Nestled strategically along the Strait of Malacca, Malaysia has enjoyed a favourable position on one of the world’s most important trade routes since the days of the sultanate.

With manufacturers in the South-East Asian region expected to ramp up production – courtesy of the ongoing US-China trade war – there is an opportunity for Malaysia to play the role of a regional logistics hub.

After all, we have the infrastructure and expertise to be the hub, says PKT Logistics Group Sdn Bhd group chief executive and managing director Datuk Michael Tio.

“A lot of factories are already looking to move here because of our language capability, labour and connectivity is here. So we need to be ready. Export is going to be quite huge out from Malaysia and we need to compete very fast. If we don’t do it, the business will move elsewhere,” says Tio.

Tio has long pushed for Malaysia to be a logistics hub for the region and has been actively engaging other stakeholders to achieve this goal.

Governments are noting the importance of this role and have been doling out incentives to attract shipping lines to their ports.

But with incentives being a dime a dozen in the region, Tio says there is a need to rethink how Malaysia can better attract the lines to local ports.

“If we make the relevant services available in Malaysia, in terms of connectivity, logistics capabilities like warehousing, and ensuring that our ports are up-to-date, then I think we can create a more attractive pull factor in making Malaysia a logistics hub.

“People need to be able to perceive us as a good hub with natural logisticians, whether in the areas of sea, air or land logistics.

“Malaysia is connected to Singapore and Thailand on land and we have rail links coming up as well. And we have world-class warehousing facilities to serve the industry,” he explains.

Should Malaysia be successful in building a hub, there is a high likelihood that we will be able to draw more manufacturers and regional distribution centres to set up shop here.

“If we are ready, they will come. Manufacturers select a country as a hub not only for their incentives, but also wherever provides the cheapest logistics cost,” he says.

Tio adds that a robust hub will not only bring in manufacturing businesses that will boost the local economy, it will also host the highly lucrative regional hubbing business which will see a rise in transhipment cargo.

Chief marketing officer Kuan Eu Jin points out that Malaysia should be a natural choice given that our cost is one-third that of Singapore.

“Additionally, our customs is one of the most business friendly in the region. Nobody doubts the capability of Malaysia,” says Kuan.

With a little innovation in the incentives we provide, Malaysia could potentially take the lead, Kuan adds.

He notes that large retailers such as Daiso Industries Co Ltd has chosen to locate its regional distribution centre for popular household products to Malaysia. The centre is part of Daiso’s business expansion strategy to streamline their logistics operations for the South-East Asia and Middle East regions.

Notably, other countries in the region are also looking into their infrastructure needs and to enhance their capabilities to draw more containers to their ports.

Indonesia, for one, has a grand plan of building ports in every corner of the Strait, says Tio.

But being a hub is a prized position that may not be open to everyone. A lot of work is needed to ensure good connectivity along whole value chains.

While Malaysia has some way to go to catch up to the capabilities of Singapore as a hub, Tio says Malaysia has the capability to work towards the top.

Singapore is currently the second busiest port in the world, after Shanghai.

What Malaysia may lack, at the moment, notes Tio, are more deep-sea ports.

There is also a need to enhance connectivity at the Thailand-Malaysia border and improve overall efficiency in the logistics industry.

“We are already in a good position. We just need to move fast before other countries start working on their infrastructure,” he says.