KUALA LUMPUR: Malaysian ports are at risk of shipping disruptions if Thailand's US$28 billion plan to bypass the Straits of Malacca to the US, materialises.
But this is not a doomsday scenario as it also offers opportunities for strategic upgrades in Malaysia's port infrastructure and operational efficiency, analysts said.
Malaysian Institute of Economic Research economist Dr Shankaran Nambiar said the plans poses a critical challenge to Malaysian ports, with uncertainties about which vessels will opt for the new Thai shipping line and which will continue to use Malaysian ports.
While the specifics regarding the vessels are unclear, it is evident that there will be a reduction in traffic through the straits, he added.
"This calls into question the competitiveness of our ports and what we can do to upgrade them," Nambiar told Business Times.
As the global shipping landscape undergoes potential transformations, he stressed the need for strategic upgrades in Malaysia's port infrastructure and operational efficiency.
He said there is an urgency for Malaysian ports to implement robust trade facilitation measures and streamline customs procedures to retain attractiveness.
It is also imperative to focus on improving supporting services and fostering a more business-friendly regulatory environment.
Thought Partners Group group managing partner Abi Sofian Abdul Hamid said Malaysia will potentially have two new ports to compete with - one on the east coast and the other on the west coast of Thailand.
Abi Sofian, who was chief executive officer of Northport (Malaysia) Bhd, emphasised that Malaysian ports must create a highly attractive proposition for customers in terms of both products and services.
He pointed out that, to start with, they need to retain existing customers and focus on their growth market.
"There will be some impact and the ports must be proactive to come up with the right strategy in advance. Ports will also have to intensify their improvement works on performance that are relevant to their customers.
"Another dimension is for Malaysian ports to work together and collaborate not only among ports but also with all the industry players and stakeholders in the logistics and supply chain so that they could offer a wholesome value to all customers.
"This means that movements from ports to the end user utilising land and rails especially will be seamless," he added.
Abi Sofian said this is also in addition to the National Single Window ecosystem to be implemented at major ports soon.
Making Malaysia the logistics and supply chain hub especially for Asean would be the real game-changer.
Nevertheless, Abi Sofian said while there are perceived benefits, he has not seen any significant numbers regarding savings.
"It will not be a zero-sum gain because there will be additional handling activities at the two ports if you are talking about the transit market. The main benefits would be for goods coming out and going into Thailand for their consumption and neighbouring countries.
"There will still be those goods going to other parts of intra-Asia and Far East. A more detailed study on the current and future trends would be a good start for ports in Malaysia," he said.
Sunway University professor of economics Dr Yeah Kim Leng highlighted the downside risks, including the potential loss of logistics, refueling, and supply services at Malaysian ports due to shifts in shipping patterns as ships bypass the Straits of Malacca
He pointed out that despite these challenges, Malaysian ports will continue to play a crucial role in serving the country's maritime cargo trade, including transshipments.
"In short, it's not a doomsday scenario, as the canal will help decongest the Straits of Malacca. It will also lead to a more efficient, faster and lower shipping cost for transporting cargo between the Indian and Pacific Oceans.
"Asean countries such as Vietnam and the Philippines, along with Far East countries like Japan, Korea, Taiwan and China, will benefit from the shorter route," he said.
Echoing similar views as other analysts, Yeah emphasised that Malaysian ports should continue to focus on increasing cargo handling, logistics efficiency, and competitiveness in line with the country's goal to be among the world's top 15 trading nations.
He added that an efficient port sector will help raise the competitiveness of the country's manufacturing sector, leading to higher seaborne cargo volume and increased trade with the rest of the world.
Thailand is proposing a multibillion-dollar project to reduce shipping times between the Indian and Pacific oceans by avoiding the crowded Melaka Strait, a major sea route.
Thai Prime Minister Srettha Thavisin had told investors in San Francisco that the project can cut shorten travel time by around four days and decrease shipping expenses by 15 per cent.
He said with traffic volumes projected to exceed the Straits of Malacca's capacity by 2030, the new project will ensure seamless flow of goods.
The ambitious Landbridge project is estimated to cost around one trillion baht (US$28 billion). It involves constructing seaports on either side of Thailand's southern peninsula, connected by a comprehensive network of highways and railways.
The 100km connection will serve as an alternative to a decades-old proposal to dredge a canal through the Kra Isthmus.
The Straits of Malacca, situated between Malaysia and Singapore, currently acts as the shortest sea route linking the Asia-Pacific region to India and the Middle East.
About 25 per cent of the world's traded goods pass through this strait, and the increasing traffic is expected to elevate shipping costs.