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KUALA LUMPUR: Global maritime trade is expected to plunge 4.1% in 2020 as the health pandemic has affected not only supply chains but also transport networks and ports, causing a drop in chopped cargo volumes, from which Malaysia was not spared.
The industry has also been grappling with the side effects of growing trade protectionism and introspection policies, according to the United Nations Conference on Trade and Development (UNCTAD) in a report last month.
Locally, Malaysian port operator Westport Holdings Bhd had said its container volume decreased by four percent during the first nine months of 2020 compared to the same period last year.
It handled a lower container throughput of 7.73 million twenty-foot equivalent units (TEU) during the first nine months of 2020 as container volume and demand were affected by various forms of lockdown imposed globally to control the spread of Covid-19.
According to the Shipping Association Malaysia (SAM), container throughput for 2020 is expected to decline by 15 percent from 25 million TEU in 2019 due to lower transshipment activities and container volume caused by disruption. in the supply chain.
The Malaysian maritime sector also witnessed heated discussions on cabotage policy in Parliament in late November, leading to a shift in Malaysian policy and sparking some positivism in the industry.
On November 24, Transport Minister Datuk Seri, Dr. Wee Ka Siong, while finalizing his debate on the Supply Bill 2021, told Dewan Rakyat of his decision to revoke the exemption from the cabotage policy that allowed foreign-flagged ships to repair submarine cables in Malaysian waters.
The proposed revocation led former Transportation Minister Anthony Loke Siew Fook, who had granted the waiver at the time, to question Wee’s justification for the decision.
Subsequently, opposition lawmakers and giant tech companies questioned the government’s stance to welcome investment from international companies, as well as Malaysia’s aspirations as a data center hub.
However, the Malaysian Shipowners Association, the Malaysian Oil Support Vessel Owners Association (OSV) (MOSVA) and the Malaysian Marine Industries Association (AMIM) welcomed the decision to revoke the policy exemption. coasting.
They consider that it is opportune, since they consider that local companies should have opportunities and take into account before the bids for related works are awarded to foreign companies.
MOSVA President Mohamed Safwan Othman said the association supported the government’s decision and emphasized that more measures should be taken to revitalize and protect the local economy, as it had endured the brunt of Covid-19.
Citing other countries that are taking similar steps, he said the United States, Brazil and even Indonesia have a stricter cabotage policy than Malaysia.
He also highlighted that there were more pressing problems than cabotage, with many pseudo-Malaysian companies operating in the region.
“These companies use powers to ‘Malaysian’ their vessels and companies, but they are actually owned by foreign companies, especially our neighbor to the south.
“According to our estimates and observations, there are up to 100 OSVs in Malaysia with Malaysian flags operating under these pseudo-Malaysian companies,” he said.
MOSVA members own around 300 vessels. There is an addition of around 100 vessels in Malaysian waters that are owned by non-MOSVA members, including those owned by pseudo-Malaysian companies.
“That translates to about RM1 billion of charter hires per year and this is actually bad for our economy as much of the money will flow out of the country.
“With the recent controversy over foreign-owned cable-laying vessels operating in Malaysian waters, it is time for such a cabotage policy to be strictly enforced and the practice to stop, otherwise the balance of payments will worsen. even more, ”said Mohamed Safwan.
On Covid-19, he said that the OSV segment in Malaysia was greatly affected by low oil prices and the increase in the pandemic, with a series of delays in operations and project cancellations.
“Most of the contracts that support the productions remain as usual and there is no major renegotiation of the contracts of the big oil companies, including Petronas. The number of projects, including drilling, has been postponed, ”he said, adding that disruptions had brought about 30 percent of MOSVA member fleets to a halt.
On the allocation of RM3.7 billion in the 2021 Budget for the Maritime Development and Logistics Program, he said it was timely.
“The MOSVA members will definitely try to use the funds to be managed by Bank Pembangunan Malaysia Bhd (BPMB) and we have had a number of discussions with BPMB on this matter.
“The bank needs to somehow relax conditions so that we can expand or renew our fleets during this difficult economic climate,” said Mohamed Safwan.
Meanwhile, he said certain types of OSVs, including crew speedboats, accommodation workboats, and anchor handling and tug supply vessels (180 tons and above) needed to be built to restore supply depletion.
“Most of these vessels are close to the 15-year age limit and are out of specification. That is the reason for expanding the fleet of certain types of vessels.
“The vessels that were put in are those that are already oversupplied on the market, including anchor handling and tug supply vessels (60 tonnes and less) and platform supply vessels,” he said.
AMIM Acting Chairman Soo Jee Main said Malaysia’s shipbuilding and repair industry (SBSR) has yet to recover from the global economic downturn and that the Covid-19 outbreak compounded the slowness that resulted in the reduction of large projects, particularly in the upstream sector.
“The full impact of Covid-19 remains to be seen, along with the knock-on effects in the SBSR sector, but some countries tightened their cabotage policy,” he said.
On the Maritime Development and Logistics Program, Soo said the association was excited about the fund, although policies related to supporting the local maritime shipyard industry need to be reviewed.
“The relaunch of the fund does not mention in any sentence that the funds will be for vessels that are financed to be built / manufactured by Malaysian shipyards. It would not help the Malaysian economy or the local shipbuilding industry if shipowners buy these financed vessels from countries outside Malaysia.
“If these subsidized funds were used by the shipowners to build their boats / ships in Malaysia, the contribution to the local economy will be huge and the spin-off will contribute to the Gross Domestic Product and Gross National Income of Malaysia,” he said.
Soo added: “If shipowners buy boats / ships from foreign builders, then there is no contribution to the Malaysian economy and it becomes an outflow of foreign exchange.”
According to him, AMIM had approached BPMB on the issue when the fund was first launched, but unfortunately, the response was that there was no Ministry of Finance term for (ship) construction in Malaysia.
“This resulted in all the subsidized funds being used to buy vessels abroad, mainly from China, as BPMB does not take it as a mandate to support the local shipbuilding industry,” he said.
Nonetheless, MOSVA is optimistic about 2021 with the announcement of several successful trials of the Covid-19 vaccine.
“Oil prices have been quite persistent at the level above US $ 45 (US $ 4.06 = RM1) during the last few months. It shows many encouraging signs and we are poised for more activities in this segment next year.
“We also anticipate that the large tender for new Petronas construction will be ready for the first quarter of 2021,” said Mohamed Safwan.
Its outlook for 2021 is in line with that of UNCTAD, which expects maritime trade to also grow to return to positive territory and expand by 4.8%, assuming global economic output recovers.
However, the industry must prepare for change and adapt and ensure that it is also well prepared to enter the post-Covid-19 era, UNCTAD said.
The 195-member organization said that as the recovery debate continues to evolve, it is becoming clear that the disruptions caused by the pandemic will have a lasting impact on shipping and trade.
Disruptions can trigger profound changes to the overall operating landscape, along with increased sustainability and a resilience-building imperative, he added. -Called
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