10

CHAPTER TWO: Logistics Economic Performance

Contents: Introduction, Overview of Malaysia’s economic competitiveness, The Malaysian economy, Trade

in goods and the industries, Mode of transportation, Infrastructure

Key Points

1. Malaysia’s economy recorded a value of GDP at RM1,106.6 billion in 2014 (2013:

RM1,018.8 billion) at current prices. The economy has strengthened to 8.6 per cent

in 2014 as against 4.9 per cent in the preceding year with all sectors posted a better

growth.

2. Malaysia Global Competitiveness Report (2014-2015) 2nd pillar on Infrastructure has

assessed the country logistics competitiveness as follows:

Score Rank

2.01 Quality of overall infrastructure 5.6 20

2.02 Quality of roads 5.6 19

2.03 Quality of railroad infrastructure 5.0 12

2.04 Quality of port infrastructure 5.6 19

2.05 Quality of air transport infrastructure 5.7 19

3. Malaysia ranked 25th out of 160 countries in the World Bank Logistics Performance

Index (LPI) Report 2014; 12th out of 60 economies in the World Competitiveness

Yearbook (WCY) 2014, 18th position out of 189 countries in the World Bank Doing

Business (DB) 2015 and ranked 34th as the most complex economy in Economic

Complexity Index (ECI) report.

4. The total freight volume transported by sea in 2014 was 98.4% or 539.2 million

tonnes. The annual growth rate between 2005 and 2014 for sea freight volume was

5.4%.

5. Rail cargo recorded 7.8 million tons in 2014. Aggregate rail payload throughput in

Malaysia came to 7.8 million tons, with 30% of cargo volume from South Thailand.

6. In 2014, 1.2 million new heavy vehicles were registered, indicating its contribution

to the increasing road freight. The number of drivers issued for LA class licence was

approximately 200,000 for year 2014 showing high demand for lorry drivers.

7. Number of ships arrival at Malaysian ports has shown the downward trend where

the value has decreased by 33 per cent over the last four years (and -46.7% decline

for international shipping) compared to 2010.

8. Malaysia’s top five export destinations in 2014 were Singapore (US$31.8 billion),

China (US$30.7 billion), Japan (US$25.3 billion), the USA (US$18.4 billion),

Thailand (US$12.6 billion).

9. Malaysia’s top five import in 2014 were from China (US$115.5 million), Singapore

(US$85.6 million), Japan (US$54.7 million), the USA (US$52.3 million), Thailand

(US$39.6 million).

11

Introduction

“Logistics services as one of “drivers of growth” to propel the country into high income

economy”1. The transportation and logistics industry forms the backbone of modern

global supply chains. Airlines and airports, shipping companies, logistics service

providers and other transportation companies are all part of the process to keep people

and products on the move. Ultimately, an efficient and dynamic logistics system is

crucial to delivering a world-class economy, well integrated with other countries and

delivering high growth.

Logistics is a crucial contributor to Malaysia’s trade and economic growth. The

importance of an efficient logistics system to facilitate cross border trade (growth)

cannot be overemphasised. The demand drivers for logistics services and facilities in

Malaysia stem from the capability of companies to be competitive by delivering the

right products, in the right quantity, to the right place, at the right time, and at the lowest

cost possible. The productivity of logistics is influenced not only by the quality

infrastructure and effective management but also by good regulatory practices which

otherwise may slow the movement of goods and/or reduce their marketability. An

important issue in Malaysia is whether duty-free zones and similar arrangements has

improved logistics and the competitiveness of Malaysian products.

Malaysian Government has allocated RM3 billion to stimulate the development of the

logistics industry under the Third Industrial Master Plan 2006-2020 (IMP3)2. The Plan

has set a target of 36 million TEU or 751 million tonnes of cargo to be handled by

Malaysian ports as the growing trade volumes and strong economic performance over

the years. For as long as the nation’s economy remains robust and its trade volumes

grow, the logistics sector continues to have a bright future. The outlook for the demand

for Integrated Logistics Services (ILS) and multimodal transport is especially bright as

the country capitalises on growing intra-regional and international trade.

Overview of Malaysia’s Economic Competitiveness

Malaysia has a population of 30.5 million and therefore is the 44th most populated

country in the world. Malaysia has a birth rate of 2.55 per cent while the death rate

is 5.03 per 1,000 population. According to the projection of the United Nations the

population of Malaysia in the year 2050 will rise to 42.11 million and in the year 2100

to 42.40 million.3 The average life span of Malaysian is 74.9 years. On economy, the

World Competitiveness Yearbook (WCY) 2014 ranked Malaysia in 12th position out of

60 economies; 20th out of 144 countries in the Global Competitiveness Report (GCR)

2014/2015 and 18th position out of 189 countries in the World Bank Doing Business

(DB) 2015 (Figure 2.1).

1 10th Malaysia Plan 2 The Third Industrial Masterplan was launched by Prime Minister Datuk Seri Abdullah Ahmad Badawi on Friday August 18, 2006 consist of

15-year economic blueprint that maps out Malaysia's growth strategy from 2006 to 2020 3

12

Figure 2.1: Competitiveness ranking for Malaysia

Source: WCY 2014, GCR 2014/2015 and DB 2015

According to The Economist Intelligence Unit’s report (2014), Malaysia is among the

top 20 friendliest countries in the world to do business for the years 2014 to 2018. This

ranking rose from 23rd in 2008-12 to 19th in 2013-17. The country's regional ranking is

unchanged at sixth position. Malaysia is ranked 34th most complex country with an

Economic Complexity Index (ECI)4 of 0.693 based on economic complexity for a year

2013 (Figure 2.2).

Figure 2.2: Malaysia Ranking in Economic Complexcity, 2008-2012

Source: EIU 2014

4 A measure of the knowledge in a society that gets translated into the products it makes. The most complex products are sophisticated

chemicals and machinery, whereas the world’s least complex products are raw materials or simple agricultural products. The economic

complexity of a country is dependent on the complexity of the products it exports.

10th16th 14th 15th 12th

Wo

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26th21th 25th 24th 20th

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21th 18th12th

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2011 2012 2013 2014 2015

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2009 2010 2011 2012 2013

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According to The Economist Intelligence Unit (EIU 2014) it is forecasted5 that market

opportunities will improve in the future amid sustained economic growth and relatively

strong external demand. There will be improvements in policy towards private

enterprise and foreign investment, largely because the government will continue with

its efforts to raise private-sector investment levels. The higher global ranking is an

indication that the government's reforms will overcome many of the structural and

political impediments to its ambitious plans to transform Malaysia into a high-income

country. Its unchanged regional position, in turn, shows that Malaysia faces strong

competition in its own backyard (Table 2.1).

Table 2.1: Overview of Malaysia Business environment ranking, 2008-2017

Value of indexa Global rankb Regional rankc

2008-12 2013-17 2008-12 2013-17 2008-12 2013-17

7.14 7.56 23 19 6 6

a Out of 10. b Out of 82 countries. c Out of 17 countries: Australia, Bangladesh, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand and Vietnam.

Source: EIU 2014

Malaysia’s economic freedom score is 70.8, making its economy the 31st freest in the

2015 Index. Its score has increased by 1.2 points since last year, with improvements

in corruption, business freedom, and trade freedom which outweigh the declines in

labor freedom and the management of government spending. Malaysia is ranked 8th

out of 42 countries in the Asia–Pacific region, and its overall score is above the world

and regional averages. Malaysia has risen to the “mostly free” category. Since 2011,

its economic freedom has advanced by 4.5 points, the third largest point increase in

the Asia–Pacific region.

Despite the enviable achievement in competitiveness rankings, the productivity

performance of the country is considerably low. Productivity of Malaysia is far behind

the Asian economies like Hong Kong, Singapore, and Taiwan. In 2013, Malaysia’s

productivity levels in PPP (US$39,790) are significantly below those of Hong Kong

(US$100,487), Australia (US$88,913), Chinese Taipei (US$ 83,496), Japan

(US$73,112), New Zealand (US$66,140), and Korea (US$61,664).6 Productivity of

Singapore at (US$ 96,239) in PPP recorded the highest productivity among ASEAN

countries, approximately 2.4 times higher than Malaysia (Productivity Report

2013/2014). On logistics, the World Bank ranked Malaysia 25th in the Logistics

Performance Index, with a score of 3.59 out of the maximum 5, which has only slightly

5 The Economist Intelligence Unit. http://country.eiu.com/malaysia 6 IMD World Competitiveness Yearbook 2014

14

improved over the past 5 years Figure 2.3 shows the comparison with the

benchmarked economies.

Figure 2.3: Malaysia and Top 5 LPI Ranking; 2007-2014

Sources: http://lpi.worldbank.org/

Malaysia share in world total imports of goods and services is 1.09 per cent out of

which transportation services contribute 31.7 per cent, while Malaysia’s share in world

total exports is 1.21 per cent where 11.7 per cent is contributed by transportation

services.

The Malaysian Economy

Real GDP grew 6.0 per cent in 2014, driven mainly by robust private consumption,

which grew by 7.1 per cent, underpinned by favourable labour market conditions.

However, public consumption recorded a slower growth rate of 4.4 per cent while public

investment contracted by 4.9 per cent. Meanwhile, private investment grew by a robust

11 per cent Malaysia has benefitted from higher external demand particularly from US.7

Malaysia’s international trade experienced tremendous growth throughout the last

four decades with total trade from merely RM 9.45 billion in 1970 to RM 1.45 trillion in

2014. Malaysia has managed to maintain a positive trade balance, exporting more

goods than it imports except the years 1982, 1991 and 1994 – 1997. In 2014, Malaysia

posted a trade surplus of RM 83.11 billion. The highest was recorded prior to the global

recession in 2008 at RM143.21 billion. Malaysia’s total trade in 2014 continued on an

upward trend, expanding by 5.9 per cent to reach RM1.45 trillion, compared with

RM1.37 trillion in 2013. Table 2.4 shows the projection of trade growth.

Figure 2.4: Malaysia International Trade and GDP from 2000 to 2019

7 Bank Negara Malaysia Annual Report 2014;http://www.bnm.gov.my

27

1

912

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29

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41

29

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5

10

15

20

25

30

35

Malaysia Singapore United Kingdom Belgium Netherlands Germany

LPI

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2007 2010 2012 2014

15

Source: The Economist Intelligence Unit. http://country.eiu.com/malaysia

Exports expanded by 6.4 per cent, while imports grew slightly slower at 4.5 per cent

during the period. Consequently, balance of payments (BOP) current account surplus

improved substantially, registering RM47.3 billion (2013: RM35.5 billion), supported by

substantial improvement in external trade accounts. Overall BOP registered a surplus

RM36.5 billion in 2014 (2013: -RM14.7 billion), underpinned largely by a strong

merchandise balance. Financial account has also improved in the recent quarter, but

has been offset to a large extent by continued deficit in "net errors and omissions8"

recorded at -2.5 billion (2013: 0.61 billion).

Current account (CA) surplus of BOP is projected to remain in surplus, albeit at a

smaller amount in 2015, on the back of J-Curve effects on trade balance and also

improving services deficit. Falling commodity prices are expected to lower exports

value, while Ringgit depreciation is expected to increase import bills, but at the same

time enhance export competitiveness in the medium-term and long-term. With

generally improving financial account, overall BOP is expected to remain favourable

this year. BOP and CA surplus is projected to moderate further in 2016, escaping to a

large extent the "twin-deficit" problem, as predicted by many analysts.9

The major obstacles to economic progress and higher productivity are insufficient

educational and skills levels. Nevertheless, Malaysia is well placed to make rapid

progress in the next 20 years. Malaysia will continue to have a young, expanding and

racially diverse labour force that has relatively good English language proficiency.

Average annual economic growth is forecast to slow from 5.4% in 2013-20 to 4.2% in

2021-30 as the rate of expansion in the working-age population slows (Table 2.2). The

8 What is “net errors and ommissions”? It is the showing of any statistical discrepancies in balance of payments accounting. This includes any inaccuracies in the collection of the data, an example of which might be adding an extra 0 in a column that included payments due vs. payments collected. http://www.businessdictionary.com/definition/net-errors-and-omissions.html 9 Malaysian Economic Outlook; https://www.mier.org.my/outlook/archives/000133.html

16

major obstacles to economic progress and higher productivity are insufficient

educational and skills levels. Nevertheless, Malaysia is well placed to make rapid

progress in the next 20 years.10

Table 2.2: Average annual economic growth forecast; 2013-30

Growth and productivity

(% change; annual average) 2013-20 2021-30 2013-30

Growth of real GDP per head 3.9 3 3.4

Growth of real GDP 5.4 4.2 4.7

Labour productivity growth 3.1 3.3 3.2

Sources: The Economist Intelligence Unit, 2014

Trade represents a sizeable portion of Malaysia's economic output, with exports of

goods and services averaging more than 100% of GDP over the past 15 years and

resulting in sustained trade surpluses. This cushion of foreign reserves has allowed

the government to run continued budget deficits while maintaining a current-account

surplus. However, as the export-oriented economy has evolved from excessive

reliance on the electrical and electronic (E&E) products chain to hydrocarbon-intensive

industries, the mix of products that Malaysia exports has become less valuable and

more volatile, leaving the country vulnerable to global market sentiment. Figure 2.5

shows the contributions from the three key economic sectors.

10 The Economist Intelligence Unit. http://country.eiu.com/malaysia

17

Figure 2.5: Share of economic sector to GDP, 2003-2014

Source: Department of Statistic Malaysia (DOSM)

Malaysian economic growth moderated in 2013, dropping to 4.7% from an impressive

5.6% in 2012 and 5.1% in 2011. Growth is more than 6% for the first half of 2014. Bank

Negara Malaysia (Malaysian Central Bank) has changed its full year 2014 growth

forecast to 5.5% and forecasts almost the same growth for 2015. Figure 2.6 shows the

summary of trade volume and GDP growth.

Figure 2.6: Percentage change of Export, Import and GDP annual growth, 2000-2014

Source: Department of Statistic Malaysia (DOSM)

Malaysia’s growing trade volumes and strong economic performance has seen freight

volumes growing and demand for logistics services increasing. Exports in 2014 rose

by 6.4% or RM46.14 billion to RM766.13 billion, surpassing the forecast export growth

of 6% in the 2014/2015 Economic Report (Table 2.7).

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Agriculture Industry Services

8.9

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6.85.3 5.6

6.34.8

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

GD

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Import volume of goods (Percent change) Export volume of goods (Percent change) GDP growth (annual %)

18

Figure 2.7: Malaysia Total Trade and Trade Balance; 2009-14

Source: Department of Statistic Malaysia (DOSM)

Total trade exchange in 2014 was RM1.45 trillion or 174.9% of GDP, a 5.9% expansion when

contrasted with 2013. Amid the same period, aggregate cargo volume transported via ocean,

rail and air came to 548 million tons, a 6.6% expansion when contrasted with 2013. Major

trading partners that contributed to the growth in trade were 11:

ASEAN, growing by RM14.54 billion or 3.9%;

The European Union (EU), RM8.35 billion or 6.2%;

The United States of America (USA), RM8.01 billion or 7.4%;

Australia, RM7.48 billion or 16.4%;

Hong Kong, RM6.05 billion or 14.5%;

Taiwan, RM5.94 billion or 11.2%; and

The Republic of China (PRC), RM4.54 billion or 2.2%.

Malaysia ranks 28th globally in terms of proven crude oil reserves, and 14th in terms of its

natural-gas endowment. Exports from the sector, which includes crude oil, petrol, refining

by-products such as industrial coke, and liquefied natural gas (LNG), have been rising

quickly in the course of the most recent 20 years, bouncing from 6.2% of fares in 1998 to

more than 22% in 2014. Malaysia is presently the world's second-biggest LNG exporter

behind Qatar, with trade totalling over M$64bn in 2014, over 8% of all exports.

Malaysia’s top five export destinations this year were Singapore, valued at US$31.8 billion,

China US$30.7 billion, Japan US$25.3 billion, the USA US$18.4 billion, Thailand US$12.6

billion (Figure 2.8). Highest value Malaysian export products range from petroleum and palm

oil to sophisticated electronic components and telecommunication devices.

11 www.matrade.gov.my

0

500,000

1,000,000

1,500,000

2,000,000

2009 2010 2011 2012 2013p 2014p

Total Trade Trade Balance

19

Figure 2.8: Top 5 Malaysia Export Destinations (millions of US$); 2014

Source: Department of Statistic Malaysia (DOSM)

Table 2.3 shows that by 2030 China will overtake Singapore as Malaysia’s most immensely

colossal export destination. Exports to China are expected to grow by 12% per annum in

2021-30.

Table 2.3: Malaysia Top 5 Export Destinations

Rank 2014 2030

1 Singapore China

2 China Singapore

3 Japan Japan

4 USA USA

5 Thailand India

Source: https://globalconnections.hsbc.com

20

Figure 2.9: Top 5 Malaysia Major Import Destinations (millions of US$); 2014

Source: Department of Statistic Malaysia (DOSM)

Imports increased by 5.3% or RM34.32 billion to RM683.02 billion. The growth impetus of

exports had resulted in a trade surplus of RM83.11 billion, representing Malaysia’s

achievement of 17th consecutive years of trade surplus. The trade surplus in 2014 registered

a double-digit growth of 16.6%, a remarkable achievement compared with negative growth

in 2012 (-22.8%) and 2013 (-25.7%).

Table 2.4: Malaysia Top 5 Import Origins

Rank 2014 2030f

1 China China

2 Singapore Singapore

3 Japan USA

4 USA Indonesia

5 Thailand Vietnam

Source: https://globalconnections.hsbc.com

China was the largest import source, followed by Singapore, Japan, the USA, Thailand and

Taiwan. These countries accounted for 55.9% of total imports. ASEAN contributed

RM175.45 billion or 25.7% of Malaysia’s total imports for the year 2014. These import and

export statistics show the significance of road freight in trading across borders as Singapore

and Thailand are among Malaysia’s top five trading nations.

21

Figure 2.10: Malaysia import export percentage to Thailand and Singapore; 2014

Source: Department of Statistic Malaysia (DOSM)

Figure 2.10 shows the significant role of logistics services on trading across border between

Malaysia with Singapore and Thailand. This indicates the importance of land transportation

in order to move the goods efficiently.

Trade in goods and the industries

For centuries, Malaysia has profited from its location at a crossroads of trade between the

East and West, a tradition that carries into the 21st century. Geographically blessed,

peninsular Malaysia stretches the length of the Strait of Malacca, one of the most

economically and politically important shipping lanes in the world. Capitalizing on its location,

Malaysia has been able to transform its economy from agriculture and mining in the early

1970s to a relatively high-tech, competitive manufacturing economy. Today services and

manufacturing now account for 75.8% of GDP (52.9% in services and 22.9% in

manufacturing in 2014)12.

Malaysia’s economy expanded 5.8 per cent in the fourth quarter of 2014, largely due growth

in Services, Manufacturing and Mining sectors. For 2014, GDP rose to 6.0 per cent with a

value added of RM835 billion at constant prices and RM1,070 billion at current prices. Figure

2.11 shows the contributions to GDP by sectors.

12 http://www.bnm.gov.my/index.php?ch=statistic_nsdp&uc=2

14%

5.90%

IMPORT

SINGAPORE THAILAND

Import US$

170,754

13%

5.10%

EXPORT

SINGAPORE THAILAND

Export US$

191,532

22

Figure 2.11: Malaysia Gross Domestic Product (GDP) By Sector, 2014

Source: Department of Statistic Malaysia (DOSM)

Figure 2.12: Top 10 Major Export Products, 2014

Source: http://www.matrade.gov.my/

The Top 10 export product for 2014 shown on Figure 2.12. The total export for 2014 stood

at RM 766.13 billion, which was an increased 6.4%. E&E product contributed the most

representing 33.4% of total export, and followed by Petroleum product and LNG at 9.2% and

8.4% respectively.

57.5

65.7205.2

33.0

462.0

34.1

Agriculture, Forestry and Fishing

Mining and Quarrying sector

Manufacturing sector

Construction

Services sector

Transport, Storage and Communication

23

Figure 2.13: Top 10 Major Import Products, 2014

Source: http://www.matrade.gov.my/

Total imports for 2014 registered at RM683.02 billion, and increased of 5.3% from 2013 as

shown in Figure 2.13. E&E products remained the highest imports at 27.9% followed by

Petroleum products, Chemical & chemical products and Machinery appliance & parts at

11.7%, 9.1% and 8.4% respectively.

Mode of transportation

Sea Mode

Sea transportation has always been an important feature in Malaysian logistics, as the

country has been in the major sea trade route over the last many centuries. Table 2.5 gives

an overview of the country sea transport facilities.

Table 2.5: Summary of Malaysia sea transport facilities

Waterways: (Peninsular Malaysia 3,200 km; Sabah 1,500 km; Sarawak 2,500 km) (2011)

7,200 km

Country comparison to the world 20

Merchant marine: 315

By type: Bulk carrier 11, Cargo 83, Carrier 2, Chemical tanker 47, Container 41, Liquefied gas 34, Passenger/Cargo 4, Petroleum tanker 86, Roll on/roll off 2, Vehicle carrier 5

Country comparison to the world (Merchant marine) 31

24

Foreign-owned: (Denmark 1, Hong Kong 8, Japan 2, Russia 2, Singapore 13) 26

Registered in other countries: 82

(Bahamas 13, India 1, Indonesia 1, Isle of Man 6, Malta 1, Marshall Islands 11, Panama 12, Papua New Guinea 1, Philippines 1, Saint Kitts and Nevis 1, Singapore 27, Thailand 3, US 2, unknown 2) (2010)

Ports and terminals (30 Seaport; 14 Container Terminal) 44

Major seaport(s): Bintulu, Johor Bahru, Penang, Port Klang, Tanjung Pelepas

Major container terminal(s) (TEUs): Penang (1,202,180), Port Klang (9,435,403), Tanjung

Pelepas (7,302,461)

Source: The World Factbook; www.cia.gov

Sea freight is the preferred choice due to its lower cost and ability to handle bulky shipments.

Figure 2.14 illustrates that continuing growth of freight volume over the last decade with sea

freight dominating the trade volume. The total freight volume transported by sea in 2014 was

98.4% or 539.2 million tonnes. Ports that contributed significantly to shipment of goods were

Port Klang, Port of Tanjung Pelepas, Penang Port, Kuantan Port, Johor Port and Bintulu

Port. The annual growth rate between 2005 and 2014 for sea freight volume was 5.4% and

the growth momentum is expected to continue until 2020 at 5.6%.

Figure 2.14: Malaysia freight volume transported (Million Tonnes), 2006-2014

Source: Ministry of Transport, RMK11

Number of ships arrival to Malaysia however, is showing a downward trend where the value

has decreased by 33 per cent (46.7% decline in international ships arrival) compared to that

of year 2010. From Figure 2.15, it can be seen that the number of ships arrival has fallen

over the last five years, although the trend has stabilised after 2012.

0

100

200

300

400

500

600

0

2

4

6

8

10

2006 2007 2008 2009 2010 2011 2012 2013 2014

Air

& R

ail (

Mill

ion

To

nn

es)

Air (RHS) Rail (RHS) Sea (LHS)

25

Figure 2.15: Number of ships arrival at Malaysia Ports, 2010-14

Source: Ministry of Transport, Malaysia

Figure 2.16 shows the volume handled by all the key ports of the country with Port Klang

accounting for the largest share of cargo handled totalling an average of 60 per cent of the

freight volume. In 2012 alone, Port Klang handled 195.9 million tons of sea freight.

Figure 2.16: Key ports and cargo throughput in Malaysia; 2011-2014

Source: Ministry of Transport, Malaysia

Port Klang, well-located in the Straits of Malacca is the 13th busiest container port in the

world. In 2014, Port Klang handled 10.9 million TEUs, an increase of 13.9% as compared to

2010. Almost 63% of the port's container throughput was for transhipment. Moving forward,

investment in port (basic equipment needed for a business or society to operate) must attract

more international vessels, and this has to be supported with efficient handling at the port

and with good connectivity. Only then will this enable Port Klang to 16.4 million TEUs in 2020.

Figure 2.17 shows that the import-export shipment has plateaued over the last seven years.

However, transhipment continues to growth at a steady but marginal pace.

0

50,000

100,000

150,000

200,000

2010 2011 2012 2013 2014

Domestic International Total

60%

69%

79%

81%

84%

84%

88%

89%

90%

91%

97%

99%

99%

100%

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

500000

0%

20%

40%

60%

80%

100%

120%

('00

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REI

GH

T W

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HT

TON

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Total Cumulative %

26

Figure 2.17: Total cargo throughput by sea freight in, Malaysia, 2009 – 2014

Source: Ministry of Transport, Malaysia

Malaysia is developing as a transhipment centre in the region. With 60 percent of the

country’s container throughput coming from other countries, mainly at Port of Port Klang

(51%) and Penang ports (9%). In recent years, the number of vessels entering Port Klang

has increased considerably. As a result, the existing port facilities have become congested

especially at Pintu Gedong where ships have to anchor outside the port limits while awaiting

berthing instructions.

Port Klang, the home of Westports and Northport terminals, remained the leading ports in

the country last year, holding a 48.5 per cent share of the total number of containers carried

by all Malaysian ports. Port Klang handled 10.94 million TEUs (20-foot equivalent units) last

year, against the 10.49 million TEUs handled by all Malaysian ports last year. Westports led

the way with a 15.2 per cent increase in container volume from 2007, handling some 4.96

million TEUs, while Northport saw a 7.1 per cent increase to three million TEUs last year

(Table 2.6).

Table 2.6: Container port traffic (TEU: 20 foot equivalent units)

Container port throughput, 2008-13

2008 2009 2010 2011 2012 2013f

Malaysia 16,093,953 15,922,800 18,267,475 20,139,382 20,897,779 21,426,791

Sources: Worldbank data; data.worldbank.org

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

2009 2010 2011 2012 2013 2014

Export Import Transshipment Total

27

Land Mode

Land transportation comprises railways and roadways, is another important feature in

logistics. The railways for freight logistics has not improved much over the industrialisation

era. However, road infrastructure has improved by leaps over the last three decades. Table

2.7 shows the summary of the current rail and road availability.

Table 2.7: Summary of Malaysia Road Transport facilities

Railways 1,849 km

Country comparison to the world 75

Standard gauge: (1.435-m gauge (57 km electrified)) 57 km

Narrow gauge: (1.000-m gauge (150 km electrified) (2010)) 1,792 km

Roadways (does not include local roads) 144,403 km

Country comparison to the world: 33

Paved: (includes 1,821 km of expressways) 116,169 km

Unpaved: (2010) 28,234 km

Source: The World Factbook (www.cia.gov)

The local area goods logistics involves rail and road transport. Rail cargo volume achieves

consistent growth at a rate of 7.3% between 2005 and 2014, and recorded 7.8 million tons

handled in 2014. Containerised freight, concrete and clinker the main cargo transported by

rail. Road transport provides the connectivity and the last-mile delivery to and from rail depot

to destination. In 2014, aggregate rail payload throughput of 7.8 million tons from which 30%

of cargo volume is from South Thailand. Rail based freight transportation service in

Peninsular Malaysia is operated by KTMB covering a total track length of 2,262 km includes

the terminal facilities at 11 locations comprising dry-port, inland container terminal, seaport

and freight terminal.

Tolled highways has expanded by more than 200% since 1992. Among the tolled highways

is the North-South Expressway (846km) which is connected to other highways, industrial

regions and port with the usage spreads of 81% of populace and 89% of trade in GDP for

Peninsular Malaysia.

28

Figure 2.18: Lorry operators and licensed drivers, 2014

Note: Licence Class A (LA); Licence Class C (LC)

Source: Ministry of Transport, Malaysia

The number of licences issued for class A drivers (LA) at approximately 200,000 for

year 2014 as compared to the number of class A lorry operator shows high demand

for professional drivers (Figure 2.18). In 2014, 1.2 million heavy vehicles were

registered, indicating its contribution to road freight logistics.13

Air Mode

Malaysia has good airports for both international and domestics travelling and

transport. The air transport infrastructure is summarised in Table 2.8. The international

airports in the country have the necessary facilities to cater for air freight logistics where

high added value, low volume/weight products are handled.

The total air freight volume in 2014 was 987,362 tonnes, of which 91.2 per cent was

handled by the Kuala Lumpur International Airport (KLIA), Penang Airport, and Subang

Airport. The annual growth rate between 2005 and 2014 however declined by a

marginal 0.8 per cent. Major factors contributing to this decline were limited

connectivity and frequency of air cargo flights, low cargo volume as well as competition

from neighbouring countries.

Table 2.8: Summary of Malaysia air transport facilities

Airports (2013) 114

Country comparison to the world 51

Airports - with paved runways 39

Paved runways (over 3,047m) 8

13 Ministry of Transport; http://www.mot.gov.my/en/resources/quarterly-statistics-of-transport

0

50,000

100,000

150,000

200,000

250,000

LA LC LA LC

Licence Driver Lorry Operator

29

Paved runways (2,438 to 3,047m ) 8

Paved runways (1,524 to 2,437m ) 7

Paved runways (914 to 1,523m) 8

Paved runways (under 914m) 8

Airports - with unpaved runways 75

Unpaved runways (914 to 1,523m) 6

Unpaved runways (under 914m) 69

Source: The World Factbook (www.cia.gov)

KLIA handled 76.3% or 753,900 tonnes of total air cargo volume in 2014, which is far

below the original projection and cargo capacity of 1.2 million tonnes. This suggests

significant potential to grow the air freight sector in KLIA. Concerted effort will be

undertaken to boost KLIA as the preferred gateway for air cargo from domestic and

neighbouring countries.

INFRASTRUCTURE

With a land area of 329,847 sq km, Malaysia ranks 67th among all countries in the

world. The border of Malaysia with its neighbour countries is 2,669 km in total length.

Also, it has a coastline (length between land and sea including islands) of 4,675 km

(Peninsular Malaysia 2,068 km, East Malaysia 2,607 km). Malaysia share 2,669 km

land boundaries with a border countries Brunei 381 km, Indonesia 1,782 km and

Thailand 506 km.14

Malaysia ranked 25 out of 160 countries in the World Bank Logistics Performance

Index (LPI) Report 2014 and attained top position among the upper middle-income

countries. The quality of the logistics infrastructure also has been ranked in the top 25

positions as shown in Figure 2.19.

14 The World Factbook (https://www.cia.gov)

30

Figure 2.19: Quality of Malaysia Infrastructure, 2014

Source: World Economic Forum, Global Enabling Trade Report 2014

Malaysia Quality of port infrastructure has not much changed where in 2014 the quality

was assessed at 5.6 which is lower than the previous report 5.7 (2007-08; 2011).

However, liner shipping connectivity performance, has been improving indicating good

connectivity in global networks (Figure 2.20).

Figure 2.20: Malaysia Quality of port infrastructure, 2007-1415

Sources: Worldbank data; data.worldbank.org

The Liner Shipping Connectivity Index captures how well countries are connected to

global shipping networks. It is computed by the United Nations Conference on Trade

and Development (UNCTAD) based on five components of the maritime transport

15 The Quality of Port Infrastructure measures business executives' perception of their country's port facilities. Data are from

the World Economic Forum's Executive Opinion Survey. Data are collected online or through in-person interviews. Responses are aggregated using sector-weighted averaging. Scores range from 1 (port infrastructure considered extremely underdeveloped) to 7 (port infrastructure considered efficient by international standards). Respondents in landlocked countries were asked how accessible are port facilities (1 = extremely inaccessible; 7 = extremely accessible).

0

5

10

15

20

25

Quality of overallinfrastructure

Quality of roads Quality of railroadinfrastructure

Quality of portinfrastructure

Quality of airtransport

infrastructure

Value Rank/148

31

sector: number of ships, their container-carrying capacity, maximum vessel size,

number of services, and number of companies that deploy container ships in a

country's ports. The Malaysian shipping connectivity continues to improve over the last

fifteen years measured at slightly above 60 points to above 110 points in 2015 as

shown in Figure 2.21.

Figure 2.21: Malaysia Performance in Liner Shipping Connectivity Index, 2004-15 16

Source: World Economic Forum: Global Enabling Trade Report 2014; www.weforum.org

16 The Liner Shipping Connectivity Index captures how well countries are connected to global shipping networks. It is computed by the United

Nations Conference on Trade and Development (UNCTAD) based on five components of the maritime transport sector: number of ships, their container-carrying capacity, maximum vessel size, number of services, and number of companies that deploy container ships in a country's ports. For each component, a country's value is divided by the maximum value of each component in 2004, the five components are averaged for each country, and the average is divided by the maximum average for 2004 and multiplied by 100. The index generates a value of 100 for the country with the highest average index in 2004. The underlying data come from Containerisation International Online. (Source: Worldbank)

0.0

20.0

40.0

60.0

80.0

100.0

120.0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015