KUALA LUMPUR: Malaysia’s logistics sector is set to benefit from the full opening of intra-Asean borders once several land transport and logistics agreements are ratified by member countries by the end of this year.
Once the agreements are ratified and enforced, it would benefit consumers and businesses as costs could be reduced as land transport is cheaper than shipping and air freight, said Ministry of International Trade and Industry’s Asean Economic Cooperation division senior director P Ravidran.
The agreements include the Asean Framework Agreement on the Facilitation of Goods in Transit, signed in December 1998, the Asean Framework Agreement on Multimodal Transport, signed in November 2005, and the Asean Framework Agreement on the Facilitation of Inter-State Transport, signed in December 2009.
The opening of the borders under the Asean Economic Community (AEC) could help grow intra-Asean trade to 30% to 35% from 24.2% in 2013 and logistics is key to effecting that growth.
“Logistics is very important because we are looking at expanding intra-trade. Like I said, intra-trade at the moment is about 24%. We would like to see intra-trade grow and reach 30% to 35%. In the European Union (EU), for example, intra-EU trade is 70%.
“If you allow for facilitated movement of vehicles, you can reduce cost. As a result, you can save consumers money,” Ravidran told the press at a roundtable discussion on the impact of the Asean Free Trade Agreement on the trucking industry yesterday.
Nippon Express (M) Sdn Bhd general manager Billy Tee believes logistic companies can save on operating costs once the borders are opened up. Nippon Express recorded a revenue of RM50 million in 2014 and is looking to increase its revenue by 10% this year.
Presently, as Malaysian trucks cannot cross the border to Thailand, the company had set up an operating office in Padang Besar to receive and dispatch cargo between the two countries, which is the main cost of the company’s operations here.
“We have spent more than RM10 million to set up our border operations. We have 80,000 sq ft of warehouse to cater to such an import and export. That commitment in our expenditure actually draws us back.
“It takes years for us to recover but we had to do that. Otherwise, we would be unable to do the volume we are doing now,” Tee said, adding that the investment was made five years ago.
Commercial vehicle providers such as the Scania Group are looking forward to the integration of the region, particularly in boosting the demand for trucks.
“We are gearing towards doubling the growth [of truck demand] in the next five years. If there are any significant changes with the progression of the AEC in the coming years, we’ll move to support that,” said Scania Southeast Asia sales director for truck and engine Roslan Effendi.
While the logistic sector is looking forward to the agreements to come into force, challenges remain on the harmonisation of rules and regulations of the 10 Asean members, the establishment of common guidelines and procedures, the upgrading of the skills set of truck drivers, and more.
Other panel members of the roundtable are Goodway Integrated Industries Bhd group strategy manager Tai Qi Sheng and Asian Trucker magazine editor Stefan Pertz.
This article first appeared in The Edge Financial Daily, on January 15, 2015.