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The Asian Journal of Shipping and Logistics 32(3) (2016) 127-137

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The Asian Journal of Shipping and Logistics

Journal homepage: www.elsevier.com/locate/ajsl

Malaysian Container Seaport-Hinterland Connectivity: Status, Challenges and Strategies

Shu-Ling CHENa, Jagan JEEVANb, Stephen CAHOONc

a Senior Lecturer, Australian Maritime College, University of Tasmania, Australia: Email: [email protected], (Corresponding Author) b PhD Candidate, Australian Maritime College, University of Tasmania, Australia: Email: [email protected] c Director, Sense-T, University of Tasmania, Australia: Email: [email protected]

A R T I C L E I N F O A B S T R A C T

Article history: This paper adopts a qualitative methodology to assess the Malaysian container seaport-hinterland Received 3 Feburary 2016 connectivity from the perspective of its physical properties. The findings reveal that although Received in revised form 30 August 2016 ’s major container seaports are connected to the hinterlands through road and rail Accepted 1 September 2016 transport, they are highly dependent on road. These seaports are also connected to inland freight

facilities such as dry ports and ICDs, which are positioned as transit points to help connect Keywords: Malaysia exporters and importers in the hinterlands to seaports as well as facilitating regional and cross- Hinterland Connectivity border trades. This paper suggests that the quality of hinterland connectivity of Malaysian container Container Seaports seaports could be improved by implementing strategies which tackle the existing challenges Inland Facilities including overcoming an extremely imbalanced modal split, insufficient rail capacity and limited train services, increasing road congestion and the limitations of space restriction in some inland facilities.

Copyright © 2016 The Korean Association of Shipping and Logistics, Inc. Production and hosting by Elsevier B.V. All rights reserved. Peer review under responsibility of the Korean Association of Shipping and Logistics, Inc.

1. Introduction

To increase trade for a nation, it is necessary to develop trade corridors A seaport’s hinterland may be captive or contested and can impact on that integrate ‘the seaport system in a multi-modal transportation network seaport competition. For example, Rodrigue and Notteboom (2006) in order to improve market access, fluidity of trade and the integration in argued that the overlapping hinterland area usually creates marginal an industrial network’ (Merk and Li, 2013, p.21). Therefore, for a seaport competition where seaports and terminals battle with each other using to be well connected to its hinterland there must be the availability of differential corridors, costs and services. They further explain that a efficient transport infrastructure, a range of modal options, and reliable seaport’s competitiveness lies in achieving regional accessibility in freight services connecting seaports and hinterlands (Acciaro and McKinnon, distribution and improving hinterland accessibility and inter-modal 2013). efficiency. The hinterland accessibility influences seaport competitiveness

http://dx.doi.org/10.1016/j.ajsl.2016.09.001 2092-5212/© 2016 The Korean Association of Shipping and Logistics, Inc. Production and hosting by Elsevier B.V. All rights reserved. 128 Malaysian Container Seaport-Hinterland Connectivity: Status, Challenges and Strategies because the higher the accessibility of an individual seaport, the more logistical perspectives. The macro-economic hinterland perspective is a potential customers and suppliers that can be reached (Cullinane and function of transport demand, representing a set of logistical sites with Wang, 2009). Nevertheless, hinterland accessibility relies on hinterland some focusing on production and consumption, while the physical connectivity, a key container seaport selection criterion for seaport users hinterland perspective relates to the transport supply that considers the (Wiegmans et al., 2008). network of modes and terminals connecting the seaport and hinterland. Globalisation has helped countries in South East Asia (SEA) improve The logistical hinterland perspective however, is more focused on how their trade performance. The Association of Southeast Asian Nations trade flows are organised while considering the existing macro-economic (ASEAN) (2014) reported that the average annual growth rate of overall and physical setting. Modal choice in combination with maritime and ASEAN trade was 9.2% during the period 1993 to 2013. The fast pace of inland freight distribution synchronisation tends to be the main issues increase in trade in this region has resulted in a growing volume of from the logistical hinterland perspective. Accordingly, the seaport- containers being transported through various transport nodes in hinterland relationship is not only related to physical transport networks hinterlands of ASEAN, with a substantial capacity of transport but also to global supply chain networks, which involves different actors. infrastructure and services being required to assist seaports meet the As a result, the supply chain management concept could be a useful demand for the container trade (UNESCAP and KMI, 2007). Similarly, means of managing seaport hinterlands (Notteboom and Rodrigue, 2007). Malaysia as one of the countries in ASEAN, has also had significant Connectivity refers to the ability of linking the nodes in a network to international trade performance as indicated by an average growth rate of one another. Rietveld (1995) argued that the quality of transport networks 9.6% during the period 1993 to 2013 (Department of Statistics Malaysia depends on both the features and how the links are connected; hence 2015). This was reflected in an impressive increase of container trade suggesting that attention should be paid to the cost and quality aspects of from 900,000 TEUs in 1990 to 20.8 million TEUs in 2013 (MOT 2014). interconnectivity. De Langen and Sharypova (2013, p.98) further The significant growth is due to the strategic location of Malaysian described the connectivity of transport networks as ‘an attribute of a seaports being between the Indian Ocean, Pacific Ocean and South China network that indicates whether it is possible to reach all nodes from all Sea. The three major container seaports of Port , Port of Tanjung other nodes’. Pelepas (PTP) and Port are the backbone of the Malaysian Seaport connectivity is a sub-network of the transport network with international trade and economy. With the potential for increasing interdependent components including the hinterland, seaport and foreland; container volumes evident in these seaports, there is greater pressure on the connectivity is what captures seaports’ ability to manage flows the seaport sector to improve hinterland connectivity so as to efficiently between the foreland and the hinterland (Pafioti et al., 2014). Hinterland and effectively facilitate container cargo flows from the foreland to connectivity of container seaports, which is the focus of this paper, is of hinterland. importance to a container seaport’s competitiveness. Of interest, there is This paper analyses Malaysian container seaports’ connectivity with no specific definition of seaport-hinterland connectivity in the literature. their hinterlands and explores their challenges and the implications for Therefore, this paper applies the definition of transport network strategies. Connectivity is measured from a dimension of physical connectivity by De Langen and Sharypova (2013) and maritime properties including transport connections i.e. rail and road and the connectivity by Merk and Li (2013), to describe seaport-hinterland linkage with inland freight facilities. Data for analysis were mainly connectivity as a network with a collection of transport infrastructure and collected through relevant literature including government statistical data, services enabling containers to be transported to and from seaports. and reports from the United Nation Economic and Social Commission for Within the network, the seaport has the central role that connects with Asia and the Pacific (UNESCAP). In addition to secondary research, other other transport nodes in the hinterland. This involves connectivity data were obtained through interviewing container seaport operators, between physical infrastructure, institutions and people in the network seaport authorities, rail operator and intermodal terminal operators in Malaysia. (Bhattcharyay, 2012). In the following section, this paper discusses the hinterland connectivity Development of seaport-hinterland connectivity contributes to regional of container seaports including its concept and measurement. Section 3 economic development and sustainability by reducing transportation costs, explains the hinterland of Malaysian container seaports and analyses trade improving quality of the goods and services and facilitating intraregional performance and container flows of major container seaports, followed by trade and investment (UNECE, 2010). Efficient transportation linkages to the measurement of the seaports’ hinterland connectivity in terms of its the hinterland will also contribute to the integration of those physical infrastructure in Section 4. Section 5 discusses the implications geographically disadvantaged areas and thus wider increased economic for strategies, and section 6 concludes the paper. activities (Bhattcharyay, 2012).

2. Hinterland connectivity of seaports and measurement 2.2. Measurement of seaport-hinterland connectivity 2.1. Seaport-hinterland connectivity The extant studies on seaport connectivity measurement tend to From a seaport perspective, its hinterland is an area containing the extensively focus on foreland connectivity (Pafioti et al., 2014), see for majority of export/import related businesses, which cannot be delimited example Wilmsmeier et al. (2006), Wilmsmeier and Hoffman (2008); because hinterlands differ in terms of time, distance, transport mode and Wilmsmeier and Sanchez (2009), Wilmsmeier and Martinez-Zarzoso commodity (Notteboom, 2008). Market dynamics in trade, supply chain (2010), Marquez-Ramos et al. (2011), and Cullinane and Wang (2009). In and logistics systems may impose challenges to seaports to maintain a addition, the Liner Shipping Connectivity Index (LSCI) is published by static hinterland (Notteboom, 2008). Considering such market the United Nations Conference on Trade and Development (UNCTAD) to development of seaports, Notteboom and Rodrigue (2007) reassessed the measure a country’s connectivity to maritime shipping and trade seaport-hinterland relationship from macro-economic, physical and facilitation. As for the hinterland connectivity measurement, there is Malaysian Container Seaport-Hinterland Connectivity: Status, Challenges and Strategies 129

relatively limited research due to the unavailability of data (Pafioti et al., (MIMA, 2015). These seaports underpin Malaysia’s economy by 2014). In addition, there is no international standard for measuring connecting the maritime network and the inland transport system. Of hinterland connectivity although a few indices appear to be in use, such as importance, , PTP and Penang Port are the nation’s most the Logistics Performance Indices (LPI), Trading Across Borders Indices dominant container ports. Figure 1 indicates the location of major seaports and the Enabling Trading Index, each of which have some measures in Malaysia. linked to hinterland transport, for example efficiency of costs, time and Penang Port is located in the northern region of peninsular Malaysia transport infrastructure (UNECE, 2010). In the academic literature, there and geographically close to . It serves as the main gateway for are only a few studies related to port-hinterland connection and its shippers in the northern States of Malaysia and also the southern performance such as De Langen and Chouly (2004), De Langen (2008), provinces of Thailand (Penang Port, 2015). There are several industrial De Langen and Sharypova (2013), Acciaro and McKinnon (2013). Of estates in northern Malaysia using Penang Port as their main gateway for note, Pafioti et al. (2014) considered both foreland and hinterland export and import, such as , Padang Besar, Pengkalan connectivity and proposed an integrated methodology to measure seaport Kubor, Prai, Mak Mandin, Kulim, and Bayan Lepas (Federal Department connectivity resulting in a seaport connectivity index that required further of Town and Country Planning, 2013). testing. Port Klang is strategically located in the central region of peninsular Acciaro and McKinnon (2013) suggested that the hinterland Malaysia consisting of , Negeri Sembilan and Malacca, and is connectivity of seaports can be measured by the density of inland about 40 km from the capital city and of proximity to the transport networks, the accessibility to key industrial and logistical centres commercial and industrial hub of the country as well as the country’s most (measured by transit time and transport costs), the range of modal options populous region such as , Bukit Jalil, , and available to carriers, the capacity of the main corridors, and the reliability Subang (Chai and Im, 2009). The seaport also serves the trade corridor to of deliveries across the hinterland. Meanwhile De Langen and Sharypova Southern Thailand. (2013) developed an indicator to measure a seaport’s intermodal PTP is located in the southern region of peninsular Malaysia and connectivity, using the data from a number of inland nodes, connected to a adjacent to the Port of . It is situated on the eastern side of the seaport with weekly rail/barge connections provided by 26 European mouth of the Pulai River in South-West (PTP, 2015). Although seaports. Kunaka and Carruthers (2014) argued that the availability of transshipment is its core activity, PTP handles small volumes of imported transport connection with seaports and the capacity of inland facilities commodities and exported commodities (MOT, 2013). Its hinterlands where seaports are linked are important for assessing seaport-hinterland include Industrial Park, , Iskandar Region, connections. Nusajaya Tech Park and Jurong in Singapore (MITI, 2013). The availability of transport connections, in particular the existence of a modal shift from one mode to another, such as seaports to dry ports or industrial zones may affect the competitiveness of the product in the market (Wisetjindawat et al., 2007). The inland transport facilities linked to seaports, for example container freight stations and dry ports, will benefit customers in terms of service, which includes time and cost (Kunaka and Carruthers, 2014); and their capacity should have the ability to accommodate a large amount of containers and efficient transport connections through road and rail to destinations (Roso, 2008). In summary, it appears that physical properties of the seaport-hinterland network are the basis of the measurement of seaport-hinterland connectivity. These include seaport-hinterland transport connections, modal options, and inland facilities. In addition, reliability measures such as the frequency of transport services connecting seaports and inland Fig. 1. Location of Malaysian container seaports nodes, time and costs are also used. Accordingly, this paper investigates Source: Adapted from Federal Department of Town and Country Planning (2013) the hinterland connectivity of Malaysian container seaports focusing on the physical properties of the seaport-hinterland network. Table 1 shows the container traffic of the three major container seaports between 2009 and 2014. Port Klang handled 10.95 million TEUs in 2014, which is about 50% of the total nation’s container traffic of 22.37 million 3. Malaysia container seaports and their hinterlands TEUs (MOT 2015). The main operators of Port Klang, West Port and North Port, contributed 67% and 33% respectively to the total throughput More than three quarters of Malaysia’s total land is open to maritime (Salisbury, 2015). PTP is recognised as an ideal container seaport for water and this geographical landscape justifies the importance of the global and regional transhipment, handling about 8.23 million TEUs, maritime industry for the nation’s economic growth. With a geographical accounting for 36.8% of the nation’s total container traffic (MOT, 2015). advantage, the maritime industry in Malaysia has been extremely Penang Port, which is an important container hub for the - important since the 1970s (Third Malaysia Plan, 1976). This is evident by Malaysia-Thailand Growth Triangle, handled 1.27 million TEUs (PPC, the volume of cargo handled increasing from 23.1 million tonnes in 1980 2015). It accounted for 5.7% of the total container traffic. to 539 million tonnes in 2010 (Tenth Malaysia Plan, 2011). The major Table 2 shows the container flows of each container seaport in 2014. seaports in Malaysia include Port Klang, Penang Port, Johor Port Port Klang was the only seaport with slightly more import containers including PTP, Kuantan Port and Bintulu Port. Others such as Lumut Port, (17.9% of its total containers) than exports (17.7%). This is due to the Sabah Port, Kuching Port, Rajang Port and Miri Port are regional seaports seaport being close to the capital city and the populated region which 130 Malaysian Container Seaport-Hinterland Connectivity: Status, Challenges and Strategies demands more imported consumption goods. PTP and Penang Port were The rail service links the Malaysian seaports, that is, Port Klang and the only ports that handled more export containers. Of note, among the Penang Port both have railheads with the ICDs at Lat Krabang in Thailand three seaports PTP handled the highest transhipment containers (94.3%) through the border crossing of Padang Besar (UNESCAP, 2013). but the lowest imports (1.7%) and exports (3.9%). This is evidence that Expected benefits gained from this so-called a landbridge service are just PTP is positioned as a transhipment hub in the region. Penang Port had the least in time (JIT) delivery, simplification in documentation procedure and transhipment containers compared with 64.3% in Port Klang and 94.3% in PTP. lower unit transport costs (UNESCAP, 2012). However, this service is hardly used because of the poor condition and shortage of locomotives Table 1 faced by SRT, and hence the majority of cargo travels from the nearby Container Traffic in Main Malaysian Container Seaports (2008-2014) provinces of Thailand by truck to the border of Malaysia and then % of the total Port 2009 2010 2011 2012 2013 2014 container traffic transfers to Penang Port through the rail network (UNESCAP, 2013). As a /Year in 2014 result, the number of landbridge train services has been reduced to two per Port 8.4 8.77 9.42 9.22 10.35 10.95 48.9 Klang month from an average of four to six per month (Mahendran, 2014), and PTP 5.68 5.73 7.28 7.02 7.63 8.23 36.8 Penang the volume of cargoes transported decreased from 216,000 tons in 2004 to 0.94 0.95 1.17 1.14 1.21 1.27 5.7 Port 19,000 tons in 2013 (MITI, 2013). The inefficiency of the landbridge train Source: Adapted from MOT (2015) service resulted in the imbalance of transport modes used by Malaysian seaports as well as the Malaysian-Thailand border and underutilisation of Table 2 the inter-regional multi-modal opportunities between the two countries 2014 Container Flows of Three Major Malaysian Container Seaports (UNESCAP, 2012). Flow (TEUs) / Port Klang PTP Penang Port Seaport Import 1,962,431 143,887 563,557 (17.9%) (1.7%) (44.5%) Export 1,942,773 322,792 594,255 (17.7%) (3.9%) (47%) Transhipment 7,040,600 7,765,434 107,900 (64.3%) (94.3%) (8.5%) Total 10,945,804 8,232,113 1,265,712

Source: Adapted from MOT (2015)

4. Performance of seaport-hinterland connectivity

This section provides discussion on how hinterland connectivity of Malaysian major container seaports is measured in terms of physical infrastructure (Bhattcharyay, 2012), including the availability of transport networks to hinterlands and linked inland facilities.

4.1. Rail transport connections

The total railway route length in Malaysia is about 1,641 km. By 2013, about 80% of railway lines were single-track and 20% were double-track with a maximum speed limit of 70 km per hour (UNESCAP, 2013). However, the double-track railway network was increased to 774 km Fig.2. Malaysia’s Railway Network (47%) after the completion of the electrified double track project in Ipoh- Source: Adapted from UNESCAP (2015) Padang Besar in November 2014 (ASEAN-Japan Transport Partnership,

AJTP, 2015). Railway lines use metre-gauge (narrow gauge) which limits Although the existing Malaysia rail network connects container the ability of providing the double-stack container service (Malaysia seaports and hinterlands, it is not well utilised. This is evidenced by a low Freight Transport, 2012). Figure 2 shows the Malaysian rail network share of rail freight of containers of about 2% (Table 3). As shown in which is operated by the only operator - the Malaysian Railway Limited Table 3, the number of containers shipped by rail in 2013 was 343,395 (KTMB). TEUs, which is a slight increased from 302,736 TEUs from 2004. Importantly, Padang Besar-Johor Baharu rail is part of the Singapore- However, the percentage of the total container freight decreased to 1.6% Kunming Rail Link network. The rail network has the main catchment of in 2013 from 2.7% in 2004. The extreme imbalance of modal split in land industrial area such as Ipoh, and connects transport nodes freight transport creates challenges to seaports’ hinterland connectivity as such as major container seaports (Penang port, Port Klang and PTP) and a result of road congestion. four dry ports located near Padang Besar, Ipoh, Seremban and Segamat. The three container seaports all provide a train service of six trips per day connecting to other nodes in the hinterland. Each train service is able to 4.2. Road transport connections carry 64 TEUs per trip which is lower than the world average capacity of 66 TEUs per trip (Woodburn, 2011). The road network in Malaysia covers about 210,658 km, of which 79% According to the joint Traffic Agreement 1954, alandbridge train is paved and 1,969 km are expressways (PWD, 2014). The road network service operates between KTMB and the State Railway of Thailand (SRT). covers three sub-networks i.e. Malaysian Federal Roads System, Malaysian Container Seaport-Hinterland Connectivity: Status, Challenges and Strategies 131

Malaysian State Roads System and Malaysian Expressways System dividers and traffics lights, caused by the heavy load of freight vehicles. In (PWD, 2014). The North-South Expressway (846 km) links the Thai particular, the State government is unable to undertake upgrading works border and Singapore and connects to major industrial areas and seaports; due to the heavy congestion in the city, which is similar in Port Klang. it covers about 81% of population and 89% of GDP in Peninsular In summary, each container seaport has a road network to its Malaysia (Masriq, 2012). The Malaysian road system facilitates almost 80% hinterlands, however, the quality of connections requires improvement. In of the nation’s freight logistics task (Masriq, 2012). The major container addition to the issues of high congestion and the heavily used road seaports Penang Port, Port Klang and PTP are close to the main cities of infrastructure as discussed above, the high number of road accidents in the Penang, Klang and Johor respectively, and these cities are the most congested area, especially close to main seaports, is another problem congested regions in Malaysia. affecting the quality of road connectivity. For example, MOT (2013) reported that in 2013 there were 199,551 accidents in Selangor and Kuala Table 3 Lumpur (nearest city to Port Klang), 64,600 cases in Johor (nearest city to Containers Carried by Rail and Road (2004 -2013) PTP) and 39,391 accidents in Penang. The main reasons for the accidents Year/TEUs Rail % Road % Total TEUs include hauliers that bypass expressways or highways and use roads not designed for freight vehicles; overloading of trucks to reduce costs, 2004 302,736 2.7 11,038,535 97.3 11,341,271 leading to the deterioration of the roadway, rutting, fatigue cracking, and 2005 310,011 2.6 11,735,902 97.4 12,045,913 in certain cases structural failure (creating a vulnerable situation for 2006 339,037 2.5 13,129,611 97.5 13,468,648 motorcyclists, bicyclists and pedestrians); and less capability of handling the extra heavy commercial vehicle in emergency situations (Karim et al., 2007 333,688 2.2 14,837,208 97.8 15,170,896 2013). All these existing problems of the Malaysian road network will 2008 203,939 1.3 16,072,493 98.7 16,276,432 affect the efficiency of road connection between seaports and their 2009 266,722 1.7 15,592,424 98.3 15,859,146 hinterlands and impact on the level of container dispersion and concentration at the promised time, which may reduce the level of 2010 238,251 1.3 17,935,543 98.7 18,173,794 attractiveness of seaports (Notteboom, 2008). 2011 282,352 1.4 19,696,354 98.6 19,978,706 The fact that Malaysia heavily relies on road transportation for the land

2012 331,870 1.6 20,224,855 98.4 20,556,725 freight logistics task has a significant environmental impact on communities, such as noise and vibration by freight vehicles (Hanaoka & 2013 343,395 1.6 20,532,923 98.4 20,876,318 Regmi, 2011). Similar to other developing countries, the very high share Source: Adapted from MOT (2014) of road freight over rail in Malaysia is highly related to energy consumption, pollution, congestion and delays, thus affecting the Penang Port is connected to the North-South and East-West highways. competitiveness of the seaports (Wilmsmeier et al., 2014). The main issues faced by this port is the high traffic volume and congestion in the city centre, narrow road widths and many one way routes (Aziz & Mohammad, 2013, ASIRT, 2015). These issues have 4.3. Linkage with inland freight facilities become major constraints on seaport-hinterland connections. In addition, the first was the only connection to the Penang Island other The container seaport system could be better connected if inland freight than ferry. Freight hauliers were unable to use ferries to the mainland facilities are included to connect stakeholders in the supply chain through because of the limited capacity of ferry. The bridge has a low capacity of the seaport. In Malaysia, there are several major inland freight facilities only four lanes (two in each direction) to cater for the catchment zone in including four dry ports, Padang Besar Cargo Terminal (PBCT), Ipoh Penang Island (ASIRT, 2015). Recently, the opening of the second Cargo Terminal (ICT), Nilai Inland Port (NIP) and Segamat Inland Port Penang Bridge and the increase of lanes from four to six on the first (SIP), and freight terminals such as Sungei Way Inland Clearance Depot bridge has improved road congestion at Penang Port. and Bukit Kayu Hitam. They are all connected to container seaports either Port Klang has a good road network connecting with other parts of by road or rail transports or both (see Table 4). Malaysia through the North-South Expressway, Klang Valley Expressway PBCT is located at the border of Thailand and serves the south Thailand and Federal Highway 2 (PKA, 2015). However, there have been some market. It is located 158 km north of Penang Port and 588 km north of issues impacting on the quality of linkage to and from Port Klang Port Klang. It is connected to Penang Port and Port Klang via road and resulting in traffic congestion (Anor et al., 2012). One of the issues is the rail transport networks (Jeevan et al., 2014). The volume of containers narrow width of road lanes to and from Port Klang, which is not able to from southern Thailand through PBCT was 100,371 TEUs in 2013 (Jeevan accommodate the increased capacity of hauliers required for the growing et al., 2015). The landbridge train service mentioned serves the inland trade container traffic in Port Klang, and as a result creates congestion. corridor Port Klang - Penang Port - PBCT - Lat Krabang (Thailand). Moreover, the behavior of haulage drivers taking a detour from the bypass ICT is located 181 km south of Penang Port and 250 km south of Port highway and using the main State roads to avoid toll payments also Klang. It mainly serves the northern industrial area of Malaysia through impacts on the congestion (Anor et al., 2012). Another consequence intermodal transportation, and is the only dry port connected with all however, is the heavier dependence on road transport, thereby worsening major Malaysian container seaports through road and rail links. It handled the road conditions. 40,100 TEUs in 2013 (Jeevan et al., 2015). However, the connectivity of PTP is well connected to Kuala Lumpur and Singapore via the North- this dry port to the hinterland location in short distance (less than 15 km) South Highway Link and Malaysia-Singapore Second Link respectively has become an issue because local hauliers are reluctant to provide short (PTP, 2015). Nevertheless, the quality of the connection is impacted on by the damaged infrastructure and facilities, such as roads, flyovers, road 132 Malaysian Container Seaport-Hinterland Connectivity: Status, Challenges and Strategies

Table 4 Hinterland Connections of Penang Port, Port Klang and PTP Seaports Hinterland Distance (Km) Duration (Hrs) -road Duration (Hrs) -rail Train services Linked inland facilities Transport connection to seaports

Penang Bukit Kayu Hitam 135 1hrs 45minutes Not applicable Not applicable PBCT (158km) Road/Rail Port Padang Besar 166 2hrs 05minutes 5hrs 16mins 6 trips per day ICT (181 km) Road/Rail Hatyai, Thailand 238 4hrs 6hrs 39mins 2 trains per week Bukit Kayu Hitam inland Road / Rail clearance depot (135km)

Pengkalan Kubor 315 4hrs 49mins No rail link Not applicable Prai 17.3 Less than 45 minutes Not applicable Not applicable Mak Mandin 4.0 Less than 15 minutes Not applicable Not applicable Kulim 29.6 Less than 1hr Not applicable Not applicable Bayan Lepas 28.4 Less than 1hr Not applicable Not applicable Port Kapar 24.3 1hrs Not applicable Not applicable PBCT (558km) Road/Rail Klang Bukit Jalil 4.5 Less than 1 hr Not applicable Not applicable ICT (250km) Road/Rail Shah Alam 24.2 1hr Not applicable Not applicable SIP (255km) Road/Rail Selayang 64.6 1hr 15mins 4.7hrs 6 trips per day NIP (93km) Road Hatyai, Thailand 476 6hrs 14mins 13hrs 2 trains per week inland Road clearance depot (36km)

Subang 32.7 Less than 1hr 2.4hrs 6 trips per day Padang Besar 538 5hrs 45mins 11hrs 30mins 2 trains per week ICT (238km) Road/Rail PTP Pasir Gudang 43.5 2hrs 3hrs 6 trips per day ICT(551km) Nusajaya Tech Park 10.4 Less than 1 hr Not applicable Not applicable SIP (188km) Jurong 22 2.5hrs Not applicable Not applicable NIP (300km) Iskandar Regional 25.7 Less than 1hr Not applicable Not applicable development Authority

Tanjung Langsat Industrial 56.7 2.5hrs Not applicable Not applicable Park

Source: Interviews; Nazery (2012); Nasir (2014) Malaysian Container Seaport-Hinterland Connectivity: Status, Challenges and Strategies 133

distance delivery service because of the unattractive freight rate. As a in facilitating trade through good hinterland connectivity leading to consequence, it takes time for ICT to find hauliers to deliver such service, efficient and effective international supply chains. The findings have which causes delays and additional charges on shippers and consignees. implications for strategies to enhance the efficiency and reliability of Despite ICT being is physically well connected to seaports, the result is connectivity between seaports and their hinterlands. The following are less reliable hinterland connectivity to seaports in terms of time and costs. strategies recommended for modal shift, freight facility development and Consequently, the competitiveness of seaports will be affected because as capacity enhancement. a network based entity the dry port is unable to support door-to-door service in the least time given the competitive freight rate (Hall, 2002, Kunaka & Carruthers, 2014). 5.1. Enhancing rail capacity to promote modal shift NIP is located 50 km south of Kuala Lumpur and 93 km south of Port Klang. It is connected to Port Klang and PTP by road transport only. NIP A short lead time has driven Malaysian container seaports˅ heavy handled 175,000 TEUs in 2013 increasing from 15,000 TEU in 2000 dependence on road transport even if traffic congestion often occurs. (Jeevan et al., 2015). SIP is located in the southern peninsular of Malaysia, Other factors contributing to this is the limitation of rail transport capacity 212 km south of Kuala Lumpur and 188 km north of PTP, and is such as single track systems, limited numbers of service, no rail links in connected to PTP and Port Klang by road and rail transport. Regarding the certain inland freight terminals and poor condition of wagons. Given that three intermodal terminals, Sungei Way Inland Container Depot is the transport cost by rail is less than road in Malaysia (based on interview connected to Port Klang by road; Bukit Kayu Hitam, located in the north, findings), using rail transport would be preferred by exporters and is connected to Penang Port by the landbridge road service to Thailand. importers in the hinterland if the rail network capacity can be improved, All Malaysian dry ports support container seaports by adding space to and thus they can gain comparative advantages from the modal split in perform some of the seaports’ functions so that the congestion issues in terms of time and costs. The empirical study by Jeevan et al. (2015) found container seaports can be relieved (MOT, 2013). These functions include that Malaysian seaport stakeholders are concerned about the nation˅s being interface nodes linking production zones with seaports, providing development of intermodal supply chains and logistics networks and customs clearance services, warehousing, container storage and value- acknowledged the importance of a modal split in improving the added services and benefit to seaport stakeholders. As a result, these dry competitiveness of seaports by enhancing seaport-hinterland accessibility ports are connecting points for intermodal transport systems that help and reliability distribute containers to and from seaports’ hinterlands (Jeevan et al., To tackle the problem of an extremely imbalanced modal share in the 2014). Not all of the four dry ports are connected via road and rail Malaysian multi-modal freight transport system, the government has transport system to seaports, for example in NIP, there is only a road projects in place to improve rail infrastructure, such as upgrading the transport service provided despite there being a nearby rail system. With single track rail to electrified double track systems in the North-South rail the growing number of containers handled by NIP, the use of road link to enhance the train capacity and increase the speed of container transport produces more environmental issues and increases traffic transfer to and from seaports and vice versa. When completed, the rail congestion in the seaport zone (Jeevan et al., 2015). operator should increase the number of service linking seaports to PBCT has potential to attract more customers from southern Thailand hinterlands and encourage stakeholders to utilise the rail network. In fact, because the international customers can gain the benefits of distance, price the Malaysian rail system possesses several advantages. Firstly, the and time from utilising the transport network connecting PBCT, Penang maximum speed of a freight train can reach 70 kilometres per hour, far Port and Port Klang. On the other side, NIP is the highest contributor in faster than the world average between 30-50 kilometres per hour (Berg terms of container volume to Port Klang and PTP. However, the and De Langen, 2014). Although the average world figure comprises all constraint of space at PBCT and NIP in particular for empty containers levels of efficiencies, it provides an indication that Malaysian rail impacts on supporting the container seaports. In general, short-range dry transport has a potential role for undertaking the nation’s freight task. ports are designed for reducing space and capacity constraints at seaports Secondly, in comparison to the road freight cost, rail freight transport is and local traffic congestion (Roso et al., 2009). However, NIP as a short- cheaper. For example, according to the data collected from an interview, range dry port to Port Klang, has become less able to support the seaport’s the cost of shipping a container from PBCT to Penang Port via rail is increasing number of containers. As a consequence, increased congestion, about RM 2,690/TEUs compared with RM 3,370/TEUs by road. Shippers dwell time and over utilisation of existing facilities in Port Klang may from Thailand and Malaysia potentially receive almost a 25% lower price occur and cause inefficient connectivity between the seaport and the if they choose the rail service when sending their containers to Penang hinterland. Table 4 summarises hinterland connections of Penang Port, Port. However, the services have not been utilised much due to the Port Klang and PTP respectively, including major hinterlands and shortage of locomotives and limited services as mentioned in section 4.1. distances, transport connections, travel time between transport nodes in Thirdly, the institutional integration of rail and road operation within the hinterland, number of rail services, and connected inland facilities. the rail freight transport network is able to enhance the efficiency of implementing the modal shift strategy. This is due to the institutional structure of the Malaysian rail freight transport system in which KTMB is 5. Strategies for enhancing hinterland connectivity the only rail operator in the nation which also owns a container haulage company called Multimodal Freight to provide door-to-door service. Several issues impact on the quality of hinterland connectivity of When considering the comparative rail freight transport cost and the Malaysian container seaports. These include an extremely imbalanced integrated operational structure, it is suggested that strengthening the modal split, insufficient rail capacity and limited train services, road Malaysian rail freight system with double tracks and an increased number congestion and space constraint of some inland facilities. Given the trade and quality of wagons and utilising the system by increasing service growth of the nation, Malaysian container seaports have an important role 134 Malaysian Container Seaport-Hinterland Connectivity: Status, Challenges and Strategies frequencies will contribute to the rationalisation of the modal share between dry ports and inland freight terminals such as ICDs in a close between road and rail for the Malaysian freight logistics system. proximity. For example, there is an inland container depot called Bukit Malaysia is positioned as a strategic regional transport corridor. Its Kayu Hitam which is only 44 kilometres from PBCT. The ICD does not container seaports serve the inland trade corridors to Thailand and have a space limitation and therefore can help PBCT accommodate the Singapore, which are important trading partners of Malaysia. Landbridge over flow traffic received from seaports. This strategy is expected to services either by road or rail are provided for connecting exporters and effectively reduce congestion, dwell time and over utilisation of existing importers in Thailand and Singapore to container seaports in Malaysia. facilities in seaports and divert stakeholders from seaports to the freight However, under development of rail facilities, in particular in southern facilities so as to enhance connectivity between seaports and hinterland. Malaysia and southern Thailand, encourages the use of landbridge rail This study considers that the hinterland connectivity of the major service. Strategies are needed for improving the connection of the trade container seaports in the west to east part of Malaysia would be improved corridors. These include upgrading rail infrastructure and utilising the if a new dry port can be built in Gemas (Figure 3), which is close to Port landbridge rail system to connect Thailand-Malaysia-Singapore so as to Klang and located at a rail link junction connecting Padang Besar- improve intermodal freight transportation cross the border. National plans Singapore and east coast Malaysia. This suggestion is based on the dry to prioritise rail transportation development, improvement in road quality port SIP having a disadvantage of being located away from manufacturers and improving capacity in freight facilities needs to be streamlined as a and being affected by frequent flash floods in Segmat district close to the main agenda in the government plan entitled the Malaysian Plan. In dry por. These issues have resulted in the loss in transport infrastructure addition, dry port operator interviewees expressed that simplifying trade lining to SIP (interview findings). With the new dry port Gemas, it will procedures such as custom clearance at the inland border to Thailand and provide a transport link between east and west coast Malaysia and help to Singapore will contribute the connectivity in terms of time. generate more containers from east-coast Malaysia especially from , Kuala Terengganu and Kuantan to Port Klang, PTP or Penang Port. It not only increases the trade of Malaysian seaports located along the 5.2. Improvement in road congestion Malacca Strait but also boosts the trade from South China Sea.

In addition to enhancing rail transport capacity, the authors suggest some changes required to improve road traffic congestion, such as: • Encouraging all the haulages’ containers to be cleared for tariffs, customs, health and taxation charges at inland locations away from the ports. This would help reduce port congestion but could raise additional security concerns. • Moving non-maritime port activities (mostly value-added production and packaging services) inland. • Increasing police patrols on the roads to prevent trucks being overloaded and accessing roads which are not permitted, and impose fines on hauliers against the traffic regulation. • Upgrading road infrastructure such as road lanes’ expansion.

5.3. Capacity enhancement of inland freight facilities and further development

One of the issues related to the operations’ inland facilities affecting the hinterland connectivity of seaports is the transport service provision for a short distance. Road transportation is ideal for relatively short distance container distribution because of its high flexibility to access multiple destinations (Miau et al., 2012). However, in Malaysia, road freight transportation owners prefer long destination trips to gain more profits. There is a problem of finding hauliers delivering containers from the dry Fig. 3. A new dry port at Gemas port ICT to the hinterland destination in a short distance, which Source: Adapted from PWD (2014) contributes o inefficient hinterland connectivity of a seaport in terms of increased dwelling time in the dry port. To overcome this situation, the authors suggest that ICT could provide 6. Conclusion its own haulier services for short distances rather than seeking the hauliers who are reluctant to deliver short distance services. This approach is This paper overviewed the Malaysian container seaport system and adopted by another dry port (NIP) that provides its own inland transport assessed the seaport-hinterland connectivity from the physical properties services to cater for their customers from various distances. perspective including transport connections and inland freight facilities. Utilisation of the capacity of inland freight facilities connected to Travel time between transport nodes in the hinterland and number of rail container seaports will help the hinterland connectivity. However, it was services were also provided for supporting the evaluation. The findings found that dry ports such as PBCT and NIP have a limitation of space. revealed that although Malaysian major container seaports are connected This study suggests a location pooling strategy encouraging cooperation to the hinterlands through road and rail transport but are highly dependent Malaysian Container Seaport-Hinterland Connectivity: Status, Challenges and Strategies 135

on road. These seaports are also connected to inland freight facilities such of container port accessibility", International Journal of Logistics as dry ports and ICDs, which operate as a transit point to help connect Research and Applications, Vol. 12, No.2, pp.103-117. exporters and importers in the hinterlands to seaports and facilitate regional and cross-border trades. This paper also identified challenges of DE LANGEN, P. and CHOULY, A., (2004), "Hinterland access Malaysia’s hinterland connectivity including an imbalanced modal share, regimes in seaports", European Journal of Transport and Infrastructure insufficient rail capacity and limited services, road congestion and space Research, Vol. 4, No.4, pp. 361-380. constraints of inland facilities. It has recommended strategies for coping with the existing challenges of seaport-hinterland connectivity, in DE LANGEN, P., (2008), Ensuring hinterland access: The role of port particular for road transport and inland facilities. These findings also help authorities, JTRC Discussion Paper no. 2008-11, OECD/ITF, to expose new areas requiring further study within the Malaysian transport http://www.internationaltransportforum.org/jtrc/discussionpapers/DP2008 related sector. 11.pdf, accessed 3 March 2015. As a seaport-hinterland network involves connectivity of physical infrastructure, institutions and people, the measurement of hinterland DE LANGEN, P. and SHARYPOVA, K., (2013), Intermodal connectivity of container seaports should also be undertaken considering connectivity as a port performance indicator. Research in Transportation the institution and people dimensions, for example, how collaboration or Business and Management, Vol.8, pp. 97-102. coordination among the actors in the seaport-hinterland network can enhance the connectivity. This is an area worthwhile for further empirical DEPARTMENT OF STATISTICS MALAYSIA, (2015), External trade, study. http://www.statistics.gov.my/index.php?r=column/ctimeseriesandmenu_id =NHJlaGc2Rlg4ZXlGTjh1SU1kaWY5UT09, accessed 20 April 2015.

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