KUALA LUMPUR: Malaysian ports are set to drive trade and economic growth in the coming quarters, having demonstrated resilience despite disruptions caused by the Red Sea crisis.
As Malaysia continues to attract foreign direct investments (FDIs) from global technology giants, port operators are planning long-term expansions to reinforce the country's status as a global maritime and logistics hub.
Agyl & Partners managing partner, Wan Agyl Wan Hassan, said that Port Klang (including Northport and Westport) and the Port of Tanjung Pelepas (PTP) have shown impressive resilience this year, despite challenges from the Red Sea crisis.
Port Klang, the second largest port in Southeast Asia, advanced to 11th place in the 2023 rankings of the world's top 100 busiest container ports, according to Lloyd's List.
PTP, meanwhile, was the fifth most efficient container port in the world and secured the first place in the Southeast Asia region, according to the 2023 Container Port Performance Index (CPPI).
Wan Agyl said that these ports are well-positioned to play a key role in driving trade growth in 2024 and stand to benefit from the recovery of the global economy.
However, Wan Agyl cautioned that while Malaysia's strategic location and its ports' ability to manage increased traffic have provided an advantage during the crisis, this temporary surge could revert to its original routes, potentially slowing the current momentum.
He also noted that global supply chain disruptions are affecting major industries such as chemicals and automotive, while high shipping costs to Europe continue to challenge exporters, potentially impacting the competitiveness of Malaysian goods.
"While the ports are capitalising on the current situation, it's crucial for Malaysia to remain proactive, preparing for potential shifts in global trade and ensuring that infrastructure and capacity keep pace with growing demands," he told Business Times.
Fierce competition from regional ports
Malaysia's ports face intense competition from Singapore, which boasts advanced technology, strong global partnerships, and a well-established reputation, making it challenging for Malaysia to narrow the gap.
Wan Agyl noted that Malaysia's ports are also contending with rising competition from Vietnam and Indonesia. These countries are rapidly modernising their ports, offering lower labour costs, and upgrading infrastructure, which intensifies the competitive landscape.
He said that external risks, such as global economic slowdowns and the increasing focus on sustainability in shipping, add another layer of uncertainty.
To stay competitive, he said that Malaysia's ports must focus on more than just expansion.
"They need to invest in technology, improve operational efficiency, and develop a unique value proposition to attract global shipping lines and stay ahead of regional rivals."
Wan Agyl added that infrastructure and investment plans like the New Industrial Master Plan 2030 offer long-term growth potential.
However, delays in project implementation and rising operational costs could limit short-term gains.
"High inflation and reduced consumer spending could also slow down trade volumes, making it crucial for the ports to focus on improving efficiency, expanding capacity, and adapting to new global trade realities to stay competitive," he added.
Port operators gearing up to tackle challenges through expansion
MMC Corp Bhd's Johor-based subsidiary, PTP, is set to invest RM3 billion over the next five years to boost its capacity by an additional 3.5 million TEUs.
Similarly, Penang Port has allocated RM2 billion to expand the North Butterworth Container Terminal, aiming to increase its quayside capacity to 4.1 million TEUs by 2050.
Beyond these expansions, Malaysia is also looking forward to new port developments, including projects at Carey Island in Selangor and Sanglang in Perlis.
Penang Port Sdn Bhd chief executive officer, Datuk Sasedharan Vasudevan, recently noted that container throughput growth at the port is expected to be slower this year due to the ongoing Red Sea crisis.
The port's TEU forecast has been adjusted from 1.55 million to 1.5 million, a 4.0 per cent decline, following the crisis' escalation in April, which forced ships to reroute around Africa.
"We lost 50,000 to 60,000 containers because of this. We don't think it's going to go on forever because it's not sustainable," he said.
To counter the impact, Penang Port is focussing on more stable markets, such as the Bay of Bengal, and has introduced incentives to encourage transshipment activity.
He added that a recovery is anticipated by next year once stability returns or excess capacity enters the northern region.
Meanwhile, Westports Holdings Bhd announced the launch of its Westports 2 container terminal expansion, which will add eight new terminals.
Executive chairman and group managing director, Datuk Ruben Emir Gnanalingam Abdullah, said that the expansion will double the port's container handling capacity from 14 million to 28 million TEUs.
Ruben emphasised that the Westports 2 project is essential not only to meet current demand but also to prepare for the expected growth in trade volume over the next decade.
He noted that the expansion is projected to contribute RM55 billion to the Malaysian economy, based on an economic impact assessment report by PricewaterhouseCoopers (PwC) dated December 12, 2022.
Additionally, Ruben highlighted that Westports has contributed nearly RM4 billion to the government through corporate taxes and lease payments, a figure expected to increase over the next 30 years under the new Westports 2 agreement.
The expansion will also include a new 222.58-hectare free zone, aimed at attracting foreign direct investment (FDI) and facilitating the development of regional and global distribution centres.