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Logistics Development in Malaysia East Coast Region: Infrastructure, Constraints and Challenges

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Logistics Development in Malaysia East Coast Region: Infrastructure, Constraints and Challenges International Journal of Trade, Economics and Finance, Vol. 4, No. 5, October 2013 Logistics Development in Malaysia East Coast Region: Infrastructure, Constraints and Challenges A. A. Zuraimi, Mohd Rafi Yaacob, and Mohamed Dahlan Ibrahim more than half of Peninsular Malaysia. The ECER's Abstract—This paper examines the current logistics population of about 3.9 millions represents 14.5% of the total development in the East Coast Region of Peninsular Malaysia. population of Malaysia. Five economic clusters have been Malaysia as well as other developing countries are still at the identified as key focal points for development in the ECER moderate stage in developing logistics systems and often face such as i) Tourism, ii) Oil, gas and petrochemical, iii) considerable challenges and constraints to provide efficient and effective logistics service. This research is based on survey Manufacturing, iv) Agriculture and v) Education. In order to conducted in the region. The respondents were from the fast track the setting up of ECER Master Plan, the East Coast different logistics players and stakeholders. Altogether there Economic Region Special Economic Zone (ECER SEZ) has were 41 usable questionnaires were analyzed. In general the been launched which covers the 6 key economics drivers results reveal logistic players satisfied with the current logistics such as high-value manufacturing; agro-based industry; oil, infrastructures in the region. However, further analysis found gas and petrochemical; tourism/real estate; organizations that have been operated more than 10 years neither satisfied nor dissatisfied with the current logistics knowledge/education & information, communication and infrastructures. In addition this study found a couple of technology (ICT); and logistics [2]. constraints and challenges in the logistics industry and amongst With regards to logistics, it has assumed a very prominent them were professionalism in supporting the development, skill role as it provides the backbone of economic growth in the of manpower and financial issues within organizations deal with region and to facilitate international trade to tap available logistics. opportunities of booming economy of neighbouring countries and the Far East. It is one of the key service Index Terms—Challenges, constraints, infrastructure, offerings required in the business environment today and a logistics development. driver of growth in developing economies. As it has being one of the catalysts for the development of industrialization in Malaysia, the performance of this industry will have an I. INTRODUCTION impact of the nation’s industrialization and its East Coast Economic Region (ECER) was established by competitiveness in international trade. Thus, the existence of the government of Malaysia as one of Malaysia economic conducive logistics development in this region helps the corridors within the East Coast Region (ECR). Apart from expansion of the above mentioned industries. Indeed, the ECER, there are four others regional economic corridors in improvement of logistics systems in ECR can provide a Malaysia namely; Iskandar Regional Development Authority foundation for further economic development and integration (IRDA), Northern Corridor Economic Region (NCER), within the areas of the region. Sabah Development Corridor (SDC) and Sarawak Corridor Notwithstanding with the importance of efficient and of Renewable energy (SCORE) [1]. The purpose of ECER effective logistics systems, however, there has been very establishment is to effectively transform the under-developed little published research in the area in Malaysia and other region into a major international business activities as well as developing countries; resulting very limited information to beef up local business activities, covering the exporter of could be gathered on the patterns of logistics development in natural resources based and a small extent of manufactured the recent years. The importance of efficient logistics for products, a vibrant trading centre, and an infrastructure and trade and growth is now widely acknowledged. Therefore, in logistics hub. In terms of geography, ECER is strategically light of the above, the objectives of this paper are: i) to located; it is near to booming areas of Vietnam, Thailand, examine the current logistics infrastructures in the ECR, ii) to Cambodia as well as China. Thus, the ECER has the potential find out the constraints and iii) to know the challenges in to become the main gateway for trade and industry within the logistics development. Asia Pacific region [2]. The ECER covers the whole coastal areas in Peninsular Malaysia, involves the states of Kelantan, Terengganu and II. LITERATURE REVIEW Pahang, as well as the district of Mersing in Johor. With an A. Logistics Infrastructure area measuring more than 66,000 sq km, the ECER covers The development of logistics infrastructure has been a key factor in trade integration [3]. It would be a fundamental Manuscript received June 20, 2013; revised August 25, 2013. This work factor in the operation of logistics networks through was supported by the Universiti Malaysia Kelantan under the Short Grant integrating of maritime, air and land transport mode. Research Scheme. Furthermore, logistics infrastructure would be important to The authors are with the Faculty of Entrepreneurship and Business, Universiti Malaysia Kelantan, 16100 Kota Bahru, Kelantan, Malaysia the country attractiveness in terms of attracting potential (e-mail: [email protected], [email protected]). investor from both domestic and international to set up new DOI: 10.7763/IJTEF.2013.V4.310 325 International Journal of Trade, Economics and Finance, Vol. 4, No. 5, October 2013 or expand its business activities. In developed countries, Electronic Data Interchange (EDI) pricing and charges due to ports, and especially the logistics platform have played an in transparent marks-up by freight forwarders, lack of follow important role in facilitating the trade activities. This is up actions after certain meetings or issues raised, lack of because most of global trade involves maritime traffic and it sophisticated management techniques among the supply requires integration between maritime and road traffic as well chain companies, and overall performance and functionality as rail transportation. For example, Germany as reported by of the system, lack of skilled and trained manpower, no [4] has been one most attractive location for distribution single established source of logistics data and information centers. Germany has an excellent road systems, waterways including lack of information of the industry players, and rail networks, an extensive network of freight villages facilities, services and capabilities of the sectors, lack of and intermodal facilities includes rail-road, water-road, research and development of the industry, lack of regulatory water-rail-road equipped with rolling road terminals; forms to facilitate the industry, and lack of dissemination of airports, seaports and inland ports. information with regard to the development and expansion of However, the developing countries including Malaysia are the logistics industry. still struggling in providing the sufficient logistics A study conducted by [5] in China, it was found that infrastructure. For example, infrastructure capacity in China human resource is one of the constraints where the demand is unbalanced although strong exports in past two decades for talent outstripped supply in the logistics industry. have stimulated the infrastructural development in China Logistics cost also the constraints as the proportion of the important coastal regions [5]. Despite the increase in logistics cost to total production cost is estimated at 20-30% highway length in the country, the rate of increase in highway in China, compared to only 10% in the developed countries length is generally much slower than the rate of increase in [11]. Other major logistics barriers in China included; the highway freight volume [6]. With regards to Malaysia, lack of responsiveness and dependability of local suppliers, especially in the West Coast of Peninsular Malaysia, major inadequate communications infrastructure, complicated and Malaysian ports have both road and rail access but the quality time-consuming customs procedures and the unavailability of the connectors need to be improved [7], [8]. of logistics consulting services [12]. The most developed industrial areas in the ECR are Even in Singapore which is far ahead of other Asian Pahang and Terengganu. Both states supported by two ports countries faces some constraints in transport and logistics i.e. Kuantan Port and Kertih Terminal; and one supply base systems in term of high cost of operations (especially land which is Kemaman Supply Base (KSB). In these areas, rental and wages), small geographic space and domestic logistics systems play a very crucial role to ensure that the market, industry was fragmented and lacks scale with very businesses run smoothly, especially for import and export few global players with global aspirations, instances of lack activities. However, Kelantan is lagging behind the both of logistics clusters, lack of responsiveness of customers’ areas, is now developing the industrial areas such as the needs, shortage of skilled, experienced and entrepreneurial supply base and soon to be a seaport in operation namely logistics professionals and inadequate technological Portokbali which was launched in March 2012 to capabilities
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