Purpose: The purpose of this assignment is to demonstrate a comprehensive understanding of the functioning of a port in trade operations. Phases and requirements: This assessment has multiple phases (team formation, presentation for feedback, and report). While the marking is based on the report, the report must consider the feedback provided during the inclass presentation. There are three aspects to consider: A. Team formation and port selection: Each team must have between 4 to 6 studentmembers. Each team needs to select a port from the following Excel file (click hereLinks to an external site.). You can only select a port in the Excel file once your team has at least 4 members By the end of Week 4, each student needs to be part of a team. If by then you are not part of a team, the lecturer will assign you to one B. Presentation for feedback (this you do not submit in Canvas) Do not submit the presentation in Canvas. Each team is required to send the presentation (e.g., PowerPoint, etc) to the lecturer before class in Week 8. During the inclass presentation in Week 8, your team will provide an overview of their team report findings (see section B. Report below), and, more importantly, focus on one or two aspects for which the team would like to obtain some feedback from the class. Length of presentation, 12 minutes maximum per team. Not all members must present, but all members must be ready to answer any question. B. Report requirements (this is what you have to submit in Canvas on Week 9) Brief but clear overview of the chosen port including its location and historical evolution. Detailed description of the port, including modes which it serves, important infrastructure, intermodalism capabilities, key import and exports, and documentation required for import. Analysis of the ports competitive advantage by comparing it against a Vietnamese port. You should focus on at least three relevant determinants of country competitiveness, and compare them visavis with the Vietnamese counterpart. The Vietnamese ports to compare against differ by class group: SGS_G01 (Oanh, Fridays 15:00): compare your port against Danang port. SGS_G02 (Duy, Wednesdays 11:30): compare your port against Quy Nhon port. SGS_G03 (Duy, Wednesdays 15:00): compare your port against Hai Phong port. SGS_G04 (Santiago, Thursdays 08:00): compare your port against Ba Ria Vung Tau port. SGS_G05 (Santiago, Thursdays 11:30): compare your port against Quang Ninh port. HN_G01 (Oanh, Wednesdays 11:30): compare your port against Cai Mep port. HN_G02 (Oanh, Thursdays 11:30): compare your port against Cat Lai port. Analysis on comparative advantage, by focusing on one product that is produced both in that country and in Vietnam, and analysing which of the two countries has a comparative advantage against the other with respect to that product. Analysis on operational challenges of the port, followed by a recommendation to overcome those challenges. Conclusion providing a summary of the main findings and, importantly, mentioning how you incorporated the feedback (obtained during the inclass presentation) in your report.
Introduction
The analysis of PTP-Malaysian port will be highlighted via characteristics and in comparison, with UIH-Vietnamese port with the focus on its competitive advantage based on several determinants at three levels However, since the logistics industry strongly influences the port operations and performance, determinants at-industry-level are especially stressed according to Porter’s Diamond (1990) Moreover, some challenges and recommendations of PTP are also indicated for better advancement of the port operations Additionally, CA of P&A in both countries is also analyzed to know which country has more well-developed factors of production for P&A manufacturing Overall, this-paper-is-helpful-to provide-comprehensive-knowledge-of- not-only-the-port-but-also-Malaysia’s-progress-of maritime-logistics-regarding-operations-and- technology.
Analysis
Overview
PTP is the largest and world-class container port in Malaysia, strategically positioned at the Southern tip of the Malaysian peninsula and at the confluence of the busiest East-West shipping lanes that cross the Malacca Straits, which is the arterially shortest shipping route connecting the Indian Ocean and the Pacific Ocean (South China Sea) (Figure 1) Thus, PTP's advantageous location makes it an ideal gateway port for the world's other economic regions such as Europe or U.S (David and Renkena 2000).
Periods Historical evolution of PTP
October 1999 The port became operational (Jica n.d.)
PTP achieved a ficially launched PTP handled 1M TEUs in the first 571 days of operation, setting a world record for fastest growing port (MMC 2022)
PTP achieved a throughput of 2.05M TEUs, successfully executing 2.286 container ship calls
Won the award “Best Emerging Container Port” (PTP 2002)
2006 Malaysia's PTP Wins Lloyd's List's prestigious AMCP award
June 2010 PTP attained a productivity target of 35 moves per hour compared to the industry average of 25 moves per hour (PTP 2010)
PTP currently serves 26 shipping lines and is Malaysia's largest container port It is one of only seven ports worldwide selected by Maersk Line for the new "Daily Maersk" service (PTP 2012)
PTP became the first port in Southeast Asia to receive the world's largest, latest container of Mediterranean Shipping Company (MIDA 2022)
Description of the port
PTP is Malaysia's most important port, having a technologically equipped container terminal and being at the junction of main international shipping routes that pass across the Malacca Straits (PTP 2022).
On the infrastructure side, the container-storage-facilities-cover-290 acres and can hold 6M TEUs There are also-about-4000-reefer-hookups, 140 gantry cranes, 350 trailers, 45 post-Panamax-cranes, and-other-equipment-service-the- port-berths (PTP 2020) The port's container handling capacity has increased to- 145M-TEUs A custom-built information technology system that provides real- time container tracking and automated scanning has significantly boosted the port's efficiency (PTP 2022)
PTP started the expansion of the container storage yard which will add over 9 hectares of new space for container storage and is expected to be completed by Q3 2022 (PTI 2022) Once all the aforementioned projects are completed in
2022, PTP’s capacity will increase to 12.5m, accelerate the conversion, optimized ITS systems and infrastructure, and encouraged digitalization-and-automation (Container News 2022).
PTP is linked to Singapore by the North-South highway and to Malaysia's capital via the Malaysia-Singapore Second expressway (APM Terminals n.d) PTP is Malaysia's most developed container port with an annual capability of 12,500,000 TEUs and it is expected to increase to 15M TEUs in the following years (PTT 2022).
The-most-recent-exports-are-led-by-Integrated-Circuits, Refined-Petroleum, Palm Oil, Semiconductor Devices (Figure-1) The most valuable imported goods are electronic integrated circuits and micro assemblies, refined petroleum oils, computers and ethylene polymers considering overall cost (OEC 2022) Besides, the top imports of Malaysia are Integrated Circuits, Refined-Petroleum, Crude- Petroleum, Special-Purpose-Ships, and Broadcasting Equipment (Figure-2).
Invoice, packing list, delivery letter, leaflet, catalog, insurance, certificate, Bill of Lading, letter of credit, licenses and certificates, proof of fare import payment, declaration form no.1 (ITA n.d.)
Those types of documentation help Malaysian importers to process transactions in all ways such as scheduling, payment assurance and claim on losses (Hiraide et al 2022)
Competitive advantage
Thanks to Malaysia’s strategic location, PTP is a main trading channel which connects Pacific and Indian Oceans to the east, relying on global trade (ITA 2022) Firstly, it joined several bilateral trade agreements with Australia, India, and Japan Secondly, Malaysia also focuses on regional trade agreements comprising politics, economics, trade, investment, culture, science, technology, and the environment Overall, Malaysia’s internationalization enhances the competitive advantages as trade base internationally and regionally, which helps the country become more trade opened and gain more benefits for PTP
Vietnam also depends on trading activities in internationalization (International Economics
2015) However, its export structure is less complementary to Malaysia’s (Trung 2002)
Comparing two countries, both receive precious opportunities to develop when ASEAN integrates with ROW (Sophie 2018) This leads to the development of both ports, but PTP is more competitive thanks to Malaysian complementary.
Malaysia prioritized upgrading their infrastructure, not only at the PTP but also nationally to increase the trade openness of them and PTP The government spent approximately US$21M for
2023 plan, a rise of 26% from 2022, to conduct 8,000 projects major in rural areas, especially port and railway improvements (Woof 2022)
Vietnam’s infrastructure also developed remarkably (World Bank 2022) Its government spent 6% of GDP to upgrade infrastructure, meanwhile Malaysia’s investment is 2.5% of its GDP (World Bank 2022) Vietnamese infrastructure investment is not effective to helps them become more open to trading (Celina 2022) Malaysia’s infrastructure can be considered more expedient than Vietnam’s one, thus, PTP has more competitive advantage against PQN.
According to MOSTI and MASTIC (2021), thanks to its science and innovation in many fields, especially in infrastructure and logistics, Malaysia successfully increased the capacity and competency of the nation and PTP They use updated technology in manufacturing and services to transfer from primary commodities to a multi-sector economy after 30 years
Vietnam’s technology is dependent on foreign and outdated, which is very costly and inefficient compared to Malaysia (Hien 2018) Accordingly, PTP’s science and innovation is a more competitive advantage against PQN.
In this part, Porter’s Diamond-will-be-utilized-as-it-emphasizes the theory of country competitive advantage based on four determinants and explains why certain nations outperform in some specified industries than others Nevertheless, we-only-pay-attention to the analysis of the logistics industry owing to three-determinants-below.
Porter's (1990) diamond model highlighted the importance of created factor conditions like advanced infrastructure, skilled labour, and scientific skillset over natural ones when it comes to boosting industry competitive advantage, particularly those that demand substantial investment and are highly specialized.
Regarding infrastructure, Malaysian government has consistently invested in various top-notch logistics infrastructure project to facilitate international trade, such as ECRL and KLIA acropolis (MIDA 2021) While ECRL seeks to increase national connectivity among east-west regions and broaden the nation's economy, KLIA acropolis focuses on establishing a fully integrated, aerospace ecosystem that are synergistic to aviation, business, and leisure activities (SCMP 2017; Aeropolis n.d.; Railway-technology 2019) Thus, maintaining competitiveness in supporting regional logistics activities and progressing towards becoming ASEAN gateway Meanwhile, significant improvements and investments were undertaken in Vietnam's infrastructure to meet growing logistics demand and spur economic development, especially in road and aviation sectors, as seen by ongoing constructions like the HCMC-Hanoi highway and the LTIA (Pham 2022; MOC 2022) However, due to lack of cutting-edge technologies, budget overruns, poorly timed initiatives, Vietnam's infrastructure is still unable to keep up with its economic expansion and rising FDI (Pham 2022; Vien Thong 2022)
The nature of logistics industry itself, with digitalization, has queried for new and technical skills from employees to adapt with technological changes like AI or big data (Benayoune et al 2022) Nevertheless, Malaysian logistics sector continues to rely on semi-skilled workers, with just 28% of Malaysia's workforce being high-skilled, calling for competency improvements to match the skill gap (DOSM 2022) Similar concerns with qualified workers shortage were present in Vietnam, where 53.3% of businesses lack trained professionals having solid expertise and operational experience (VNS 2018) Consequently, businesses must create efficient T&D programs to enhance local competencies (Agrawal et al 2020) Malaysian government has implemented diverse upskilling training programs, like a partnership with 21CC Education to deliver online training modules about logistics concept for blue-collar workers (CEMCA 2021; Wahab 2021) Contrarily, Vietnam's logistics workforce had to contend with businesses' low investment HR training, with 93–95% of workers apparently missing formal training (VIRAC
Given its robust transportation infrastructure and consistent labor skill enhancement, Malaysian factor conditions in the logistics industry outperformed those of Vietnam.
According to Bowersox et al (1999), significant level of customer demands is connected to logistics capabilities as all logistical activities are driven by those demands, which are represented in the order Therefore, the supplier's ability to provide services must be evaluated at a level that satisfies those consumer demands (Lin 2007) Particularly, our main focus in this case will be rising consumer demands on e-commerce, which helps to increase trade at
Malaysian seaports by more than 7% and support the expansion of Vietnam’s cargo throughput through maritime by more than 19% in 2021 (Harizah 2022; U&I Logistics 2022) Surging consumer demands on e-commerce reinforce the growth of logistics firms-in both countries (Figure 3.2.2a and 3.2.2b) (Cramer 2021; Simply Walls 2022).
However, Vietnamese firms cannot fulfil customer demands effectively on e-commerce as well as Malaysian firms since Vietnam’s logistics are still in the early growth stages, hence it cannot meet online merchants’ needs for rapid and cost-efficient delivery while handling many orders at once (B&Company Vietnam 2022) Besides, Vietnamese e-commerce firms are forced to rely on cash-on-delivery which leads to 6-12% higher operational and logistics costs for companies in Vietnam compared to Malaysia (Bhatla 2020) Therefore, it can be seen that Malaysia’s logistics industry supports demands from consumers and logistics firms better due to higher delivery speed and logistics cost efficiency.
In this case, ICT is considered as a supportive industry to logistics industry in both countries since it helps to improve port efficiency and responsiveness to users’ demand by enhancing real- time data management and scheduling (Vaggelas 2020; Webster and Muller 2000)
Indeed, due to the development of ICT, Malaysia’s logistics industry is strongly advanced by the capability of intelligent logistics and warehouse utilizing cutting-edge technologies (AI or automation) Accordingly, seaports can increase the efficiency of its stowage and warehouse pick-up, leading to the precision of 99% in sortation and container handling Besides, Malaysian application of PMIS also reduces ship‐waiting time and bolster product loading (Bagchi & Paik
2001) In contrast, unlike advanced Malaysian seaports, most Vietnamese seaports are not well- equipped to load and unload specialist ships and products efficiently owing to poor freight infrastructure Additionally, Vietnam’s lack of technological equipment and data transmission services also provokes inadequate warehouse infrastructure, which is inappropriate for the speedy load of products (Lang 2022)
Thus, compared to Vietnam, Malaysia gains competitive advantage of higher port efficiency and port performance management thanks to stronger application of information technology to logistics infrastructure.
First, PTP's-technology-advances-rapidly-with-application-cases-including VCS, GCMS and Smartrail Systems (UNE 2021) PTP also-uses-the-latest-digital-roadmap, collaborates-with- providers-of-terminal-operating systems, carrier-and-vessel-technology-solutions, to-optimize- RTG-Fleet-as-well-as-using algorithms powered by AI and machine learning to provide best-in- class service for its customers amid rapid technological change (PTP 2019) Additionally, PTP will use artificial intelligence to improve scheduling, real-time order status, automatic invoicing, and vessel tracking on a live map (APM Terminals 2022) Furthermore, the Noell super post panamax quayside cranes, the biggest in Southeast Asia, speeded-up-container-loading-and- discharge (APM Terminals 2020) Finally, PTP invests in factor creation via advanced-training- with-top-GE-engineers, research-&-development, terminal-expansion plans, and-a-new-berth- that-will-add-3.5M TEUs-by-2025 (The Sun Daily 2022)
Comparative advantage
In 2021, Malaysia's total exports of P&A reached $8,1billion, increasing 52.1% (UN Comtrade
2022, Appendix 1) Besides, Vietnam exposed a more impressive P&A export of $37.264 billion (UN Comtrade 2022) Generally, Malaysia and Vietnam are considered noticeable P&A producers and exporters worldwide.
CA is a nation's ability to produce a good/service at a lower opportunity cost than others
(McLaren 2012) To predict whether Malaysia or Vietnam has a CA in P&A, in theory,
Heckscher-Ohlin model should be applied H-O theorem implies that a country will gain CA in producing products that are intensive in the production factor which is relatively abundant in that country (Leamer 1995, McLaren 2012) CA can be determined by two factors of production, namely, labor and capital (Balassa 1965).
Regarding capital, producing P&A is capital-intensive because setting up P&A production lines requires substantial capital investment in facilities, infrastructure construction, machine purchases, advanced technology, and R&D expenditures (Simmat 2021) Malaysia reached a GDP of $372.7billion, ranked 37th among global major economies, and has an average salary estimated at 18,877 USD/year in 2021 (World-Data n.d) Meanwhile, Vietnam’s economy ranked 39th, with GDP of $362,6 billion (World-Bank 2022), and citizens’ average income being
3324 USD/year (2021) (277USD/month) (Nguyen 2022) Both domestic and foreign investment of Malaysia in P&A manufacturing sector accounts for $33.46 billion (RM148 billion) (Statista
2022), whereas Vietnam’s total registered investment capital reached around $1.7 billion
(Vietnam Construction 2021) Hence, Malaysia has a more abundant capital resource than Vietnam Furthermore, Malaysia’s average wage rate is approximately 5.7 times higher than Vietnam, and Vietnam’s labor productivity is only equal to 19% of Malaysia's (VNS 2019), implying more capital is invested per worker in Malaysian than Vietnam Consequently,
Malaysia is relatively well-endowed with capital relative to Vietnam According to H-O model, Malaysia should export P&A (capital-intensive product), rather than Vietnam.
Secondly, a skilled labor force possessing sufficient knowledge and skills to complete complicated tasks is a significant contributor to high productivity (ILO 2014) Manufacturing P&A is a skilled-intensive task due to high level of technical complexity, manipulating complicated tools and machines, and highly adapting advanced technologies in production, hence, requiring medium-to-high skilled workers to complete skilled tasks (Brambilla et al
2015) Malaysia has 24.9% high-skilled and 62% semi-skilled workers while in Vietnam, most of labor are unskilled, accounted for 63% total labor force (Vietnam-Plus 2022) Consequently, Malaysia is skilled-labor abundant relative to Vietnam since the skilled-labor-to-unskilled-labor ratio of Malaysia is higher than Vietnam (McLaren 2012) Malaysia’s Human-Capital-index per person (HCI) is higher than VN’s for 5 years (2015-2019) (FRED 2021, Appendix 3,4), which reflects Malaysia’s labor force is more knowledgeable, skilled, and productive, compared to Vietnam Through H-O theory, Malaysia has a CA against Vietnam in P&A.
However, in reality, both Malaysia and Vietnam have CA in P&A because their RCA ratios both are greater than 1 (Malaysia RCA=1.5, Vietnam RCA=4.8) (UNCTADSTAT 2022, Appendix
2) Additionally, Vietnam possesses a much higher RCA, illustrating that Vietnam experiences significantly greater export competitiveness in P&A against Malaysia (UNCTADSTAT 2022) Indeed, Vietnam has comparative-advantage in P&A, which exports more P&A than Malaysia (Appendix 1).
In short, according to H-O theory, Malaysia has CA in producing and exporting parts and accessories against Vietnam, but this result is not consistent with the reality as Vietnam experiences higher RCA ratio, resulting in Vietnam's more CA in P&A and has higher export strength against Malaysia.
Operational challenges and recommendations
The first difficulty of PTP, according to Beth (2020), is related to the digitalization process PTP adapted to new technologies at an astonishing rate Modern technology is always fraught with security concerns Furthermore, because people are the port's most important resource, a lack of skilled personnel is a challenge for PTP's digitalization process Both aforementioned factors slow down the digitalization process and make it more difficult for people to use technology for port activities
PTP is recommended to develop various digitalization platforms to increase the diversity of technologies and tools applied They should increase their security to avoid cyber-attack due to high technology For human resources, they should provide training and empowerment for employees towards higher knowledge, performance and productivity The meaning of this recommendation is that digitalization process should be conducted in both factors, human as well as equipment to generate advantageous environment for PTP to develop This helps the digitalization process enhance PTP’s performance and become consistently productive and safe
PTP may face the second bunkering challenge since they aim to become Malaysia's bunkering hub (Hellenic Shipping News 2019) According to David (2018), the issues include environmental concerns, high and concurrent demands and workload (bunkering and cargo operations at the same time), and failure to follow operational procedures This causes inefficiency in both trading and bunkering
It is recommended that detailed and strict procedures be established to ensure that bunkering expansion plans do not jeopardize the benefits of other stakeholders or the environment PTP's activities will become more logical, and they will have more opportunities to gain diverse benefits in addition to traditional exchanges.
According to Zaideen (2021), Malaysia's current port system is fragmented and fails to efficiently collaborate among the bodies due to lack of an integrated strategic framework, incoherent decision-making, overlaps between authorities, and duplication of port policies Malaysian’s lack of coordinated policy could cause port congestion and physical constraints because of imbalanced cargo concentration (Othman et al 2019) Thus, problems with the existing system's planning, execution, and policymaking demonstrate the failure to create sustainable growth for PTP and Malaysia ports
Therefore, coordinated policies or cooperation schemes must be created to provide proper framework for stakeholders in port activity to establish more resilient and sustainable ports (Zaideen 2021) The cooperation among port bodies includes, but is not limited to, cooperation between various ports, cooperation between terminal operators, and cooperation with other service providers (Pallis and Notteboom 2022) Overall, by implementing integrated policies to ensure sufficient management of the port sector, all Malaysian ports and PTP itself could enhance competitiveness.
Conclusion
Malaysian PTP has strategic location and historical evolution which contribute to its exceptional development At country, industry, and firm levels firm Malaysia has diversified edges including internationalization, technological innovation, infrastructure, factor and demand conditions, related and supportive industries, and organizing principles that generate PTP’s competitive advantages against PQN Parts and accessories of machines (SITC 759) are elected and applying H-O model to justify that Malaysia has more CA in producing it than Vietnam PTP’s operational challenges include low integration between regional ports, digitalization process, and bunkering hub expansion In reflection, we are-recommended-to-apply-Ricardian model in CAs analysis However, we realize it is not necessary to use it as we only have one product to analyze Additionally, we should choose essential findings to incorporate in the report because our-presentation-adjusted-various-points-of competitive advantages, operational challenges, and recommendations-that-are-not-extremely-sufficient-to-demonstrate-Malaysian-PTP's-strengths and-weaknesses.
Appendices
Appendix 1: Export and import of parts, accessories for office and automatic data- processing machines in 2021 of Vietnam and Malaysia with the Rest of the world
A country i is considered to have a revealed comparative advantage (export competitiveness) in a particular product j when its RCA ratio of the product j is greater than 1 ( RC A i j >1) (Balassa
1965) The higher the value of a country’s RCA for product j, the higher its export strength in product j (UNCTADSTAT 2022).
Where: ã RC A i j : revealed comparative advantage for good-j of country-i. ã X ij : exports-of-product-j-from-country-i ã X wj : total world exports of product j ã X it : total exports from country i ã X wt : total world-exports
Data (billion USD) for parts, accessories for office and automatic data-processing machines (P&A) in 2021, accessed by UN Comtrade (2022).
X ij 8.126 (billion USD) 37.264 (billion USD)
X wt 22.3 (trillion USD) "300 (billion USD) 22300
Appendix 2: RCA ratios of Malaysia and Vietnam in 2021 (UN Comtrade 2022)
Appendix 3: Human Capital Index of Malaysia (FRED 2021)
Appendix 4: Human Capital Index of Vietnam (FRED 2021)