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MALAYSIA SHIPPING MASTER PLAN

“Towards Maritime Excellence”

Presented by

Capt. Noel John Thompson

26 March 2015, Istana Hotel,

Kuala Lumpur

“For the Shipping Industry to be Competitive, the

COUNTRY has to be supportive.”

Although Shipping is an internationally competitive

business, the Cost of Management, Administration

and Operations is mainly determined by the country

of registration and operation.

Where is Malaysian Shipping Today in respect to our ASEAN neighbours?

In terms of GRT, we are now number 3, losing to Singapore by 570

percent, and Indonesia has overtaken us to be number 2.

We only have one (1) major shipping company in this country, if this

company is sold, we will lose over 40% of our national GRT, and will

drop below Philippines to number 4 in the ASEAN ranking.

Generally, Malaysian ship ownership is not doing well, especially

since the downturn of 2008.

Cont…

Yes, as a Peninsular / Island State, divided by the South China

Sea, for the following :

Local Trade between Peninsular Malaysia, Sabah and

Sarawak

Maritime Security, long coastline and geographical divide

Trade Protection for product export and production,

including Oil & Gas offshore exploration and production.

Balance of Payment (BOP) losses.

Positioning and strengthening our Shipping Industry for the

coming ASEAN Single Shipping Market (ASSM).

Is Shipping Important to Malaysia?

Most of our Cargo is carried by Ships of other countries.*

Most of our Oil and Gas Exploration works offshore is provided by Ships

of other countries.*

Some of our Ports are serviced by Tugs, owned and/or operated by

Foreigners.*

Malaysia Plan has not focused on Shipping since 2006 (MP9 and 10).

Shipping is not part of the 12 NKEA of our Economic Transformation

Program (ETP) launched in 2010

(* Based on MOT data on the DSL issued)

So are we in Trouble?

Direct and Indirect Effect:

Cause & Effect of National Shipping?

Cargo logistics can be delayed or stopped.

Oil & Gas Exploration and Production can be delayed or

stopped.

Ports Efficiency can be delayed or stopped.

Trade Imbalance.

National Financial Risk.

Possible Risk by Foreign Vessels?

To address the Issues, we need aPLAN!!

We suggest a “Malaysian Shipping Master Plan” (MSMP)

i. Who to Initiate?

ii. Who to Champion?

iii. Who to Drive?

MASA initiated it, MIMA is driving it, Ministry of Transport needs to

Champion it and The Head of our Country has to Adopt it into the 11

MP (2016-2020), NKEA and ETP.

ALL stakeholders have to be Part of it to make it happen.

Follow our Successful Neighbours.

Take advantage of our unique position.

SWOT ourselves.

Malaysian “Shipping Landscape” has changed from globally focused,

to more locally/regionally focused.

Our products and produce are mainly sold FOB, no longer are we much

in control of the shipping component as in CIF.

To survive we need to compete in pricing and efficiency.

Protection mechanism, Cabotage Policy needs improvement.

MSMP will need a Direction:

The Methodology use in MSMP

The proposed MSMP

The following are parts of the proposed Malaysia Master Plan.

It is to be deliberated further if necessary.

Result: Stakeholders Brain Storming

Global Energy Shipping – 20% of World Market Share

Cont… Global Energy Shipping

Where are we now?

LNG Transportation, Ships owned and registered – over 10% of

World LNG Shipment (2014)

Crude Oil/ Petroleum Product Transportation, Ships Owned –

Market Leader, US Gulf for Ship-to-Ship Transfer.(2014)

Possible future quick wins?

Coal & Palm Oil Transportation – TNB & Felda

LNG, Crude and Petroleum Products – Petronas future Mega

Refinery and Tank Terminal at Southern Region.


What is preventing the quick wins?

The removal of tax reliefs to the shipping business in 2016. For

International shipping business, it would be cost effective to

register vessels in a tax supportive country.

Very few suitable Malaysian registered Dry Bulk and Chemical

vessels available to capture this business.

These large Ships are very costly. Highly capital intensive, we

may need another national shipping company to take up these

sectors, which the existing national line is not focusing on.


Financing terms not supportive of the shipping business:

Currently, loan facilities requires long term contracts, which is

available during good economy, but this is when the price of

vessels are also high causing a disadvantage in price

competition and higher vessel depreciation. Loan facilities to

support „Asset Play‟.

Interest rates to be compatible with competing nations.

Longer loan tenure, to match the useable age of vessels.

Payment Moratorium and government assistance during

Shipping down turn.

Intra ASEAN Trade Shipping – 30% of ASEAN Market Share

Cont… ASEAN Trade Shipping

Where are we now?

17% for Import (2011)

20% for Export (2011)


TNB Coal Transportation –as a catalyst to support Malaysian Dry-

Bulk shipping.

LNG, Crude and Petroleum Products – Our Mega Refinery and

Tank Terminal down south.

Capitalisation and positioning for ASEAN Single Shipping

Market –Rice, Cement and Palm oil are examples.



The removal of tax reliefs to shipping. For International shipping

business, it would be cost effective to register vessels in a tax

supportive country.

High financing interest rates for shipping, compared with competing

countries.

High Crew cost, for Crew that have to pay Income Tax.

For these medium sized vessels, Dry-docking and Major Repairs

facilities not available locally. Costly downtime and voyages sailing

to foreign yards.


We are seen as small foreign owners. Unfavorable pricing and

payment terms, e.g. pay first before leaving.

Repair in Malaysia costly. Parts and Specialists mainly based in

Singapore.

Spare Parts and Supplies are taxed in Malaysia.

Operational downtime and opportunity loss waiting for

specialist and parts from foreign countries. Especially for Sabah

and Sarawak.


Financing terms not supportive of the shipping business

Difficult to get financing facilities for new shipowners -

shipping has bad industrial track records (NPL), banks are

cautious.

Capital intensive and hostile Financial terms; few

investors are keen, as some have gone bankrupt doing this

business. Even public-listed shipping companies have

closed down.

Domestic Water OSV Services – 75% of our OSV Market Share

Cont…

Cont… Domestic Water OSV Services

Where are we now?

19% Malaysian and 81% Foreign by DSL Applications

(2012)


Up to 81% of ready Market to capture, Cabotage Policy.

Not enough suitable vessels for our own O&G needs.

To prepare for ASEAN Single Shipping Market, especially

Indonesia, Thailand and Vietnam oil fields requirement.



81% ready market? Why aren‟t Malaysians taking up this opportunity? High

cost of operations as follows:

Financing terms not supportive of the shipping business:

High vessel cost. Loan facilities require long term contracts, during good

economy and high vessel price and large vessel depreciation value.

High crewing cost, paying Income tax, EPF and Socso.

High corporate tax 26%

Capital intensive and hostile Financial terms; investors are not keen, some

have gone bankrupt doing this business.


Difficult to get financing facilities - shipping has bad

industrial track records (NPL), banks are very careful.

High cost of repairs.

Prolonged downtime due to unavailability of spares and

specialists.

To do major repairs, vessel have to sail to Singapore or Batam.

Time and distance will incur extra expenses.

Repairs and parts cost more, for small foreign owners.

Unfavorable payment terms, e.g. pay first before leaving.

Domestic Trade Shipping – 90% of ourDomestic Shipping Market Share

Cont… Domestic Trade Shipping

Where are we now?

Total 44% Malaysian and 56% Foreign DSL Applications

(2012).


About 56% of ready Market to capture, Carbotage Policy.

To prepare for ASEAN Single Shipping Market.



Not enough vessels of the right specification and locations.

Blanket DSL approval. E.g. Tanjung Bin bunker shipping taken

over by foreign vessels. This can happen to Pengerang and other

southern regions, where Singapore bunkering fleet is very large.

The possible removal of tax reliefs to the shipping business. For

International shipping business, it would be cost effective to

register vessels in a tax supportive country.

Financing terms not supportive of the shipping business.


Difficult to get financing facilities

High cost of repairs.


specialists.

To do major repairs, vessel have to sail to Singapore or Batam.

Time and distance will incur extra expenses.

Repairs and parts cost more in foreign yards. Unfavorable

payment terms.

High Crew Cost.

Local Ports Tug Boat Services – 90% of the Tug Boat Services Market Share

Cont… Local Ports Tug Boat Services

Where are we now?

51% Malaysian and 49% Foreign DSL Applications for

towing (2012).


About 49% of ready Market to capture, Carbotage Policy.

Not enough suitable vessels for our Ports.

To prepare for ASEAN Single Shipping Market.

Cont… Local Ports Tug Boat Services


Financing terms not supportive of the shipping business.

Competition using fully paid old vessels, ex Singapore tugs.

High Crew Cost.

High Repair Cost.


specialists locally.

Blanket DSL approval.

MSMP needs the following support:

We need our Ministry of Transport to Champion.

We need our Prime Minister‟s approval and adoption into 11MP,

ETP and NKEA.

We need the support of all Governmental Agencies.

We need the support of all the supporting industries to work

together focusing on the bigger picture that we need to keep

shipping healthy for all to survive.

We need the support and drive of all stakeholders, especially

Malaysian cargo owners.

The success of MSMP depends:

1. National Shipping Council (NSC) to be revived and strengthened

with dedicated and experienced team.

2. GLC such as Felda, TNB, PETRONAS and Bernas to support by

selling cargo using CIF and buying FOB terms, hence able to give

the shipping component back to Malaysian vessels.

3. MOF, BNM and Financial institutions to support ship owning and

operations by providing financing that is appropriate and realistic

to the shipping business, compatible with competing countries.

Cont….

4. To form another national shipping line, support sectors in Dry

Bulk, Chemical, Containers and etc..

5. All related Governmental Agencies to be advised that shipping

is very costly. “Time is of the Essence in Shipping”. A 24/7

system should be available to support shipping business

throughout the country, especially CIQ and Marine Department.

6. Tax Free incentive to Malaysian shipping and other businesses

that directly support shipping.

Cont….

7. Tax Free status for Malaysian Crew onboard Malaysian vessels.

To reduce the crew cost, promote Malaysians to sail and reduce

dependency on foreign crew.

8. Encourage shipbuilding and repairs at locations our vessels are

mostly operating, including tax free parts.

9. Encourage Parts Makers and specialists to set up shop at main

Shipbuilding/Repair locations, by providing tax incentives,

creating the environment that will develop enough critical mass to

sustain the business.

CONCLUSION

The Government plays a key role in the success or

failure of our Shipping Industry.

For our shipping companies having Malaysian registered

vessels to succeed, we need conducive governmental

legislation as well as efficient administrative and

operational support. This will enhance our pricing

competitiveness and operational efficiency to compete in

the Shipping Arena.

THANK YOUwww.masa.org.my

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