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Tackling the challenges together

The global maritime industry is weathering headwinds in an uncertain market. Leading players suggest a host of strategies, including the well-proven collaborative approach between industry, government and the unions, to further hone Singapore's competitiveness

Good commercial skills, good operations and good people are the three ingredients for sustained success, says Mr Sohmen-Pao.

Our declining population, says Mr Teo, means that we need technological innovation and effective business processes to improve productivity.

Mr Poulsson says that the collaborative approach between industry, government and the unions is at the heart of maritime Singapore's success.

The trend towards mega vessels, according to Mr Tan, will bring about port efficiency challenges as it could potentially affect the entire supply chain.

Roundtable participants

  • Andreas Sohmen-Pao, chairman, BW Group; chairman, Singapore Maritime Foundation
  • Teo Siong Seng, managing director, Pacific International Lines (PIL); chairman and chief executive officer of PIL's listed subsidiary, Singamas Container Holdings Ltd, Hong Kong
  • Esben Poulsson, chairman, Enesel Pte Ltd; president, Singapore Shipping Association
  • Andrew Tan, chief executive, Maritime and Port Authority of Singapore (MPA)

Moderator: Narendra Aggarwal

The Business Times: As the global maritime industry is facing a severe downturn and an uncertain market outlook, what can Singapore players do to withstand the headwinds and ride through the storm?

Andreas Sohmen-Pao: Important actions are to strengthen the finances, and to keep the team focused on the right things. Strengthening one's financial position is of course difficult once the market declines. But there are still actions that can be taken to manage costs, preserve cash, and to communicate with stakeholders to provide the company with maximum visibility. In terms of the team, there can be a lot of distractions when the company is under pressure and costs are being reduced, so it is important to be clear on priorities and to keep the team motivated. For those who have a strong balance sheet and well functioning team, there are markets which will provide many interesting opportunities, so in our business we are focusing on investment and growth.

Market voices on:

Teo Siong Seng: The uncertainty is not restricted to the global maritime industry. In fact, it is also evident from the global and regional economies and further contributed by the drastic drop in oil and commodities prices and China's slowdown. These have resulted in the intensifying competition between ports while freight rates are at multi-year lows.

Reducing capital and operating expenses are the norm in addressing these difficult times. But to brave through the stormy waters, Singapore businesses should collaborate to pool resources and reduce cost by effectively utilising assets amid the severe overcapacity.

Esben Poulsson: Each owner, charterer or other market participant, depending on their particular circumstances, will decide for themselves how best to face the headwinds, be it through improved technologies, rationalising or other measures to reduce costs. Most owners in Singapore are operating regionally or internationally so the challenges facing us are the same as any other market participant.

Andrew Tan: The maritime industry is facing cyclical and structural changes. Instead of taking defensive cost-cutting measures, we should think long term - and even counter-cyclical - as market corrections will occur, trade will pick up and growth will return.

Besides managing costs, Singapore players should use the opportunity to invest in future capabilities to prepare for the upturn. This includes investing in manpower development, enhancing productivity and finding new market opportunities. For example, PSA and Jurong Port have various projects to enhance their terminal productivity by leveraging technology such as use of automated cranes and automated guided vehicles, and optimisation of workflow and processes.

The maritime sector will remain a key pillar of Singapore's economy. Besides our global hub port, Singapore has been building up its International Maritime Centre (IMC) for more than a decade, comprising commercial operations of maritime companies, ship brokers, finance, insurance, classification societies, legal and arbitration all based in Singapore. BT: What are the key challenges ahead in positioning maritime Singapore for future growth?

Sohmen-Pao: We need to keep a strong pipeline of talent and not over react to short-term pressures. We need to keep industry participants working closely together to find solutions. And we need to keep encouraging companies to centre their activities in Singapore by maintaining a pro-business stance.

Teo: Besides battling overcapacity and the lacklustre economic conditions, attracting manpower, growing regional competition coupled with high operating costs and the strong Singapore dollar, continue to be the key challenges to Singapore maritime growth.

Poulsson: Ensuring that the value proposition of Singapore is retained and enhanced. We do not claim to be the cheapest IMC and in reality, we cannot compete simply on price. Markets are markets and our influence on them is limited. But as long as we continue striving for excellence and continual improvement in all we do, we will meet these challenges. Never resting on our laurels but striving for constant improvements is what has brought maritime Singapore to where it is today. If we continue this quest we will meet these challenges.

Tan: The first key challenge is how quickly world trade recovers. This depends very much on the global economy and developments in Europe, US and Asia. While part of the global slowdown is due to weak demand from Europe and a cooling off in the Chinese economy, the slowdown is also due to changes in the trade-income relationship as world trade becomes less sensitive to changes in global income. For instance, container trade used to grow at 3.5 times faster than GDP growth but today it is less than 1.5 times. This slowdown not only affects Singapore but other countries.

Another key challenge is the formation of mega-alliances and the trend towards mega vessels. These ultra large container vessels will bring about port efficiency challenges as it could potentially affect the entire supply chain. Apart from port infrastructure, suitable port facilities and assets must be in place to ensure that port operations can continue to run smoothly and efficiently. Nonetheless, it also brings opportunities as not many ports have the capability to handle these large vessels and their alliances like the Port of Singapore.

The third challenge is to ensure that we have sufficient pipeline of well trained and experienced talents to support the growth of Singapore as an IMC as it grows in size and complexity. BT: Looking ahead, what are the bright spots for maritime Singapore? Do you see any silver lining?

Sohmen-Pao: Not all shipping sectors are under pressure - there are bright spots even now. For some areas of our business, 2015 represented a record year. The maritime industry has always been one that repairs itself over time because weak markets lead to reduced capacity, which sows the seeds for the next upturn.

Teo: We have the best hardware including good port, connectivity to major trading hubs, manufacturing bases, stable political, economic, social conditions, strong legal system and business-friendly tax structure. Major suppliers and logistics companies also set up their regional office or headquarters in Singapore.

Asean will become a common market through the establishment of the Asean Economic Community. Perhaps the silver lining is our growing educated and talented workforce that will be in constant demand for its specialisation. Our government is pro-active in opening doors for businesses through bilateral and multilateral agreements.

Poulsson: Plenty. Two respected international survey firms voted Singapore as the world's No 1 IMC last year. It is not our style to thump our chests but rather to be humble and remind ourselves of what it has taken to get to this position. We must now ensure that we stay there! With strong moral and concrete practical support from the Singapore government through the MPA - be it through training schemes, port due discounts for the offshore and container segments, union fee rebates recently introduced, and a host of other initiatives - it shows that our fellow stakeholders recognise how difficult things are in most of the industry's segments. And frankly, I am unaware of any other jurisdiction in the world where such support is so readily extended. So the bright spot is that investment in people, especially, are being made and in a downturn that is precisely the time to be investing in our future talent, in order to be well prepared and ready for the recovery.

Tan: We are optimistic of the long-term growth prospects for Asia as it remains one of the fastest growing regions in the world. Asia's demand for good infrastructure is immense and we will see greater air, sea and land connectivity in the coming decades. New multilateral initiatives such as the Asean Economic Community (AEC), the Transpacific Partnership (TPP), China's One Belt, One Road, have the potential to usher in a new era of cooperation within Asia and spur greater intra-regional and international trade.

As a maritime nation in the heart of Asia and home to a leading hub port and IMC, Singapore remains in a strong position to serve as a gateway to Asia for businesses to tap on Asia's growth opportunities.

BT: What recommendations would you make for propelling Singapore's continued growth as an international maritime centre?

Sohmen-Pao: The work of the Singapore Maritime Foundation, MPA and other maritime institutions is to keep addressing the challenges mentioned earlier. By welcoming maritime companies and executives from around the world to base themselves and their activities here, and by growing a strong pool of talent for the long term, we can continue to grow as an international maritime centre.

Teo: Innovation will thrust Singapore's continued growth as an IMC. This is very crucial to Singapore. Our declining population means that we need technological innovation and effective business processes to improve productivity. Secondly, the collaboration among the different maritime players in Singapore must be strengthened to promote Singapore as a "one-stop hub". Thirdly, government support (eg MOT and MPA) and good public-private sector collaboration (eg SSA, SMI and SMF) are essential. Also, as Singapore is a major finance centre, banks must work closely with maritime players to weather the storm.

Poulsson: I recommend that the well-proven collaborative approach between industry, government and the unions be continued as before - and which already now includes quite a lot of recently launched initiatives to further sustain this approach. I cannot emphasise strongly enough my belief that this collaboration is at the heart of maritime Singapore's success, and when I have the privilege of representing Singapore on the international stage I always point this out -- and I am, in turn, always told how fortunate we are to have this level of collaboration. I could not agree more!

Tan: We aim to grow a comprehensive and vibrant maritime ecosystem so that Singapore remains attractive as an international maritime centre. Besides encouraging maritime companies to anchor more activities in Singapore, MPA is also actively growing the spectrum of maritime services such as broking, finance, insurance, legal and arbitration.

We will continue with our plans to consolidate our future container operations at our Next Generation Port in Tuas even as we work towards more efficient terminals at Pasir Panjang with higher land and berth productivity. Plans are underway to build a more efficient, intelligent and sustainable port that will meet the demands of the future.

To develop a pipeline of maritime manpower to cater to future growth and demand as well as to anticipate changes in skill sets and competencies, we have established two taskforces under the National SkillsFuture initiative, one on seafaring and another on shore-based sectors. This effort to drive and implement a sectoral manpower plan for the maritime industry is undertaken in close collaboration with our partners, including the maritime unions, industry players and educational institutions.

BT: How can Singapore's maritime industry work to sharpen its competitiveness to position itself for new growth opportunities going forward?

Sohmen-Pao: Three ingredients for sustained success are: good commercial skills (customer and revenue management), good operations (cost and quality management), and good people to help make it happen. By focusing on finding good people and developing the right skills, we will over time capture good growth opportunities.

Teo: The foundation is the continual fortification of our hardware strength as mentioned earlier. To complement this and bolster our competitiveness, we need the following:

  • Review regularly Singapore's competitiveness in areas such as operation, cost and expertise relevancy.
  • Reinforce Singapore as the preferred business centre by attracting organisations to set up operations in the country.
  • Be sensitive to customer needs and demand.
  • Update core competency and knowledge capital within the IT capital.
  • Continue to cultivate local and foreign talent and engage young people to join the maritime industry.

Poulsson: We must be alert and, as I already said, not rest on our laurels. I think we must also be ready to be "self critical" where needed, and where we perceive we are not good enough, be ready to adapt and take the necessary measures to address these shortcomings.

Tan: The Singapore maritime community is highly resilient. It has gone through many down cycles in the past. As long as it stays cohesive and invests in future capabilities, it will emerge stronger from this crisis.

MPA will continue to work closely with the community to identify areas where we can work together to develop new competitive advantages. For example, MPA has worked with the Singapore Shipping Association (SSA) to set up the Singapore War Risks Mutual Class with The Standard Club Asia Ltd and the Singapore Maritime Foundation's Singapore Ship Sale Form with Bimco.