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By Richard Ho and Chung Hosanna
Photo by Daniel Lee
“The transport and logistics sector gains strategic value as a barometer for gauging the overall health of the economy, as it directly affects the major key indicators, such as capital flow, mobility, the provision of goods and services,” said Datuk Redza Rafiq Abdul Razak, CEO of the Northern Corridor Implementation Authority (NCIA) in his opening speech at the NCIA and SERI co-organised lecture entitled “Revisiting, Reviving and Refocusing NCER: Implications on Transport and Logistics”.
The lecture, held at Wawasan Open University on 28th October 2010, was delivered by Associate Professor Dr. Anthony Chin from the National University of Singapore. Dr. Chin noted that the logistics sector comprised more than just a supporting framework to facilitate transport and industry. Logistics had to be viewed as inherently a process, and should be understood as such.
Likewise, there is a distinction between the various levels of corridors; the range begins from a transport corridor, which is a corridor that physically links an area or region. While a multimodal transport corridor is one that physically links an area or region through the integration of various modes of transport. A Logistic Corridor not only physically links an area or a region but also harmonises the corridor institutional framework to facilitate the efficient flow and storage of freight, and movement of people and related information. At the highest level is an Economic Corridor, which is able to attract investment and generate economic activities along the less-developed areas in the region.
The Northern Corridor Economic Region (NCER) is not only a corridor within Malaysia, but must also be understood within the regional context of the Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT), a region that needs to speed up structural changes for greater efficiency and productivity given the meteoric rise of the China and its economy. Penang could position itself as the core growth pole for the IMT-GT region as it boasts the geographical advantage of proximity to a population of 1.3 billion in China, 1.1 billion in India, and 560 million in Southeast Asia. Within the IMT-GT, human capital development remains slow and eradication of income disparities is behind that of other regions – a case of a region impacted by global trends but still facing issues of local poverty.
Photo by Daniel Lee
The growth and development in the region actually puts logistics on centre-stage – making it the factor that either facilitates or impedes progress. Logistics enjoys a kind of duality, impacting development trends while at the same time being impacted by them in turn. Intra-ASEAN trade trends are becoming more apparent even as the region becomes more trade dependent, and the question that arises would be: why should investors choose Penang as a hub over other locations? Once again, it is emphasised that logistics goes beyond just moving and transporting goods; it impacts the entire process from procurement, manufacturing, production, and distribution to output and beyond, and must be addressed as such.
Comparative assessment of the ASEAN economies shows cost reductions across the board in terms of time and distance can be used as a model to understand the improvements needed for the transport & logistics sector. Benchmarking against international standards indicates the need to bring down the average OECD cost in terms of distance and time, based on the various logistic performance indicators and logistic cost components.
Dr. Chin opined that economies like Malaysia really need to find a high-value added core activity or niche, and this can be developed by transforming the traditional agriculture sector to focus on non-traditional high-value agriculture products, such as organic rice, “virgin” coconut oil, etc. which can be retailed more profitably than the staple agricultural produce. He also suggested the development of tourism products with a difference to “level up” the tourism industry, e.g. the Lembah Bujang early civilization marketed to bring in top tourist dollars.
Furthermore, he suggested that the streamlining of NCER activities may include the transformation of cities as hubs for culture or education or finance. Berlin, for example, rose from the post-Berlin Wall era to spontaneously trigger a thriving arts scene. In Boston, on the other hand, 90% of its buildings are related to public and private education. Whereas London, Hong Kong, and Singapore are examples of a city-turned-financial-hub, and the Caribbean is a cruise hub.
Photo by Daniel Lee
Other streamlining measures should include the revitalisation of SMEs, involving the private sector in key development ventures, and building up collaborative networks of Federal-State ventures to keep institutions efficient, to develop needed solutions and to maintain liberal/open trade and economic policies.
In pointing out several global trends within the logistics industry, Dr. Chin pointed out that the revolutionary High Speed Rail (HSR) development would very likely make it possible to reach London from Singapore in three days, and to travel to Beijing from Singapore in one day. HSR’s main framework would likely eclipse sea routes as much as “peripheral cities” – linking up the main global cities already on the forefront of technology and development.
Dr. Chin anticipates that issues of contention will move beyond traditional fuels like petroleum; conflicts may arise over the uses of formerly abundant resources such as water. Competition over water as the “new-age petroleum” would reflect the growing scarcity of natural global resources as the environment experiences ever higher levels of exploitation, with critical shortages of water for billions of the world’s inhabitants by the middle of the 21st century. Conflicts over natural resources and other environmental issues are expected to heighten.
There appears to be a shift of the growth pole moving towards Asia. Naturally, global aviation, shipping, trade routes will gradually re-orientate to reflect these new trends and equilibrium characteristics. In order to meet the new challenges of the global economy, ASEAN countries must be in a state of “logistic readiness”. Logistics barriers to trade facilitation should be removed, including customs, foreign investment, maritime, aviation, and land transport impediments. Particularly, licensing regulations which slow down the logistics process is an importance indicator to assess. Falling behind efficient levels on these indicators will incur an economic cost.
Photo by Daniel Lee
Dr. Chin proposed four strategic revamps to improve the areas of:
1) trade & customs facilitation
2) transport & logistics facilitation
3) logistics human resource development
4) multi-modal transport structure & investment.
In greater detail, these measures involve the strengthening of ASEAN framework for goods & transport facilitation, maritime shipping services, skills development & upgrades in logistics networks, collaborative ASEAN-wide certification & training centre development, stimulating private investments and private-public sector collaborations, among others. There has to be a “champion” to drive these strategic parameters, as growth of human capital takes time.
In summary and conclusion, these efforts can be guided by core “strategic parameters” expressed as upgrading:
1) Connectivity (better interfaced air/sea/ IT infrastructure & investment / taxation agreements)
2) openness (supporting globalisation, cultural infusion & cosmopolitanism)
3) reliability (secure and investment friendly practices)
4) enterprise (focusing on international enterprises, start-ups & enterprise growth)
