Bangkok--13 Jan--Frost & Sullivan
The Malaysian logistics industry is expected to grow 10.3 per cent to RM129.93 billion in 2012 as compared to an estimated RM117.8 billion a year ago, due to strong government support on logistics-related development and economic growth fuelled by foreign investments in the country, says Frost & Sullivan.
Mr. Gopal R, Vice President, Transportation & Logistics Practice, Asia Pacific and Country Head for Malaysia at Frost & Sullivan said that Malaysia's strategic advantage due its geographical location and focus on improving supply chain efficiency will also drive growth in the logistics industry.
He added that external trade for Malaysia is expected to increase 5.9 per cent to RM1.32 trillion in 2012 as compared to RM1.24 trillion in 2011. "Growth of the country's external trade signifies the growth of the transportation and logistics industry especially for import & export forwarding, air freight and ocean freight-related businesses," Mr. Gopal said.
He noted that foreign direct investments (FDIs) surged to RM21.3 billion in the first half of 2011 as compared to RM12.1 billion in the corresponding period in 2010, reflecting the growing investors' confidence following the Government's initiatives to stimulate economic growth.
"The introduction of several initiatives such as the Government Transformation Program and the Economic Transformation Program provided a conducive business environment for the logistics market to grow," Mr. Gopal said.
He added that Malaysia's major trading partners are Asian countries, which are expected to experience stable economic growth. He also said that electrical & electronic products, chemicals, palm oil, machinery, appliances & parts are key trading commodities for Malaysia.
"However, share of trade with Japan and Thailand is expected to shrink due to supply chain disruptions and production slow down following disasters in the respective countries," Mr. Gopal said.
He added that logistics service providers which are able to leverage their integrated network to offer alternative solutions and help clients maintain the distribution flow, can tap into the growth opportunities from new clients.
The Malaysian logistics industry is forecast to grow at a compound annual growth rate (CAGR) of 11.6 per cent to reach RM203.71 billion in 2016, Mr. Gopal said.
Sea dominating more than 90% of total freight traffic, rail gaining significance
Mr. Gopal forecasts Malaysia's total cargo volumes to increase 10.1 per cent to 545.13 million tons in 2012 as compared to 495.29 million tonnes in 2011. "Sea-freight is the most favored mode of transport for cargoes in Malaysia, handling more than 90 per cent of total freight traffic in 2011," he said.
Mr. Gopal said that total cargo volume by sea is expected to grow 10.1 per cent to 538 million tons in 2012. He added that Port Klang, Malaysia's busiest container port, contributed 39.2 per cent of total sea throughput in 2011 while Port of Tanjung Pelepas contributed 22.7 per cent.
"With strong growth in the nine months to September 2011, Johor Port is likely to overtake Penang Port in terms of cargo volume handled by end of 2011," he said, estimating Johor Port's market share to total sea throughput at 6.7 per cent as compared to Penang Port at 5.9 per cent.
Cargo volume by rail is expected to increase to 6.2 million tons in 2012 as compared to 5.9 million in 2011. "Rail has sustained positive cargo volume growth over years and can be a significant differentiator for Malaysia to position as a supply chain hub."
Mr. Gopal is predicting cargo volume by air to grow 3.9 per cent to 925,000 tons in 2012. He said that steady growth in the economy and external trade will contribute to the growth of air cargo volume in 2012, adding that Kuala Lumpur International Airport contributed about 74.8 per cent to the total cargo volume by air in 2011. "Air Cargo volumes should aim to cross the 1 Million Mark to ensure the infrastructure facilities as well as supporting supply chain functions are fully leveraged. This is very critical for the overall industry growth as well."
Key industry trends
Mr. Gopal said that freight forwarding, transportation, and warehousing services will remain as the main revenue stream for logistics service providers as these key functions are most likely to be outsourced by logistics end users. He added that value-added services such as information management and vendor management are likely to be outsourced more in the future.
He also said that logistics end users are increasingly looking for capable logistics service providers to help them in better inventory control and information management.
Mr. Gopal also believes that sustainability and healthcare will be the focus areas for the logistics industry in Malaysia in 2012.
He advises logistics service providers to co-ordinate sustainable logistics practice in a way that meets customer requirements at minimum cost such as transport modal shift to lower CO2 emission and utilize the warehouse rooftop area to install solar panels under the feed-in tariff (FiT) scheme implemented by government.
He also see logistics service providers continuing investing in building green warehouses which are built in a way to fully optimize the usage of natural light, advanced air circulation to maintain a constant warehouse temperature and systematic rain harvest system.
Mr. Gopal said that the Government's plan to develop Malaysia into a medical devices hub in Asia Pacific under Healthcare National Key Economic Areas (NKEAs) is expected to increase spending in the healthcare logistics segment.
Mr. Gopal foresees logistics service providers in Malaysia to focus on specialized logistics solutions for specific industries such as healthcare and pharmaceutical segment in the future as compared to basic services currently.
Logistics end-users are also expected to centralize their supply chain needs as compared to the current trend of engaging multiple logistics service providers for different logistics requirements.
He added that in the near future, logistics companies are expected to implement advanced technology across supply chain to improve visibility and traceability at part level than just management of transportation assets.
Mr. Gopal said that consolidation will be a growth driver for the industry and this would help in transforming the fragmented industry to be a strong economic growth driver for Malaysia.
Mr. Gopal emphasized that the National Key Economic Areas under ETP will deliver opportunities for the Logistics Industry through development of hubs across the identified industry segments like Oil, Gas & Energy, Electrical & Electronics, Retail, Healthcare and Agriculture; capture values from upstream and downstream segments of Energy and Palm Oil; drive wholesale, retail and tourism sector to enhance demand for goods and services and develop national and international distribution hubs in the country. Logistics Service Providers need to build capabilities to address this impending requirement of the Malaysian Economic Contributors.
Sasikarn Watthanachan | Corporate Communications, Thailand | Frost & Sullivan
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