Becoming a halal logistics hub

Frost & Sullivan says that Malaysia’s highly recognised halal certification system has given it an advantage to develop into the region’s halal logistics hub.


Malaysia’s highly recognised halal certification system


Becoming a halal logistics hub

Frost & Sullivan says that Malaysia’s highly recognised halal certification system has given it an advantage to develop into the region’s halal logistics hub.

Gopal R, vice president, transportation and logistics practice, Asia Pacific and country head for Malaysia at Frost & Sullivan said that green logistics practices and the development of halal logistics are likely to help Malaysia to transform itself into a regional logistics hub in the future. “The highly recognised halal certification system in Malaysia has given the country an advantage to develop and position itself as the halal logistics hub in the region,” he added. He also said that Malaysia has the necessary infrastructure such as halal logistics parks and warehouses at its ports, which will further aid the growth of the halal logistics sector. The Malaysian logistics industry is expected to grow 11.5 per cent to RM121 billion (US$39.7 billion) in 2011 as compared to RM108.5 billion a year ago, supported by the country’s strong external trade and stable economic outlook. Gopal said that external trade for Malaysia is expected to increase 10 per cent year-on-year to RM1.28 trillion in 2011 as compared to RM1.16 trillion in 2010. “High technology and capital intensive projects under the 10th Malaysian Plan and Economic Transformation Program (ETP) are expected to create opportunities for the nation’s logistics market,” he predicted, adding that foreign direct investments are likely to flow into the electronics and electrical, oil and gas, healthcare and solar-related industries. In 2010, the third party logistics market (transportation, storage and courier services) were valued at RM 27.5 billion, while in-house logistics costs/ spending in the Malaysian economy – manufacturing, mining, agriculture, telecommunications, construction, energy, finance, trade and government services – were valued at RM81 billion. The Malaysian logistics industry is forecast to grow at a compound annual growth rate (CAGR) of 12.6 per cent to reach RM196.5 billion in 2015, Gopal said. He said that the investmentfriendly environment created by the Malaysian Government will also boost subsectors of the logistics industry such as import-export forwarding, shipping and airfreight related businesses. However, he cautioned that growth in the Malaysian logistics industry could be hampered by the lack of skilled logistics professionals, fragmented nature of the logistics sector and lack of emphasis on value-added services by logistics service providers. Gopal forecasts Malaysia’s total cargo volumes to increase 12.4 per cent to 498.4 million tonnes in 2011 as compared to 443.4 million tonnes in 2010. “Sea-freight is the most popular mode of transport for cargo in Malaysia, handling more than 95 per cent of total volumes in 2010,” he said. Gopal said that cargo volume by sea is expected to grow 12.5 per cent to 493.7 million tonnes in 2011. He also predicts cargo volume by air to grow 12 percent to 1.03 million tonnes in 2011 as compared to 918,100 tonnes last year. He said that Kuala Lumpur International Airport contributed about 73 percent to the total cargo volume by air in the country. Meanwhile, cargo volume by rail is expected to increase 3.7 per cent to 5.5 million tonnes in 2011. Classic outsourcing activities such as transportation, freight forwarding and warehousing are the most sought after logistics activities in Malaysia in 2010. “Value-added services such as packing and labeling, reverse logistics, quality assurance and control and information management are the top 10 logistics functions outsourced in Malaysia in 2010,” he added. Currently, the use of technology in the logistics industry is mainly focused on warehousing, bar coding and transportation management systems. “The adoption of visibility tools such as RFID (radio-frequency identification) or smart labeling system and GPS (global positioning systems) or vehicle tracking systems are still in their infancy with an average of 35 per cent using the technologies,” he added. He said that based on a survey conducted by Frost & Sullivan in 2010, logistics end-users in FMCG, automotive, retail, pharmaceutical, consumer goods and high tech electronics sector, said they have plans to increase the usage of technology especially in visibility tools such as RFID or smart labeling, bar coding systems and GPS or vehicle tracking systems in the near future. Gopal said that for third party logistics service providers to be successful in Malaysia, they need to be able to offer diverse logistics services with well built infrastructure and competitive pricing. “Logistics end-users surveyed said the reasons that prompted them to engage with more than one logistics service providers or change logistics service providers were due to limited service offering, increase in cost and limited geographical coverage,” he said.