MAERSK'S SHIFT TO TANJUNG PELEPAS (Impact on Port of Singapore)

Mr Yeo Guat Kwang asked the Minister for Communications and Information Technology what is the impact of Maersk's shift to Tg Pelepas on the Port of Singapore and what plans the Maritime and Port Authority of Singapore has to improve our port competitiveness.

Mr Yeo Cheow Tong: Sir, Maersk Sealand is reported to have taken up a 30% equity stake in the Port of Tanjung Pelepas (PTP). As such, it has indicated that it will move its hubbing operations to PTP by the end of the year. In 1999, the shipping line accounted for about 11% of PSA's throughput or 1.7 million TEUs.

Maersk's move to PTP is a commercial decision on its part. Apart from being a major global shipping line, Maersk runs many dedicated shipping terminals around the world. This move by Maersk must, therefore, be viewed in that context. It does not reflect a lack of competitiveness on the part of PSA.

All over the world, whenever new ports come on stream, they take market share from existing players. One such example was when the South China ports of Yantian, Shekou and Chiwan were developed a few years ago. However, as trade volume grew, a new equilibrium was soon established, and Hong Kong terminals continue to grow.

With charges at about a third to a half of those for ports in Hong Kong, Japan, Europe and the United States, PSA remains the world's leading port in terms of competitiveness and the value that it provides to its customers. PSA does not compete on price alone. It intends to retain its premier position through even better services and greater efficiency to meet the needs of its customers. For example, PSA is helping its customers enter the world of e-commerce, through its Portnet system. This system enables all players in the global shipping community to make paperless and seamless integrated transactions with each other effortlessly, and at the lowest costs.

To be a premier port, one must have superb shipping connectivity and frequency. PSA has, through its high levels of efficiency and service, built an unrivalled shipping network of 120 container shipping lines that connects Singapore to over 500 ports. This has enabled PSA to move 15.9 million TEUs last year. For this year, it expects to move over 17 million TEUs. Many of the major shipping lines are increasing their throughput through PSA by double-digit growth. This is a strong reaffirmation in PSA's value-for-money services by its customers.

On its part, the Maritime and Port Authority (MPA) has adopted various measures to enhance the competitiveness of the Port of Singapore over the years. Since May 1996, it has granted concessions of 20% on port dues for container ships using our port. It has also fully deregulated tug boat services within our port waters, to give shipping lines more choices that offer more competitive rates.

MPA has developed electronic services such as the MARINET and the Singapore Maritime Portal to speed up various statutory clearance processes. Combined with a strong commitment to high standards, these and other measures have helped to ensure that the Port of Singapore is able to offer cost-competitive services of the highest quality.

MPA is also working closely with other relevant Government agencies such as TDB and MAS to develop Singapore into an International Maritime Centre (IMC). These agencies work in close consultation with the shipping community to develop our expertise and build up our critical market mass in the areas of ship financing, marine insurance, maritime arbitration, ship management and repairing, and shipbuilding. The agencies will continually assess, evaluate and re-examine our policies to align them to the emerging industry trends and ensure that we remain competitive.

Assoc. Prof. Toh See Kiat: Sir, I have two supplementary questions for the Minister. First, it was common knowledge, before the move, that both Maersk and NOL were looking at the PTP. Would the Minister explain whether the move was because PSA did not act fast enough, eg, cutting prices before Maersk moved?

Second, it is trite wisdom that if you cannot beat them, you join them. Since PTP is looking for investments, would PSA consider buying a stake in PTP?

Mr Yeo Cheow Tong: Sir, negotiations between PSA and its shipping lines' clients are commercial issues which the Government does not get involved in. I believe PSA has been in close contact with all the shipping lines and it is dedicated and committed to giving cost competitive services, not just in terms of the charges for lifting the containers, but also through the provision of other value added services as well.

Sir, with regard to PSA taking a stake in PTP, I think this is an issue for PSA to decide upon, and I believe this issue has now been settled by Maersk taking up a 30% stake.

Mr Chng Hee Kok (East Coast): Sir, I think the Minister is aware that the Tanjung Pelepas Port won a major award recently at some international shipping conference as the most improved port. Coupled with the fact that it is going to be managed by Maersk Lines, I would say that Tanjung Pelepas will, in fact, pose very serious competition to the Port of Singapore.

With this move by Maersk Line, the volume of the port seems to be substantially affected. Will this affect the time table for the initial public offer of PSA?

Mr Yeo Cheow Tong: Sir, with regard to strong competition posed by PTP, PSA is used to competition, because there are already many well-established ports such as in Hong Kong and in the region which PSA has to compete against for transhipment business. Much of the business that PSA handles are transhipment containers, and they do not need to be transhipped in Singapore. They can be transhipped at any port along the route taken by the container lines. Therefore, PSA is quite used to competition and with the development of PTP and with the involvement of Maersk in PTP, I am sure PSA will now be even more attentive to competition.

With regard to the date for the flotation of PSA, I think this is an issue which Temasek Holdings has to deal with, and that comes under the Ministry of Finance.