Port Klang Shapes up as Logistics Hub

The Malaysian government is now actively encouraging the setting up of international procurement centers to foster distribution activities especially at ports. This includes the offer of suitable fiscal incentives to investors and the Customs designation of special free zones areas where such activities could be carried out.

The National Economic Recovery Plan (1998) acknowledged the importance of the value-adding activities as part of the efforts to foster greater competitiveness of the Malaysian economy. The Plan emphasised the need to promote the usage of the various free commercial zones in the country for value-adding and transhipment activities, especially for industries licensed under manufacturing warehouse and free industrial zones.

The move to encourage the development of international procurement centers and distribution activities forms an integral part of the government's policy to stem the outflow of foreign exchange payments. It is also seen that the role of the ports in the national economy would be further strengthened through the linkages created by the generation of cargo.

The international procurement centers (IPCs) are allowed to be set up at designated free zones only. The free zones offer an environment free from Customs documentation and duties.

The designated areas for the development of IPCs to carry out distribution and logistics services in Port Klang at the free zones in Westport and Northport.

A wide range of value-adding services are provided in addition to consolidation and storage functions by the IPCs in the distriparks at the Westport Distripark and at the Port Klang Distribution Park in Northport.

In an attempt to further enhance the role of distribution activities the government has allowed minor manufacturing activities to be carried out at the distriparks in the ports.This is in addition to break-bulking, sorting/grading, packing/repacking, labeling and packaging activities in the free Zones. (This is provided for under Free Zone Act 1990.)

Effective April 1998, all goods under schedule 2 and 3 of the Malaysian Customs Act have been exempted from approved permits when entering the free zones. Examples of goods classified under the two schedules include tobacco and vehicles.

An important outcome of this, for instance, was the move by Philip Morris to initiate the rolling of blended tobacco into cigarettes by machines at the Westport Distripark in Port Klang for distribution to its plant in Seremban, about 100 km from Port Klang as well as for re-exports to regional markets.

The Westport Distripark, which has more than two million sq ft of space, has also attracted other companies to engage in value-adding activities, including the Swedish furniture-maker- Ikea as well as several Japanese electrical products manufacturers, including Sony and Hitachi.

The removal the requirement for Customs approved permits for vehicles imported into the free zones has also paved the way of re-shipment of motor vehicles via local ports. This has paved the way for the development of vehicle's transit center at Westport facilitating the transshipment of imported vehicles to regional markets.

In addition to the Westport Distripark at Westport, the Port Klang Distribution Park, located in the free zone at Northport, also offers space to companies to carry out value-adding services.

The Port Klang Distripark, which is located strategically between two container terminals in Northport at Port Klang, offers leased space to cargo consolidators to carry out a broad range of value-adding services. PKDP and Westport Distribution Park are well link by rail network.

The attraction of Port Klang for companies to set up the IPCs has also been fostered by the recent increase in the mainline shipping services. The three container terminals at Port Klang are visited by about 70 mainline operators which provide direct services to almost all major markets worldwide.

In addition, the pro-active business stance taken by Port Klang Authority by offering the "One-Stop Agency" services has also increased the attraction of Port Klang to companies keen to engage in distribution and logistics services. The trade facilitation provided under the Port Klang Community System (PKCS) with access to Electronic Funds Transfer also

Offers considerable benefits with prospects for saving in time and costs.