Components of logistic services still poor in Sabah : Tan

KOTA KINABALU: Components of logistic services in Sabah such as courier services, road freight transport, sea transport services, shipping and forwarding agencies, cargo handling and stevedoring services, and port services have a poor record card each where efficiency and productivity are concerned, according to a study commissioned by the ministry of industrial development.

“Goods going in and out of Sabah have to rely on ships as a single mode of transport (other than by air), whereas in Peninsula Malaysia, shippers have additional choice of road and rail. Therefore, a model adopted is to compare that if there was a (hypothetical) rail transport to bring products from Sabah to Kuala Lumpur, how much would it cost as against sea freight,” Datuk Raymond Tan said, suggesting that the federal government looked into subsidising the difference.

There is a case for freight equalisation with rail given the long sea distance between Port Klang and Kota Kinabalu, which is equivalent to the rail distance between Bangkok and Johor Bahru. By sea, the rate for 20 ft container is RM2,499 as compared to by rail RM1,960, according to the consultant’s estimate.

“To achieve a lower cost of doing business in Sabah, it is important for us to trace back the source and why it costs so much in various levels of handling,” the minister of industrial development said.

This requires the private sector and people dealing with transportation to come up with the right strategy and response.

Tan said, “We need to improve our handling services. This area of human resource is important as any delay in port services add more cost to the shipper.”

There is a need to develop human resource capital in logistics and supply chain management disciplines by engaging with public and private training and institutions of higher learning.

As a consequence, most of Sabah’s supply chains are controlled by West Malaysia and other international trading partners, and therefore suffer from high cost and efficiency.

Where containerised traffic is concerned, the performance of all five ports in Sabah is considered below par.

The ports have not met their own targets in container handling rates and these delays imposed penalties to importers and exporters.

In addition, surcharges imposed on bunkering services and water supply by sister companies of Sabah Ports Sdn Bhd (SPSB) add on to logistics costs, together with arrangements involving the purchase and maintenance of port handling equipment.

The lifting capacity restrictions of material handling equipment in Sandakan Port imposes significant cost penalties to exporters in that region, in particular plywood exporters.

It is estimated that the logistics cost penalty to Sandakan-based plywood exporters amounts to RM45 million per year.

The monopolistic conduct of stevedoring services at the ports provides little incentives to improve performance.

It is suggested that the Sabah Ports Authority to closely scrutinise the culture, structure, conduct and performance of port and related services.

Exporters of Sabah produced or manufactured goods are disadvantaged by the lack of velocity to markets and high shipping costs as shippers that provided the shipping capacity had schedules and capacity that suited them.

This supply driven scenario did not make sound economic sense and stifled the economic growth potential of Sabah.

On this, the minister called for the full liberalisation of the Cabotage Policy with no restriction on callers to free up constraints on goods movements.

The report also reveals that lorry transport charges in the state are higher than the national average.

Lorry tonnage can be improved, said Tan.

The payload for general freight road transport operators needs to be increased from the current 20 tonnes to 28 tonnes for articulated vehicles.

The distance and routes compounded by more trips to haul the same cargo (due to low payload), more cost is added to the shipment.

For the lorry operator, cost inputs such as batteries and tyres are more expensive than in West Malaysia, more woes to his overheads.

The hilly landscape in Sabah means lower fuel consumption efficiency.

Moreover, due to the road conditions, the loaded cargo can only go on an average speed of 60kph compared to 80 kph in West Malaysia.

This would take longer trip time and time could be translated into money.

The poor condition of the main roads linking the state capital with the main regional towns of Sandakan, Lahad Datu and Tawau in the east and Kudat imposed congestion related cost on shippers.

The lower average speed (60 kph) incurred higher land transport cost and higher inventory holding costs on shippers.

Tan added, “We can improve infrastructure and roads to transport goods to ports. An allocation of RM62.38 million had been set aside under the 9th Malaysia Plan by the state government.”

Sabah is very much dependent on roads as a major means of internal transportation.

The state has a network of more than 6,000 km of sealed roads linking the major towns and another 9,825 km of gravel roads.

“The government is very much aware that sufficient and efficient road transportation network and system in the state is essential to provide a healthy business climate. Road construction and development is therefore a priority,” he said.