Malaysia’s logistics lags on policy

This causes the nation’s logistics performance to drop to No 41 out of 160 countries, World Bank’s LPI shows

by ANIS HAZIM / Pic by MUHD AMIN NAHARUL

THERE is no doubt that the logistics industry has played a significant role in increasing the country’s economic development.

Since 2006, the government has classified logistics as a priority industry with several initiatives introduced such as the Third Industrial Masterplan for 20062020, the Logistics and Trade Facilitation Masterplan (2015-2020) and the National Transport Policy (2019-2030).

Despite the ambitious target, Malaysia’s logistics performance has dropped to No 41 out of 160 countries, according to the World Bank’s Logistics Performance Index (LPI) 2018.

The Organisation for Economic Co-operation and Development (OECD) noted that Malaysia has slid down 16-place in over four years, putting it behind Thailand and Vietnam.

OECD recent assessment review found this has far-reaching implications for policymaking for its logistics industry.

“Restrictive regulations in Malaysia’s logistics industry push up costs for businesses and consumers so that logistics costs form a higher proportion of the price of finished goods than the global average,” the OECD stated.

It also noted that timeliness is the most challenging issue for Malaysia — which is increasingly important as consumers are willing to pay premium prices for faster deliveries.

“The average transport-related costs of regulatory barriers to cross-border trade are 60% across Asean, but almost 80% in Malaysia,” it stated.

Moreover, the Covid-19 crisis has also hit Malaysia’s economy hard, leading to a 5.6% contraction in 2020, from which the country must recover.

“The pandemic has resulted in the disruption of supply chains and limited the flows of trade and investment. Logistics companies have been impacted by operational constraints (delivery delays, congestion and higher freight rates) and lower demand in certain sectors,” it said.

Covid-19 has led to soaring growth in freight transport within cities in Asean countries, which was 20% up in 2020.

“This is likely to continue growing as patterns of production, distribution and consumption have changed permanently,” it noted.

Airfreight Forwarders Association of Malaysia chairman Walter Culas said Malaysia is also behind in several logistics systems, especially registration procedures.

“They (Customs Department) don’t make changes for improvement. They go backwards. This is the main concern of our logistics, which we find very frustrating,” Culas told The Malaysian Reserve.

According to him, about 40% of issues are related to the registration system for cargo deliveries.

“We are still using the manual system for registration which delays the deliveries process. This has affected the whole logistics process, especially for the time-sensitive cargo,” he said.

There have been no discussions between the Customs Department and logistics players, which complicated the whole process.

“Before they do anything, they should discuss with the industry players to see if there will be any setbacks or if there are any improvements that can be made. However, they never do this,” Culas added.

He is also concerned about the inefficient process practised for quite some time in the logistics industry.