MARTEC 2012: Embracing Technology & Science to Power Business

1.0 INTRODUCTION
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The global business landscape is changing fast parallel to the advancement in technology which is ubiquitous and in mobile form. These advancements and new technology capabilities enable business transactions at fingertips 24/7 from any part of the world. The sophistication and integrated logistics solutions also make it possible for goods and products to be shipped, transported and delivered safely in the most efficient way. Air, sea and land transport have been integrated and mobilised to make global business borderless and seamless.
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In order for Technology and Science to be the catalyst for business development, continuous effort in research and development and the culture of innovation must be supported at various levels including at the varsities. The high demands for goods, product and services require business community to continuously come out with new ideas, innovate and modify existing systems, products and services in order to compete and capture the market share. Similar demands and needs in the maritime sector. Power your business with technology and science; innovate to ensure success in meeting the demand of the digital economy.
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This paper will firstly highlight the global and Malaysian economy standing and will focus on the discussion related to the Malaysian maritime industry in shipping sector, offshore support vessel, port and the challenges ahead. The paper will provide suggestions on the role of technology and science for the maritime industry to remain competitive and the role of the various agencies and varsities in research and development to create growth in developing the intellectual capital, continued profit and sustainability, setting trend and benchmarks to compete against the world best.

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2.0 GLOBAL AND MALAYSIAN ECONOMY

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The global economy is seeing recovery despite the Eurozone crisis with developed countries regaining growth at 2.4% to 2.8% and while emerging economies continue to drive global growth. It is expected that the global growth will be 3.5% in 2012 compared to 4.4% in 2011. China and India will lead the economy at 8% and 6.9% GDP growth respectively. They and the Asian economy will be the driving force in spurring of world economy navigating it out of recession. US is slowly recovering with 1.8% expected growth in 2012.

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The Malaysian economy is strongly moving out of the fallout of 2009 Global Financial Crisis. It is expected to grow at an average of 5% in 2012 and remain resilient against the global impact of the prolonged debt crisis in the Eurozone. The national economy expanded by 5.1% in 2011, down from 7.2% the previous year. As trading nation Malaysian economy will depend on our trading partners and 64.9% percent of our trade is with Asian neighbours. This insulates us in a way from the troubled European economy which account for merely 9.1% of our trade.

3.0 MALAYSIAN MARITIME INDUSTRY

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The importance of maritime industry in Malaysia hails from its trading nation status as well as its geographical strategic position along the Straits of Malacca. Our sea areas are four times the size of the land area and all our oil and gas reserve is from the sea. It contributed 19% to national GDB in 2009 amounting to RM 127 Billion. Our oil and gas industry is one of the most vibrant in South East Asia and among the pillar of our economy and technology quest.

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3.1 SHIPPING SECTOR

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MISC is the largest shipping company in Malaysia servicing national and international markets in oil and chemical tankers, LNG tankers and Offshore FSO and FPSO. The company recently divest its containers fleets succumbing to international liners business gloom. There are few more ship owners that actively served Malaysia shipping requirements such as Orkim Shipping, EA Technique, Johan Shipping, Semua Shipping, Global Carriers and Gagasan Carriers.

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Historically, the growth of Malaysian tonnage was phenomenal since 1970 but stagnated in 2009 in line with the global financial crisis. The growth was actually assisted by government’s fiscal and legislative measures including tax incentives and the introduction of cabotage policy in 1980. Currently, Malaysia was ranked top 25 maritime countries in the world but the current global shipping downturn will continue to affect our growth.

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As a trading nation shipping will remains a strategic industry that need to be protected and supported. Furthermore, Sabah and Sarawak separation by South China Sea from Peninsular Malaysia need the shipping to bridge the link. Transportation account to 4% of Malaysian external trade and 70% of costs are carried by foreign flag. Therefore, it is important to protect and grow Malaysian fleet to reduce the deficits and as security to transportation of energy products.

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The shipping industry is facing tremendous pressure since 2009 and does not seem to improve in near future. The poor freight market is caused by over supplied of vessels, poor demand, political and economical instability (Iranian factor, economic crisis in EU/US), high bunker price, weak US Dollar versus RM, high assets costs, raising operational costs and uneven playing field. It is known that China and South Korea provide bailouts and subsidies to protect their own shipping industry.

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Further challenges include facing highly regulated industry in terms of stringent post state control, new IMO regulations, ILO and charterers stringent requirements especially in oil and gas industry. Securing finance is more difficult now due to reluctance of bankers to finance due to poor market sentiments, absence of long term contracts, high risk business and high volatility of the shipping market. The shortage of technical employees for both offshore and onshore has also stressed the industry further.

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The industry is now undergoing consolidating stage with less number of players, polling arrangements, mergers and reduced number of new ship orders. It is our hope that the vibrant Malaysian economy and recovering global economy will finally translates to higher demands and freight for shipping.

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3.2 OFFSHORE SUPPORT VESSEL (OSV) SECTOR

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The OSV sector has been developing strongly for the past twenty years seeing more new players entering the market. The sector used to be dominated by foreign players but now controlled by Malaysians especially on smaller and less sophiscated vessels. The cabotage laws and PETRONAS Malaysianization policy has managed to strengthened Malaysian presence here. The stable market and charter hire has flourished this market and look like it’s going to be one of the dominant players in Malaysian maritime industry. The active PSCs contractors that been supporting the OSV sector includes PETRONAS Carigali, ExxonMobil, Shell, HESS, Talisman, PTTEP, Murphy etc. PETRONAS remains the driving force in prospering the Malaysian Oil and Gas industry with budget of RM 300 Billon for the next five years.

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Unlike its counter parts in shipping, the OSV sector did not benefit from tax free regime. Therefore, the corporate and personal income tax is heavy on the players and personnel serving this vessels. This will result less profit available to expand fleets in this capital intensive industry.

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The cost of finance with local banking institutions is also much higher compared to offshore foreign banking facilities. This will work to the disadvantage of local players which then have to offer their vessels at higher charter hire compared to foreign vessels. Since the oil majors did not give much long term contract it will be difficult for new players to secure finance for their new vessels.

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The OSV sector need to mature and start expanding business to international market instead of depending fully on Malaysian market. The good run at home must be used as leverage to develop fleet, expertise and global competitiveness. This lucrative sectors need to further developed to be among the stars in Malaysia maritime sector.

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3.3 PORT SECTOR

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As a trading nation, ports plays a vital role to ensure good gateways as well as facilitators to total logistics system. Ports also becoming one of the catalysts for economic growth. Malaysia due to its planning and development has managed to establish good ports all around the country. Among the main ports are Penang, Port Kelang, PTP, Pasir Gudang, Kuantan, Labuan, Kota Kinabalu, Bintulu, Kuching, Miri dan Sandakan. We have two Global ranking ports i.e. Port Kelang 13th and PTP 16th . Malaysia ports expected to handle 21 million TEUs in 2012. Bintulu is the world largest LNG Export Terminal and Pasir Gudang Port is the world largest palm oil export terminal.

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The latest major port development seemed to focus in Johor with the expansion of PTP ship berth, opening of oil terminal at Asian Tanks Terminal and development of deep water terminal at Pengerang. PETRONAS floating LNG Terminal at Sg Udang Port is ready for operations first quarter 2013 and similar terminal will be built at Pengerang and Sabah in the near future.

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At present, Malaysian major ports are doing well and competitive. Nevertheless, in facing future challenges and meeting changing trading patterns they need to stay abreast in serving the shippers needs.

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4.0 EMBRACING TECHNOLOGY AND SCIENCE TO STAY COMPETETIVE

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The maritime industry is also very much affected with the usage and development of technology and science. To stay abreast with the challenges and fast development in the business environment since two decades ago, all maritime sectors are embracing the technology to be current and meeting the demands.

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The followings are some of the examples:

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A) In the containers business the 3000 TEUs vessel which among the biggest in the 1980s , at present it looks like just a small feeder vessels to the 15,000 TEUs. The hub ports have to use different technology to handle the bigger volume and as such changed their cranes to be able to handle the latest container vessels. The changes goes all the way down the line in terms of documentation clearance, storage, distributions of containers meeting the door to door service expectation. Delays in ships arrival and operations is no more a tolerance nor acceptable to the industry.

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B) Similar technology changes happening in tanker, chemical, bulk and LNG vessels where vessels are nowadays fully automated with very much reduced crews. Gone were the days where a ship have 30 crews and lately manpower of 15 crews is considered luxury to handle VLCC and Mega Container Ship. This was all made possible due to the automation and mechanisation of most of the equipments including unmanned engine room which is controlled 100 percent by technology.

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C) As for the ship bridge gone were the days of celestial navigation and paper chart. The technology in use is SatNav and ECDIS, electronic chart display system that will assist you to navigate all the way across the pacific.

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D) The OSV also experienced some changes in meeting latest demands. Bigger and more powerful AHTS is required for deeper water exploration and development. DP becomes norm on AHTS/PSV to achieve precision and improve safety in operations.

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Thus, all these examples and many more show that we embrace the technology development as a way forward to stay competitive and relevant in the market. We must be able to integrate the right technology in our facilities, assets and operations to achieve superior performance. In order to move the challenge up another level, we must be ready to carry Research & Development in crucial areas. We must now not only navigate our business to success but must innovate along the way to stay ahead of competitors.

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5.0 USING RESEARCH & DEVELOPMENT TO CREATE GROWTH

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The similarity among developed and successful economies is that they are very advanced in Research and Development. They have a very clear plan and strategy to ensure the R&D is current, and will keep them abreast and ahead of others in the industry. This of course will give them the advantage of being the champion or leaders in the industry. All relevant resources are channelled to achieve the objective.

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The Malaysian government is very determined to improve our R&D standing by creating financial, facilities and policy support towards this. In fact four Universities have been recognised as Research University namely University Sains Malaysia, University Kebangsaan Malaysia, Universiti Malaya and Universiti Teknologi Malaysia.

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Research grants and funding have been established at relevant ministries to encourage R & D. Ministry of Higher Education established Fundamental Research Grant Scheme (FRGS), Exploratory Research Grant Scheme ( ERGS), Long Term Research Grant Scheme ( LRGS) and Prototype Research Grant Scheme (PRGS). Multimedia Development Corporation established MSC R & D Grant Scheme, MSC Pre-Seed Scheme, MAC3 Co pro Fund and MSC Intellectual Property Grant scheme. While Ministry of Science , Technology & Innovation provides Science Fund, Techno Fund, Inno Fund, eContent Fund, Industry R&D Grant Scheme. Malaysian Technology Development Corporation provides Commercialisation of R&D Fund, Business Growth Fund, Business Start Up Fund and Technology Acquisition Fund. There are many more grants and funding from other Ministry that facilitate R&D and its commercialisation . The Ministry of Higher Education budget for High Impact R&D stand at RM 1 Billion for 2013. The industry, universities and R&D institution must take full advantage of this financial and policy support given by the government and create greater economic growth within the maritime industry.

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 Although R&D in maritime industry has been known lacking in Malaysia but it should not be an excuse to let it drift away in importance. In fact, it is about time aggressive R&D activities being planned and carried out to take advantage of the various incentives given by the government in this areas.

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We have about 200 papers being presented in MARTEC 2012 and I am sure at least 50% of them are directly relevant to improve the industry or provide answers to issues facing the industry. There are so much time, energy, intellectual and money being spent to produce these 200 papers so let’s refer to these papers and the conference resolutions to further improve and assist the industry management, operations and process, and R&D. It is our hope that the R&D contributes to the following :

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1. Develop the intellectual capital in the Malaysian Maritime Industry

2. Focus on technology and innovations that ensures continued profitability and sustainability for the industry

3. Creates the culture of trendsetter and leaders

4. Ready to benchmarks and compete against the world best

6.0 CREATING CHAMPION FROM UNIVERSITY &BUSINESS PARTNERSHIP

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The university and industry partnership especially in the areas of R&D has shared some success stories but in reality we still have a long way to go. As for the maritime industry the university and industry collaboration is still in its infancy as there is no major breakthrough in terms of findings or inventions.

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As the saying goes if you not willing to change you be irrelevant in no times. In order to change for the better what more to be trendsetter you must do R&D in areas your business. Since R&D is a very expansive business in terms of expertise, resources, time and expenditure, the maritime industry in general must collaborate with the best suitors available. The University will be the perfect match. I would like to recommend that UTM should spearhead the collaborations with the shipbuilding and marine construction industry such as Boustead Shipyard, MMHE, NGV Tech and Labuan Shipyard. UMT can lead the collaborations between oil and gas and shipping industry such as PETRONAS, PSC Contractors, Sapura Crest, Kenchana Petroleum, OSV Operators, MISC etc. UITM may instead lead the partnership with the port and logistics industry. This partnership if planned and implemented well will definitely put the Malaysian maritime industry in better position in meeting global challenges. Lets this conference be the platform that facilitate the above partnerships, networking and knowledge sharing in breaking uncharted technology application.

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Plenary Paper for International Maritime Technology & Science Conference

20 to 23 Oct 2012 @ University Malaysia Terengganu

By Dato’ Capt Jaffar Bin Lamri FIK

CEO Centre of Maritime Excellence

jaflam@cme.net.my

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References:

-Disruptive innovation the way forward for high value adding economy by Shaifubahrim Saleh 2012 - Essence of ICT Roadmap 2012 for Innovation Driven growth by Dr Amiruddin Bin Abdul Wahab 2012

-The Role and Contribution of Logistics Sector as a Trade Facilitator by M .Aramugam

-Role of Maritime Education and Training by Capt. Razali Yacob

- Assessment of the contribution of the maritime industry to the Malaysian economy by Nazery Khalid 2012

- Malaysian Economic and Information Communications Technology Outlook by Woon Tai Hai & Dr Chin Yoong Kheong 2012

- Malaysian Shipping Outlook by Capt. Johari Mohd Noh 2012

- OSV Malaysia Outlook by Capt. Tasripin Masotee 2012

- Entrepreneurship in Global Economy by Dato’ Jaffar Lamri 2012

- Maritime Leadership Journey by Dato’ Jaffar Lamri 2011