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Nazery Khalid Senior Fellow, MIMA National Shippers Conference 2009

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Trade transport policies : Issues, challenges and opportunities for shippers. Nazery Khalid Senior Fellow, MIMA National Shippers Conference 2009 Petaling Jaya, - 19 November 2009. Presentation outline. Importance of trade transport policies Drivers of changing trade transport policies

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Trade transport policies : Issues, challenges and opportunities for shippers

Nazery Khalid

Senior Fellow, MIMA

National Shippers Conference 2009

Petaling Jaya, - 19 November 2009

presentation outline
Presentation outline
  • Importance of trade transport policies
  • Drivers of changing trade transport policies
  • Trends in trade transport policies
  • Issues in trade transport policies
  • Challenges to enhance business and trade competitiveness
  • Opportunities for shippers arising from trade transport policies
  • Conclusion
about mima
About MIMA…
  • Policy research institute under the Ministry of Transport Malaysia.
  • Established in 1993 under the PM’s Dept.
  • Conducts policy research on maritime matters for the Government and industry, undertakes selected consultancy project.
  • Covers maritime economics, ocean law and policy, Straits of Malacca, maritime security, maritime environment.

Importance of trade transport policies

‘Global division of labor’ renders logistics as key in determining prices of goods.

Changing production trends i.e. Just In Time (JIT), zero inventory requires good transport policies.

Demand for multimodal / door-to-door transport requires overhaul of port-to-port transport systems.

Business- and trade-friendly transport policies are key to reduce inventory, lower cost, increase efficiency of delivery of goods.

Good transport policies can contribute to protect environment and public interests.


Why change transport policies?

Creating level playing field in business as a basis to establish ‘economic democracy’.

Enhancing efficiency and competitiveness of businesses and nations.

Encouraging investments and innovation.

Improving flow of supply chains and distributive trade to boost trade volumes.

Coping with rising trade volume.

Encouraging economic growth.

Improving quality of environment, society, life.


Percentage of time spent to export goods *










*Study by JETRO (2006) for ASEAN Logistics Network Map focusing on seven intra-ASEAN trade routes




Percentage of cost incurred to export goods *










*Study by JETRO (2006) for ASEAN Logistics Network Map focusing on seven intra-ASEAN trade routes



drivers of changing transport policies
Drivers of changing transport policies
  • Globalization and liberalization of trade.
  • Advent of ICT.
  • Focus on economic growth.
  • Growing concern over security and safety of trade.
  • Pressures from NGOs, media, society for transport to be conducted in a fair, equitable & sustainable manner.
  • Rising awareness of corporate social responsibilities.
  • Rising oil prices and cost of transportation infra/assets.
  • Changing dynamics and emergence of new thinking on competition, service reliability.

Trends in trade transport policies

Introduction of rules against cartels, market controls and restriction of competition i.e. by way of price fixing, capacity reduction.

Integration of supply chains.

Greater degree of containerization.

Increasing sharing of information in transport industry i.e. exchange of information system among European Liner Affairs Assocn. members.

Privatization of transport entities & operations.

Increasing bilateral & multilateral cooperation.


Trends in trade transport policies

Increasing integration between transport modals in the carriage of goods.

Tightening of Cabotage Policy to protect local interests.

Liberalization of transport services, either unilaterally or regionally (i.e. initiatives in ASEAN and EU).

Shift towards regulatory regimes in countries with dominant state-owned entity in transport.

Greater focus on environmental and social issues.


Issues in trade transport policies

Trade transport policies slow to adopt to changing world and social values.

Negative effects of liberalization of transport & logsitics services / free trade agreements.

Lack of regional / multilateral agreement on transport services liberalization.

Unequal treatment of trade in services by WTO - transport sector is not protected against subsidies in GATT unless linked to exported goods.

Nations still protective of their transport sector.


The shipping industry experience

Carriers impose various charges to shippers i.e. terminal handling charges (THC), bunker surcharge, peak season fee, currency adjustment fee etc. on grounds of rising costs and dwindling margins.

Shippers say these charges are made unilaterally and are unreasonable and unjustified. Some say the charges are monopolistic and illegal.

Calls to abolish THC resulted in governments stepping in to restore order i.e. passing of anti-trust law in China.

us rail transport experience
US rail transport experience

More cargo pouring into overloaded US rail network prior to recession as West Coast ports i.e. LA, Seattle were overloaded.

Now, there are excess inventories due to falling consumer demand and inefficient supply chain.

Railroads struggled to keep average train speeds.

Clogged railways threatening JIT production and zero inventory operations of US companies.

Worries over breakdown of intermodal transport : railway problems can adversely affect ports.

US Congress considering bill to encourage double tracking and upgrading of railway facilities.



Malaysia’s haulage sector experience

Growth in seaborne trade in Malaysia in the 1990s led to port congestion and slow delivery of goods to markets.

There were 4 haulage operators in 1991. The small number of players were blamed for the delay in clearing containers at ports.

The Government liberalized the sector in 1997, leading to too many players servicing a small market.

While efficiency has improved, there are concerns over poor service, overcapacity and price wars.


ASEAN transport initiatives

ASEAN frameworks for rules / regulations to facilitate intra-regional trade :

- ASEAN Framework Agreement on the Facilitation of Goods in Transit

- ASEAN Framework Agreement on Multimodal Transport

- ASEAN Agreement on the Recognition of

Commercial Vehicle Inspection Certificates for

Goods Vehicles and Public Service Vehicles Issued by ASEAN Member Countries


Transport initiatives in SEA region

Singapore’s open-sky agreements with US, Cambodia, Laos, Myanmar, Vietnam.

Air service agreement among ASEAN members.

Indonesia’s and Philippines’ liberal policy towards foreign carriers in the early 1990s.

Thailand’s liberalization of domestic air transport in 2002.

Malaysia’s liberalization of haulage industry in 1997.


EU transport initiatives

White Paper on EU Transport Policy for 2010 spells out 60 measures to develop a European transport system capable of :

- shifting balance between transport modes

- revitalizing railways

- promoting sea & inland waterway transport

- controlling growth in air transport

Various transport research initiatives under EU Transport Research i.e. Greening of Transport (road), Clear Sky (air).


Concerns on transport liberalization

Private sector dictating terms favorable only to business interests while ignoring corporate social responsibility, accountability and transparency.

Unregulated competition, monopoly by state- owned entities, distorted pricing, price wars, unfair cross-subsidization, overcapacity, abuse of dominance.

Marginalization of local transport service providers.

Too much interference of governments in commercial decision making.

impact of inefficient transport policies to businesses
Impact of inefficient transport policies to businesses

Less-than-load carriage of goods.

High costs of moving goods across supply chains.

Delivery of goods / flow of information punctuated by delays and bottlenecks.

Choking flow of intermodal transport of goods, hence frustrating multimodal transport.

High inventory levels, high holding / managing costs.

Prolonging order cycle and product cycle.

Hampering JIT production & lean supply chain.

Slowing down response time to market demands.


developments in carriage of goods introduction of rotterdam rules
Developments in carriage of goods : Introduction of Rotterdam Rules

UNCITRAL Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea or Rotterdam Rules (introduced on 23 Sep 2009) .

More expansive and inclusive than Hague-Visby and Hamburg Rules which govern cargo liability regime.

Rotterdam Rules outline rights & obligations in carriage of goods via seaborne transport to include rights of controlling party, transfer of rights, jurisdiction and arbitration.

Focus on protecting interests of developing countries.


benefits of good trade transport policies for shippers
Benefits of good trade transport policies for shippers

Facilitating setting up manufacturing bases with competitive production costs, easy access to materials and good transport connectivity to attract investments.

Enabling access to one-stop, integrated and specialized logistics services.

Boosting linkages with efficient supply chains hence enabling them to tap into larger markets.

Fostering integrated, end-to-end supply chain solutions

Enables JIT production via door-to-door transport.


benefits of good trade transport policies for shippers1
Benefits of good trade transport policies for shippers

Optimizing product planning to enable production and inventory to be kept at the right levels.

Enabling businesses to meet customer demands and to be responsive to changing market dynamics.

Improving forecasting of demand and supply to avoid less-than-load shipments.

Reducing costs of delivery of goods, warehousing, inventory keeping, paperwork, labor etc.

Fostering partnerships, collaboration, sharing with vendors and among parties along supply chains.


challenges to enhance business and trade competitiveness
Challenges to enhance business and trade competitiveness

Working at reducing / eliminating wastage and inefficiency that can be detrimental to business, trade, society and environment.

Aligning processes, systems and business philosophy to facilitate sharing of resources and data to optimize supply chain efficiency.

Allocating / raising funds to undertake R&D to develop better, more innovative logistics solutions.

Developing human capital to meet sophisticated increasingly complex demand for trade transport.


opportunities for shippers arising from good trade transport policies
Opportunities for shippers arising from good trade transport policies

Extending reach of markets.

Shifting bigger volumes more efficiently.

Adapting international best practices and adhering to international standards in their respective industries.

Inculcating good business ethics.

Promoting business practices based on sustainable development principles.

Aligning company growth with national agenda.

Reducing costs & delivery time along supply chain.


opportunities for shippers arising from good trade transport policies1
Opportunities for shippers arising from good trade transport policies

Sourcing out materials / parts from the cheapest sources anywhere, anytime and at favorable costs.

Being close to vendors, suppliers, business partners.

Producing on JIT basis & keeping lean supply chains.

Optimizing inventories and transportation load.

Attaining economies of scale.

Freeing capital and resources to focus on R&D and improving products / services to customers.

Fostering strategic alliances.


  • Trade transport policies must keep abreast of changes in transportation, ICT, industries, businesses, production, supply chain management, market structures.
  • The policies must be made in consultation with the stakeholders and must balance business needs and society’s demands and expectations.
  • The policies must facilitate, not frustrate; foster, not hamper; aid not complicate; help not hinder business and trade.
  • End-to-end, multimodal transport and integrated logistics services cannot happen without agreeable trade transport policies.
  • Good trade transport policies enable businesses / nations to buy from anywhere, make products anywhere, and sell anywhere.
  • With good transport policies, shippers can optimize supply chain to gain competitive edge.
  • Business- and trade-friendly trade transport policies are a primer to business and trade competitiveness, efficiency & productivity.

“Manage change or

change management!”