Aviation article(s)
November 2, 2017
IMG_1318_OC Liow Tiong Lai
Malaysia will become a major distribution centre for the ASEAN region, says Liow Tiong Lai, the country’s minister of transport. (Photo: FIATA)

Malaysia will become a major distribution centre for the ASEAN region, driven by investment projects and the growth of e-commerce, according to the Malaysian minister of transport.


Liow Tiong Lai, who was giving the keynote address at the FIATA World Congress 2017 held in Kuala Lumpur, said that Malaysia had taken the initiative to establish a national logistics task force which is led by the Ministry of Transport and whose function is to coordinate various government departments, institutions, logistics associations and the private sector in order to implement a seamless logistics sector.


“This task force is chaired by me and we have actually come up with a master plan for logistics and trade facilitation plans,” he said. “Phase one is to debottleneck, phase two is to enhance domestic growth and phase three is to create a regional footprint. We are in the midst of implementing this master plan.”


Liow added that, as the global economy is increasingly become digital, it is estimated that a 20% increase in ICT investment will result in 1% of GDP growth of a country.


“For Malaysia, that figure is even higher, at around 1.4%, as we are more seeing more and more cross-border e-commerce trading taking place,” he said. “E-commerce in Malaysia is expected to grow to RM1.4 billion (US$330 million) by 2020 or 6.4% of GDP, with the implementation of a national e-commerce strategy roadmap. In addition, Malaysia has excellent logistics infrastructure, such as ports, airports, roads, container depots and free trade zones to facilitate trade.”


Malaysia is confident that its central location in ASEAN means that it can act as a strategic base for logistics and transportation.


“I wish to give you the government’s commitment to continuously enhancing and improving our infrastructure to support a growing industry like logistics,” said Liow. “This includes future expansion of airports, development of several ports including a third terminal at Port Klang on Carey Island, a new Malacca gateway port, the redevelopment of the Sepanggar port in Kota Kinabalu, Sabah, and the development of a new deepsea port in Kuantan, to name but a few.”


The country is also investing in a large-scale rail project that will connect ports to cities and include a high-speed rail link to Singapore.


“Once completed, I can guarantee we’ll have the best network of rail, road, sea and air transport to support the fast-growing logistics industry,” Liow said.


In 2016, the government launched KLIA Aeropolis, a 9,015-acre piece of land on the site of Kuala Lumpur International Airport which is intended to serve as an ecosystem for the cargo and logistics, aerospace and aviation, and MICE and events clusters.


According to Mohd Badlisham bin Ghazali, managing director of Malaysia Airport Holdings Berhad, the goal is to increase KLIA’s air cargo volume from the current 650,000 tonnes to about 3.5 million tonnes by 2055. In order to achieve that, the government has laid out a three-phase plan, consisting of the development of a free commercial zone in the short term, the opening of a 400-acre logistics park in the medium term, and the transformation into an integrator hub in the long term.


In March 2016, the Malaysia Digital Economy Corporation and the Alibaba Group signed a memorandum of understanding to establish and develop a new Digital Free Trade Zone at KLIA Aeropolis to facilitate cross-border e-commerce.


“The free trade zone is designed to promote the growth of e-commerce and capitalize on the exponential growth of the internet economy, making Malaysia the fulfilment hub for ASEAN consumers,” said Liow. “It will serve to facilitate seamless cross-border trade and enable local businesses, especially SMEs, to export their goods easily with the help of leading fulfilment service providers.”


A core component of the DFTZ will be a 60-acre e-fulfilment hub, to be developed as part of another MoU Malaysia Airports signed with Cainiao Network, Alibaba’s logistics arm.


According to Mohd Badlisham bin Ghazali, the pilot phase of the DFTZ became operational from October 2017, involving land converted from the old low-cost-carrier terminal and now used by national postal provider Pos Malaysia and e-commerce marketplace Lazada.


The first phase, involving the Cainiao facility, will be developed from 2018. The second phase will add about 350 acres of warehousing facilities for SMEs.


Liow said that the government is prepared for the transhipment of cargo within the region and is confident in the KLIA Aeropolis.


“All four major integrators and 20 of the world’s top 25 freight forwarders have operations here,” he said. “We’re going to get them to support and participate in this DFTZ, and it will be our gateway for Southeast Asia with over 1,250 weekly flights within the region. We promise people in ASEAN that goods purchased will be delivered from KLIA to their doorstep within 72 hours.”


When it is fully completed in 2025, Liow said that the DFTZ will create a holistic logistics ecosystem which is estimated to move up to US$65 million worth of goods around the ASEAN region.


“Come to our Digital Free Trade Zone,” he said. “We’ll give you the best.”


Liow ended by saying that the country is on an exciting journey and that he was excited about the business that will be available for Malaysians and the world to capture.



“The potential is limitless,” he said. “All that is required is our willingness and readiness to explore all opportunities, and the government will act as a catalyst to make all these things happen.”



By Jeffrey Lee


Asia Cargo News | Kuala Lumpur

While one expert at the FIATA World Congress 2017 in Kuala Lumpur believed that the shipping industry might be at risk of being commoditized, another was convinced that the traditional sea freight forwarder is here to stay.


According to Dee Waddell, global managing director of IBM Travel and Transportation Industries, if the industry doesn’t recognize the various risks it is facing and find new ways to capitalize on opportunities, it will be further commoditized by new players.


Speaking during a meeting of FIATA’s Multimodal Transport Institute, Waddell said that companies in the industry need to move away from thinking inside their own silos.


“Let’s think bigger and broader,” he said. “What are the things that are going to disrupt us? Take Amazon, Alibaba or Apple. What do they have that you also have? Data is what it really comes down to. They’re not interested in owning a port. What they’re mostly interested in is data, because they can then go to the customer, aggregate forwarders and commoditize our industry.”


According to Waddell, these kinds of companies have massive pockets and so forwarders must think about how to get in front of this, as well as how to bring in more people with a strategic perspective at the leadership level so that boards and senior committees can have the hard discussions about what to do.


Express and parcel volumes continue to grow in a relatively favourable environment, driven by e-commerce, and while ocean shipping rates are recovering, the industry appears to be in flux, with continuing overcapacity and consolidation. Waddell noted that much of the shipping M&A activity has been happening within the industry.


“My concern, from a global industry perspective, is that the e-commerce firms are diversifying to include logistics,” he said. “What I’m seeing is that logistics companies are not diversifying the other way. My question is, when we look back at this on a broader basis 50 or 60 years from now and say what would be the right things we should be doing today, I wonder if we should be diversifying in a broader space?”


Also speaking during the session was Jens Roemer, chairman of FIATA’s working group for sea freight, who was more optimistic about the role of ocean forwarders.


“It is expected that in years to come our industry will go through dramatic changes,” he said. “With the advent of digitalization, big data, the Internet of Things and blockchain technology, there will be challenges but also opportunities for the traditional sea freight forwarder.”


According to Roemer, threats will come not only from the conventional market players, but also from shipping lines and startup companies with a very strong IT base.


“The continuous mergers and acquisitions of shipping lines will lead to very big and powerful companies with their own agendas,” he said. “These few shipping lines, organized in only three major alliances, are expected to invest in better control of the supply chain, competing head-on with the sea freight forwarder. There have been three waves of mergers and acquisitions, and in the last two years alone, eight of the top 20 container shipping lines have disappeared.”


Today, the three alliances together have a market share of about 95% on the major East-West trade lanes. Roemer said that, despite government and international bodies monitoring developments to ensure fair competition, the alliances are likely to invest and try to make the middleman redundant.


“The big boys in the trade are powerful and have substantial resources,” he said. “They’re often supported with state aid and are lining up with IBM, Microsoft, Alibaba and others. They’re investing in blockchain technology and cloud computing, but they also want to control the supply chain with vertical integration by investing in terminals, forwarders, customs brokers and carrier haulage services, in the process challenging the traditional sea freight forwarder.”


IT-driven startup companies represent another group of challengers, with access to substantial funds and with a heavy focus on big data.


“With their analytical tools, they may have unlimited options to present related information in different colours and designs,” Roemer said. “Algorithms may work in the background to simulate the real world and let artificial intelligence make decisions. But can digitalization and the analytical tools to deal with big data really replace the function of the freight forwarder? Can algorithms really replace human involvement and human intelligence completely? I don’t think so. As the advent of digitalization evolves, processes will change and some functions of the traditional sea freight forwarder may indeed disappear, but this is a normal evolutionary process.”


According to Roemer, it is the special experience and expertise of the freight forwarder which adds value and which makes it indispensable to shippers. This applies to a wide variety of scenarios in the highly complex supply chain, such as hazardous cargo regulations, customs and tax issues, security requirements for oversize cargo and police escorts.


“There’s no algorithm that can successfully absorb, understand and counter all the challenges that a freight forwarder faces on a daily basis,” he said. “It is my opinion that the involvement of a freight forwarder in the supply chain is totally underestimated. The real services we’re offering are not transparent in our quotations and invoices. In my opinion, we are to a high degree the interface between the customer and the usually inefficient and unreliable environment of the supply chain. We identify interruptions in the supply chain if and when they occur, and take immediate action. These interruptions are not recorded or reported, but we act on them without delay.”


While such interruptions can to some degree be anticipated with more visibility, predictability and analytical tools, Roemer said that it would still require the freight forwarder to fix any problems that arise, often instantly and in the background, based on decades of knowledge.


There is therefore much potential for sea freight forwarders, as long as they develop a clear vision and realize that there are more opportunities than threats, since forwarders often act as a principal or carrier rather than just an agent, building up their own networks of offices and agents.


“In fact, the shipping lines are our subcontractors for the port-to-port part of the multimodal integrated services we offer,” said Roemer. “If we don’t handle door-to-door services, we at least integrate origin pickup or destination delivery, usually with our own customs service facilities and merchant haulage.”


He added that the future of the industry lies in big data, and that many forwarders are already in possession of a huge amount of it.


“All we need to do is to identify the data that we need to have – data that we are virtually sitting on,” he said. “We just have to make it available and analyze it. This would provide the visibility of the supply chain that everyone talks about.”


While sea freight forwarders must make a serious effort to clearly define data and data-quality policies, Roemer stressed that there is no need to be overly concerned as they are well positioned to use digitalization to their advantage.


“We are the integrator of container logistics,” he said. “We have everything that the shipping lines or the IT-driven startup companies want to achieve.”

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