PSA CORPORATION LIMITED (Competitiveness)

Mdm Halimah Yacob asked the Minister for Transport what measures are being taken to ensure PSA Corporation Limited's competitiveness in view of the intense challenge posed by other ports to PSA's premier position.

The Minister for Transport (Mr Yeo Cheow Tong): Mr Speaker, Sir, first, let me assure the House that PSA has been a competitive port operator, and that it is committed to remaining so for the long term. Despite the decision of a major customer, Maersk, to hub elsewhere, PSA's container throughput for the first four months of this year went up 8.6% compared with last year's figures.

As a reflection of its capabilities, PSA has been consistently voted the best container terminal operator in Asia for 13 years. More than 250 shipping lines call at the port, providing PSA with superb connectivity.

However, shipping is a dynamic and increasingly competitive business. This is especially so for the transhipment business, as shipping lines need not call at Singapore to tranship their containers. Given the open and competitive nature of the shipping industry, it is not uncommon for new ports to woo shipping lines, and for the latter to seek out ports which offer better commercial terms. PSA expects that it will continue to grow its volumes in the coming years even as shipping lines readjust their ports of call.

Sir, there are many positives in PSA's favour, including its high connectivity, high productivity, reliable services and a large critical base of over 15 million TEUs per annum. It took PSA many years to achieve this, and it will not lose its big lead overnight.

Having said that, let me add that PSA is acutely aware that the competitive environment is constantly changing. Competition for the regional transhipment business has intensified, with countries in the region striving to develop their own hub ports. PSA is reviewing its strategy, and is taking steps to anchor its customers here for the long term. It is committed to remaining customer-oriented and price-competitive in order to maintain and grow its position as the world's number one transhipment port. PSA will also continue to innovate and add value to its services through the adoption of new technology and processes. It will share the savings from productivity improvements with its clients. This win-win approach will help entrench PSA's long term position as a hub port. . The Government, through agencies such as MPA, IE Singapore, EDB and MAS, will also continue to grow the maritime services sector. These activities, like ship management, ship financing, insurance and other specialised services, provide high value-add to the economy. In this regard, I am pleased to announce that MPA is setting up a $80 million fund to help speed up the development of the maritime sector. One key focus of the fund will be the development of the specialist knowledge and expertise needed by the sector. Details of this fund and how the shipping community can benefit from it will be released by MPA shortly. The fund and its programmes will complement PSA's efforts, and ensure that Singapore continues to grow as a hub port, as well as an International Maritime Centre.

Mdm Halimah Yacob (Jurong): Sir, the Minister has mentioned that PSA is looking into ways on how to innovate its operations, its business, as well as how to share the productivity gains. The situation is now much more competitive. Competitors are giving things like lower rates. They are also allowing a share in the port operations. Does it suggest that PSA has failed to look at all these areas of innovation before?

I also want to ask the Minister what useful lessons can other Singapore companies draw from PSA's experience, and what are the implications to workers and management in PSA as a result of this development.

Mr Yeo Cheow Tong: Sir, PSA has had a very competitive regime of rates. As you know, the marketplace is a very dynamic one. Different ports offer different rates, different benefits. And PSA has always strived to make sure that it is able to keep ahead of the competition.

In the case of the two lines that are leaving to hub elsewhere - one of which has already left - they were offered terms which they found difficult to turn down. PSA is reviewing its strategy now. As I have mentioned just now, primarily, it has to be price competitive. But price is not the end of the story, because what shipping lines look for are other services. It is the range of services that can be provided because, at the end of the day, they are looking at the total value chain that the port can give. A port can give very low rates. In fact, there are many ports that give rates that are far, far below what PSA is offering. But, because of inefficiencies and other problems, the total cost incurred by the shipping line to call at those ports is actually much higher than what it would cost to call at PSA. So it is a total equation that has to be taken into consideration. PSA is reviewing this total equation to make sure that it is still the most cost effective port to call at.

As the Prime Minister has mentioned, we would definitely consider the other options as well, such as offering dedicated terminals and offering shareholdings in PSA by the shipping lines. All these options are being actively explored at the present moment.

Dr Warren Lee (Sembawang): Sir, may I ask the Minister whether there is any success in wooing back some of the shipping lines which have gone to our rival ports?

Mr Yeo Cheow Tong: Sir, whilst Maersk has shifted its hub to another port, I must inform the House that Maersk is still a substantial customer at PSA. It has retained some of the international routes through PSA, and it is sending a large number of containers through PSA port every month.