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Are ASEAN tigers about to roar loudly once again?

Prospects in the ASEAN bloc appear to be very promising, influenced in large part by China, as well as regional and international factors.

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Sahathai Terminal operates a two berth facility called Sahathai Terminal for international traffic
Sahathai Terminal operates a two berth facility called Sahathai Terminal for international traffic

There are several indicators that suggest the socalled ASEAN tigers are in the ascendancy once more.

 

First, there has been a definite shift in investment and trade from China to lower-cost production centres in countries such as Thailand, Vietnam, Cambodia, Myanmar and Malaysia in recent years. Labour-intensive industries, such as textiles, apparel, footwear, furniture and sports equipment, have been the first to move.


Second, investors comprise multinational companies and also Chinese firms. The latter are as keen as the multinationals to take advantage of the lower labour and factory construction costs. In particular, the Chinese view the ASEAN bloc as part of a future integrated supply chain where basic manufacturing/assembly takes place. The products would then move to China for finishing off before finally being exported. This suggests the China/ ASEAN/China trade is poised for very strong rates of growth.

 

Third, rising tensions between China and the US over the past nine months have given added momentum to the above mentioned trends. There is still the threat that the US Government will impose tariffs on US$250B of additional imports from China.

 

Fourth, in the ASEAN bloc itself, closer economic and fiscal integration is taking shape between member countries, and there have been, and continue to be, strong levels of investment in infrastructure, including ports. It is developments such as these that are helping facilitate both internal and external trade in the region.


Come together


At a recent meeting of the ASEAN Maritime Transport Working Group, held in Singapore, Calvin Phua, deputy secretary of hub strategy at Singapore’s Ministry of Transport, called on all members to “improve their maritime connectivity and promote the free flow of shipping services”. In an address, he said: “ASEAN is set to become the world’s fourth largest economy after the European Union, the US and China by 2030, and shipping will be a key enabler of this economic growth.”


He added: “Globally, 90% of world trade is carried by ship, and maritime transport will continue to be a critical backbone of the ASEAN region’s growth. Therefore, we must press on with our efforts to reduce cross-border barriers, and to achieve a seamless ASEAN.”


Most of the world’s leading ocean carriers believe that the intra-Asia trades will be among the fastest growing in the world over the next decade. Several are working on initiatives that they hope will give them a bigger role in the market and allow them to compete with regional specialists, such as Wan Hai Lines, SITC Container Lines and Regional Container Lines.


A meeting of investors towards the end of 2018, Jeremy Nixon, CEO of Singapore-based Ocean Network Express (ONE), said: “As an Asia-originated global carrier, we should take advantage of increasing demand in the intra-Asia trade.”


In order to improve the carrier’s fiscal margins and develop a strong platform for growth in the region, CMA CGM has merged the intra-Asia organisations of APL and Cheng Lie Navigation (CLN). CLN is now responsible for operating and marketing all of the French group’s intra-Asia network, in a move that Nicolas Sartini, CEO of APL, said would allow “the group’ ambitious volume targets and market development plans” to be attained.

 

MSC, which up to now has had a small position in the intra-Asia market, appears to be making moves to change this. In February, the world’s second largest liner shipping company announced that it would start a dedicated service linking South East Asia, including Singapore (its main transhipment port in the region) and China. Feeder and local cargo will be moved.


MSC intends starting its weekly Seagull service during April. It will call weekly at Port Tanjung Pelepas (PTP), Singapore, Laem Chabang, Vung Tau, Shanghai, Ningbo, Xiamen, Shekou, and return via Vung Tau and Laem Chabang to PTP. While the carrier has indicated that four vessels will be deployed on the loop, it has provided no information on the size of the ships.


Taipei-based Yang Ming Marine Transport Corp is also stepping up its presence in the region. This year has seen new intra-Asia services started, including with APL and China Cosco Shipping. It also has a strong fleet investment programme that will see the delivery of 10 x 2,800 TEU feeder-class ships. Deliveries are scheduled between Q2 2020 and Q2 2021.


Compatriot operator Evergreen Line is also constructing ships for the intra-Asia market. Its backlog is much larger, with 24 x 1,800 TEU ships and 18 x 2,500 TEU under construction. These vessels will also be delivered by the end of 2021.


New ports

 

Modern container ports are essential too, and several very large development projects are underway in the ASEAN bloc. Myanmar, Cambodia, Thailand, Vietnam and Indonesia are all building new deepwater container terminals. These nations’ governments want their ports to handle more mainline services and to process a much larger proportion of imports and exports, to save on foreign currency outflows as a result of cargo being transhipped over hubs in Singapore, Malaysia and, to a much lesser extent these days, Hong Kong.


But established hubs, such as Port Klang, PTP and Singapore, which have invested billions of dollars in their facilities, will fight hard to retain this valuable relay cargo. Interestingly, each of these hub ports is expanding its throughput capacity, investing heavily in new technologies and innovative solutions, and placing a greater emphasis on environmental protocols (see box story, p34).


In Indonesia, many of the development projects are designed to expand and improve container handling capacity in the vicinity of Jakarta. The New Priok Development Project was launched in 2012, and the first terminal commenced operations in August 2016. By the time the whole project is completed in 2023, Tanjung Priok port’s total handling capacity could be as high as 18M TEU a year.


Lower dwell times

 

But it has not only been about expanding capacity, building modern infrastructure and buying new handling equipment. The authorities and terminal operating companies have worked together to simplify documentation and customs procedures. In less than two years, average dwell times in Tanjong Priok have been cut from seven days to an average of less than 2.5 days.

 

Meanwhile, over US$1.1B has been secured from the Japanese Government through its Official Development Assistance Loan scheme to build a new port at Patimban. The planned port is located in Indonesia’s Subang province, which is approximately 150 km east of the country’s main container handling complex at Tanjong Priok. It will be developed in three phases over a nine-year period, and will have an ultimate throughput capacity of 7.5M TEU.

 

Construction of the new port started in the autumn of 2018, and it is hoped that the first ships will be handled towards the end of 2019/early 2020. At that time, Patimban will feature:

  • A box terminal with the potential to handle 3.5M TEU/year.
  • A 350,000 CEU vehicle facility.
  • A ro-ro dock, catering mainly for ferry traffic.

Key location

 

The new port is located close to several of west Java’s largest industrial zones, including Bekasi, Karawang and Purwakarta, and it will offer importers/exporters a highly competitive and viable alternative to Tanjong Priok.


The bidding process for operating the new container terminal is proceeding, with an announcement expected in July this year. WorldCargo News understands that state-controlled port group Pelindo II is involved in at least one of the consortia that is interested in the contract.


Elsewhere in Indonesia, a new port is being constructed at Pantai Kijing in West Kalimantan (Borneo), and it is also expected to commence operations in the latter part of this year. It is intended as a long-term alternative to the area’s existing port at Pontianak, which has limited land available for expansion. The port also suffers access problems as a result of heavy sedimentation from the Kapuas River.

 

The new port is being constructed in four phases, with stage one comprising a 1M TEU/year capacity container terminal, as well as liquid and dry bulk handling facilities capable of processing 8.3 Mtpa and 15 Mtpa, respectively.

 

A special economic zone is being developed near the port as the government seeks to diversify the local economy and add assembly and manufacturing activities to the region’s basic mining and processing of raw materials. The new deepsea port is also designed to improve inter-island connectivity and to expand the island’s general cargo and container trade with other countries, particularly in Asia.


Philippines’ plan

 

The Philippines faces similar challenges to Indonesia. First, investment in infrastructure has lagged behind that of the nation’s economic growth. Second, many of its islands are not effectively linked with each other, and this has meant limited economic and social integration and held back trading opportunities. Third, the majority of its imports and exports are routed via hub ports in other countries.


The government hopes that the next decade will see many of these issues addressed. Its Maritime Industry Development Plan 2019-28 is designed to:

  • Modernise and upgrade the domestic shipping fleet by phasing in new and more modern second-hand vessels and retiring obsolescent tonnage.
  • Raise the carrying capacity of the fleet to 153 Mt, up more than 45% on current levels.
  • Develop 73 new trading routes.
  • Modernise 572 of the country’s existing ports and develop 287 new ones, including five that can handle international cargo.

A principal objective of the plan is to capitalise on the Philippines’ location within Asia and its maritime heritage, to ensure that the sector’s contribution to GDP will double over the next 10 years.


Of more immediate concern in the Philippines, however, is tackling congestion at several ports, including Manila. This has slowed down the country’s trading potential in the past couple of years and affected the competitiveness of several of its exports.

 

The worsening situation has resulted in terminal operators active in Manila, including International Container Terminal Services Inc (ICTSI) and Asian Terminals Incorporated (ATI), various shipping lines, the Bureau of Customs and other agencies collaborating on a number of initiatives to help solve the problems. This has included requests to the Philippine Economic Zone Authority to find and allot space that can be used for the setting up of empty container depots that can then be shared by various parties.


ATI is also planning to develop a number of facilities for its own use. It believes such a strategy will allow it to offer its customers a range of value-added services, while providing it with a new revenue stream.


Outside of the main port complex, ICTSI has submitted a proposal to the Philippine Ports Authority (PPA) to invest US$94M to modernise and expand the ports of Iloilo and Dumangas (Visayas).


Specifically, ICTSI plans to deepen the access channel at Iloilo so that much larger ships can call, and to buy new cargo handling equipment. At Dumangas, new facilities will be developed to handle overspill cargo from the main city port, thus ensuring a congestion-free environment prevails in the area.

 

Taking control


The proposal also includes a plan for ICTSI to take full management and operational control of the facilities. It believes this will allow it to formulate a strategy that will ensure growth and allow it to secure a wider trading role.


“ICTSI believes that developing the ports will not only raise efficiency, but, more importantly, improve connectivity for cargo movement within the country,” explained Christian Gonzalez, ICTSI’s global corporate head. “Our vision is to ultimately turn these two ports into international gateways.”


Indochina (Cambodia, Laos and Vietnam), Myanmar and Thailand all have ambitious deepsea port development projects in progress or in the pipeline. Potentially, they will transform these nations’ trading roles and affect the structure of liner shipping networks across the region.

 

This is already happening in Thailand where the phasing-in of new deepsea container handling capacity is attracting more mainline direct call services and leading to some hub-and-spoke activity taking place.


Recently, Hutchison Ports Thailand opened the first phase of Terminal D in Laem Chabang. It comprises 400m of quay line and features three fully automated super post-Panamax STS cranes and 10 remote-controlled RTGs. A further three STS cranes and 10 RTGs are being kitted out and tested, and will be phased into operation later this year.


On full completion Terminal D will have 1,700m of quay line, 17 STS cranes and 43 RTGs. It will be capable of handling 3.5M TEU a year. In all, Hutchison will invest US$600M in the facility (also see page 23).

 

Meanwhile, in other developments, the Port Authority of Thailand (PAT) has completed feasibility studies and published environmental and health impact statements that pave the way for phase III of Laem Chabang’s development to proceed.

 

Construction of the new complex is scheduled to commence in May of this year. It will cost more than US$4B to complete, with a finishing date expectedin 2025. It involves the building of four deepsea container terminals with a combined handling capacity of 7M TEU a year, a dedicated coastal/feeder terminal capable of handling 1M TEU a year, and a 1M CEU capacity ro-ro facility. In addition, phase II of the port’s so-called Single Rail Transfer Operation will be completed. PAT hopes that this will raise the proportion of cargo moved to/from the port by rail to 30%. Currently, it stands at just 7%.


The phase III development will increase Laem Chabang’s annualised container and vehicles throughput capacity to 18M TEU and 3M CEU, respectively.

 

Capital port

 

In the smaller port of Bangkok, which handles mainly intra-Asia and feeder services, a new container terminal is also planned. The Hague-based global port operating company APM Terminals and locally based Sahathai Terminal PLC and Mitr Phol Sugar have signed a Memorandum of Understanding to develop a new 345,000 TEU capacity facility.

 

“Our Bangkok River Marine Terminal will not only deliver higher levels of reliability for global customers, but also enable more efficient multimodal transportation options to be provided for Thai shippers, thereby delivering ease of doing business and helping grow the economy,” said Maarten Degryse, managing director, APM Terminals Inland Services, Thailand.


Further west, in Myanmar, an estimated US$10B is being invested in a new port and special economic zone at Kyaukpyu on the Bay of Bengal. The initial phase of the project will include the construction of two container berths, and the outlay of an estimated US$1.3B


There is no doubt that with trade increasing, there is a need to develop new container handling capacity, as existing operations in the ports of Yangon and Thilawa are becoming constrained.


Cambodian capacity

 

In Cambodia, the new Kampot International Deepwater Port, which will have the capacity to handle 100 Mtpa, is taking shape. Being built by China Railway Group Port and Shipping Bureau Group, the first phase of the project opened in September 2018. It is located 160 km from Phnom Penh, the country’s main centre of production and consumption, and opposite the planned China Light Industry Special Economic Zone.

 

Kampot is set to transform freight transport in Cambodia, particularly the movement of containerised cargoes, once its container terminal is built. The port’s access channel of 13m, which can be dredged to 16m, is deeper than that at the country’s existing main port of Sihanoukville, and its highway connection is being improved. Kampot is 60 km closer to Phnom Penn than Sihanoukville, and so this means its users will enjoy cheaper and faster journeys.


Nonetheless, Sihanoukville is being expanded. Last year, Sihanoukville Autonomous Port (PAS), which is controlled by the government, commissioned a new 330m berth for the handling of general cargo and containers. Moreover, a new 350m-berth container terminal is being built with US$209M funding from the Japanese Government. It will be capable of servicing 60,000 dwt ships, and will expand Sihanoukville’s box handling capacity to over 1M TEU a year.

 

 

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