KUALA LUMPUR: The logistics sector in Malaysia needs to urgently move forward against the backdrop of greater competitive landscapes as Thailand and Vietnam have recently overtaken the country in key industry rankings.

This is necessary given that Malaysia had fallen behind in the World Bank’s Logistics Performance Index (LPI), where the country saw its position drop to 41 out of 160 countries – compared with its ranking of 25 in 2014 and 32 in 2016.

“The LPI is a key indicator for investors when they do their evaluation on whether Malaysia is capable of doing logistics for them or not. This data must be used (in their evaluations).

“The investors want their goods to be distributed in a cheap and efficient way. If the government knows this, then they would know what to do,” PKT Logistics Group Sdn Bhd managing director Dato' Seri Micheal Tio said.

He was speaking at the Malaysia Competition Commission panel discussion on Takeaways from The Market Review and the OECD Reports on Malaysia’s Transportation Sector.

The recent LPI 2018 report saw three Asean countries being ahead of Malaysia – Singapore (2), Thailand (32) and Vietnam (39) – while Indonesia (46) is fast catching up.

“There is a lot of inefficiencies, that’s why we are low in the rankings. For example, we were supposed to be fully computerised through electronic data interchange for customs brokerage without the need for face-to-face meeting with customs officers.

“This is already happening in other neighbouring countries such as Singapore – it is so easy. But we still have this inefficiency and because of this, we are ranked quite poorly,” Tio said.

He pointed out that while this is lacking, Malaysia still had an advantage in its infrastructure as it is among the best in the Asean region.

“We are ranked quite well in terms of infrastructure in Asean with amazing connectivity. Our ports reach all over the world and the airports, with companies like AirAsia for example, we already have the reach in the region.

“If the government can pay more attention by giving a ministry the (task) to restore our rankings, I’m sure we can achieve this. It is a matter of focus and implementation,” Tio said.

“At the moment, we have to deal with five ministries when we talk about customs. So how we can do this is, perhaps, by creating one-stop centres. Choose someone who is responsible to report directly to the Prime Minister,” he suggested.

In the panel discussion, which was moderated by Star Media Group Bhd’s group adviser Datuk Seri Wong Chun Wai, Tio said he believes Vietnam had overtaken Malaysia in the rankings as it had implemented a one-stop centre for investors.

“In Vietnam, all of the investments that goes into that country is solved by this one-stop centre. I believe they had learnt from the Malaysian government how we implemented this sometime ago.

“We need to re-create this one-stop centre so that if there are any issues by investors, they would only need to talk to one centre and not many government ministries,” he said.

Meanwhile, Tio said Malaysia is still protecting the local industry and this is a hindrance for further growth.

“This is not necessary since we are already in a position to become the next logistics hub to take over from Singapore and we are not doing anything to ensure this happens.

“What we are seeing here is that our infrastructure is good but we are still being held back by other factors. If we can address these issues, to move up our rankings to maybe 10th eventually, I’m sure Malaysia will become the Asean logistics hub,” he said.

Pertaining to this matter, MyCC’s member of commission Datuk Mohd Jamal Sulaiman said there were six criteria that had been highlighted in the LPI report and the government has to pay attention to these in order to move up in the rankings.

“This is a cause for concern for us actually and the criteria can be addressed even without the one-stop centre. I would think that something needs to be done to improve the LPI rankings,” Jamal said.

According to the report, Malaysia lost out in the criteria of efficiency (or clearance processes), quality of trade, ease of arranging competitively priced shipments, competence and quality of logistic services, ability to track and trace consignments and punctuality of arriving shipments.

“I believe the major threat comes from Vietnam for the next 10 years. We need to be competitive and focused, and the government needs to quickly make a decision to open up in order for us to compete with Singapore,” Tio said.

“If there are no barriers to entry there, then it should be the same here. Also, Malaysian logistics players must not forget to move up the value chain as third-party logistics (3PL) is low value to the international players. We are talking about the whole spectrum of logistics, of up to 7PL.

“Malaysia is only 3PL while Singapore is already 7PL. We are very far behind despite land prices in Singapore being much higher than Malaysia while the cost of living is higher there,” Tio added.

He said the reason why Singapore was able to possess such high rankings is because it focused on higher value-added logistics business.

“If a company doesn’t know how to do it, then they should go for joint ventures by finding foreign partners. This is how knowledge is transferred.

“The government should allow for joint ventures, which will help local companies gain more knowledge in the face of strong competition,” Tio said.