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2 Port Comparison1. Overview2. Description of the port3. Competitive advantageCountry levelFirm levelIndustry levelBoth countries adopt several trade agreements internationally and regionallyPut a high emphasis on regional and bilateral trade agreements Located in the center of ASEAN communities and is neighboring with Korea, China, Japan, and India (MOT 2015)Situated along one of the busiest shipping routes in the world, the Straits of Malacca connects the Pacific and Indian oceans.=> Ideal position as a logistics and transshipment hub for passenger and freight movement in region and beyond (Ramli and Shakir 2021)=> Not affected by USChina trade tension (MIDA 2021)=> Regional gateway of RECEP for Chinese companies to venture into ASEAN (MIDA 2021)4. Comparative advantage5. Operational challenges and recommendations
OMGT2321 GLOBAL TRADE OPERATIONS ASSIGNMENT TWO Table of contents Overview Description of the port Competitive advantage Comparative advantage Operational challenges and recommendations Tanjung Pelepas Port Location PTP is strategically located at the southern tip of the Malaysian peninsula, confluent with the busy east-west trade lanes that pass through the Strait of Malacca Port of entry to Asean and Asia-Pacific markets for the region History evolution The port became operational in 1999 and was officially launched in 2000 Within first 571 days, It handled 1M TEUs, creating a world record as the fastest growing port and Malaysia 1st container terminal supassed 1M TEUs Received the world's largest container terminal port of Mediterranean Shipping Company in 2019 Major shipping lines and box operators use the port for reliable, efficient, and advanced services, enabling shippers in Malaysia to connect to global markets in a convenient manner 02 Description of The Port Description Mode Intermodalism capabilities Key import The container storage facilities span 290 acres capable of storing million TEUs, more than 4000 reefer connections The port berths are served by 140 gantry cranes, 350 trailers, 45 post-Panamax cranes etc (Joshi 2022) The top imports are Integrated Circuits, Refined Petroleum, Crude Petroleum, Special Purpose Ships, and Broadcasting Equipment (OEC 2020) Infrastructure Invoice, packing list, delivery letter; leaflet, catalog or other related documents, insurance certificate, Bill of Lading/Airwaletter of credit; permit (ITA 2022) The most recent exports are led by Integrated Circuits, Refined Petroleum, Palm Oil, etc in terms of overall cost (OEC 2020) With an annual capacity of 12,500,000 TEU the Port of Tanjung Pelepas (PTP) is Malaysia’s most advanced container terminal (APM terminals n.d.) Key export Required documentation for import 03 Competitive Advantage Country level INTERNATIONALIZATION Both countries adopt several trade agreements internationally and regionally Put a high emphasis on regional and bilateral trade agreements Support local manufacturing and trading openness Increase competitive edge as a production base in the world market & attract more foreign direct investment (ITA 2022) Country level SCIENCE AND INNOVATION Malaysia Impressive successes over the past three decades: primary commodities to multi-sector economy (MOSTI and MASTIC 2021) Vietnam Production resource shortage and low quality, independent and outdated technology, bureaucratic and corrupt administration, and slow SOEs reform (Hien 2018) Country level MACROECONOMIC SOUNDNESS Malaysia Ranking Malaysia Vietnam GDP of USD $358.6B ranked the 37th $245.2B ranked the 47t GDP 5-year average growth 29th 17th GDP per capita 67th 138th Between 2010 - 2022, averaging GDP growth of 5.4% Vietnam Between 2010 2022, averaging GDP growth of 3.6% (World Bank 2022; Georank n.d.) Country level INFRASTRUCTURE Malaysia Prioritize infrastructure works in rural areas, including road maintenance and upgrade works Budget of US$20.43 billion for 2023 (Woof 2022) Vietnam 6% of its GDP on infrastructure while other countries in the region spend an average 2.3% Has a gap between its current infrastructure and its aspirations of being a fast-growing economy (Celina 2022) Country level INSTITUTIONAL SYSTEM Malaysia Vietnam Over the past years, Malaysia faced weak and unstable political system (Temjenmeren 2021) Politically stable countries in Southeast Asia Malaysia’s ruling parties will sign a coalition agreement to ensure greater stability (Kok and Anisha 2022) Its main aim is economic growth (GOV.UK 2021) SUMMARY International Science and innovation Macroeconomics soundness Infrastructure Institutional system Malaysia Vietnam - Both countries adopt international and regional trade agreements, reflecting the openness to trade - Vietnam exports performance is greater than Malaysia Updated technology, helping countries improving the production and trading Outdated technology, behind global leaders, ineffective production and trading - Strong economy background - Prospective and stable growth - Attract FDI => generating opportunities for trading - Weaker economy background - Less stable growth - Attract FDI => less opportuntites to grow than Malaysia Prioritize infrastructure works in rural areas, including road maintenance and upgrade works Spend more in investing infrastructure but less effective - Unstable political system - Ensuring greater stability - Stable political system - Strategic plan for economic growth Industry level Factor conditions Malaysia's logistics industry Strategic Location Located in the center of ASEAN communities and is neighboring with Korea, China, Japan, and India (MOT 2015) Situated along one of the busiest shipping routes in the world, the Straits of Malacca connects the Pacific and Indian oceans => Ideal position as a logistics and transshipment hub for passenger and freight movement in region and beyond (Ramli and Shakir 2021) => Not affected by US-China trade tension (MIDA 2021) => Regional gateway of RECEP for Chinese companies to venture into ASEAN (MIDA 2021) Vietnam's logistics industry Logistical advantage that comes from being located at the center of Southeast Asia and its proximity to China (Bhatla 2020) Long coast line close to many international shipping routes (Emerhub 2020) => Vietnam is an ideal export hub to reach other ASEAN markets (Nguyen and Mah 2022) => The strategic locations of the two nations are utilized by both to promote trade within the region and around the globe However, Malaysia takes advantages more than Vietnam, as evidenced by its prominent position as a transshipment hub in the global logistics sector Industry level Infrastructure Factor conditions Malaysia's logistics industry Existing top-notch infrastructure regarding extensive and well-linked transportation network: roads, hinterlands, airports, maritime and railways Huge investment in developing fully-equipped infrastructure such as East Coast Railway Line (ECRL) and KLIA Aeropolis (MIDA 2021a) => ensure efficient movement of cargoes and passenger => support international trade activities in Malaysia (MIDA 2021a) => providing an integrated, complete and synergistic ecosystem (MIDA 2021a; Aeropolis n.d.) Vietnam's logistics industry Ranks 71 (out of 201 markets) in transport network (scored 56.8 /100), with the limited extent and quality of network infrastructure (Vien Thong 2022) Not all logistics facilities are located near the ports and manufacturing hubs => Heavily congested, hinder movement of goods and service The government is putting funds towards building and improving expressways, airports, and ports such as Long Thanh International Airport and North-South expressway => In order to compete with regional players, both nations have made gains in funding infrastructure Malaysia, on the other hand, surpasses Vietnam regarding facilities, technologies, and connectivity thanks to its modern infrastructure Industry level Labor Force Factor conditions Malaysia's logistics industry Facing a shortage of qualified workers in logistics industry that could incorporate technical skills to operate newly adopted advanced technology (Wahab et al 2021; MIDA 2021b) CEMCA strategic plan (2021-2017 conducted upskilling blue-colour workers in logistics industry (CEMCA n.d.) => help employees migrate to new technological skill requirements and assist them feel more secure in IR 4.0 era (Wahab1 et al 2021) Vietnam's logistics industry Vietnam’s logistics HR are not only insufficient in quantity but also weak in quality (expertise and professionals) (VIRAC 2019) Among domestic enterprises, 93-95% of workers are not trained in logistics due to not many opportunities for staff to update their skills and professional knowledge (VIRAC 2019) => Challenge the logistics industry developement Limited HR training improvement => logistics enterprises are mainly selftrained (VIRAC 2019) => Although both of countries are lack of high-skilled labor needed for logistics industry, Malaysian government put more effort in enhancing and developing labor force than Vietnam => more chance to gain competitiveness regarding labor Industry level Rivalry and business policy Malaysia's logistics industry Vietnam's logistics industry Competitive Landscape Freight and logistics market landscape is fragmented with a large number of players (PMI 2022) => fostering competition and specialisation ( Adopting M&A trend to gain significant market share and rising demand (PMI 2022) => Expected to transform into a consolidated state in the future Operation licence requirements is high, => harmful to competition, high entry cost for new companies (especially for SMEs), discourage investments limited choice for customers (Bernama 2021) Transportation is (Nguyen 2022)in natur now seeing a lot of competition, including numerous SMEs and famous global companies like DHL, FedEx, and Maersk (Nguyen 2022) => Intense competition among domestic logistics companies and from foreign players (Nguyen 2022) => Adopt and encourage technology research and application in logistical activities => Leading to bottleneck due to fragmentation (Nguyen 2022) Both countries experienced high competition due to numerous SMEs in logistics sectors However, Malaysia gains more from competition by adopting more technology from big players Industry level DEMAND CONDITIONS A high level of customer needs is associated with logistics capabilities (Bowersox et al 1999) 57% growth of the Asian e-Logistics market in 2020-2025 due to the rapid increase in e-commerce => E-commerce is driving consumer demand => increasing demand for logistics Consumer demand Malaysia's logistics industry Vietnam's logistics industry Nearly 90% of Malaysian consumers have shopped online in the past six months (Global Data 2022) => The Malaysian freight and logistics market is expected to have a growth rate of more than 4% during the forecast period (2022 - 2027) (Mordor Intelligence 2022) Vietnam has the highest number of people shopping on ecommerce platforms in the Southeast Asia region at some 49.3 million (VNA 2022) => The fast-growing Vietnam e-commerce set high demand for e-logistics development, with an expected growth rate of 42% in 2018 – 2022 => Increasing demand for logistics and transportation activities in Malaysia and Vietnam => Compared to Malaysian consumers, delivery speed is a major factor affecting Vietnamese customer satisfaction and retention Industry level Logistics business demand DEMAND CONDITIONS Malaysia's logistics industry Higher demand from logistics businesses, especially large companies such as DHL, Tiong Nam, or Ceva to fulfill customer demands (Ken Research Private Limited 2022 => Revenues for these companies have grown 14% per year (Simply Wall 2022) Vietnam's logistics industry High consumer demand encourages traditional postal service providers such as VN Post, EMS, and Viettel Post to respond to the market by offering solutions for an online retailer and high operational capacity Many e-commerce focused delivery start-ups obtained significant financial support from investors like Giao Hang Nhanh (GHN); Giao Hang Tiet Kiem (GHTK); NinjaVan (Bhatla 2020) => Increasing port container capability and replacement for better port equipment (quay cranes + container handlers) to fulfill the high demand of customers and logistics firms from e-commerce platforms => However, Vietnamese logistics firms suffer higher logistics costs (6-12%) than Malaysian firms since e-commerce firms are forced to rely on cash on delivery (Bhatla 2020) => Compared to Malaysian e-commerce logistics, especially Vietnamese last-mile delivery firms have still been in the early stage of development; thus, haven’t met online retailers’ requirements for timely, reliable, and cost-efficient delivery Industry level ICT industry Related, supportive industry Malaysia's logistics industry The facility of smart logistics and warehouse also improved its storage and warehouse pick-up efficiency => Overall accuracy of 99% in sortation and parcel handling with lower management costs (MIDA 2022) PISM along with the throughput increase, the port also experienced a sharp decrease in ship‐waiting and stand‐by rate (Bagchi & Paik 2001) Vietnam's logistics industry Most Vietnamese businesses are still not fully aware of the need to invest in good logistics management compared to Malaysian businesses Vietnam has the poorest freight infrastructure since most of the seaports are not suited for loading and unloading because of lacking adequate technological equipment for loading and unloading products and telecommunications (Lang 2022) =>Vietnam’s poorer application of information technology to logistics infrastructure Firm level Tanjung Pelepas Technology innovation Organizing principles Influencing factor creation Digital roadmap AI technology & machine learning Smartrail System, Vessel Clearance Systems (VCS) Deploy artificial intelligence to boost efficiency and optimise scheduling The super post panamax quayside cranes A scanner that can tell the delivery truck the location and time to stop PTP has expanded terminal development plans and is building a new berth to add 3.5 million TEUs by 2025 Advanced training with top GE engineers and exchanges overseas at GE centres (Lloyd's List 2022; Finn 2022) Quy Nhon Automatic fee collection system e-Port model Terminal Operating System (TOS) software Improving the quality of corporate governance Reviewing and arranging of the use the workforce appropriately E- Port helps reduce many types of paperwork Plan to achieve a cargo clearance target of at least billion tons by 2020 and 1.2 to 1.6 billion tons by 2030 The development plan for the 2021-2025 period calls for an expansion of Quy Nhon Port to nearly 90 hectares (Binh Dinh province 2022; Vietnam Economic news 2022) 04 Comparative advantage HECKSCHER-OHLIN MODEL According to the H-O theory, countries will export goods that heavily rely on their abundant factor because of differences in their factor endowments Manufacturing parts and accessories for machines require high tolerance of precision in both quantity and quality to assemble machines accurately The labor need to manage part complexity in machine, and strict tolerances so require the labor have knowledge, and high skills to use tools and technologies to finish complicated parts => Ensuring right size, right shape, and material for separate parts and accessories of machine => Parts and accessories for office and auto data-processing is highly skilled-labor-intensive product MALAYSIA VIETNAM High-skilled labor force with tertiary education: 24.9% Semi-skilled laborforce : 62% Low-skilled labor force: 13.1% (HRM Asia 2022) => Malaysia is a skilled labor -abundant country Highly-skilled laborforce with enough expertise and working seniority: 11% Trained laborforce with degrees and certificates: 26% Low-skilled labor force: 63% => Vietnam is an unskilled labor-abundant country Based on H-O model, Malaysia has more comparative advantage to produce Parts and Accessories of office and auto data-processing machines 05 Operational challenges & recommendations Lack of Effective Coordination Challenges Lack of network connectivity between ports in Malaysia (Chen et al 2016) Lack of national strategy to coordinate the ports (Azhar 2019) Inconsistency and fragmentation among port parties Recommendations A coordinated policy for Malaysian ports including reducing excessive competition between them, coordinating development and allowing access to international players => increase shipping lines and transportation service , expand global liners to operate in city-state (Azhar 2019) Enhance infrastructure (road, railway), a range of modal options (Acciaro and McKinnon 2013) Low digitalization process Challenges Reason: ports adapt with new digital technologies, but people is the biggest asset for the port => Lack of skilled employees is the difficulty for port in digitalization process => High technology goes with high risk of security Recommendations Develop various digitalization platforms Empower and develop employees towards becoming a high performing, especially for the blue-collar staff to boost their performance and productivity workforce Digitize people as well as technology => Consistent productivity whilst improving the Port’s current performance ... (VNA 20 22) => The fast-growing Vietnam e-commerce set high demand for e-logistics development, with an expected growth rate of 42% in 20 18 – 20 22 => Increasing demand for logistics and transportation... billion tons by 20 30 The development plan for the 20 2 1 -2 025 period calls for an expansion of Quy Nhon Port to nearly 90 hectares (Binh Dinh province 20 22; Vietnam Economic news 20 22) 04 Comparative... ranked the 37th $24 5.2B ranked the 47t GDP 5-year average growth 29 th 17th GDP per capita 67th 138th Between 20 10 - 20 22, averaging GDP growth of 5.4% Vietnam Between 20 10 20 22, averaging