Sunday, August 4th, 2019


MB: Terengganu launches plan to make agriculture a lucrative business

KUALA TERENGGANU, Aug 4 — The state government today launched the Terengganu Agricultural Strategic Plan 2019-2023 to ensure that agriculture will no longer be associated with poverty but to be viewed as a lucrative business. Mentri Besar Datuk…

Logistics players do battle with start-ups

PETALING JAYA: As traditional forwarding agents reach for a share in the booming e-commerce business, they are competing with rising technology-centric express logistics companies and start-ups to win the trust of e-commerce players across the region.

The Malaysian Investment Development Authority (Mida) has approved eight e-fulfilment projects as of March 2019, of which seven are locally owned. The interest of companies in emerging areas, such as cold chain logistics, last-mile delivery services and halal logistics, is growing, due to the high margins and rising demand.

CJ Century Logistics Holdings Bhd is an example of an industry player that has made the move. From being a forwarding agent in the 1970s, the group has since diversified into integrated logistics, oil logistics, procurement logistics as well as data management solutions. According to its annual report, expansion into courier services is its new core activity.

CJ Century has aggressively expanded its courier services network during 2018 to ride on the momentum of the booming e-commerce industry in Malaysia. This expansion is set to continue in 2019 and e-commerce will remain an important growth factor for CJ Century in the coming years.

The group plans to grow in tandem with the increasing scope and scale of the e-commerce trade to provide integrated cross-border logistics and supply chain solutions for a new era of strategic commercial partners.

“Looking ahead, e-commerce logistics is expected to play a more important part in the group’s business. Leveraging on our extensive ground network as well as the unwavering support of CJ Logistics to roll out their innovative logistics solutions and expertise in courier services, CJ Century is ready to ride on the rapid growth of e-commerce and drive faster growth for the logistics business,” CJ Century managing director Teow Choo Hing said in its 2018 annual report.

E-commerce in Malaysia is envisaged to achieve its projected annual e-commerce growth of 20% in 2020.

Top e-commerce platform Shopee achieved over a threefold increase in its gross merchandise value during Chinese New Year and Hari Raya this year, compared with the corresponding festive periods in 2018.

Shopee has also introduced its next-day delivery service in June which served to disrupt the logistics sector in Malaysia.

“We have no qualms that the second half of 2019 is going to be a vibrant season that is poised for strong growth with the 9.9, 10.10, 11.11 and 12.12 sales, not just for our industry but also the entire network of industries that support e-commerce including the banks, telcos and logistics providers,” said Shopee.

According to a recent survey by Parcel Perform and iPrice Group, 43% of consumers in Malaysia are unhappy with their e-commerce delivery experience, as Malaysia reports the longest transit time in the Southeast Asia region, with deliveries taking 5.8 days versus a regional average time of 3.3 days.

This reflects room for improvement in the logistics industry as players aim for a foothold in the thriving e-commerce business.

Traditional freight forwarders keen to ride the e-commerce wave

PETALING JAYA: Traditional freight forwarders and logistics players are keen to go into e-commerce logistics given the strong demand and popularity of online business activity.

Federation of Malaysian Freight Forwarders (FMFF) vice president and Selangor Freight Forwarders & Logistics Association president Datuk Tony Chia Han Teun said many traditional freight forwarders in Malaysia are interested to venture into this new stream of business.

“Many realise that they have to be ready for e-commerce and be part of the new wave, or risk being left behind. Statistics show that e-commerce transactions have been growing steadily and traditional freight forwarders try to see where they can position themselves in the e-commerce growing business,” Chia told SunBiz recently.

He added that many forwarders see e-commerce as the only way forward as more and more online sales are made rather than through traditional retail channels. Goods moved through e-commerce are not limited to small parcels but can include shipments of many containers in one consignment.

“Except for a handful of traditional freight forwarders who have ventured into or teamed up with foreign e-commerce companies to get into e-commerce, the rest are still in the wait-and-see mode.”

He said e-commerce would need shipments to be contracted, stored and distributed at e-fulfilment centres and then delivered to the customers.

“The traditional freight forwarder may play different roles, such as customs broker for Customs declarations, freight forwarder to plan and move international shipments and also NVOCC (Non-Vessel Operating Common Carrier) and MTO (Multi-Modal Transport Operator) acting for individual customers.

“Under the e-commerce ecosystem, the roles of freight forwarders would be significantly different as the players and their roles in the e-commerce ecosystem are very clear and distinct and would be very different from their traditional business.”

On whether the profit margin would be better, Chia said among logistics companies that are already in e-commerce, there is conviction and belief that the profit margin would be better.

“Since most processes would have been improved through digitalisation and AI (artificial intelligence), there would be expectations of greater efficiency and reduced costs in the long run,” said Chia.

However, FMFF president Alvin Chua Seng Wah opined that while some traditional freight forwarders are interested in e-commerce logistics, some may not be.

“Some want to go into this business to expand their capabilities. But they must have e-capabilities with proper supply chain systems to handle the logistics part. As for last mile delivery, this will be another level and more asset needed.”

He said logistics/shipping for e-commerce would be fast moving with full tracking capabilities door-to-door against traditional forwarding where one handles from port to door or vice versa only.

“The profit margin depends on the volume you are handling and during the start-up, there is a lot of capital injection and you won’t see profit until you reach a certain volume,” Chua said.

Logistics players that SunBiz met recently are generally more receptive towards the logistics opportunities brought on by e-commerce.

UCS Logistics Sdn Bhd business development manager Ken Wong said it is keen to go into e-commerce as it wants to be a total logistics provider.

AES Logistics Sdn Bhd manager Ang Yuek Mei is of the view that the traditional way of running a business is no longer in demand in the market and in the competitive logistics business, it needs to upgrade and move towards electronic business.

“A lot of customers also prefer a one-stop centre to cater to all their needs. So we cannot just focus on forwarding but also cater to warehouse, distribution and more so that we cover a wider market,” said Ang, who plans to apply for the International Integrated Logistic Services (IILS) status from the Malaysian Investment Development Authority.

“The chances of being exposed to foreign investors are also higher (via e-commerce). If we get the IILS status, we’re more sellable to the overseas market,” she said, citing role models like DHL and CJ Century as successful providers in total logistics solutions.

Minister: Over RM100m allocated to assist smallholders get Malaysian Sustainable Palm Oil certification

JERANTUT, Aug 4 — The government has allocated more than RM100 million to assist smallholders obtain the Malaysian Sustainable Palm Oil (MSPO) certification to increase the value of the commodity in the international market. As such, Primary…

Economy may weaken in third quarter

PETALING JAYA: Malaysia’s economy may soften in the third quarter (Q3) taking cue from the July Nikkei Manufacturing Purchasing Managers’ Index (PMI), which contracted to 47.6 from 47.8 in June.

AmResearch said based on the historical reading, the current PMI level may keep the gross domestic product (GDP) growth at 4.5%, which is in line with its forecast.

“Nevertheless, our concern at this juncture is that we are still not seeing signs of global manufacturing sector bottoming out. As such, the risk to the economy is still tilted to the downside. Based on our assessment, our worst-case scenario suggests that GDP growth could hit as low as 4%, should the headwinds intensify,” the research house said in a note last Friday.

It cautioned that the manufacturing players continued to report tougher business environment due to lacklustre demand conditions which had put a strain on production, and discourage firms from hiring.

Although Malaysian manufacturers have reported a net inflow of new businesses from abroad, in particular from the US, Japan, and Turkey, the overall demand condition remains challenging on the back of stiff competition.

“As a result, the survey suggests that the local firms are having difficulties securing more new work, citing concerns over slowing global economic growth and geopolitical tensions as their key headwinds. However, manufacturers indicated that their business optimism remained strong in July, albeit a slight pullback from the peak in June, supported by new projects, expansion plans, and more aggressive marketing.”

Meanwhile, MIDF Research opined that the Malaysian economy still remains on an upward track with leading economic index pointing towards a recovery path.

“The optimistic outlook for the second half of the year is underpinned by lower interest rates in developing and emerging economies, gradual pick-up in commodity prices and firm domestic demand.”

The research house expects exports performance to be quite vulnerable especially with the latest abrupt decision by US President Donald Trump to impose 10% tariffs on a further US$300 billion (RM1.24 trillion) worth of imports from China, which would mean that all trade with China will subject to new taxes.

“With the new tariffs in place, it could add more risks to the global economy including Malaysia due to the supply chain factor.”

MIDF foresees Malaysia’s exports growth to moderate further to 3.6% this year from 6.7% in 2018, due to higher base effects and continuous signs of faltering trade globally derived from rising protectionism and a loss of momentum in some major economies, especially in Europe.

Malaysia’s exports in June saw a year-on-year (yoy) decline of 3.1% to RM76.2 billion, due to lower exports of electrical & electronic (E&E) products.

However, a larger trade surplus of RM10.3 billion was recorded as imports contracted at a faster pace of 9.2% to RM65.9 billion.

Rina Harun: Ministry targets 50pc women to be registered entrepreneurs under Companies Commission

IPOH, Aug 4 — The Ministry of Rural Development is targeting 50 per cent of women to become entrepreneurs registered under the Companies Commission of Malaysia (SSM). Its minister, Datuk Seri Rina Mohd Harun said to date only 27 per cent of women…

Agriculture Ministry to launch massive fruit promotion campaign

MUAR, Aug 4 — The Ministry of Agriculture and Agro-Based Industries (MOA) will launch a massive campaign to promote local fruits in foreign markets to lure more tourists in conjunction with Visit Malaysia Year 2020. Its minister, Datuk Salahuddin…

Foreign funds sell RM293.5m this week

KUALA LUMPUR, Aug 4 — International funds have sold RM293.5 million net in the holiday-shortened week of July 29 to August 1, about six times more than the RM53.4 million disposed of during the whole of last week. MIDF Amanah Investment Bank Bhd…

How a shadow banking crisis sent India’s autos sector into a tailspin

MUMBAI, Aug 4 — Sudhir Gharpure and his sales team sat chatting at a big Maruti Suzuki dealership on the outskirts of Mumbai some two hours after its doors were opened on a recent Saturday morning — not a single customer was in sight. “There…

For Airbus, capitalizing on Boeing’s woes is challenging

NEW YORK: With its main rival hobbled by the worldwide grounding of a top-selling jet, Europe’s Airbus could seem poised to emerge as the undisputed global aerospace leader.

Airbus has overtaken the American giant Boeing in some key benchmarks in 2019. And the company is now better positioned to move quickly on a new jet product.

Meanwhile, the American company is mired in efforts to get its crisis-stricken 737 MAX planes back in the sky after two deadly crashes.

Still, experts say the Toulouse, France-based aviation giant faces production constraints that likely limit its ability to grab more market share.

“Airbus is a winner only at the margins,“ said Richard Aboulafia, a longtime industry analyst at the Teal Group, an aerospace market analysis firm.

To be sure, Boeing’s suspension of deliveries of its top-selling plane has added luster to Airbus’s solid and unscathed results.

Moreover, as the MAX grounding has dragged on since March, key airline customers are becoming increasingly blunt in expressing frustration.

Airbus delivered 389 planes through the end of June, an increase of 28%. During the same period, Boeing deliveries fell 37% to 239.

It was the first time since 2011 that Airbus overtook its US rival in plane deliveries, which is when the bulk of revenues are generated, effectively rendering Airbus the world’s largest aircraft maker.

Airbus also has had net orders of 88 planes in 2019, compared with Boeing, which has seen a decline of 119.

At the Paris Air Show in June, Airbus announced orders for 383 planes worth RM182.91 billion, about RM41.57 billion more than Boeing’s take from the show.

Still, a consolation prize for the US company was a letter of intent by British Airways parent IAG to buy 200 new 737 MAX planes, a vote of confidence in the aircraft.

Airbus is primed to move more quickly with commercializing a new mid-distance plane, launching the A321XLR in Paris this year, a single-aisle plane with greater range and passenger capacity of 240.

Boeing also has had a plan under development for a competing jet, but the timeframe has been pushed back because of the MAX.

No major Boeing cancelations

But since the MAX crisis, Boeing has seen “no major cancellations of orders,“ said Aboulafia.

The Saudi budget carrier Flyadeal reversed a plan to purchase MAX planes but the deal had been provisional, aviation experts said.

Still, some plane contracts allow airlines to cancel the agreement without charge six months after a grounding. That means late September could be a telling juncture.

“That’s when we’ll know whether Airbus really has benefited from this tragedy,“ said Michel Merluzeau, an expert at Air Insight Research, an analysis firm and consultancy.

But even if airlines did want to shift to Airbus, they might have doubts about the European company’s ability to deliver higher output.

Ramping up production in aerospace is a capital-intensive process that involves around five years of planning, Merluzeau said.

“I’m not sure Airbus’s supply chain can sustain another increase in production,“ Aboulafia said. “It will require additional investments, and we are talking about millions of dollars.”

Airbus has struggled to keep up with some of its production targets due to difficulties at engine makers Pratt & Whitney and CFM International, a joint-venture of General Electric and Safran.

Airbus has said it expects output of MAX rivals under its A320 line to reach 60 per month in 2019 and 63 per month next year. — AFP