Massive plans for capacity augmentation-

The world’s seaborne trade is becoming increasingly containerised. Given the geographical location of the Southeast Asian countries, they are considered to be an important gateway for maritime containerised trade. Singapore enjoys a dominant position as the leading container transhipment hub, while Malaysia is emerging as a major competitor. There has also been remarkable progress in the growth of container traffic of other countries in the region in the past few years. However, the existing port capacity in the region leaves much to be desired, and increasing this capacity is essential if Southeast Asian countries are to make the best use of their dominant location.

Performance 

The Port of Singapore is the second busiest container handling port in the world, behind China’s Shanghai port. Indeed, the Port of Singapore used to be the top container handling port until 2009, only to be surpassed by Shanghai port in 2010. In terms of volume, container traffic at the Port of Singapore increased from 29.93 million twenty-foot equivalent units (TEUs) in 2011 to 30.92 million TEUs in 2015. However, in terms of year-on-year (YoY) growth, there was a negative growth rate of 8.7 per cent in port traffic at the port in 2015.

The ports in Malaysia, which are the only other ports in the region besides Singapore to feature in the list of the top 30 container handling ports in the world, have also recorded high growth during the last five years. The container throughput at  Port Klang increased from 7.97 million TEUs in 2011 to 10 million TEUs in 2015, registering a compound annual growth rate (CAGR) of 5.5 per cent.

Laem Chabang, one of the leading container handling ports of Thailand, handled 6.82 million TEUs of containers in 2015 compared to 5.73 million TEUs in 2011, recording a CAGR of 4.45 per cent. Ports in the Philippines have also recorded significant growth in volumes, increasing from 4.9 million TEUs in 2011 to 5.8 million TEUs in 2015.

Another primary port in the region is the Tanjung Priok in Indonesia. The container throughput at the port increased from 5.6 million TEUs in 2011 to 5.9 million TEUs in 2015, registering a CAGR of 1.24 per cent. However, there was a decrease of over 7.9 per cent in the containers handled by Tanjung Priok in 2015 over the volumes handled in 2014.

Other countries in the region like Cambodia have also achieved extensive growth in the recent past, in spite of the small amount of container cargo handled. Phnom Penh port in Cambodia recorded a CAGR of 15.32 per cent in container volumes over the period 2011-15, with traffic increasing from 82,000 TEUs to 145,000 TEUs. Similarly, Sihanoukville port in Cambodia recorded a CAGR of 13.33 per cent in container throughput over the period 2011-15, with traffic increasing from 237,000 TEUs to 391,000 TEUs.

The ports in Southeast Asia also cater to the demand and supply requirements of other countries in Asia like India and China by operating as transhipment hubs. During 2015, the share of transhipment cargo in the total container traffic at the Port of Singapore and Port Klang stood at 85 per cent and 67 per cent respectively.

Capacity augmentation plans

The ports in Southeast Asia are largely focusing on the development of container handling facilities. For instance, PT Pelabuhan Indonesia II in undertaking the Kalibaru port project, which is considered to be one of the largest port development projects in Indonesia. Kalibaru port is an extension of the existing Tanjung Priok port. The project calls for phase-wise expansion of capacity. In Phase I, three container terminals with a combined capacity of 4.5 million TEUs are being developed. Recently, in August 2016, Pelindo II commenced commercial operations on the first of three container terminals set to be built at the new harbour by 2023. The terminal, having a capacity of 1.5 million TEUs, has a designed depth of up to 20 metres.

As part of the Phase II plan, the port will have four new container terminals with a combined capacity of 8 million TEUs. Upon commissioning, the terminals will more than triple the current container handling capacity of Tanjung Priok port. The project will also enhance the port’s ability to serve larger container vessels as it allows Triple E class container ships (12,000-15,000 TEUs) to pass through Indonesia without transhipment at other ports. At present, existing port terminal facilities in Tanjung Priok port only serve vessels with a maximum capacity of 6,000 TEUs.

Malaysia is also in the process of expanding its container handling capacity. The country is planning to develop a third container terminal at Port Klang jointly with China.  Similarly, Thailand plans to counter increasing congestion problems and a projected increase in container traffic at Laem Chabang by expanding the capacity of the port by 0.3 million TEUs. However, the project is facing delays due to environmental concerns.

The Maritime and Port Authority of Singapore is also making concerted efforts to revamp several port terminals. The authority is undertaking a key project at Tuas port. During Phase I of the Tuas terminal development project, 20 deepwater berths will be developed adding a capacity of 20 million TEUs. The entire mega-terminal will have a total capacity of up to 65 million TEUs. Other ports in the region have also formulated similar plans to augment the capacity of their container terminals; these include Westports in Malaysia, Sumatra in Indonesia and Muara in Brunei.

Issues and challenges

Maritime logistics and connectivity has been a huge challenge for Southeast Asian countries. The shortcomings in maritime logistics and infrastructure have resulted in a high turnaround time at the ports, undermining their trade and competitiveness. Interregional disparities in terms of port infrastructure are another major cause for concern. According to the Global Competitive Index Report, 2015-16, World Economic Forum, the ranks of the Southeast Asian countries in terms of the quality of port infrastructure vary from as high as 2 with a score of 6.7/7 (Singapore) to as low as 87 with a score of 3.7/7 (Brunei) amongst a total of 140 countries.

High capacity utilisation levels are another primary cause for concern. Tanjung Priok port is in dire need of additional capacity as the capacity utilisation level at the end of 2015 was recorded at over 104 per cent. The port was designed initially to handle traffic volumes of 5 million TEUs. However, port traffic crossed the 5 million TEU mark in 2011 itself. As a result, the port has since been plagued by congestion and efficiency issues. Further, the problems of port congestion, high transportation cost, and surcharge imposed by shipping lines to remove large quantities of empty containers continue to loom in the background.

Competition among the major Southeast Asian nations themselves is another major challenge. For instance, the activities of Port of Singapore revolve around connecting oil and cargo markets in the West (Europe, Africa, the Middle East, and South Asia) with that of East Asia. However, the port has been facing stiff competition from the Shanghai port to grab container traffic from Asian countries. Moreover, some shipping lines have started direct port-to-port service (bypassing Singapore) due to lower bunker prices. To reverse the decline in container traffic, Singapore has provided an additional 10 per cent concession on port dues for containers calling at the port with effect from January 15, 2016.

The way forward

Planned container capacity expected to be commissioned in the coming years is likely to provide a solution to most of the problems faced at present and lead to more and more commodities being moved via containers. However, the effective execution of capacity augmentation projects within the projected budget and within the planned time frame will be a true test of their success.