On Sept 17, the Port of Tanjung Pelepas (PTP), informed the Federation of Malaysian Manufacturers’ (FMM) Johor Branch that PTP intended to consolidate the containers cargo handling functions of Johor Port (JP) and PTP.
The purpose of this port consolidation would result in JP, located at the Pasir Gudang Industrial Zone, being dedicated to handling only bulk cargo while PTP would serve as a dedicated container port. The proposed consolidation would become effective on Jan 1, 2010.
FMM Johor expressed grave reservations on this proposed move, and consequently organised numerous dialogues and meetings, both official and unofficial, with manufacturers, the Transport Ministry (MOT), the International Trade and Industry Ministry (MITI), the Malaysian Industrial Development Authority (Mida) and officials from the public and private sectors including PTP.
As at this point in time, FMM has received no indication from PTP that the plan for the proposed move is being reviewed or dropped. FMM Johor wishes to reiterate that it strongly opposes the port consolidation plan for the following reasons:
1. Disruption of manufacturing operations - Manufacturers, especially those operating in the Pasir Gudang Industrial Zone, have over the years planned, organised and executed their operations on the basis of their close proximity and the availability of container services at the Johor port.
Such close proximity availed manufacturers the opportunity of speed and flexibility in operations. For many, the existence of a major port in the industrial zone was the main factor in their decision to set up manufacturing plants in Pasir Gudang. This self-reinforcing situation allowed both the port and manufacturers to thrive and grow.
Such a move to consolidate the ports and the resultant diversion in the handling of containers cargo from JP to PTP would cause serious repercussions and disruptions in operations for manufacturers not only in Pasir Gudang but also for manufacturers located in the Tampoi and Tebrau Industrial Estates.
2. Substantial increase in logistical costs - Currently manufacturers at the Pasir Gudang Industrial Zone enjoy cost effective haulage through quick access to JP covering between 5 and 10 km and approximately 15 minutes carriage time as compared to a distance of 70 km to PTP and carriage time of about 1½ hrs.
This would be discounting the greater time envisaged due to the congestion in PTP that is bound to occur. FMM Johor estimates that haulage costs are expected to double when taking into account the significantly higher port charges at PTP.
After factoring the expected increase in freight rates, the cost increase for the manufacturers would translate into potential losses amounting to millions of ringgit as well as time wasted. The sudden introduction of the Weighbridge Charges of RM7.50/- per container at PTP is unjust and this was never implemented prior to the rationalization.
3. Inadequate readiness at PTP
FMM Johor is of the view that PTP, at this point in time, is not ready for such a move, first and foremost because there are only two Main Line Operators (MLO’s) operating at PTP notably Maersk and Evergreen.
Shippers would in effect be denied the choice and the ability to meet buyers’ requests for specific shipping lines which may lead to serious disruptions in the global value chain that manufacturers have established over the years.
Currently only Maersk provides Less than Container Load (LCL) services at PTP but at a cost three times higher than JP. In addition, the requirements at PTP are more onerous as compared to JP.
For example, containers have to be at PTP 24 hours prior to the vessel sailing as compared with eight hours for JP, while the repositioning of containers at PTP also takes much longer than at JP thus impeding the JIT practice of manufacturers.
4. Cargo security - There are also concerns on the security of the high-value cargo and the transportation of dangerous goods through iso-tanks from Pasir Gudang to the Port of Tanjung Pelepas.
In conclusion, FMM would like to stress that many investors and companies have been assured over the years that JP would continue to expand and improve its facilities. FMM notes that as recently as beginning of September, 2009, JP assured manufacturers that it would continue to provide the full extent of its services to shippers.
Therefore any action by the port owners and operators to renege on these assurances will affect the credibility of the government and port authorities. FMM calls on the federal government to maintain the status of JP and ensure container operations in JP are continued. Manufacturers must be allowed to decide on their port of choice through market forces.
