For a region that includes 24,000 islands, spread across 5,200 km east to west and 3,400 km north to south, modern and well-managed maritime and aviation sectors are crucial to economic progress. While the Covid-19 pandemic affected both sectors, growth in the Association of Southeast Asian Nations (ASEAN) countries is expected to pick up pace over the medium term owing to a strong rebound in trade, robust domestic demand and infrastructure development initiatives undertaken by various governments.
Trends across the port sector
Given the geographical location of the Southeast Asian countries, they are considered an important gateway for maritime containerised trade. Singapore enjoys a dominant position in the ASEAN container market. The Port of Singapore is the second busiest container handling port in the world, behind China’s Shanghai port. The port handled about 591 million tonnes (mt) of cargo during 2020, of which container traffic accounted for 61 per cent (357.98 mt). Other than serving as container ports, Southeast Asian ports also serve as key transhipment hubs for countries like India and China. With regard to transhipment, Singapore plays a vital role and is one of the world’s leading transhipment hubs. The upcoming Tuas terminal, when completed, is expected to further strengthen its position in the transhipment market. In December 2021, Samudera introduced a new shuttle route between India’s busiest public container port and Singapore, with an eye on transhipment cargo, as shippers scramble for any capacity available to them.
Southeast Asian ports have been among the leading ports in terms of technology penetration. Reduced costs and improved efficiency are the reasons for the increased emphasis on technological deployment and advancements. Technological advancements enabled shippers and port operators to continue operations despite the pandemic. In fact, the pandemic accelerated digitalisation in the maritime sector. To support maritime companies in accelerating their digitalisation plans to match this “new normal”, the Maritime and Port Authority of Singapore, the Singapore Shipping Association and the Infocomm Media Development Authority launched the Maritime Digitalisation Playbook in June 2020, which serves as a guide to help maritime companies uncover opportunities in digital transformation and improve competitiveness and productivity.
Port operators have started laying greater emphasis on the adoption of sophisticated technology. Better technologies are being adopted to improve the digital logistics infrastructure and operational efficiency at ports. For instance, Jurong port in Singapore has partnered with telecom companies to roll out 5G and internet of things technology to facilitate faster exchange of data across port terminals. Earlier, in December 2019, the Cai Mep international terminal, Vietnam, joined TradeLens’ shipping blockchain solution to ensure transparency in its container supply chain.
While overall private participation in the Southeast Asian region has been low, the Philippines has been the front runner in the public-private partnership (PPP) race. The strong PPP environment in the Philippines has positioned the country well to take advantage of the opportunities available through PPPs. In fact, the Philippines has signalled its interest in using PPP to develop new infrastructure as part of its post-pandemic economic recovery plan. The country plans to encourage PPPs to develop a number of sectors, including logistics hubs. More and more countries have also started adopting the International Maritime Organisation’s guidelines to slash the sulphur cap on fuel oil from 3.5 per cent to 0.5 per cent sulphur content in order to reduce sulphur oxides from ship air emissions.
Trends across the aviation sector
Air transport has been one of the sectors hit hardest by the pandemic, while probably being one of the pandemic’s largest initial drivers. According to a report by the Aviation Studies Institute, Singapore University of Technology and Design, during January-June 2021, the ASEAN countries experienced passenger traffic declines sharper than the global and Asia-Pacific averages.
Market conditions in the ASEAN airline sector remained extremely challenging and have, in fact became more difficult in the first half of 2021 as traffic levels declined again due to new waves of Covid-19 and the emergence of new, more contagious variants. After the initial recovery, domestic traffic again declined during the first six months of 2021 in all five of the main domestic markets in the ASEAN region – Indonesia, Thailand, Vietnam, Malaysia and the Philippines.
Airlines in these markets began 2021 in the hope that domestic traffic would continue to increase, following the same trend line of domestic traffic improvements that were recorded in the second half of 2020. Instead, the opposite happened. With domestic traffic dropping quarter over quarter in the first quarter of 2021 and again in the second quarter of 2021, revenues of airlines based in these countries also declined from a base that was already over 70 per cent below normal in the fourth quarter of 2020, exacerbating their already weak financial position.
The report further added that several ASEAN airlines are now seeking to boost liquidity and renegotiate contracts with suppliers, particularly aircraft leasing companies. Some of these airlines have sought or are planning to seek assistance from bankruptcy courts to facilitate restructuring. With regard to international traffic, initiatives to facilitate the resumption of international traffic through the use of green lanes, travel corridors and air travel bubbles also failed to materialise. Total international passenger traffic in ASEAN has declined by about 98 per cent since the start of the pandemic.
While the rate of decline fell slightly in the middle of 2021, international traffic in ASEAN is currently 95-97 per cent below pre-Covid levels and remains significantly below the global average. Other regions have partially reopened their borders, enabling a resumption of international travel, albeit at a reduced and stochastic level. What lies ahead While the pandemic has had a significant impact on port and air traffic levels, and continues to do so, it accelerated the preexisting digitalisation drive and environmental sustainability trends.
Customs officials, port workers and transport operators recognised the value of new technologies and digitalisation, not just as a way of boosting efficiency but also for maintaining business continuity during times of disruption. Seaports, which are a lifeline for economies small and large, have been hit hard by Covid-19 disruptions. Using smart technology will help them rebound and could usher in a new era of equitable economic growth.
In the aviation sector, while domestic traffic improved to some extent, partly driven by vaccination roll-outs, international traffic is expected to take a much longer time to recover. ASEAN airlines began 2021 on an optimistic note, hoping that international recovery would start by mid-2021, the start of this recovery has been set back due to new variants of Covid-19. A full recovery of the international market is likely to take at least two years once the recovery phase begins. But it is critical for ASEAN airlines to at least start the recovery phase as soon as possible as they rely on international passenger services for a large part of their revenues.