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Business trends

Southeast Asian countries vie for port supremacy

China's 'Belt and Road' may tip balance from Singapore to newcomers

The Port of Singapore, the largest in Southeast Asia by cargo volume, is facing a stronger challenge from regional rivals.   © Reuters

SINGAPORE -- The Port of Singapore has long been the unchallenged leader among marine transport hubs in Southeast Asia, but that may be changing  as it suffers slowing growth  in container traffic growth and nearby ports in Indonesia and Malaysia gain ground.

One driver of the shift is manufacturers' efforts to disperse production around the region. The tussle recalls a similar fight in the 2000s between Hong Kong and mainland Chinese ports.

The Port of Tanjung Pelepas in the Malaysian state of Johor has emerged as a major challenger to Singapore. The port's operating company in mid-November announced it has installed four new cranes measuring 55.5 meters in height. The tallest such cranes in the region, they make it easier to haul large cargo loads from ships to the dock.

In a statement, Dato' Sri Che Khalib bin Mohamad Noh, chairman of the port, boasted that the facility was the most advanced in the region.

Tanjung Pelepas, which opened in 2000, surged to 19th worldwide in terms of container traffic volume in 2016, thanks in part to its location just an hour's drive from Singapore, which remains Southeast Asia's main business center. Its cargo handling fees are also significantly lower than Singapore's. According to one person familiar with developments, momentum is building to shift more marine transportation from Singapore to the Malaysian port.

Singapore has long had the upper hand. Located on a key shipping route between Asia and Europe, the port gained an early edge by developing an efficient customs clearance system and transshipment capabilities.

Rival ports nearby lacked the space to accommodate large vessels, and their cargo handling was nowhere near as efficient as in Singapore. That helped cement the city-state's position as a transshipment center, sending goods made elsewhere in the region on to their final destination.

Singapore sinking?

But Singapore's days as the undisputed king of shipping look numbered. Last year it handled the equivalent of 31.68 million 20-feet containers, putting it at No. 2 worldwide, behind the Port of Shanghai. But according to the United Nations Conference on Trade and Development, the 2016 figure was just 8.6% higher than in 2010, a small improvement considering that worldwide volume grew 27.6% over the same period.

During that period, the value of traded goods in Southeast Asia rose more than 11% as manufacturers shifted production from China in response to higher labor costs in that country. Container traffic volume in Indonesia jumped 53.7%, while that of the Philippines and Vietnam were both up by more than 40%.

Singapore's nearby rivals captured much of the growth in traffic. They have been upgrading their facilities with modern equipment to smooth transportation for manufacturers that have relocated, eliminating the need for transshipment out of Singapore.

China's investment in Indonesia, Thailand and Malaysia through President Xi Jinping's signature Belt and Road Initiative could also disrupt Singapore's strategic strength and position.

All to play for

Another key contender in the competition is Indonesia, which accounts for 40% of the region's gross domestic product. It plans to spend $3 billion to develop a port in West Java Province, 100km from Jakarta. The area has an industrial park where many companies, including Toyota Motor, operate.

The goal, again, is to establish a hub that will create routes bypassing Singapore.

In Vietnam, there is a $1.06 billion project in the northern city of Haiphong to build a port with twice the depth of the country's current main port, allowing large ships to dock. It is scheduled to be partially open as early as 2018. The project is financed by official development assistance from Japan, and a Japanese trading company, Itochu, will help with the port's operation.

The Port Authority of Thailand plans to spend over $2.5 billion through a public-private partnership to expand a port in the eastern coastal province of Chonburi, increasing its capacity 130% by 2022.

The competition Singapore is facing mirrors that seen by Hong Kong in the early 21st century. Hong Kong long served as the main maritime gateway to China and the world's top port for container traffic. But its was overtaken by Shanghai in 2007 and now ranks below Shenzhen and Ningbo as well. The shift in cargo traffic away from Hong Kong was prompted by the industrialization of southeastern China, which later spread throughout the country.

The rising profile of other ports in Southeast Asia may herald the end of Singapore's long reign in the region. The city-state is fighting back with an expansion of its own and efforts to further improve efficiency. It has begun work on a central port facility -- which some complain is too narrow -- and a project to build a new facility near an industrial park in western Singapore. The city-state's total cargo capacity is expected to rise 50% versus the current level when the first phase is completed in the first half of the 2020s.

In a Facebook post on Oct. 16, Singapore's Prime Minister Lee Hsien Loong said the new port "will strengthen our international maritime hub. We must do all we can to keep the path ahead smooth sailing!"

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