysian Peninsula, with the remaining sites on Borneo in the east.

Production sites include: • Lumut – Perak – West Malaysia • Port Klang – Selangor – West Malaysia

• Kemaman –Terengganu – West Malaysia • Pasir Gudang – Johor • Sibu – Sarawak – East Malaysia17 Most yards produce small-tomedium sized vessels, with six sites capable of producing ships with a deadweight tonnage of 30,000 tons.18 Shipbuilding and offshore facility fabrication has been identified as an area for expansion under the Economic Transformation Programme.19

The Malaysian government has promised a range of huge tax incentives to boost productivity in this sector. For context, Malaysia only contributed 1% towards global ship demand in 2013.20 Manufacturing takes place across the country. There are now over 500 industrial estates or parks throughout Malaysia. In addition, there are also 18 Free Industrial Zones, designed specifically for export development.21

PROJECT CARGO CASE STUDY: MOULDING FACTORY MACHINERY FROM MALAYSIA TO VIETNAM Location: Malaysia to Laem Chabang, Ho Chi Minch City & Busan

MS Global Freight Solution, project cargo specialists, transported a variety of used machinery from Malaysia to Laem Chabang, Ho Chi Minh City, and Busan in Vietnam.

Cargo: Moulding Machinery

The consignment weighed 840 tonnes and was collected from the client’s moulding factory in Malaysia. The cargo included a press machine that weighed 31 tons and measured 6 metres in height and required special lifting through the roof of the factory.

Transport Company: MS Global Freight Solution

“We managed shifting out from a factory by jacking and skidding, arranged wooden crating and vacuum packing, lashing, chocking, and transport by low loader trucks to the port and ocean freight from Port Klang by breakbulk vessel and flat rack containers,” a spokesperson for MS Global said.

Date: September 2016

Headquartered in Port Klang, Malaysia, MS Global Freight Solution provides air and sea heavy-lift project cargo services to and from Malaysia including feasibility studies, road survey, method of statement, execution and supervision of packing, transportation, loading, lashing, unloading and placement at the consignee’s site.

http://www.mida.gov.my/home/3246/news/new-incentives-to-boost-the-shipbuildingship-repairing-industry/ http://www.globalsecurity.org/military/world/malaysia/industry-shipbuilding.htm 19 http://www.mida.gov.my/home/3246/news/new-incentives-to-boost-the-shipbuildingship-repairing-industry/ 20 http://www.globalsecurity.org/military/world/malaysia/industry-shipbuilding.htm 21 http://www.mida.gov.my/home/why-malaysia/posts/ 17 18

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Section 1. Malaysia at a Glance

OIL & GAS PRODUCTION Oil and gas production is another vital GDP contributor for Malaysia. Roughly 20% of Malaysia’s $296.2 billion economy stems from the energy industries, for a valuation of around $59.2 billion.

Spearheaded by PETRONAS, there are over 3,500 Malaysian companies involved in mineral extraction.

In 2014, oil and gas products were Malaysia’s second largest export group22 in value terms.

But declining oil prices and OPEC-led production caps may hamper the industry’s short term growth.

There is a real drive by the Malaysian government to encourage the use of renewable energies across the nation.

A renewable energy power

https://www.pwc.com/my/en/assets/publications/2016-msian-oil-n-gas-industry.pdf http://www.mida.gov.my/home/clean-technology-&-environment-management/posts/

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generation target of 2080 megawatts, or 11% of Malaysia’s power needs, has been set for 2020.

This means a larger number of energy projects will be taking place across the country this decade, leading to a greater need for specialist or oversized cargo and subsequent transportation services.23

Section 1. Malaysia at a Glance

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According to Offshore Technology, Malaysia is currently engaged in 15 oil and natural gas projects:

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9 2 1

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1

Balai Cluster Project

2

Berentai Gas Field

3

Bertam Oil Field

4

Damar Gas Field

5

Gumusut-Kakap Deepwater Oil & Gas Project

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KBM Cluster Field Development Project

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Kebebangan Gas Field

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Kikeh Floating Production Storage & Offloading Development

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Kumang Cluster Development Phase 1

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Layang Offshore Field Development

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Malikai Deepwater Oilfield Project

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North Malay Basin Integrated Gas Development Project

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Ophir Oil Field Development

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PFLNG-2/Rotan FLNG Project

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Siakap North-Petai (SNP) Oil Field24

http://www.offshore-technology.com/projects/region/asia/

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Section 1. Malaysia at a Glance

PROJECT CARGO CASE STUDY: OIL & GAS COMPONENTS FOR PASIR GUDANG Location: Pasir Gudang, Johor, Malaysia Cargo: Oil & gas components Transport Company: JS World Date: November 2016

Singapore’s JS World Freight Distributor transported 300 tons of oil and gas equipment from its home nation to Pasir Gudang, Johor, in November 2016.

The cargo was comprised of oil and gas equipment originally shipped to Singapore last year and on to Indonesia to help fix a leaking gas pipeline. Once this project was completed, the cargo was transported back to Singapore for storage.

A Dutch client of JS World Freight, DCN Diving, required the equipment in order to be connected to an oil and gas vessel in Pasir Gundang destined for use in the Middle East.

A total of 15 low loaders was employed by JS World Freight to transport all of the project equipment. The overland journey took 2 days from Singapore and included a police escort. JS’ lifting team also used a 250 ton mobile crane to aid with loading and discharging.

JS World Freight Distributor is a member of the Cargo Connections network (the association of worldwide breakbulk carriers).

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Section 1. Malaysia at a Glance

MINING Mining, despite falling output and a ban on bauxite mining due to environmental concerns, is another high value sector in terms of Malaysia’s economic makeup. Roughly $6 billion worth of mined resources are extracted each year, and are mostly shipped to nearby Asian countries such as China and Japan.25

Malaysia’s mining sector remains underdeveloped in comparison with other nations in the region such as Indonesia or Vietnam. Despite this, there are well over 100 active mining operations throughout the country including: • • • •

98 iron ore mines 15 gold mines 14 tin mines 7 coal mines26

Three Malaysian states have been identified as the most mining-friendly: Pahang, Perak and Kelantan. It is here where the bulk of Malaysia’s mining activity takes place. Elsewhere, mining operations can be found in the states of Johor, Terengganu and Kedah.27

http://malaysianminerals.com/index.php?option=com_content&task=view&id=62&Itemid=89 http://www.benpartners.com/the-potential-of-mining-sector-in-malaysia/ 27 http://www.benpartners.com/the-potential-of-mining-sector-in-malaysia/ 25 26

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Section 1. Malaysia at a Glance

PROJECT CARGO CASE STUDY: CONSTRUCTION COMPONENTS FOR TELUK RAMUNIA Location: Teluk Ramunia , Johor Cargo: Construction components Transport Company: MS Global Freight Solution

Logistics firm Cuchi Shipping was responsible for transporting two breakbulk shipments from its native Vietnam to Malaysia for use in the ongoing development of Johor state.

The larger of the two measured 3,857 cubic metres and weighed 698 tonnes. It was delivered in May and included equipment and structures destined for Teluk Ramunia in Johor.

The other shipment, weighing 657 tonnes, was slightly smaller at 3,457 cubic metres and was delivered in April. Both shipments were transported aboard a 11,000 deadweight-ton sea-barge from the port of Saigon in Vietnam.

Date: July 2016

Based in Ho Chi Minh City in the South of Vietnam, Cuchi Shipping provides project cargo and heavy-lift handling throughout the country.

The company is a member of the Project Cargo Network.

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Section 2.

Major Projects requiring breakbulk transport services in Malaysia

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Section 2. Major Projects requiring breakbulk transport services in Malaysia

Malaysia, in its bid to boost economic performance to reach High Income economy status, is investing heavily in a number of infrastructure mega projects. Much of this activity is centred on ports and associated facilities, but there are nationwide initiatives in place to improve Malaysia’s energy and industrial production capabilities.

2016’s budget promised mega projects galore until at least 2020. Billions of dollars of government investment has been allocated for mass rapid transit projects, port and airport upgrade programmes, road building and industrial development on a massive scale.

RM2 trillion, roughly $447 billion, has been apportioned by the government for infrastructure development.28

In this section, we will take a look at some of the biggest Malaysian developments occurring now or in the near future.

http://www.thestar.com.my/news/nation/2016/12/07/mega-projects-to-give-big-boost-to-countrys-economy/

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Section 2. Major Projects requiring breakbulk transport services in Malaysia

JOHOR INDUSTRIAL DEVELOPMENT Johor, one of Malaysia’s most crucial states, occupies a position next to some of the busiest shipping lanes in the world. As such, development of its industrial zones is a key priority for the local and national authorities. Since 2010, around $17.6 billion has been pumped into the region across 720 industrial projects and sectors, including the petrochemicals industry, manufacturing and transportation.29

Now, the state is witnessing an influx of port expansions and the construction of updated oil and gas terminals. As with the majority of Malaysia’s megaprojects, these projects represent billions of dollars of investment and suggest a greater need for oversized cargo shipment services in the immediate future.

A plan to develop Johor’s ports, in order to raise capacity from 40 million tonnes to 100 million tonnes annual capacity until 2025, is in place.30 Particular focus lies on the port of Tanjung Pelepas (PTP), which will see

$2.1 billion invested in fresh facilities over a fifteen year period.

PTP’s Chairman Datuk Seri Che Khalib Mohammad Noh has said the immediate focus at the port was to replace or refurbish quay cranes and rubber tired gantries.

Future phases, according to Mr. Noh would cover the addition of six new berths, three kilometres in length, in order to boost PTP’s capacity to 22.2 million TEUs prior to 2030.32 Port expansion or construction dominates industrial activity in Johor at present. Johor Port has been undergoing a period

of modernisation since 2012, upgrading facilities and adding further berths to handle liquid cargoes.33 Expanded ports, with their larger trade turnovers, necessitate improved infrastructure services and links in the nearby area.

For example, plans to update the PTP-Johor Port cargo rail are being mooted. Transport Minister Datuk Seri Liow Tiong Lai stated in December 2016 that the plan was to improve rail links to reduce Malaysia’s dependence on road transport while improving cargo handling facilities in the region.34

http://www.mida.gov.my/home/3111/news/81.4-manufacturing-projects-in-johor-successfully-implemented/ http://www.seatrade-maritime.com/news/asia/johor-ports-to-more-than-double-capacity-in-10-years.html 31 https://www.porttechnology.org/news/malaysia_in_2bn_port_expansion 32 https://www.porttechnology.org/news/malaysia_in_2bn_port_expansion 33 http://worldmaritimenews.com/archives/59540/malaysia-johor-port-five-year-modernisation-plan/ 34 http://www.malaysiandigest.com/news/637889-plans-afoot-to-upgrade-ptp-johor-port-railway-track-liow.html 29 30

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Section 2. Major Projects requiring breakbulk transport services in Malaysia

Manufacturing is vital to Malaysia’s economy and Johor’s development reflects this. Both international and domestic producers are in the process of building modern production facilities in the region. American confectioners Hershey’s has invested $247.5 million in a new chocolate factory close to Senai airport for example.35 Musim Mas Group, one of the world’s largest palm oil manufacturers, is also investing in Johor, planning a $78 million fully integrated palm oil hub in at the Tanjung Langsat port. This

would expand the Singaporean company’s presence at Johor’s third largest port considerably.

At present, Musim Mas operates a palm oil refinery at Tanjung Langsat with an output of 1,800 tons per day.

Johor is also one of Malaysia’s biggest food producing regions, as well as an industrial hotspot. Reflecting this is a joint venture by J-Biotech and United Malaysian Land in the development of a 142 hectare “Halal Park” devoted to manufacturing and processing halal food. Construction is

slated to continue through to 2018 and beyond.37 The oil and gas industry also has a presence in Johor, which is set to expand dramatically before 2020. Singapore’s Amity Energy plans to build a refrigerated liquefied petroleum gas terminal alongside a 500,000 cubic metre storage facility in the state, with construction mooted for completion in 2019.38 However, Amity’s efforts are put to shame compared with the Pengerang Integrated Petroleum Complex.

PROJECT CARGO CASE STUDY: THREE TUGBOATS FOR JOHOR BAHRU Location: Johor Bahru, Joro Cargo: Three 507 ton tugboats Transport Company: Hansa Heavy Lift

Heavy-lift specialist Hansa Heavy Lift successfully transported three tugboats with a combined weight of 1,521 tons from Rotterdam, The Netherlands to Johor, Malaysia towards the tail end of 2015.

HHL loaded the cargo onto the deck of HHL Fremantle at the Port of Rotterdam before sailing via the Suez Canal to Johor Bahru, where the tugboats were discharged.

Ian Broad, Director of Cargo Management, said: “Our team of engineers and cargo superintendents working closely with the team on board managed to load all three units within the planned timeline and safely completed operations.”

Date: November 2015

The tugboats were being delivered for KOTUG Asia, a leading towage operator which recently launched in Malaysia.

HHL Fremantle’s two cranes, which have a combined lifting capacity of up to 1,400 tons, lifted the tugs at both the port of loading and port of discharge.

https://www.oxfordbusinessgroup.com/overview/state-readiness-wide-range-investment-opportunities-await http://www.mida.gov.my/home/3111/news/81.4-manufacturing-projects-in-johor-successfully-implemented/ 37 https://www.oxfordbusinessgroup.com/overview/state-readiness-wide-range-investment-opportunities-await 38 http://www.mida.gov.my/home/3111/news/81.4-manufacturing-projects-in-johor-successfully-implemented/ 35 36

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Section 2. Major Projects requiring breakbulk transport services in Malaysia

PENGERANG INTEGRATED PETROLEUM COMPLEX Pengerang Integrated Petroleum Complex (PIPC) is a 20,000-acre oil and natural gas refining, processing and manufacturing facility. The plant was conceived as a way for Malaysia to diversify its oil and gas products, adding further value to the nation’s downstream activities.39 $27 billion worth of capital has been poured into this project from both private and public investors.40

Oil refineries, naphtha crackers, petrochemical plants and an LNG import terminal are all slated for inclusion at PIPC. Additionally, a 24-metre-draught deepwater petroleum terminal will also be included at the site.

As such, PIPC will be able to handle both very large and ultralarge crude carriers.41 Despite tumbling oil prices, Malaysia is determined to plough ahead with PIPC. Its location, on the very tip of

the Malaysian Peninsula’s East coast, gives it access to international shipping lanes and could steal traffic from Singapore, which is a major regional energy terminal.42

capacity of 300,000 barrels per day once fully operational.

Further petrochemical plants will generate added value to petroleum products produced in RAPID.43

A second mega-project within PIPC is PETRONAS’ $11.8 billion Refinery and Petrochemical Integrated Development (RAPID) Project. The RAPID project’s site preparation is in progress and is expected to be commissioned by 2019. RAPID will have a refining

The ambition behind PIPC suggests it will require a great deal of specialised production equipment and modules – likely too oversized to be handled by regular transport methods.

http://www.mprc.gov.my/our-businesses/pengerang-integrated-petroleum-complex-pipc https://pic.petronas.com/About-PIC/Pages/default.aspx 41 https://www.oxfordbusinessgroup.com/overview/state-readiness-wide-range-investment-opportunities-await 42 http://www.oilandgascouncil.com/sites/default/files/files/Mohd%20Yazid%20Ja%E2%80%99afar,%20CEO,%20JPDC.pdf 43 http://www.mprc.gov.my/our-businesses/pengerang-integrated-petroleum-complex-pipc 39 40

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Section 2. Major Projects requiring breakbulk transport services in Malaysia

PROJECT CARGO CASE STUDY: RAPID BOILER FOR PENGERANG INTEGRATED PETROLEUM COMPLEX Location: Pengerang, Johor

Dutch shipping firm Roll Group transported oversized boiler blocks and combustor units from Taiwan to Malaysia in January 2017.

Cargo: 1,950 ton rapid boiler

The consignment was delivered on behalf of heat transfer specialist NEM Energy and included two boiler blocks, each weighing nearly 2,000 tons, two bulky combustor units and various air fan-ducting structures and multiple steel frames.

Transport Company: Roll Group

“Because of the weight of the cargo, Roll Group engineers had to reinforce the loadout quay as in its original state the quay strength was insufficient to handle the load. For this, we used 150 pieces of steel beams, enabling us to spread the load over a larger area,” a spokesperson for Roll Group said.

Date: January 2017

The project was handled jointly by Roll group subsidiaries Roll-Lift and RollDock. The cargo was transported aboard the heavy-lift vessel RollDock Sky and loaded by Roll-Lift using 72 axle lines of selfpropelled modular transporter to roll the boiler blocks and combustor units.

Headquartered in Capelle aan den IJssel in the Western Netherlands, Roll Group provides heavy-lift marine solutions along with engineered heavy-lifting onshore and transportation services.

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Section 2. Major Projects requiring breakbulk transport services in Malaysia

JIMAH EAST POWER (JEP) PLANT PROJECT Construction of an updated coalfired power plant, close to Port Dickson in the state of Negeri Sembilan on the Malaysian Peninsula, is underway.

Building of the station, which is separated into two 1,000 megawatt producing stations, is part of Malaysia’s efforts to secure future energy security. 44

National energy supplier Tenega Nasional BHD is behind this project. Costs for the power plant are estimated to be RM12 billion ($44.7 billion). Once fully operational, with construction to finish by 2019, an additional 2,000MW of power will be added to Malaysia’s national grid thanks to JEP.45

engineering firm will supply and install two units of ultrasuper-critical steam turbine generators. Toshiba will also be supplying other equipment including main transformers, JEP’s switch yard and plant control systems, in addition to aiding marine civil work needed at the site.46

Toshiba was awarded the contracts in 2014 to provide many of the plant’s critical systems. Under the terms of its contract, the Japanese

Other major construction firms involved in the plant include Japanese specialists IHI Construction and South Korea’s Hyundai Engineering

& Construction Co. Limited and Hyundai Engineering Co. Limited.47 Jacobs Engineering Group, an American firm, will be designing civil and structural works for the cooling water intake and discharge systems.48 Both power generating units at JEP will be fitted with a pulverised coal boiler and steam turbine generators. Associated auxiliary equipment will be supplied by Toshiba or IHI.49

https://www.tnb.com.my/announcements/construction-of-jimah-east-power-commences http://www.thestar.com.my/business/business-news/2016/07/25/construction-of-tnbs-rm12bil-jimah-east-power-plant-commences/ 46 https://www.toshiba.co.jp/about/press/2014_09/pr0201.htm 47 http://rafiziramli.com/wp-content/uploads/2015/01/JIMAH-EAST-POWER-SDN-BHD.pdf 48 http://invest.jacobs.com/investors/Press-Release-Details/2015/Jacobs-Wins-Contracts-for-Jimah-East-Power-Project-in-Malaysia/default.aspx 49 http://rafiziramli.com/wp-content/uploads/2015/01/JIMAH-EAST-POWER-SDN-BHD.pdf 44 45

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Section 2. Major Projects requiring breakbulk transport services in Malaysia

PROJECT CARGO CASE STUDY: TENSION LEG PLATFORM FOR MALAIKAI PROJECT Location: Darul Takzim, Johor Cargo: Tension Leg Platform Transport Company: ALE Heavy Lift

May 2016 saw heavy-lift specialist ALE complete load-out operations of the Tension Leg Platform (TLP) for the Malikai Project, a deep-water oil drilling operation, in Johor Darul Takzim, Malaysia.

The 27,500-tonne unit was moved at Malaysia Marine and Heavy Engineering, or MMHE, West facility and skidding was completed in 12 hours.

ALE was responsible for superlift activities, which included weighing the topside, jacking it up 40 metres and skidding it 90 metres at elevation. Once this move was complete the team from ALE then mated the topside unit with the hull.

Date: May 2016

“Quay jacks were used to ensure the vessel heel remain positive by way of monitoring calculated load on the quay. We also utilized our barge level monitoring system to constantly monitor the vessel trim, heal and deck shape in real time throughout the load-out,” said Barney Mills, Engineering Manager at ALE. The TLP is undergoing final testing and commissioning before it will be towed to its operating offshore site, 100km from Sabah, Malaysia.

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Section 2. Major Projects requiring breakbulk transport services in Malaysia

MALACCA STRAIT DEEP SEA PORT Malacca, situated on the Malaysian Peninsula’s west coast, is a strategic location, befitting the development of a greenfield deep sea port facility.

It is of particular of interest to nearby China. The world’s second largest economy is dependent on the 500-mile long sea route for much of its regional trade and energy security. The Malacca Strait is the world’s second busiest waterway50, and its importance is rising, influenced by Southeast Asia’s changing economic and political landscape.

$14 billion is being spent on developing a new deep sea harbour and oil terminal off the coast of Malacca City.51 Indicative of the strategic importance of the waterway is the $1.9 billion being invested by a group of Chinese businesses (Shenzhen Yantian Port Group, Rizhao Port Group & PowerChina) in the new port.52 The scale of this project is such that land reclamation is a necessity. Dredging is currently ongoing at the site. Roughly

620 acres of reclaimed land will be needed to situate the new port facilities if it is to compete against Singapore, the region’s nautical trade behemoth located 200 kilometres to the South.

KAJ Developers, the main Malaysian partner behind this development, is hoping to match Singapore’s annual capacity of 100,000 vessels annually at the new port.

KAJ has stated the port will include terminal and storage facilities for petroleum and

chemical products alongside vegetable oils. The site is expected to open in 2019.

The Malacca port forms the centrepiece of the multi-billion Melaka Gateway urban and resort development project in Malacca City proper. Chinese companies are planning on taking part in the non-port areas of the project too, which spans across four islands – three of which are to be manmade.53

https://www.weforum.org/agenda/2014/05/world-most-important-trade-route/ http://www.straitstimes.com/asia/se-asia/malacca-harbour-plan-raises-questions-about-chinas-strategic-aims 52 http://www.breakbulk.com/chinese-build-port-malacca-straits/ 53 http://www.breakbulk.com/chinese-build-port-malacca-straits/ 50 51

23

Section 2. Major Projects requiring breakbulk transport services in Malaysia

KUALA LUMPUR-SINGAPORE HIGH SPEED RAILWAY As mentioned throughout this report, Malaysia is throwing its weight behind far-reaching infrastructure projects under the auspices of its Economic Transformation Programme.

Part of this is establishing updated cross-border trade and transportation links – something the Kuala Lumpur-Singapore High Speed Rail project promises to deliver. 54

A bilateral agreement to build a railway running over 350km – 335 km in Malaysia and 15km in Singapore – linking the two nations was signed in December 2016. It is hoped this new rail route will foster economic cooperation between the neighbouring countries by dramatically slashing travel times. The journey presently take 4-6 hours by coach, whereas the high speed rail line is estimated to take just 90 minutes.55

A total of seven stops, incorporating two terminus stations at Bandar Malausia in Kuala Lumpur and Singapore’s Jurong East with five transit stations in between (Seremban, Ayer Keroh, Muar, Batu Pahat and Nusajaya), are planned for the route.56 Each nation is to be responsible for the construction of the sections of line crossing its territory.

The HSR link consists of doubletrack and will be designed to accommodate “all types of

conventional high speed rail trains and technology available in the market with a design speed of 350km/h”.57 Construction is expected to begin in 2017, with the tendering process underway as of February 2017. Securing a joint development partner is the first step of the tendering process, whereas assets co-operators will tendered later in 2017. Full high speed service is expected to commence in 2026.58

http://www.railway-technology.com/projects/kuala-lumpur-singapore-high-speed-rail/ http://thediplomat.com/2016/12/what-will-the-singapore-malaysia-high-speed-rail-project-mean/ 56 http://www.railwaygazette.com/news/high-speed/single-view/view/kuala-lumpur-singapore-high-speed-rail-agreement-signed.html 57 http://www.railwaygazette.com/news/high-speed/single-view/view/kuala-lumpur-singapore-high-speed-rail-agreement-signed.html 58 http://www.railwaygazette.com/news/high-speed/single-view/view/kuala-lumpur-singapore-high-speed-rail-agreement-signed.html 54 55

24

Section 2. Major Projects requiring breakbulk transport services in Malaysia

PROJECT CARGO CASE STUDY: AIRBUS EC120 HELICOPTER TO MALAYSIA Location: Norway to Malaysia Cargo: Airbus EC120 Helicopter Transport Company: Blue Water Date: February 2016

Danish logistics firm Blue Water delivered an Airbus EC120 helicopter from Norway to Malaysia early in 2016 and has been keen to point out the challenging nature of this job.

The helicopter, also known as the Eurocopter, is a five-seat, singleengine, single main rotor, light helicopter that weighs around 1 ton.

The EC120 was developed by a consortium of European and Asian engineering firms and assembled in France and Australia. “The project was challenging because it involved many parties. The coordination was a comprehensive task in itself and we were working with tight time slots. These kind of projects often include very valuable cargo and leave no room for mistakes,� said Jesper Nielsen, Blue Water Business Development Manager.

Blue Water was awarded the contract through its membership of The Aerospace Logistics Alliance, or TALA, which is a global network of transport firms focused on aerospace shipments.

Blue Water delivers freight solutions by road, rail, sea and air via its network of 55 offices. The firm is headquartered in Esbjerg on the west coast of the Jutland peninsula in southwest Denmark, but operates in more than 26 countries worldwide.

25

Section 2. Major Projects requiring breakbulk transport services in Malaysia

PAN-BORNEO HIGHWAY The Pan-Borneo Highway is a much-needed backbone connecting the two states of Sabah and Sarawak on the island of Borneo, on the eastern side of Malaysia. The highway will stretch over 1,000 km by the time it is finished in 2022.

Since the contract to get things started was signed in June 2015, progress has been encouraging.

Work on the highway has been divided into 11 packages, each managed and built separately, with three launched in 2016 – Telok Melano to Sematan,

Serian roundabout to the Pantu junction, and Bintangor junction to Sungai Kua Bridge59 – and as of January 2017, eight sections in total have been allotted at a cost of over $3 billion.

At present (February 2017), work on most sections of the

http://www.nst.com.my/news/2016/12/197774/pan-borneo-highway-road-success

59

26

highway is at a preliminary stage – earthworks, site clearing and drainage – but platform and piling work is underway for the sections that require bridges, offering opportunities for specialist project cargo shipping.

Section 2. Major Projects requiring breakbulk transport services in Malaysia

SAPANGAR BAY CONTAINER PORT EXPANSION The eastern area of Malaysia, which comprises two states located in the island of Borneo, has suffered from past underinvestment compared to the western area of the country, but the planned expansion of Sapangar Bay Container Port in Sabah is a major step to redressing this.

Malaysia’s government confirmed a funding injection of RM333.5 million (over $75 million) to boost capacity at the port to 1.25 million TEUs (it currently stands at 500,000 TEUs), providing a vital knock-on

27

effect to industry and project cargo services across the whole state of Sabah. Construction is expected to begin in 2017 and conclude in 2019.

Extra activity at the port is already generating project cargo

orders – Terex Port Solutions won a contract in late 2016 to supply two ship-to-shore cranes from the company’s Xiamen yard in China to Sapangar Bay. Delivery is anticipated for the second half of 2017.

Section 3.

The Rest of the ASEAN

28

Section 3. The Rest of the ASEAN

SECTION 3.1: ASEAN ECONOMIC COMMUNITY INTRODUCTION & OVERVIEW

The Association of Southeast Asian Nations was founded in 1967, with Malaysia being a key member right from the group’s inception. Initially, the Association was formed of the region’s biggest five economies: Indonesia, Thailand, Malaysia, Singapore and The Philippines.

Since then, it has expanded and now includes the emerging economies of Brunei, Cambodia, Laos, Myanmar and Vietnam.

2016 saw the establishment of the ASEAN Economic Community (AEC). The goal of this is to realise Southeast Asia’s

GDP (estimated): Population: Annual GDP growth:

$2.4 trillion 629 Million 4.7%66

regional goal of the economic integration. Essentially, the AEC combines all of the ASEAN member states into a single market and production base by establishing:

• Promotion of a higher level of transparency & predictability67

• Facilitation of free movement of goods, services, investments, capital & skills • Increased trade (goods & services) & investment amongst member states

Collectively, the AEC is one of the world’s largest economies with an approximate GDP of $2.4 trillion and a combined population of over 600 million.

It is an incredibly diverse collection of countries – not just culturally but economically too.

• Promotion & expansion of regional production & networks

http://asean.org/storage/2016/11/13Content-AEC-Chartbook-2016.pdf http://investasean.asean.org/index.php/page/view/asean-economic-community/view/670/newsid/755/about-aec.html

66 67

29

Section 3. The Rest of the ASEAN

SECTION 3.2: MAP OF ASEAN MEMBER STATES Thailand Myanmar GDP (estimated): $64.8 billion Population: 54,836,483 Annual GDP growth: 7.0% Industrial production growth rate: 13.7% FDI inflows: $2.8 billion

GDP (estimated): $395.3 billion Population: 68,297,547 Annual GDP growth: 2.8% Industrial production growth rate: 2.2% FDI inflows: $10.8 billion

Laos

Vietnam GDP (estimated): $193.6 billion Population: 95,414,640 Annual GDP growth: 6.70 Industrial production growth rate: 9.6% FDI inflows: $11.8 billion

GDP (estimated): $12.33 billion Population: 7,037,521 Annual GDP growth: 7.6% Industrial production growth rate: 7.5% FDI inflows: $1.2 billion

The Philippines GDP (estimated): $292 billion Population: 103,796,832 Annual GDP growth: 5.9% Industrial production growth rate: 6.0% FDI inflows: $5.2 billion

Cambodia GDP (estimated): $18.05 billion Population: 16,076,370 Annual GDP growth: 7.0% Industrial production growth rate: 11.7% FDI inflows: $1.7 billion

Brunei GDP (estimated): $15.4 billion Population: 434,448 Annual GDP growth: -0.60% Industrial production growth rate: 0.0% FDI inflows: $6.9 billion

Singapore GDP (estimated): $292.7 billion Population: 5,784,538 Annual GDP growth: 2.0% Industrial production growth rate: -3.4% FDI inflows: $65.2 billion

Malaysia

Indonesia

GDP (estimated): $296.2 billion Population: 31,164,177 Annual GDP growth: 5.0% Industrial production growth rate: 5.5% FDI inflows: $11.1 billion

GDP (estimated): Population: Annual GDP growth: Industrial production growth rate: FDI inflows:

$861.9 billion 263,510,146 4.8% 2.7% $15.5 billion

http://data.worldbank.org/indicator/NY.GDP.MKTP.CD http://www.worldometres.info/world-population/population-by-country/ 62 https://www.cia.gov/library/publications/resources/the-world-factbook/rankorder/2003rank.html 63 https://www.cia.gov/library/publications/the-world-factbook/rankorder/2089rank.html 64 http://unctadstat.unctad.org/CountryProfile/en-GB/index.html 65 http://borneobulletin.com.bn/brunei-attracts-11-fdi-projects-worth-6-9b/ 60 61

30

Data taken from the World Bank60, Worldmoeters. info61, CIA World Factbook62 63& United Nations Conference on Trade & Development.

Brunei FDI based on an article from the Borneo Bulletin.65

Section 3. The Rest of the ASEAN

SECTION 3.3: MAIN INDUSTRIES

BY ASEAN MEMBER STATE Thailand Manufacturing – incl. automobile production, agricultural machinery & rubber products Mining – incl. tungsten & tin extraction Oil & gas production

Myanmar Agriculture – incl. rice & seafood production Manufacturing – incl. clothing, cement & construction materials Mining – incl. copper & tin extraction

Laos Mining – incl. copper & zinc extraction Manufacturing – incl. clothing, cement & construction materials Construction

Vietnam Manufacturing – incl. shipbuilding, automobile & steel production Mining – incl. coal & bauxite extraction Services & tourism

The Philippines Manufacturing – incl. shipbuilding, electronics & clothing Mining – incl. gold & copper extraction Oil & gas production

Cambodia Manufacturing – incl. rubber, cement & clothing Agriculture – incl. rice & corn production Services & tourism

Brunei Oil & gas production Manufacturing – incl. petrochemical production Services

Singapore Engineering – incl. shipbuilding & aerospace engineering Oil & Gas production & engineering – incl. offshore rig & FPSO fabrication Manufacturing – incl. electronics

Indonesia Manufacturing – incl. chemicals, cement & clothing Oil & gas production Mining – incl. coal & bauxite extraction

31

Section 3. The Rest of the ASEAN

SECTION 3.4: ASEAN LOGISTICS ROADMAP As logistics are integral to the economies of all ASEAN countries, the association is keen to create a framework for efficient, competitive and cost-effective inter-regional transportation links. In doing so, a more workable environment for project cargo operators will be cultivated.

The Roadmap for the Integration of Logistics Services (RILS) was adopted by the ASEAN community in 2007. It contains a number of measures and provisions aimed at supporting logistics across Southeast Asia.

Five main targets have been set by the roadmap: • Achieve substantial liberalisation of logistics services • Enhance competitiveness of ASEAN logistics services

32

providers through trade (including documentation simplification) and logistics (transport) facilitation • Expand capability of ASEAN logistics service providers • Human resource development • Enhance multi-modal transport infrastructure and investment

While this is still an ongoing process, it indicates a regionwide initiative to improve the transport, cargo handling and logistics market across Southeast Asia.

Section 4: Major Projects in the ASEAN

33

Section 4: Major Projects in the ASEAN

SECTION 4.1 – TRANS-SUMATRA TOLL ROAD – INDONESIA Indonesia is in the midst of a flurry of road construction activity, updating highways and road links across the archipelago. One such mammoth project currently underway is the construction of the TransSumatra Toll Road.

Once complete, the road will span the length of Indonesia’s second largest island, linking Banda Aceh on Sumatra’s Northern coast to Lampung on the Island’s southern tip, for a total of 2,800 kilometres – the same as driving from Paris to Moscow.

Construction of the TransSumatra Toll Road will cost in the region of $25 billion. Eight priority sections, out of a total

of 24, have been identified.

These areas are expected to be completed by 2019 with the rest of the road being finished in the following few years.68

networks across the country. The reasons for this are twofold: 1) ease congestion and 2) increase the competitiveness of the nation’s road transport sector.

The complexities of Indonesia’s land acquisition laws have stalled the project after an initial ground-breaking ceremony in October 2014. However, the Trans-Sumatra Toll Road is a sign of Indonesia’s commitment to refreshing and upgrading road

Given the importance and dominance of road transport in Indonesia, it encouraging to see such a robust effort by the government to upgrade and expand the nation’s highway network.

http://www.indonesia-investments.com/news/todays-headlines/infrastructure-in-indonesia-update-trans-sumatra-toll-roaddevelopment/item6912 68

34

Section 4: Major Projects in the ASEAN

PROJECT CARGO CASE STUDY: SHORE SHIP LOADER CARGOES FOR INDONESIAN FERTILIZER MANUFACTURER Location: Bontang, Borneo

InterMax Logistic Solution has delivered shore ship loader cargoes to a fertilizer manufacturer in Indonesia.

Cargo: Shore ship loader cargoes

The shipment consisted of 48 pieces, totaling 2,900 cubic meters with a weight of 265 tons. The heaviest piece of the loader weighed 68 tons and measured 25 meters long, Cargo Equipment Experts said in a statement on behalf of its China-based member.

Transport Company: InterMax

InterMax used two flatbed barges from its own fleet serving the Yangtze River. The cargo was collected in Nantong and carried to the Port of Shanghai, where it was loaded on to a chartered ocean vessel.

Date: April, 2015

The vessel sailed to Bontang, Indonesia, where the shore ship loader was discharged. It will be used for loading bulk solid material like iron and coal.

InterMax engaged its own experienced staff to supervise and sign responsible for the whole process, including loading, sea-river connection and unloading in Indonesia.

35

Section 4: Major Projects in the ASEAN

SECTION 4.2: TUAS TERMINAL – SINGAPORE Despite being a regional leader when it comes to maritime transportation and storage, Singapore’s ports are living on borrowed time. In the next decade, the land leases on the ports of Tanjong Pagar, Keppel and Pulau Brani will have run out by 2027.69 Singapore is smaller than London, with an equivalent population, so land is at a premium, hence the lease system.

Of course, this will not be a clean break. While the land given over from the pre-existing ports will be put to good use in developing new residential and commercial areas, Singapore is not forgetting its maritime commitments. As such, it is currently building a massive container terminal in Tuas situated on the western coast and the Straits of Johor.

The scale of the Tuas Terminal will be suitably massive. Phase one, currently underway with construction expected for completion by 2020, will have a capacity of 20 million TEUs

annually. At its peak, Tuas will be able to handle 60 million TEUs every year.

Initial construction efforts, which began in April 2016, are being overseen by DIAPDaelim in a joint venture worth $2.42 billion. Most of the current work is focussed on shaping the first of the port’s 21-metre deep berths.

A key feature of the new port are caissons: gargantuan reinforced concrete structures providing the foundations for docks.

Manufacturing and moving these massive objects into place requires herculean effort.

Each weighs 15,000 tons and measure 28 metres in height – roughly the same size as a 10-storey building. A total 222 caissons are needed for Tuas’ first phase. So far, 30 are in place.

While Tuas Terminal is shaping up nicely, MPA, Singapore’s port authority, is unsure whether the 2020 deadline will be achieved.

Development at the Tuas site is an ongoing affair, and will take at least 30 years before finally completed.70

http://www.straitstimes.com/business/psa-gears-up-for-move-to-tuas http://www.channelnewsasia.com/news/singapore/phase-1-of-tuas-terminal-on-track-for-dec-2020-completion/3356124.html

69 70

36

Section 4: Major Projects in the ASEAN

PROJECT CARGO CASE STUDY: ELECTROSTATIC PRECIPITATOR FROM SINGAPORE TO AUSTRALIA Location: Port of Singapore to Port Pirie, Australia Cargo: 530 ton Electrostatic Precipitator (ESP) Transport Company: AAL Date: September 2016

AAL was responsible for the delivery of a giant Electrostatic Precipitator module to Port Pirie in Southern Australia during September 2016.

The module weighed 530 tonnes and measured 41 metres in length and 21 metres in height. It is the largest component shipped to date for Pirie’s ongoing Redevelopment Project.

AAL shipped the ESP module aboard its vessel AAL Dampier as part of a wider end-to-end logistics operation managed by the industrial projects division of international supply chain operator Geodis.

The ESP module was destined for one of the world’s largest primary lead smelting facilities, operated by mining and metals processing firm Nyrstar.

“For AAL it reinforces our reputation as a trusted heavy-lift specialist with the right tonnage and expertise to meet any multipurpose shipping demands. For Geodis it marks another successful stage in its seamless execution of this project, and Nyrstar takes delivery of a component that will significantly improve the environmental performance of its site as part of the delivery of the Redevelopment Project,” said Marc Willim, General Manager of AAL’s Tramp and Projects division.

Based in Singapore, AAL is a member of Cypriot investment group Schoeller Holdings. The company provides breakbulk, heavy-lift and project cargo services worldwide to the energy, oil and gas, mining, forestry, leisure, agriculture and construction sectors.

37

Section 5: The Factfile – Logistics Performance in Malaysia & the ASEAN

38

Section 5: The Factfile – Logistics Performance in Malaysia & the ASEAN

SECTION 5.1: LOGISTICS PERFORMANCE RANKINGS The World Bank’s Logistics Performance Index (LPI) provides an overall snapshot of a nation’s logistics landscape. ASEAN member states run the full length of the list, with countries either ranking at the top of the list of 160 nations or towards the bottom of the scoreboard.

ASEAN member states’ by LPI Score (World Bank, 201671). For the overall LPI ranking, the lower the number the better, but for the other columns, a higher number indicates better performance.

Country

LPI Rank

LPI Score

Customs

Infrastructure

Int. Logistics Tracking Shipments Competence & Tracing

Timeliness

Singapore

5

4.14

4.18

4.20

3.96

4.09

4.09

4.40

Malaysia

32

3.43

3.17

3.45

3.48

3.34

3.46

3.65

Thailand

45

3.26

3.11

3.12

3.37

3.14

3.20

3.56

Indonesia

63

2.98

2.69

2.65

2.90

3.00

3.19

3.46

Vietnam

64

2.98

2.75

2.70

3.12

2.88

2.84

3.50

The Philippines

71

2.86

2.61

2.55

3.01

2.70

2.86

3.35

Cambodia

73

2.80

2.62

2.36

3.11

2.60

2.70

3.30

Myanmar

113

2.46

2.43

2.33

2.23

2.36

2.57

2.85

Laos

152

2.07

1.85

1.76

2.18

2.10

1.76

2.68

Brunei

No data No data No data

No data

No data

No data

No data

No data

Additionally, the World Bank and the International Financial Corporation’s (IFC) Doing Business guide details time and cost of exports and imports – important information for all members of the international business community to know.

http://lpi.worldbank.org/ http://www.doingbusiness.org/data/

71 72

39

Section 5: The Factfile – Logistics Performance in Malaysia & the ASEAN

ASEAN member states’ time & cost of export (World Bank & IFC, 201772) Country

Time to Export: Border Compliance (hours)

Cost to Export: Border Compliance ($USD)

Time to Export: Documentary Compliance (hours)

Cost to Export: Documentary Compliance ($USD)

Singapore

12

$335

2

$37

Malaysia

48

$321

10

$45

Thailand

51

$223

11

$97

Indonesia*

63

$259

63

$150

Vietnam

58

$309

50

$139

The Philippines

42

$456

72

$53

Cambodia

48

$375

132

$100

Myanmar

144

$432

144

$140

Laos

12

$73

216

$235

Brunei

117

$340

163

$90

Data for Indonesia is an average, calculated using data from the ports of Surabaya and Jakarta as per the World Bank/IFC Doing Business Guide.

*

ASEAN member states’ time & cost of import (World Bank & IFC, 201772) Country

Time to Import: Border Compliance (hours)

Cost to Import: Border Compliance ($USD)

Time to Import: Documentary Compliance (hours)

Cost to Import: Documentary Compliance ($USD)

Singapore

35

$220

3

$40

Malaysia

72

$321

10

$60

50

$233

4

$43

Indonesia

124

$380

134

$170

Vietnam

62

$392

76

$183

The Philippines

72

$580

96

$56

Cambodia

8

$240

132

$120

Myanmar

232

$457

48

$210

Laos

14

$153

216

$115

Brunei

48

$395

140

$50

Thailand *

Data for Indonesia is an average, calculated using data from the ports of Surabaya and Jakarta as per the World Bank/IFC Doing Business Guide.

*

http://www.doingbusiness.org/data/exploreeconomies/

73

40

Section 5: The Factfile – Logistics Performance in Malaysia & the ASEAN

SECTION 5.2: DOMESTIC LOGISTICS PERFORMANCE The LPI provides a scoring system ranking a nation’s complete logistics performance. The World Bank also employs a Domestic Logistics Performance Index (DLPI) too. While this is not ranked, it does reveal more details about each nation’s internal mechanics and efficiencies of supply chains and logistics operations – highly useful for foreign firms seeking to understand Malaysia and the ASEAN market in more detail.** DLPI Table 01: Export time & cost – Port or airport supply chain (World Bank, 201674)

DLPI Table 02: Export time & cost – Land supply chain (World Bank, 201675)

DLPI Table 03: Import time & cost – Port or airport supply chain (World Bank, 201676)

http://lpi.worldbank.org/domestic http://lpi.worldbank.org/domestic 76 http://lpi.worldbank.org/domestic 74 75

41

Country

Distance (KM)

Lead time (days)

Singapore

31 km

2 days

Malaysia

75 km

3 days

Thailand

25 km

1 day

Indonesia

133 km

3 days

Vietnam

141 km

3 days

The Philippines

64 km

3 days

Cambodia

87 km

3 days

Country

Distance (KM)

Lead time (days)

Singapore

44 km

2 days

Malaysia

N/A

N/A

Thailand

25 km

2 days

Indonesia

145 km

3 days

Vietnam

249 km

3 days

The Philippines

241 km

10 days

Cambodia

178 km

5 days

Country

Distance (KM)

Lead time (days)

Singapore

44 km

2 days

Malaysia

N/A

N/A

Thailand

25 km

2 days

Indonesia

145 km

3 days

Vietnam

249 km

3 days

The Philippines

241 km

10 days

Cambodia

178 km

5 days

Section 5: The Factfile – Logistics Performance in Malaysia & the ASEAN

DLPI Table 04: Import time & cost – Land supply chain (World Bank, 201677)

Country

Distance (KM)

Lead time (days)

Singapore

107 km

2 days

Malaysia

N/A

N/A

Thailand

25 km

2 days

Indonesia

165 km

5 days

Vietnam

230 km

3 days

The Philippines

300 km

9 days

Cambodia

87 km

4 days

DLPI Table 05: Further logistics performance information (World Bank, 201678) Metric

Singapore Malaysia Thailand Indonesia Vietnam

Shipments meeting quality criteria

86.66%

Number of agencies – exports

2

Number of agencies – imports

92.5%

80%

57.38%

58.3%

92.13%

N/A

1

2

4

5

2

2

N/A

1

2

3

5

2

Number of documents – exports

1

N/A

2

4

4

5

4

Number of documents – imports

1

N/A

1

3

5

5

4

N/A

1 day

2 days

1 day

3 days

2 days

N/A

2 day

4 days

3 days

7 days

2 days

Clearance time without N/A physical inspection

82.5%

The Philippines Cambodia

Clearance time with physical inspection

1 day

Physical inspection

1.28%

N/A

1%

5.13%

16.71%

21.26%

21.09%

Multiple inspection

1.18%

N/A

1%

2.1%

9.38%

2.5%

9.65%

Declarations submitted and processed electronically/online

100%

N/A

100%

88.89%

90.91%

100%

33.33%

Importers use a licensed customs broker

80%

N/A

N/A

100%

61.54%

75%

100%

N/A

100%

37.5%

50%

50%

66.67%

N/A

100%

22.22%

58.33%

50%

N/A

Able to choose location 37.5% of final clearance Goods released pending customs clearance

**

37.5%

Please note: data for Myanmar, Laos and Brunei was unavailable at the time of writing.

http://lpi.worldbank.org/domestic http://lpi.worldbank.org/domestic

77 78

42

Section 5: The Factfile – Logistics Performance in Malaysia & the ASEAN

SECTION 5.3: LOGISTICS COSTS BY ASEAN STATE A valuable indicator of a nation’s logistics performance, logistics costs are an important metric to consider. Members of the ASEAN again reflect their diversity with regards to costs of cargo transportation in each country. Some are world leaders, others do not rank so highly. A high logistics costs to GDP ratio suggests inefficiencies and a poor environment for cargo handling, while lower costs represent a more streamlined logistics sector.

Logistics costs as a percentage of GDP for selected ASEAN Member States*** (Various Sources79)

Country

GDP

Logistics Costs - % of GDP

Singapore

$292.7 billion

8%

Malaysia

$296.2 billion

13%

Thailand

$395.3 billion

20%

Indonesia

$861.9 billion

27%

Vietnam

$193.6 billion

25%

Data for The Philippines, Cambodia, Myanmar, Laos & Brunei unavailable at the time of writing.

***

http://documents.worldbank.org/curated/en/993771468285047652/pdf/808710REVISED00rt04SEPT20130ENGLISH.pdf

79

43

Section 6: Doing Business in Malaysia & the ASEAN

44

Section 6: Doing Business in Malaysia & the ASEAN

SECTION 6.1: ASEAN MEMBER STATES BY COMPETITIVENESS Since 2004, the World Economic Forum (WEF) has published a series of reports on the competitiveness of each country worldwide. Essentially, these reports rate and rank the macroeconomic and micro/business aspects of a given nation, as well as societal factors. A high ranking suggests the business environment, and services rendered, are of a high, internationally viable quality.

Global Competitiveness Index Table 01: Overall competitive rankings (WEF, 201680)

From the above, we can determine that Singapore is the ASEAN powerhouse – at least in terms of business competiveness and international trade. The city state ranks only behind Switzerland in the WEF’s global rankings. Malaysia rounds out the top 25, implying the nation is also fertile ground for international business cooperation.

The majority of ASEAN members sit comfortably in the top

Country

WEF Global Competiveness Ranking

Singapore

2

Malaysia

25

Thailand

34

Indonesia

41

Vietnam

60

The Philippines

57

Cambodia

89

Myanmar

No data

Laos

93

Brunei

58

half of the WEF’s list of 136 ranked nations. Only Laos’ rank suggests cause for concern; yet the nation still sits over 40 positions from the bottom of overall rankings, so the world’s smallest Communist country may have more to offer than meets the eye.

Each rank is split into several ranking criteria, or “pillars”, providing a more detailed glimpse into the economic and societal makeup of each

country – enabling foreigners to further plan out their prospective business ventures.

We have laid out each “pillar” grouping to give you instant insight into each ASEAN state’s competitiveness.

Rankings refer to the competiveness of each pillar against 138 countries surveyed as part of the WEF report.

Scores are ranked from 1-7, with 7 being the highest rating.

http://reports.weforum.org/global-competitiveness-index/competitiveness-rankings/?doing_wp_cron=1483611738.1671009063720703125000

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Section 6: Doing Business in Malaysia & the ASEAN

Macroeconomic Environment (global ranking)

Macroeconomic Environment (score)

Health & Primary Education (global ranking)

Health & Primary Education (score)

6.1

2

6.5

11

6.1

2

6.7

Malaysia

26

5.0

234

5.4

35

5.4

44

6.1

Thailand

84

3.7

49

4.4

13

6.1

86

5.5

Indonesia

56

4.1

60

4.2

30

5.5

100

5.3

Vietnam

82

3.8

79

3.9

77

4.5

65

5.8

The Philippines

91

3.6

95

3.4

20

5.9

81

5.6

Cambodia

104

3.5

106

3.2

50

5.0

103

5.2

Myanmar

No data

No data

No data

No data

No data

No data

No data

No data

Laos

68

4.0

108

3.1

87

4.3

102

5.2

Brunei

47

4.2

78

3.9

61

4.9

31

6.3

Infrastructure (score)

1

Infrastructure (global ranking)

Institutions (score)

Singapore

Country

Institutions (global ranking)

Global Competitiveness Index Table 02: Basic requirements (WEF, 201681).

For each country, the first column shows the country’s position in the global ranking for that category, and the second column shows its score.

http://reports.weforum.org/global-competitiveness-index/

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Section 6: Doing Business in Malaysia & the ASEAN

SECTION 6.2: EASE OF DOING BUSINESS As part of the WEF’s reporting, factors pertaining to the ability to do business in a given country are examined too. Take a look at the following tables to understand how ASEAN member states shape up (a lower number means a higher score).

Factor

Singapore

Malaysia

Thailand

Indonesia

Vietnam

The Philippines

Myanmar

Laos

Brunei

Problematic Factors for Doing Business Table 01: Economic factors (WEF, 201684)****

Access to financing

4.7

12.4

4.7

8.6

9.7

3

No data

12.3

15.1

Restrictive labour regulations

28.4

7.2

0.9

3.7

2.1

5.6

No data

4.8

13.1

Insufficient capacity to innovate

20.6

7

9.9

3.7

1.3

2.3

No data

5

10.2

Inflation

14.9

6.9

2.1

7.6

4.8

0.3

No data

3.3

1

Tax rates

3.1

5

3.3

6.1

9.7

10.8

No data

8

0.3

Tax regulations

2.1

4

4.3

4.8

9.8

8.3

No data

6

0

Foreign currency regulations

2.3

7.1

2.3

4.6

3.5

0.3

No data

3.8

0.6

Please note: From the list of factors, respondents to the World Economic Forum’s Executive Opinion Survey were asked to select the five most problematic factors for doing business in their country and to rank them between 1 (most problematic) and 5.

The score corresponds to the responses weighted according to their rankings.

****

http://reports.weforum.org/global-competitiveness-index/

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Section 6: Doing Business in Malaysia & the ASEAN

Factor

Singapore

Malaysia

Thailand

Indonesia

Vietnam

The Philippines

Myanmar

Laos

Brunei

Problematic Factors for Doing Business Table 02: Infrastructure, Governmental & Societal Factors (WEF, 201685)****

Inadequate infrastructure supply

2.5

2.6

7.9

9

5.9

17.8

No data

7.8

12.2

Government instability

0

8.1

16.7

4.1

2.1

0.6

No data

0.7

1.3

Inefficient government bureaucracy

2.7

8.4

11.9

9.3

7.9

18.8

No data

4.1

17.4

Policy instability

1.2

6.3

9.9

6.5

10.6

7

No data

3.9

6.5

Inadequately educated workforce

11

5.9

8.5

5.6

11.6

3

No data

20.6

6.8

Poor work ethic in national labour force

6

5.9

4.1

6.3

9.3

2

No data

11.9

12.4

Crime & theft

0.1

3.3

0.4

4

2.2

3

No data

0.3

0.5

Corruption

0.1

8.8

11.3

11.8

8.8

16.9

No data

4.2

2.3

Poor public health

0.5

1.2

1.7

4

0.5

0.1

No data

3.4

0.1

Please note: From the list of factors, respondents to the World Economic Forum’s Executive Opinion Survey were asked to select the five most problematic factors for doing business in their country and to rank them between 1 (most problematic) and 5.

The score corresponds to the responses weighted according to their rankings.

****

Singapore once more takes top honours, but does present some worries – namely with labour regulations and lack of space to innovate. Malaysia and Thailand offer competitive business environments.

Thailand, however, flags political instability as a worry (the nation

was subject to a military coup in 2014 – a potential worry for investors).

Indonesia, the region’s biggest economy by some margin, highlights the nation’s ongoing infrastructure woes as an issue. President Joko Widodo is spearheading a nationwide

http://reports.weforum.org/global-competitiveness-index/

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programme of port, airport, road and rail upgrades, alongside attendant power-supply systems, in a move to shore up future economic prosperity. The scope and size of such projects also suggests Indonesia could be a huge market for breakbulk and specialised cargoes too.

Section 6: Doing Business in Malaysia & the ASEAN

SECTION 6.3: ECONOMIC FREEDOM Knowledge of a country’s economic freedom, i.e. its population’s freedom to employ labour, own property and engage in free enterprise, is handy to have in your back pocket. ASEAN states vary in their rankings, thanks to the different governmental and economic systems employed by each nation.

The US’ Heritage Foundation publishes a yearly report on global economic freedom, taking into account aspects such as rule of law, property rights, government spending, trade freedom and so on. Much like the other rating systems

discussed in this report, each nation is awarded a score with 100 being the highest achievable score.

Southeast Asia as a region scores 59.0, compared with a global average of 60.7, which

falls below those states rated “Free Economies” by the Heritage Foundation.

The average for these nations is 83.9. Check out the tables below to see ASEAN member countries’ rankings for yourself.

The Heritage Foundation Economic Freedom Index Rankings 2016 (Heritage, 201684) Country

Economic Freedom Index Score (high = free)

Economic Freedom Index global ranking

Economic Freedom Index Rating

Singapore

87.8

2

Free

Malaysia

71.5

29

Mostly free

Thailand

63.9

67

Moderately free

Indonesia

59.4

99

Mostly unfree

Vietnam

54.0

131

Mostly unfree

The Philippines

63.1

70

Moderately free

Cambodia

57.9

112

Mostly unfree

Myanmar

48.7

133

Repressed

Laos

49.8

155

Repressed

Brunei

67.3

51

Moderately free

Predictably, Singapore and Malaysia lead the charge when it comes to economic freedom.

Singapore alone ranks 2nd overall, behind only Hong Kong, continuing the theme seen across almost all doing business ranking metrics. Malaysia ranks 29 overall out of 166 countries.

Both nations have enjoyed liberalised economies since gaining independence from Great Britain midway through the 20th century.

http://www.heritage.org/index/ranking

84

49

Laos, Vietnam and Myanmar have all experimented with various forms of government, or been subject to devastating wars the impact of which is still being economically felt. However, each nation is undergoing its own process of economic reform, but governmental structures appear to be inhibiting pure economic growth. Despite this, Laos is amongst the fastest growing economies in Southeast Asia –

even if it is beginning from a low base.

Indonesia’s score is interesting.

It is only slightly above the regional average. Despite this, Indonesia’s economy dwarfs other ASEAN countries and is on course to become one of the world’s largest by 2030.

A greater level of economic freedom should therefore be expected in the near future.

Section 6: Doing Business in Malaysia & the ASEAN

SECTION 6.4: GOVERNMENT TRANSPARENCY Transparency in government often indicates economies centred on open, liberal business practices.

The aptly named Transparency International publishes a list of least corrupt countries, the Corruption Perceptions Index, annually. 2016’s report has yet to be released, so the table below is based on data from 2015.

Each nation is awarded a score (0 = fully corrupt & 100 = free from corruption) and is ranked accordingly. 167 places are found on the index, as some nations share the same score.

ASEAN Member States’ Corruption Perception Index scores & rankings (Transparency International, 201585)

Country

Corruption Perception Score (high = least corrupt)

Corruption Perception global ranking (low = least corrupt)

Singapore

85

8

Malaysia

50

54

Thailand

38

76

Indonesia

36

88

Vietnam

31

112

The Philippines

35

95

Cambodia

21

150

Myanmar

22

147

Laos

25

139

Brunei

No data

No data

Unfortunately, these statistics do not look good. Corruption, at least according to Transparency International, is rife throughout Southeast Asia. Please note that while Brunei remains unranked, this is not an indicator of a

85

50

http://www.transparency.org/cpi2015

country awash with corruption.

Judging by its performance on the other ranking tables seen in this report, it is likely Brunei would score similar to Thailand or Malaysia.

Section 6: Doing Business in Malaysia & the ASEAN

SECTION 6.5: ASEAN MEMBER STATES CREDIT RATINGS Credit ratings are another indicator by which a country’s economic stability and prosperity can be judged. A solid score points toward a secure business landscape. However, several nations in the ASEAN community have yet to be awarded ratings by any of the major credit bodies, including Moody’s Financial Services, Standards & Poor (S&P) and Fitch.

This is likely due to the fact that these nations possess small economies, or internal political instability affecting the resilience of their relevant financial authorities.

The below table outlines those countries with credit ratings from the aforementioned rating houses, as of January 2017, alongside those which have yet to be awarded a rating.

ASEAN Member States’ credit ratings & outlooks (Trading Economics, 201786) Country

S&P Rating

Moody’s Rating

Fitch rating

S&P Outlook

Moody’s Outlook

Fitch Outlook

Singapore

AAA

Aaa

AAA (stable)

Stable

Stable

Stable

Malaysia

A-

A3

A- (stable)

Stable

Stable

Stable

Thailand

BBB+

Baa1

BBB+ (stable)

Stable

Stable

Stable

Indonesia

BB+

Baa3

BBB-

Positive

Stable

Positive

Vietnam

BB-

B1

BB-

Stable

Stable

Stable

The Philippines

BBB

Baa2

BBB-

Stable

Stable

Positive

Cambodia

Not rated

B2

Not rated

Not rated

Stable

Not rated

Myanmar

Not rated

Not rated

Not rated

Not rated

Not rated

Not rated

Laos

Not rated

Not rated

Not rated

Not rated

Not rated

Not rated

Brunei

Not rated

Not rated

Not rated

Not rated

Not rated

Not rated

http://www.tradingeconomics.com/country-list/rating

86

51

Section 6: Doing Business in Malaysia & the ASEAN

SECTION 6.6: OTHER KEY BUSINESS STATS The World Bank & IFC’s guide also provides more information on the general business landscape in Malaysia and ASEAN states as a whole. This is essential for foreign businesses looking to begin operations in the nation, giving a window into how business can be hampered or enhanced by numerous factors (a score of 1 being the achievable highest rating).

Country

Starting a business

Getting electricity

Registering property

Getting credit

Protecting minority investors

Paying Taxes

Trading across borders

Enforcing contracts

Resolving insolvency

Ease of doing business metric economy rankings (low = higher performance) (World Bank & IFC, 201787)

Singapore

2

10

19

20

1

8

8

2

29

Malaysia

11

8

40

20

3

61

61

42

46

Thailand

78

37

68

82

27

109

56

51

23

Indonesia

151

49

118

49

70

104

108

166

76

Vietnam

121

96

59

32

87

167

93

69

125

The Philippines

171

22

112

118

137

115

95

136

56

Cambodia

180

136

120

7

114

124

102

178

72

Myanmar

146

149

143

175

179

119

159

188

164

Laos

160

155

65

75

165

146

120

88

169

Brunei

72

21

134

62

102

89

142

93

57

http://www.doingbusiness.org/rankings

87

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Section 6: Doing Business in Malaysia & the ASEAN

SECTION 6.7: OPPORTUNITIES & CHALLENGES MALAYSIA

ASEAN MEMBER STATES

OPPORTUNITIES

OPPORTUNITIES

• Massive range of planned or ongoing megaprojects requiring oversized cargo

• Diverse range of countries

• Top 25 country in Global Competitiveness Rankings • Second highest ranked ASEAN member state in terms of logistics performance • Impressive annual economic growth • Huge investment in infrastructure including upgraded transport links

• Almost all nations are enjoying growth in both manufacturing and GDP • Collectively one of the world’s largest economies • Region-wide commitment to improving logistics services • Region-wide investment in infrastructure

• Strategic location • Second cheapest logistics costs in the AEC

CHALLENGES

CHALLENGES

• Weak currency against the dollar

• Diversity of economies presents disparity between nations

• Located next to Singapore which outperforms Malaysia in key logistics areas

• Half of countries underdeveloped in terms of infrastructure • Corruption rampant in the region • Ease of doing business fluctuates from country to country

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Contact us Colin Ho Project Manager - Breakbulk Southeast Asia +603 5022 1999 +603 5022 1922 (DID) +6016 229 7500 (Mob) colin.ho@ite-asia.com Skype: colin.hky

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