This article first appeared in The Edge Malaysia Weekly on February 5, 2018 - February 11, 2018

WESTPORTS Holdings Bhd, the operator of Malaysia’s busiest port terminal in Port Klang, has grown by leaps and bounds in the last 22 years, becoming the nation’s load centre and one of Asia’s premier transhipment hubs.

A facility built on marshland, Westports has been synonymous with one man — Tan Sri G Gnanalingam, a marketing maestro credited with turning around Radio Televisyen Malaysia back in the 1990s.

Since 2009, his son Ruben has been helming the group, first as its CEO and now as its group managing director. While he has been managing Westports successfully, it will still be remembered as the legacy of his father.

But now that the government has agreed  in principle to a second concession for Westports, Ruben will be able to prove his mettle by overseeing the expansion and development of one of the world’s biggest ports.

However, the port industry today faces challenges that are different from those of 20 years ago. Surmounting these obstacles would be Ruben’s top priority as Westports2 is developed over the next 20 to 25 years.

“There are definitely a lot less clients than before. As you know, the container shipping industry has been consolidating, which has resulted in fewer players,” he tells The Edge in an exclusive interview.

“Consolidation removes inefficiencies and sometimes, the inefficiencies of the container shipping companies are what ports capitalise on. So now that there is a lot less inefficiency in the market, competition for services is getting tough.”

Indeed, Westports had a difficult 2017 when it lost some of its services to Ocean Alliance — a container shipping alliance made up of CMA CGM SA, China COSCO Shipping Co, Overseas-Orient Container Liners (OOCL) and Evergreen Line.

After the alliance was formed in April last year, Westports was chosen as the secondary hub in Southeast Asia with 11 services, compared with 20 for PSA Singapore. As a result, Westports’ container throughput in 2017 dropped 9% year on year to 9.05 million twenty-foot equivalent units (TEUs).

In the meantime, Westports completed its Container Terminal 9 (CT9) wharf, which increased its capacity to 14 million TEUs. This means its facilities are under-utilised.

Ruben sees the port’s container throughput growing by a low single digit this year. A 5% increase will give Westports a volume of 9.5 million TEUs — lower than 2016’s 9.95 million TEUs but nonetheless signalling a return to normalcy as the impact of the formation of shipping alliances fades.

However, at 9.5 million TEUs, Westports would be operating at less than 70% of its capacity. According to Ruben, at its current capacity of 14 million TEUs, Westports can comfortably handle 12.5 million TEUs without any congestion on the seaside.

“I think generally we can quite easily absorb new services that come along but in terms of how, with these things that have happened with the container liners, they have to decide what makes sense to their operations.

“So far, it is clear that Ocean Alliance requires two hubs while THE Alliance requires a single hub. Apart from that, inter-Asia services will continue to grow; we are getting a lot of them,” says Ruben, adding that container throughput will start growing again from July.

THE Alliance is the third biggest container shipping alliance after 2M and Ocean Alliance, consisting of Japanese liners Nippon Yusen Kaisha Line (NYK), Mitsui OSK Line (MOL), Kawasaki Kisen Kaisha Line (K Line), and Hapag-Lloyd and Yang Ming Marine Transport Corp.

The new concession will see Westports2 housing 10 container terminals, contiguous with the current terminals. While the terminals will share the same facilities as those of Westports, they will be parked under a different concessionaire.

At maximum capacity, both Westports and Westports2 will be able to handle 30 million TEUs compared with only 14 million at the current facility.

The concession for Westports has been extended for another 30 years, until 2054, and its terms will be finalised after the port completes the technical, geographical and other studies, says Ruben.

However, more terminals alone will not attract mainliners to start new services at the port. Westports has to find ways to increase its crane productivity and minimise downtime due to accidents or poor weather.

Automation is one way to accomplish this, using unmanned ship-to-shore cranes and terminal tractors — technologies that have been deployed in some terminals in Singapore, Shanghai and even the Port of Tanjung Pelepas in Johor.

New port, new strategy?

Between 2001 and 2016, Westports’ container throughput grew at a compound annual growth rate of 36% to 9.95 million TEUs. Much of the growth was fuelled by transhipment containers.

Last year, however, throughput dropped to 9.05 million TEUs as container shipping lines formed alliances. The port lost much of its business from its biggest client CMA CGM while its second biggest client, United Arab Shipping Co (UASC), was taken over by Hapag-Lloyd.

“The mergers and acquisitions led to alliance changes, so the effect did not come from just one party but from the changes in the alliances. For example, UASC does not exist anymore; this effect cannot be played down either.

“CMA CGM is our biggest client and people are ‘overweight’ on the impact it brought. But you have to look at the overall impact of the fact that the Ocean 3 alliance does not exist anymore. That is the biggest impact,” says Ruben.

The 2M Alliance, which consists of the largest and second-largest container shipping lines, namely Maersk Line and Mediterranean Shipping Co (MSC), uses the Port of Tanjung Pelepas and the Port of Singapore as its hubs in the region.

The Ocean Alliance, which was formed in April last year, has been using the Port of Singapore and Westports as its hubs in Southeast Asia.

To Ruben, the changes in the alliances inevitably cost Westports its business from the Ocean Alliance as it has a bigger container volume, which the port cannot handle. A secondary hub status was all it could muster.

“Their cargo is so big that we can’t be their primary hub anyway, as much as we want to. We can’t handle all the services. We and Northport combined cannot handle all the services. So the best that we can take on is a portion of it, and I think that is what we got,” Ruben says.

But now that Westports has a bit more space, can it attract THE Alliance to use it as its hub in Southeast Asia? Some pundits do believe the alliance might choose Westports as its primary hub in the region.

Ruben does not discount the possibility, given that each of the member liners has intra-Asia services with Westports. Hapag-Lloyd, with the merged operations of UASC, uses Westports as a hub for one of its Middle Eastern services.

One of the reasons PSA Singapore and PTP have managed to remain the primary hubs for mainliners is the partnership model the port operators enter into with the container shipping companies.

For example, APM Terminals, the port operating arm of the A.P. Moller-Maersk group, owns 30% of Pelabuhan Tanjung Pelepas Sdn Bhd, the operator of PTP. Maersk Line is a subsidiary of A.P. Moller-Maersk, a Danish conglomerate.

Meanwhile, PSA Singapore has entered into partnerships with various mainliners, including China COSCO, MSC and CMA CGM. In fact, the partnership with CMA CGM is one of the reasons the Ocean Alliance chose PSA Singapore as its primary hub.

While there is currently no arrangement for partnerships with mainliners at Westports, it is something that the port operator cannot ignore. With the opportunity for new working arrangements being created at Westports2, dedicated terminals can be evaluated, says Ruben.

The son’s turn

When asked how different his management and leadership style will be from his father’s, Ruben unabashedly says much of it will be the same as he learnt a lot from the elder Gnanalingam.

“I might have gone to various schools and educational institutions but most of my education in business comes from him. As a result, our styles are obviously very similar,” says the 41-year-old.

What may differentiate his leadership style from his father’s is that the latter relied a lot more on intuition when it came to decision-making while Ruben utilises statistics.

“This is because I started in an era when statistics were in abundance while he came from an era when gut feel was all you needed because there wasn’t much statistics,” he says.

Be that as it may, Westports cannot be the same kind of organisation built by the elder Gnanalingam — it has to move with the times. In this aspect, an area that Westports can look at is the deployment of unmanned technology in its port operations.

According to Ruben, it is more appropriate to consider automation from the design stage of the terminal. The existing terminals at Westports have been designed to employ workers in order to operate effectively and efficiently.

“Nevertheless, we regularly evaluate the possibility of automation to enhance Westports’ overall operational efficiency, cost effectiveness and EHS (environment, health and safety) parameters,” says Ruben.

Port technologies are being developed rapidly, so much so that Shanghai’s Yanshan Port can be operated totally unmanned. PSA Singapore has also deployed unmanned terminal tractors to ensure more efficient operations and minimise accidents.

On the subject of change, Ruben says the key to making an organisation last is evolution, and the only constant in this world is that things will change.

“We always tell people to embrace change. I tell my top management team that even as leaders, you have to evolve with the times, technology and market. All these factors keep changing.

“We have our own styles but we must make sure that our style keeps evolving. And if you can’t evolve for the company’s needs, then you must step aside. If I find somebody who can do this job better than me, I would be happy to step aside,” he concludes.

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