smell the coffee... ouch.... !!
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Port subsidies disguises competitiveness
THE much-vaunted port privatisation policy in Malaysia may have sent its first distress signal.
Recent reports that the Malaysian government is considering direct financial subsidy to ports is an ominous sign that all is not well in the aggressive stance adopted in promoting private sector investments in ports.
Ports that blazed the trail in diverting container traffic away from Singapore amid pomp and fanfare, are said to be seeking financial assistance from the government.
In fact, one of the major ports is understood to have secured cash subsidies while another is known to be busy trying to make out a case for itself.
The move for the government to come to the aid of private sector investors in distress in the transport sector is not without precedent.
The government decision to take over the capital investments made by the private sector in the development of the urban light transit system, the monorail, and taking over the privatised national airline are persuasive examples of the priority it places in protecting transport infrastructure investments.
Arguments advanced for subsidy by the ports are not unbelievingly simple: As they are an instrument of the government's policy to redirect trade away from Singapore, it is the responsibility of the government to see to it that they are not financially distressed (even if the situation was brought about by themselves through price distortion).
Although recent attempts have been made to revise the port tariff, the shipping industry - the liner sector in particular - has warned that it may not be a good time.
Several liner shipping companies are counting huge losses - the Singapore-owned Neptune Orient Line, for instance, recorded losses topping US$330 million (S$574 million) last year, while closer to home, Malaysia International Shipping Corp noted a loss of about RM150 million (S$69.5 million) in its liner sector.
Current market reality dictates it may be inopportune. Singapore, which has lost a substantial share of its market to the Malaysian ports, is fighting back.
Taking the threat to its economic lifeline seriously, last July, the cash-rich Singapore port slashed its charges - by as much as 50 per cent for transshipment traffic - in a bid to stop the migration of shipping lines to Malaysian ports.
Under the new discount and incentive package by PSA Corporation, customers will be granted an across-the-board additional 10 per cent rebate on all bills at PSA Corp's cargo terminals.
PSA Corp also slashed by half the charges on empty container handling, which is understood to account for 15 per cent of its local container handling. It is expected that the one-year cuts will amount to about $300 million.
PRICE OF FOOLISHNESS
PSA Corp also announced brand new 'customer-focused' flexibility, which its customers said would give them better longer-term negotiating leverage, including the much-talked-about offers of dedicated berths through joint ventures or long-term leases.
Shipping lines in Port Klang said the initiatives by Singapore to slash its rates and the offer of new terms have narrowed the differences with Malaysian ports.
The ports, which are most pressured to raise the tariffs, are those that gave unprecedented discounts, priding themselves as the cheapest in the world. With the price now being paid for the generosity, government subsidy is being sought to defray their foolishness.
Subsidy, while not entirely objectionable to promote specific national or strategic agenda or policies, may raise important questions over national port policy objectives and direction.
Financial subsidy has an in-built deficiency and brings with it an inherent weakness to market economies as it distorts prices and encourages inefficiency and wastefulness to the economy.
Financial subsidy may, in this specific case, disguise competitiveness of the ports and ultimately, financial subsidy may benefit only foreign shipping lines and cargoes of foreign countries that are transshipped at the local ports.
Why should the benefits of the financial subsidy go towards a Chinese or a French shipping line that transships Indonesian cargo to Japan at the local ports? Should Malaysia subsidise the handling of Indonesia exports, or from Thailand, India?
This Ports World article was carried in the New Straits Times on Feb 3. -
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ha ha... good one... i knew that the pictures painted by the media was too good to be true...
but it is commendable for the NST to publish something that directly questions the viability of their gov'ts economic policy without fear of recrimination.
cute of the NST to bring out that what they're doing is tantamount to subsidising foreign exports
not to mention that such loss making ventures charging such ridiculous prices are unsustainable. if u slash prices just to attract customers, nothing stops them from moving away once your price increases and their lease expires if they can get more for less elsewhere...
sigh... such is capitalism... merciless... -
Courageous, on the part of the Editor for daring to have the article transcribed in full from an article published in "This Ports World".
This maybe the opening gambit by another camp to discredit someone's pet interest in the port operations.
Don't under estimate the plots and counter plots in our neighbor's politics, as we have to prepare for some scalding when events boil over from the other side. -
PSA container volumes up 28%
SINGAPORE'S PSA Corp, operator of the world's second-busiest container port, said yesterday that it moved 28 per cent more containers through its local and overseas terminals last month compared to a year ago.
In the face of stiff competition on its home turf from regional competitors such as Malaysia's Port of Tanjung Pelepas, which has drawn away Danish shipping line Maersk Sealand and Taiwan's Evergreen Marine, PSA said throughput at its Singapore port rose 5 per cent to 1.38 million twenty-foot equivalent units (TEUs) compared to the corresponding period last year.
However, the bulk of the growth came from PSA's network of terminals around the world, which saw container throughput surge 118 per cent to 727,000 TEUs. PSA has 14 port projects in eight countries: Brunei, Belgium, China, India, Italy, Korea, Portugal and Yemen. --Reuters
looks like there are 1 winner (PSA) and 3 losers (PTP, Maersk and evergreen) ... -
Northport and PTP forecast higher TEU volume
The volume of transshipment at Northport, Klang had increase from 746,135 TEU in 2001 to 808, 521 this year. The port is confident of achieving 8% growth in TEU throughput for 2002.
During the first nine month of 2002 the port had recorded a throughput of 1.87 million TEU contributing a major volume of total 3.34 mil TEU handle by Port Klang during the same period.
Fast Fact : Northport employs around 2,900 non-executive workers
Meanwhile Port of Tanjung Pelepas posted a loss of RM32.1 million in the first six month of 2002. PTP is confident of achieving itÂ’s target of handling 3.5 million TEU in 2003 which is a 29 % increase from the 2001 estimate of 2.5 mil TEU to 2.7mil TEU.
Maersk Sealand currently accounts for 60 percent of the TEU volume.
ah..... more information.....
1... PTP lose money...
2... PTP hope to achieve an average of 300,000 TEU per month next year... (compare with PSA's 1,380,000 per month this year..)
3... but PTP is defintely still better then north port that moved 67,000 TEU per month last year.... (5 digit figure!!)
wat if maersk or evergreen later decided to dump PTP?? think they better offer some more goodies to them.... -
additional facts...
PSA handles more TEUs in 2 DAYS!! then malaysia's northport in ONE YEAR!!!
PSA handles a total of 25 million TEUs worldwide.. while malaysia's total port TEU stands at 6 million TEUs (actually less then 6 million, but give a little face lah.. round upward) -
where do you get your source from?Originally posted by tripwire:additional facts...
PSA handles more TEUs in 2 DAYS!! then malaysia's northport in ONE YEAR!!!
PSA handles a total of 25 million TEUs worldwide.. while malaysia's total port TEU stands at 6 million TEUs (actually less then 6 million, but give a little face lah.. round upward) -
which part? the 25 million TEU?? try the followingOriginally posted by CenturionMBT:where do you get your source from?
http://www.internationalreports.net/asiapacific/singapore/2002/psa.html
In 2001, PSA handled 19.13 million Twenty-foot Equivalent Units (TEUs; 1 TEU is equal to a container measuring 8 x 8.5 x 20 feet) of containers worldwide, including 15.52 million TEUs in Singapore. PSA is projecting it will handle 17 million TEUs in its Singapore operations this year. Globally, the company and its 13 overseas port projects handle the equivalent of one out of every ten containers shipped worldwide or 25 million TEUs per annum. -
Singapore's PSA port terminals never sleeps... Its work 24 hours a day, all year round.Originally posted by tripwire:additional facts...
PSA handles more TEUs in 2 DAYS!! then malaysia's northport in ONE YEAR!!!
PSA handles a total of 25 million TEUs worldwide.. while malaysia's total port TEU stands at 6 million TEUs (actually less then 6 million, but give a little face lah.. round upward)
(From the people of PSA themselves)
The investors has invested so much money in Singapore. Seeing the Singapore's quality of efficiency and effectiveness, I don't think they would withdraw from Singapore. Even so, it can only be a short-term policy. Putting it in long-term would lose the productivity needed for growth. -
actually, i kinda think that maybe its a good idea that Maersk and Evergreen left...
its never a good idea to put all our eggs in one basket...
look now... Maersk actually accounts for 60% of TEU volume... a terribly unhealthy state of affairs actually...
it gives them too much leverage and u can be sure that they will be assured extremely favourable rates for many years to come...
not that i enjoy seeing my neighbours come to a bad end, but i just don't trust MNCs to do anything other than to line their own pockets and abandon u for greener pasteurs when they've earned enough...