Home' Ships and Shipping : March 2011 Contents The Strait of Malacca: a trade lifeline
The Strait of Malacca (SOM) is a sea lane of enormous strategic
importance. Its critical role as a global trade passageway is
underscored by the fact that it facilitates a quarter of the world's
seaborne trade and a third of its crude oil transportation.
SOM provides a critical passage that facilitates trade between
the west and the east. It sits between the oil producing regions of
the Arabian Gulf and the huge consumer markets of East and
South Asia, and the world's most dynamic economies in the "Far
East", which includes China, the world's most populous nation
and now its second largest economy. SOM has played an immense
role in shaping the history of the region and the world, and will
continue to command international attention due to its strategic
location and importance to global trade and the littoral states'
socio-economic wellbeing and strategic interests.
As a body of water that lies in the heart of Southeast Asia, SOM
also hosts huge volumes of trade among regional countries and
between them and other economic regions, and much of these
trades are containerised trade. This article aims to outline a
regional perspective of the seaborne container trade in SOM by
establishing an understanding of the dynamics of container
shipping and trade in this key waterway as a prelude to discussing
the opportunities and challenges arising from them.
Various studies have projected traffic flow in SOM to increase,
in tandem with growing global trade. With this projection of
growth, there are bound to be tremendous business opportunities
to be generated by container shipping and trade in SOM.
Features and trends of container trade in SOM
Among the key features and trends of container shipping traffic
and container flow in SOM are:
• Increasing volumes of container shipping traffic in the Strait
• Increasing size of container ships traversing the Strait
• Growing volume of container throughput at ports along the Strait
• Growing investments in ports along the Strait to improve
their features and increase their capacity to handle more
• Increasing volume of transhipment container flow and
transhipment throughput at regional ports
• More movement of westbound container shipping traffic
• Increasing demand for more comprehensive port services and
maritime support services from container shipping operators and
shippers of containerised cargos.
Analyses of economic and trade figures and trends suggest that
container shipping traffic and container trade volumes in SOM will
increase in the foreseeable future, provided the elements that
create conducive circumstances for container shipping and
container trade in the sea lane to flourish remain.
Factors such as development of the ports and logistics capacities
of nations in the SOM region, the growth of China's economy,
global economic performance, regional geo-political stability; and
the pace of globalisation, liberalisation and containerisation at the
regional and global levels will exert their influence on container
shipping traffic and container trade flow in SOM.
Opportunities and challenges for the
The bright growth prospect of container shipping traffic and
trade volumes in SOM brings with it opportunities and challenges
for the littoral states of the Strait, namely Malaysia, Indonesia and
Singapore, and the home-grown players servicing the trade.
These opportunities include generating more container
throughput at ports located along the Strait, capitalising on the
breakneck growth of China's economy, providing a host of
value-adding services to mainline operators and feeder service
providers traversing the Strait, and attracting more shipping lines
to hub at local ports along the waterway. The challenges include
increasing navigation safety in the Strait, protecting its marine
environment from threats of pollution, and enhancing security
in the waterway to ensure smooth and secure passage of ships in
SOM at all times.
To capitalise on the huge volumes of container ships
plying the SOM and the container trade they generate, the
littoral states will need to spend a considerable amount to put in
place infrastructures, systems, equipment and manpower to
serve the trade, and to undertake initiatives to maintain and
manage the Strait.
In addition, the littoral states can expect to face pressure from
the international community to keep the Strait open to all. This
is a call that sometimes neglect the fact that doing so comes at a
high cost to those states, and does not come with assistance from
users of SOM to help the littoral states to maintain the Strait.
While the littoral states welcome assistance in the upkeep of the
sea lane, the users of the Strait must render help in a way that
ensures the sovereign rights of the users of the Strait are
respected, in accordance with international laws and principles.
• For the littoral states of SOM, it is imperative that they position
themselves accordingly to seize the opportunities presented by
the hive of container shipping and trade activity right on their
doorstep. They should also be mindful of the enormous
challenges and responsibilities that come with being littoral
states of such a strategic, important and busy sea lane like SOM.
To capitalise on the opportunities and face the challenges, they
would do well to adopt the following policy options:
• Encouraging home-grown companies which operate terminals in
ports along SOM to invest in international ports to enhance
linkages and connectivity. This can lead to more container ship
calls and greater container throughout at the ports along SOM.
To this end, Singapore has led the way via the successful
investments made by PSA International, one of the world's
leading port operating companies, in 28 ports in 16 countries.
• Deepening port channels and berths to accommodate larger
• Promoting more aggressively niche areas in which local ports
already have a distinct advantage -- for example, in the handling
of halal cargoes and transhipment cargoes, as are the cases with
Malaysia's Port Klang and Port of Tanjung Pelepas (PTP)
respectively, to attain differentiation among regional ports.
• Providing more and competitively priced, value-added services
and facilities to port users such as integrated logistics, bunkering
and ship maintenance.
• Improving traffic management in the Strait to enhance the
navigation safety of traffic and facilitate future traffic growth.
• Providing better protection to the marine environment of the
Strait, which is exposed to greater environmental risks arising
from rising shipping traffic.
Location, location, location: making it count
There is a need for the governments of the SOM littoral states
to recognise the importance of the container shipping and trade
dynamics in the Strait. These dynamics should inform
policymaking in various areas such as trade promotion,
economic planning, infrastructure development, supply chain
management, environmental protection, navigation safety and
human capital development.
For the littoral states to take full advantage of the tremendous
volume of liner shipping traffic and container trade movement in
the Strait, they must invest in infrastructure and human capital to
provide a comprehensive range of services to liner operators,
shippers and other players along the container trade supply chain.
The littoral states have certainly done well to capitalise on their
location along SOM and reap the benefit of the presence of huge
container traffic and flows in the Strait. Judging from the
economic benefits they enjoy and the success of regional container
ports such as Singapore, there are huge opportunities available
from the container traffic and flow in SOM yet to be fully
appreciated and tapped into.
The onus is on the littoral states to enhance their capacity,
productivity and efficiency to handle container shipping and
container trade in the Strait and optimise their proximity to SOM
and the advantages that come with their location. They also need
to be wary of the enormous challenges presented by the container
traffic and flows in the SOM, and work hard to keep the Strait
open, safe and secure at all times.
March 2011 SHIPS AND SHIPPING
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