Presented by Mr. Thong Yow Chuan, B.A. FCILT, Executive Director, TYC Resources Sdn Bhd

1. Overview – the Logistics Industry in the Northern Region & the need to enhance its effectiveness and competitiveness Presented by Mr. Thong Yow Chuan, B.A. FCILT, Executive Director, TYC Resources Sdn Bhd Penang Logistics Seminar 2007 – 5 July

2. LOGISTICS Raw Materials Factory Warehouse Consumer Logistics Logistics Logistics

3. IT Service Level Efficient TransitTime E- Biz Cost KPI Dynamic Globalization Quality New Millennium Challenges Logistics SCM

4. Sea Transport

5. Sea Transport Penang Port Cargo Passengers (Swettenham Pier) Container (NBCT & BWCT) Conventional (B/W) Bulk Dry (Prai) Liquid (B/W)

6. Penang Port Cargo Throughput (million FWT)

7. Container handling • 2006, container throughput - 849,730 teus, increase of 6.8% over 2005. • 406,493 teus (47.8%) - import containers • 421,688 teus (49.7%)-export containers • 21,550 teus (2.5%) - transshipment. • Export containers 117,954 teus (27.97 %) - from South Thailand via rail transport through Padang Besar, by road through Bukit Kayu Hitam / Betong and by barge through Kantang.

8. Logistics Performance at Penang Port • Container port’s performance vary significantly from terminal to terminal based on the type of vessel, number of bays, distribution of containers over the various bays, the port’s gantry crane potential, the speed of the cranes, their capacity and the experience of the drivers. • Penang Port’s average quay crane performance is between 20 to 22 moves per hour as compared to major port’s average of 25 moves per hour.

9. Shipping services at the port • Penang Port is served by 20 container shipping lines with direct vessels calls to China, Japan, Korea, Taiwan & Hong Kong and feeder services to North Port, Westport, PTP, East Malaysian Ports and Singapore Port. • Penang Port unable to achieve transshipment port status mainly due to geographical location, inaccessibility to large vessels, low local base cargo, small hinterland and immense competition from established North Port, Westport, PTP & Singapore

10. INLAND TRANSPORTATION

11. Container Road Haulage • Container road haulage activities have expanded due to the liberalization of the industry with new container road hauliers from the central and southern regions. 15 hauliers operate in the north compared to 5 previously. • Although rate for haulage of a 20ft container has been increased to that of a 40ft container, due to the overcapacity and fierce competition, users pay a negotiated rate depending on their volume, accessibility to their premises, type of cargo and payment terms. • The situation is bad for the road haulage industry as low rates and high operating cost of fuel, spares and human resource is squeezing the profit margins of the operators.

12. Bonded Trucking • Bonded trucking activities in the North are confined to: • Movement of goods between the Penang International Airport (PIA) and factories in the FIZ or LMW in the industrial estates, • Between factories and the KLIA, • Between the PIA and KLIA, • Between factories in the FIZ and industrial estates • Between factories and Singapore.

13. Bonded Trucking • In the northern region, around 30 companies provide these logistics services. In 2006, members formed the Bonded Trucking Operators Association of Malaysia which is inactive due to poor participation by members. • Trucking rates are not standardized and have stagnated and operations costs have risen making it difficult for the companies to operate. • High losses due to robberies & hijacks have raised insurance premiums and increase in claims from clients.

14. Railway • Rail haulage of containers is by KTMB for the movement of containers to between Penang Port and Padang Besar

15. South Thai Cargo Traffic through Penang Port 2005 2006

16. South Thai Cargo Traffic through Penang Port 2005 2006

17. South Thai Cargo Traffic through Penang Port 2005 2006

18. South Thai Cargo Traffic through Penang Port 2005 2006

19. Since April 2007 KTMB has deployed the Blue Tiger trains that can pull 60 teus wagons a time as compared to the older trains that can pull only 40 teus wagons. • Due to the limitation of the lines at 4 private depots, loading of empty containers is slow and frequently upsets trains schedules. • Padang Besar Terminal has further improved its infrastructure at the terminal with additional storage space and deployment of additional equipment and streamlining the flow of containers through the terminal.

20. Cross Border Traffic • Bukit Kayu Hitam (BKH) at the Kedah border is Malaysia’s largest road gateway for commercial traffic with Thailand. • The volume of commercial traffic through BKH over the last few years is as follows:

21. With massive commercial traffic over the border point daily, there have been numerous representations by the users to ease the congestion due mainly to the payment of the RM 10.00 fee to LKIM at its check point which forces commercial vehicles to queue for up to 3 hours. • The imposition of a levy of 0.05 sens per kg by LKIM in 2006 for all movements of seafood products into Malaysia resulted in termination of transit movement of around 100 containers of Thai seafood exports through Penang Port monthly. • The LKIM levy on the transit movement of Thai seafood through Penang Port was waived in the past. As seafood exports from Thailand has high growth potential, Penang Port is the looser due to the diversion of these cargo to Thai ports.

22. AIR LOGISTICS

23. AIR LOGISTICS • In the air cargo sector, cargo tonnage through the Penang International Airport (PIA) increased by 38 % between 2001 & 2005. • The growth of the air cargo traffic was due to the rapid growth of the electronic and semi-con industries in Penang and its hinterland

24. AIR LOGISTICS Cargo through Penang International Airport (000 metric tonnes)

25. TOTAL LOGISTICS

26. TOTAL LOGISTICS • The total logistics industry encompasses freighting, forwarding, trucking, warehousing and delivery from supplier to manufacturer and manufacturer to buyer. • The demand for total logistics has spawned the expansion of the presence of international freight forwarders (IFF) setting up in the northern region, especially in the FIZs in Penang.

27. TOTAL LOGISTICS • Vast network overseas and direct communication with the corporate headquarters of MNCs, enabled IFFs to secure their contracts at the corporate level, offering competitive freighting arrangements and efficient services. • Local freight forwarders are sidelined to only providing sub-contract services of trucking, haulage and warehousing. Due to competition amongst local freight forwarders and the small volume of local business activities available, rates offered by IFFs are depressed

28. Penang Freight Forwarders Association members 2006

29. MEASURES TO MEET THE CHALLENGES

30. Lack of follow through and a single body to coordinate • There are many bodies, associations and parties involved in promotion and improvement of the efficiency and activities of the logistics industry. These include: • MITI, MOT, MIDA, NSC, FMM, PFFA, FREPENCA, AHAM, ISOA, NMSA, PPSB, PPC, MAB, MAS, KTMB & MLC

31. Industry observers note that while there have been numerous meetings and discussions on issues raised, there must be follow through to permanently rectify the situations. • Issues involving one sector are not looked into in total as to how it will affect other sectors of the logistics industry as a whole. • Industry observers also note that there is the lack of a single body that can coordinate and monitor all the logistics activities and their development so that all sectors of the logistics industry will benefit from the shared information .

32. Establishment of the MLC – active local branch needed • The Malaysian Logistics Council under the chairmanship of the Deputy Minister of International Trade and Industry set up by the government in recognition of the importance of the logistics sector under the Third Industrial Master Plan (IMP3) is a most welcomed positive step. • The MLC with 5 focus groups with specific purposes covering maritime transport services, land transport services, air transport services, ancillary logistics, supply chain management and HR development is in a strong pivotal position to oversee the activities of all logistics sectors and promote their development in a coordinated manner

33. Establishment of the MLC – active local branch needed • While it is necessary for a central body such as MLC to coordinate the logistics industry, the establishment of a Northern Branch of the MLC with a strong active presence is crucial to the industry in the northern region due to the issues mentioned

34. Dissemination of information of development, expansion etc to all sectors • For the benefit of the industry in the northern region, it is essential that the activities of various sectors are made known to all sectors so that they can all work together towards a direction, as to how their services and facilities can be channeled towards the success of the development proposed and contribute towards positive participation at the same time. • Setting up of new industrial estates or expansions and the establishments of new investments should be disseminated to all sectors of the industry which can then advise the MLC as to how they can participate in the new business opportunities

35. Dissemination of information of development, expansion etc to all sectors • Similarly, expansion plans, new IT enhancements and expansion of activities of logistics service providers, both international and local should be more transparent

36. Transparency issues of IFF • It is unfortunate that due to competition and security reasons, corporate policies of IFFs are such that the management is not allowed to present papers at seminars or even be members of associations. • Visits to warehouse facilities by members of logistics associations are also vetted by the IFF and if visitors are from rival logistics service providers, such visits are disallowed. • This “security” arrangement unfortunately makes the IFF less transparent and unwilling to share their expertise and their development plans for the betterment of the industry

37. Assistance to local service providers • Local services providers are increasing relegated to provide localized logistics services due to their inability to participate in international logistics activities as a result of limited IT linkage, overseas corporate network and capital investment. • They can be assisted through partnership matching with appropriate IFF and financial assistance to establish technologically advanced supply chain management systems. • Hands on training attachment with selected IFFs will further enhance the capabilities of the local service providers

38. No single established source of logistics data and information • There is no single established source of logistics information and data. Each sector has its own limited data mainly on membership. There is a lack of data on facilities, services and capabilities of the sectors. A record of such useful information will enable the coordinating body to analyze the shortcomings of each sector and what can be done to rectify such weaknesses.

39. Further enhancing Penang Port’s capabilities • While Penang Port has plans to improve its services and expand its facilities over the next 5 years, it needs to secure new markets to ensure its future growth. With more consistent efficiency and increases in productivity through upgraded and new equipment and more professional human resource, the port can encourage more and new direct vessel calls especially from West Asia. • The substantial growth of the Thai traffic needs to be carefully nurtured with the proactive participation of all parties involved in the trade and levels of efficiency improved and sustained. The past occurrences of congestion and delays of arrival of Thai export containers from Padang Besar to Penang Port can only be overcome with the completion of the full development of the facilities at the Padang Besar Terminal

40. Improvement of Railing services • KTMB’s problem of having to service several container depots can only be solved through the establishment of a single well planned depot where all empty containers for the Thai traffic can be consolidated for railing, thus saving shunting movements at different depots which also have limited rail shunting space

41. Note: This overview is by no means thorough and is meant to provide only a brief into the activities of the logistics industry in the northern region, its challenges and what needs to be done to improve its efficiency and standing among its users

42. Thank you